Tuesday, January 18, 2011
Budget Crisis Rhetoric
Budget Crisis Rhetoric
By Thomas Sowell
Government budget crises can be painful, but the political rhetoric accompanying these crises can also be fascinating and revealing. Perhaps the most famous American budget crisis was New York City's, back during the 1970s. When President Gerald Ford was unwilling to bail them out, the famous headline in the New York Daily News read, "Ford to City: Drop Dead."
President Ford caved and bailed them out, after all.
The rhetoric worked. That is why so many other cities and states-- not to mention the federal government-- have continued on with irresponsible spending, and are now facing new budget crises, with no end in sight.
What would have happened if President Ford had stuck to his guns and not set the dangerous precedent of bailing out local irresponsibility with the taxpayers' money?
New York would have gone bankrupt. But millions of individuals and organizations go bankrupt without dropping dead.
Bankruptcy conveys the plain facts that political rhetoric tries to conceal. It tells people who depended on the bankrupt government that they can no longer depend on that bankrupt government. It tells the voters who elected that bankrupt government, with its big spending promises, that they made a bad mistake that they would be wise to avoid making again in the future.
Legally, bankruptcy wipes out commitments made to public sector unions, whose extravagant pay and pension contracts are bleeding municipal and state governments dry.
Is putting an end to political irresponsibility and legalized union racketeering dropping dead?
Politics being what it is, we are sure to hear all sorts of doomsday rhetoric at the thought of cutbacks in government spending. The poor will be starving in the streets, to hear the politicians and the media tell it.
But the amount of money it would take to keep the poor from starving in the streets is chump change compared to how much it would take to keep on feeding unions, subsidized businesses and other special interests who are robbing the taxpayers blind.
Letting armies of government employees retire in their fifties, to live for decades on pensions larger than they were making when they were working, costs a lot more than keeping the poor from starving in the streets.
Pouring the taxpayers' money down a thousand bottomless pits of public and private boondoggles costs a lot more than keeping the poor from starving in the streets.
Bankruptcy says: "We just don't have the money." End of discussion. Bailouts say: "Give the taxpayers a little rhetoric, and a little smoke and mirrors with the book-keeping, and we can keep the party rolling."
One of the political games that is played during a budget crisis is to cut back on essential services like police departments and fire departments, in order to blackmail the public into accepting higher tax rates. Often, a lot more money could be saved by getting rid of runaway pension contracts with public sector unions.
Bankruptcy can do that. Bailouts cannot.
What the public needs are current policemen and current firemen, not retired policemen and retired firemen, much less bureaucrats retired on inflated pensions.
The political temptation to create extravagant pensions is always there, not only at state and local levels, or at the federal level, but in countries around the world. Why? Because pensions are benefits that can be promised for the future, without raising the money to pay for them.
Politicians get the votes of those to whom pensions are promised, without losing the votes of taxpayers-- and they leave it up to future government officials to figure out what to do when the money is just not there. It is a sure-fire guarantee of political irresponsibility.
All of this works politically only so long as the voting public accepts budget crisis rhetoric at face value, without bothering to stop and think about what it means and implies.
Budget Crisis Rhetoric: Part II
By Thomas Sowell
We all know not to take politicians' rhetoric at face value. But not enough of us have yet learned not to take media rhetoric at face value either, even when it appears in what looks like a "news" story, but is actually a disguised editorial on the front page.
For example, a front page story in the January 14th issue of the San Francisco Chronicle began: "From Eureka's waterfront to San Diego's Gaslamp Quarter, California's redevelopment program has transformed polluted and blighted areas across the state into thriving destination spots and commercial districts for nearly 60 years."
This reads like a commercial for something-- and it is. It is a political commercial for continuing to spend taxpayer money on California's "redevelopment" programs costing billions of dollars, despite a budget crisis brought on by a record-breaking state deficit.
An accompanying "news" story on an inside page of the same newspaper has a headline that says: "Cut is a Threat to Affordable Housing in S.F." The opening sentence says: "San Francisco has built thousands of affordable housing units thanks to redevelopment funds, which Gov. Jerry Brown wants to eliminate."
The idea of "affordable housing" in San Francisco is a joke-- a very bad joke. This same newspaper, just a few years ago, mentioned a graduate student looking for a place to rent in San Francisco, who was "visiting one exorbitantly priced hovel after another."
Massive government intervention has made San Francisco one of the most expensive housing markets in the country. Creating token amounts of taxpayer-subsidized "affordable housing" does not undo the over-all damage that politicians have done by their severe restrictions on building.
Before the era of massive government interventions in the housing markets, beginning in the 1970s, San Francisco housing cost about the same as housing elsewhere in the country. After the environmentalists and others pushed for heavy-handed government restrictions on building anything anywhere, San Francisco housing prices rose to become more than triple the national average.
As for "redevelopment" and its alleged benefits, you can make almost anything look like a big success just by pouring enough of the taxpayers' money down a bottomless pit.
Subsidizing one particular location can indeed improve that particular location. Who could have doubted it? You could air-condition Hell if you spent enough money.
I have seen bananas growing in the Bronx, subsidized by the taxpayers' money. They were probably the most expensive bananas ever grown, because the Bronx is not a place where anyone would grow bananas to sell in a competitive market.
If "blighted" areas could be turned into showcase shopping malls or industrial parks at a cost that made sense, why would private investors not do it and make money on the deal?
Are investors just not as smart as government bureaucrats? Or is the difference that investors are spending their own money and stand to lose big time if the costs exceed the benefits?
To "redevelopment" agency bureaucrats costs are just things to conceal with lofty rhetoric and creative book-keeping. After all, it is only the taxpayers' money.
Where do all the customers and all the money that they spend come from to create what the San Francisco Chronicle calls "thriving destination spots and commercial districts"? They come from other places.
In other words, we are not talking about creating wealth. We are talking about transferring wealth from one community to another, with no net increase-- and doing so at a cost of billions of tax dollars.
Years ago, John Kenneth Galbraith argued that there was not enough government spending, compared to private spending, because private businesses advertised and the government does not.
Nobel Prizewinning economist George Stigler pointed out that the government advertises all the time-- only it is not called advertising. So-called "news" stories like those in the San Francisco Chronicle repeat the party line of government bureaucrats and serve it up to the public as information, rather than ads.
To read another article by Thomas Sowell, click here.
Posted by Brett at 11:12 AM