Friday, August 14, 2009

Spending Rehab

The town of which I am a resident has just gone through a rather painful process to develop its annual budget. We’re a mostly residential community with a population of about 17,500. One of the reasons that I like living here is that it still has somewhat of a hometown atmosphere.

As reported here, one city councilman claims that they’ve gone through “through everything in every department” and cut everything they could. The city administrator says that this year’s budget is $898,000 smaller than last year’s. That’s pretty significant for a city this size, representing a spending cut of about $51 per resident.

But employees will receive no raises and no additional positions will be filled. That sounds harsh, but when citizens are having to tighten their belts, it is appropriate for government to do the same. This is a departure from last year when, instead of working hard to cut spending, city officials voted for a tax increase over the protestations of upset citizens.

But there’s less mystery here than meets the eye. The mayor and half the council members are up for election this year, while no city officals were on the ballot last year. As Bill Bennett notes in his book, America: the Last Best Hope, Vol. 2 (p. 171), “It’s a good thing for the leaders of this great republic to fear the people.”

Spending is fun!
I found a comment by one of the city council members to be quite telling of how politicians think. Of the spending cut exercise she said, “We now know how much more fun it is to spend money than it is to cut money.”

It’s not quite fair to pin such sentiments solely on politicians. I think it’s pretty much human nature. It’s almost always more fun to spend money than to cut spending. If this were not so we’d never have reached the current volume of personal and business debt in which our nation is drowning. But it’s even more fun when you’re spending other people’s money. And that’s where politicians differ from most of us (except for those of you that took the Cash-for-Clunkers dollars and ran.)

In the current economy, many individuals, businesses, local, and state governments are cutting back. The incentives for spending have been replaced by incentives for more austerity. Some were responsible and are better suited than others to weather leaner times. But even the spendthrifts are being forced to cut back.

The faith based road to prosperity
Note that I did not include national government in the previous paragraph. It is the one entity left that is still convinced that we can spend ourselves into prosperity. It has hired an army of economic prophets that strongly affirm that this is true, and it employs intimidation tactics against any officials that fail to pay adequate obeisance to the approved doctrine.

The current preaching is that the only way to salvation is for the federal government to spend gobs more cash than we have or can ever hope to repay. There is no such thing as overleveraging. It does not exist in the lofty realms of the all powerful centralized directive, say the economic prophets. (Murmur amen.)

Stop me before I spend again!
Back to my home town. The city’s recent austerity exercise would likely have been much less severe had more fiscal discipline been the rule of the day during the fat years. Since we know that it is the nature of nearly all people, including politicians, to be less than thrifty with other’s funds, why were there insufficient safeguards against this in my city during the first eight years of this decade?

When government starts doling out benefits, those with their hands out to government proliferate. The cries to meet this or that worthy ‘need’ soon rise to cacophonous levels. These calls frequently require ongoing commitments, so that once politicians achieve a sense of altruism by obligating taxpayer funds, a permanent constituency makes subsequent reductions in the revenue stream politically painful.

These commitments usually come in such small chunks that they pass under the voting public’s radar. Or they are presented in the rosiest of lights sans any adequate understanding of the negative costs involved so that the public accepts them as an overall good.

Who could possibly be opposed to a municipal swimming pool or to a grand fireworks display on the 4th of July? Ka-ching! Permanent commitment with built-in barriers to cost cutting. But, oh, didn’t that feel good? Gimme another hit.

Pressures to altruistically spend taxpayer dollars + insufficient vigilance by citizens = government overspending that defies cost cutting efforts.

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