Public Investment and Economic Growth: Even the Commonwealth Foundation Gets It (Sometimes)

Marc Stier |

A strange post a few days ago by Elizabeth Stelle of The Commonwealth Foundation seeks to undermine the case for a severance tax on natural gas drilling, but inadvertently explains exactly why we need new recurring revenues in the state.

Stelle first repeats once again — without evidence — the same tired argument that natural gas drillers “pay more in taxes and regulatory costs than producers in competing states.” Not once has anyone at the Commonwealth Foundation quantified those regulatory costs or attempted to respond to a series of papers put out by PBPC, including this most recent one, that show that natural gas drillers are not paying much, if anything, in corporate income taxes to Pennsylvania and are paying far less in taxes (and fees) here than in other states.

The second part of Stelle’s post then points out that there is a large backlog in Department of Envioornmental Protection approval of permits to drill new wells. That has held back new investment in Pennsylvania. Stelle is right about that, and DEP is, we know, working hard to reduce the backlog.

But the backlog shouldn’t surprise anyone. This is exactly what we would expect from a department whose budget has been cut 32% since fiscal year 2007-2008. And, of course, the problem created by these deep budget cuts is not only a backlog in approving new wells, but a backlog in inspecting the wells we already have.

The Commonwealth Foundation here recognizes what any serious public policy analyst understands — public investment is critical to private investment. We simply won’t and shouldn’t have new investment in natural gas drilling unless we can properly vet the permit applications and inspect the wells that are drilled. And we can’t do that unless we invest in public goods and fund them with recurrent revenues. Here, as elsewhere, public investment will generate economic growth and more than pay for itself.

It would be nice if this post were a harbinger of future ones. Perhaps the Commonwealth Foundation will discover that we are more likely to have business investment in hi-tech or other sectors if we help more of our young people secure education and training in these fields. Or they will recognize that the boom in the good-paying jobs in the field of medicine is connected to the enactment of the Affordable Care Act.

But I wouldn’t count on enlightenment falling on the Commonwealth Foundation so quickly.