“They believe they get reelected if they’re perceived as creating jobs,” said Barry Bluestone, an economist and dean of Northeastern University’s School of Public Policy and Urban Affairs. “The political incentives are so strong to do these types of deals.”
Edward Glaeser, an economist and director of Harvard University’s Rappaport Institute for Greater Boston, laughed when asked if politicians would ever stop investing taxpayer dollars directly in specific companies. The problem, he said, is the broad policies that create a favorable business climate, such as improving schools, transportation systems, and workforce training, typically take much longer than a two- or four-year term to pay off.
“By investing in specific companies, you have this image of someone taking charge of the economy, of doing something,” said Glaeser. “It creates a strong incentive to keep doing it.”
Whether such approaches work is open to debate. Studies of incentive programs have been mixed, in part because it is difficult to determine whether incentives or other factors, such as a rising economy, spur corporate decisions to expand.
The conflicting findings on government incentives led Josh Lerner, a Harvard Business School professor, to study the issue in his 2009 book, “Boulevard of Broken Dreams.” His conclusion: “For every success story out there, you can find a whole host of failed efforts.”
States too often rush into loans and incentive deals without proper planning and financial safeguards, Lerner found.
And too often, officials chase big deals that attract attention — and risk too much money. “It’s what politicians love,” he said in an interview, “being photographed handing over a big check to an entrepreneur.”