Science Foundation 1st on chop block

Now that they are staring down the barrel of a $900 million deficit, Arizona politicians are finally talking about spending cuts. Some programs would have to be cut. Our recommendation is to start with the $25 million handout to Science Foundation Arizona (SFAz).

There are good reasons to pull the plug on SFAz.

First, it is immoral to take people's money and give it to other people.

Second, the case for government funding for SFAz is based on an erroneous view of the causal relationships between pure science, technological development and economic growth.

According to one view, progress starts with innovations in pure science, which then drive changes in practical technology, which then promote greater productivity and economic growth. People who believe in that view of progress often argue that it makes sense to "prime the pump."

Some of the junketeers who have gone to Ireland with SFAz make that argument, holding that a significant portion of Ireland's recent economic growth is because of targeted government funding of university-based high-tech research.

However, the chain of causation mostly runs in the other direction: Economic growth promotes investments, innovations increase growth. The real pump-primers of progress are tax and regulatory reductions that allow private entrepreneurs and businesses to achieve greater economic growth.

Ireland's ongoing transition from a manufacturing economy to a knowledge-based economy is natural and would occur without any government subsidies for science research. In a low-tax, high-growth economy, capital accumulation and rising wages push many entrepreneurs toward the higher-return investments of the knowledge-based, high-tech economy.

Ireland's main advantage over Arizona is that its corporate income tax rate is 12.5 percent, compared with our combined federal and state rate of 42 percent. One of the best things Arizona could do to promote investment and job creation would be to eliminate its job-killing corporate income tax.

The practical problem with SFAz is that government funds dilute the profit incentives of the private investors who make matching grants: They do not need to be as shrewd with $50 million as they would with only $25 million of their own money at stake. And it is important in the context of government "investments" to remember that politicians do not actually invest: They do not stand to make significant money profits or money losses when they appropriate money for governmental or mixed enterprises.

State funding for SFAz ought to be the first thing on the Legislature's chopping block when it goes to reduce the deficit.

Tom Jenney is executive director of the Arizona Federation of Taxpayers (www.aztaxpayers.org), a state chapter of Americans for Prosperity.