Strategic Borrowing

Posted March 06, 2009, at 5:32 p.m.

Part of the reason for the national recession is that people and companies are not spending money because they are — rightly — worried about the future of the economy. The stimulus package recently passed by Congress is one attempt to break this cycle by increasing government spending to get more money into the hands of business and individuals.

Likewise, the $300 million bond package announced this week by Gov. John Baldacci proposes to invest in several areas to create jobs, improve the state’s infrastructure and reduce energy costs. All are necessary, and investing in these projects now sends the important message that Maine plans to be active in creating jobs and reducing energy costs rather than retrenching and hoping the economic storm passes.

The package, which would be broken into two parts to go to voters this November and in June 2010, includes nearly $128 million for transportation projects, $67.5 million for research and development and redevelopment of Brunswick Naval Air Station, and $43 million for the Land for Maine’s Future program and clean water and environmental protection.

It also includes $52 million for the state’s universities, community colleges and Maine Maritime Academy for building improvements and energy conservation projects. Reducing campus energy use lowers a major cost, helping them adjust to lower state appropriations in the short-term and perhaps freeing money for other purposes in the long run.

Another $15.5 million would be devoted to energy conservation and the development of offshore wind power.

Many of the items in the bond package dovetail with the federal stimulus funding, which should enable Maine to build on the nearly $1 billion it is expected to receive. Investing in road construction, building renovation and energy efficiency upgrades now also makes sense because the prices of raw materials are much lower than in recent years.

Opponents of borrowing will argue that, with so much economic uncertainty, now is not the time to increase the state’s debt. The opposite is true because state borrowing and the investment it allows offer a way out of the recession. The news of layoffs in Baileyville and Wells this week is further evidence that Maine must diversify its economy.

Investments in research and development have paid large dividends to the state. Previous R&D investments have brought in $14 for every $1 invested, an impressive rate of return. In addition, Maine companies that receive state R&D investment are growing six times faster than the state economy as a whole. These companies also pay wages that are 25 percent higher than the state’s average per capita income. That is economic development.

“We believe bonds should be targeted with precision to stimulate job creation, improve Maine’s competitiveness and produce long-term infrastructure gains that will benefit Maine people for years to come.” That was the response from Republican legislative leaders to the governor’s bond proposal.

They have set the right standard, one which this package meets by targeting funds to areas that build on the money Maine is expected to get from the federal stimulus package while focusing on job creation.

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