Politicians and Prioritization

Imagine that you are in a budget meeting at your company.  You and a number of other department heads have been called together to make spending cuts due to a cyclical downturn in revenue.  In your department, you have maybe 20 projects being worked on by 10 people, all (both people and projects) of varying quality.   So the boss says "We have to cut 5%, what can you do?"  What do you think her reaction would be if you said "well, the first thing I would have to cut is my best project and I would lay off the best employee in my department". 

If this response seems nuts to you, why do we let politicians get away with this ALL THE TIME?  Every time that politicians are fighting against budget cuts or for a tax increase, they always threaten that the most critical possible services will be cut.  Its always emergency workers that are going to be cut or the Washington Monument that is going to be closed.  Its never the egg license program that has to be cut. 

I am reminded of this in driving long distance this weekend and I picked up, by one of those random late night AM skip-distance things, a station in Colorado, and it was full of commercials threatening dire consequences (old people will go hungry, kids won't get an education, emergency workers won't be there for your heart attack) if voters don't overturn TABOR, which is the tax plan that has, for over a decade, limited tax revenue collections to population growth plus inflation.  When I was in Colorado, I loved TABOR (the Cato institute has a nice article on why you should too) and really loved the tax refunds I often got because of it.

TABOR provides a fairly constant revenue stream to the government, in good times and bad.  When times are good, the government is flush, and when times are bad the government runs short (due to unemployment payments, more welfare, etc.).  Many of us in cyclical businesses deal with this all the time, and seem to be able to cut marginal programs added in good times that we can no longer fund in bad times.  Politicians are incapable of this.  Many businesses also underspend revenues by a wide margin in good times, knowing they will need the reserves in bad times.  Politicians are also incapable of this.

On Tuesday, Colorado voters will decide if they will require Colorado politicians to take the same responsibility for fiscal management that everyone else does in their private business lives, or if they will bail them out of their incompetance with more of their money. 

Going back to my example of suggesting in a budget meeting that you will cut your best programs and people in a budget crisis, would you expect to get more budget or to be fired?  Why can't we do the same with politicians?

Update: Bummer.  Coloradans voted to roll back TABOR.  Glad I don't live there anymore.  Roundup at Hit and Run.

  • Don Lloyd

    Imagine that you are in a budget meeting at your company. You and a number of other department heads have been called together to make spending cuts due to a cyclical downturn in revenue. In your department, you have maybe 20 projects being worked on by 10 people, all (both people and projects) of varying quality. So the boss says "We have to cut 5%, what can you do?" What do you think her reaction would be if you said "well, the first thing I would have to cut is my best project and I would lay off the best employee in my department".

    I believe that the correct logic implied in your writing above helps explain the stickiness of wages and why average wages could tend to rise during a recession. A recession is the time to cull the stragglers from the herd.

    Regards, Don

  • Damon Gentry

    I've been considering asking my state legislators to put forth a bill that would simply prioritize spending in a voter-approved order. Any changes to that order (or perhaps the first N items) would need to be approved by the voters. I've live in several states and I always here the phrase: "Well, we need this money for K-12 education. We need this money for our police departments."

    Most people (and businesses) prioritize their spending without even thinking about it. Why can't government allocate their financial resources in the same manner? They should fund the most important items first, and the least important items last. Who would oppose a system where the legislators were forced (by law) to fund education and police departments ahead of bridges to small islands?

  • http://politics.lel-hosting.com/ Matt

    It's simple. They don't want to cut _anything_, and they know if they can threaten enough pain, they won't have to. By making "essential" services the first to be cut, they provide themselves with political cover for their desired strategy...that is, no cuts under any circumstances, and any shortfalls to be covered by borrowing or raising taxes.

    Truth is, I've seen the same behavior in the private sector...one simply has to observe a sufficiently large organization. Once you accrete enough layers of middle management, this kind of agency paradox starts to take over.

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