Impact studies used to justify public subsidization

SMU Economics Professor Mike Davis talks about how impact studies are used to justify public subsidies.

By Len Boselovic
Pittsburgh Post-Gazette

Whenever President Barack Obama advocates eliminating tax breaks on corporate jets, the general aviation industry is ready to tell whoever will listen how much that would hurt the struggling economy.

According to a 2005 study commissioned by the General Aviation Manufacturers Association and the National Association of State Aviation Officials, the industry generates $150 million each year and supports 1.2 million jobs. The jobs include not only the people who build the jets, but also those who sell them, maintain them, fly them, schedule and dispatch them, and give their pilots weather forecasts.

Not to mention the attorneys who negotiate sales or leases and the accountants who calculate the tax breaks.

The aviation industry isn't the only special interest group that believes that policymakers don't appreciate its importance. For many companies, industries and organizations, economic impact studies are a cost of doing business as strapped governments look for ways to tax or rein in spending. . .

Groups that commission such studies have an obvious interest in portraying their activity as being as economically significant as possible. So when you consider the findings, consider who paid for the study and what vested interests they have in the outcome, said Mike Davis, who teaches economics at Southern Methodist University's Cox School of Business.

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