10.01.2008 0

Declining Revenues Create Hard Choices for Government

  • On: 10/15/2008 10:24:43
  • In: Fiscal Responsibility
  • By Howie Rich

    “Every crisis presents an opportunity.”

    Sure, it’s one of the oldest clichés in the book. But clichés don’t find their way into “the book” without invoking some elemental, common sense wisdom.

    Of course, since such wisdom is generally anathema to our elected officials’ way of thinking, expecting them to behave any differently during the current economic malaise than they have in previous downturns is probably wishful thinking.

    In a nutshell, here’s the predicament government budget writers are facing – the property taxes that provide their main source of revenue are plummeting alongside national home prices, which suffered a record dip in April of this year. On the other hand, record-high prices at the gas pump are sending their budgets soaring skyward.

    Caught in a pincers – and already struggling to balance unsustainable health care and employee pension increases – their budget prognoses grow grimmer by the day.

    Yet despite the gloomy forecasts, government’s impending revenue crisis does present our leaders with yet another opportunity to get their act together.

    First and foremost, it gives them a chance to reform the way they spend money at all levels of government – an opportunity our leaders utterly failed to avail themselves of during the post-Sept. 11 downturn and the recession of the early Nineties.

    In both cases, government could not control its special interest appetite and instead passed the pain onto those who could least afford it.

    Rather than cutting pork projects, trimming bureaucratic fat and adopting a zero-based approach to spending that prioritized activities and results, most governments resorted instead to across-the-board cuts that shortchanged vital frontline services.

    These services disproportionately impacted middle income earners and poorer citizens – a cruel way of bullying the public into accepting the need for “revenue enhancements.”

    So what should our leaders be doing this time around?

    Let’s start with the basic premise that the private sector utilizes when confronted with declining revenues – the principle of maximum utility.

    In any organization, public or private, there are essential and non-essential services as well as essential and non-essential employees. Unique to government, though, is the philosophy that when tough times come the solution is always to spread the cuts “equally” across government.

    “We’ve all got to share in the pain,” elected officials will say, usually right before they introduce a bill raising yet another fee or further increasing your tax bill.

    This politically-expedient approach fails to acknowledge that there are hundreds of functions that government has no business performing, and hundreds more than may be worthwhile but clearly do not fall under the definition of “core” responsibilities.

    “Maximum utility” is never achieved by simply lopping an equal amount off the top of every agency or program during economic downturns. Nor is it achieved by spending every last dime that comes in when times are good.

    Each and every year, regardless of the revenue stream coming in, budget writers should start from zero – identifying top priority public needs and then allocating funding based on which government “activities” meet those needs.

    Of course there’s one small problem with this incredibly common sense approach to spending the people’s money – politicians don’t like it.

    They don’t want the public to see how their special interest goodies and pet projects stack up compared to genuine obligations. Plus, they don’t want to lose the one pressure point they have for adding new revenue streams that will fuel even more unnecessary spending in the future.

    The result is a vicious cycle which – along with unsustainable entitlement spending and taxpayer-funded lobbying – continues to perpetuate the growth of government far beyond our ability to pay for it.

    During America’s last two economic downturns, hard choices were averted because our leaders simply failed to make them. We should expect – and demand better this time around.

    The author is Chairman of Americans for Limited Government.


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