The way governments write budgets doesn’t work well, and it works especially badly in bad economic times. Here’s a better approach: Don’t make “cuts” -- decide what to fund, and fund it.The problem. First, let’s think about the traditional approach. The budget office creates a “baseline” budget – what will it cost to do next year what we did this year? (Hint: it always costs more.) Then, the budget office compares the baseline to the money that is expected to come in, and tries to fill the hole. There are only two ways to fill the hole: cut things out, or get more money (that is, raise taxes.)
Even Gov. Strickland realizes that raising taxes in a recession is political and economic suicide, and he has vowed not to do it. So, the chief executive typically tells department heads to find things that can be trimmed in their budgets. They shave a little here and a little there and go on pretty much doing what they’ve always done.
It’s called inertia: the tendency of a thing to continue along in the same direction until acted on by an outside force.
This government inertia assumes that everything it did yesterday must be done again tomorrow. It avoids the central questions of government: What should a government do, and how much of it, and why?
Government, lacking the private sector tool of profit-and-loss for measurement, forgets to ask the question – so they just keep asking for more money, or they cut everything, good and bad alike.
A better way. The CEO – governor, mayor, president – should ask those unasked questions, and decide what the government should do. Prioritize the list. Start at the top and fund the top priority, the move on to the second one.
Now, when you run out of money, ask this question: Is the next thing on the list worth raising taxes? If not, you’re done. If you think the next item is really essential, it’s time to go to the people and tell them why you need the money.
But don’t pay living expenses on the credit card.
There are a lot of details – some government duties are statutory. Maybe it’s time to ask the Legislature to repeal a particular law. More details: Some items in the budget affect others – if you cut the budget to maintain trooper cruisers, you may spend more money to replace the cruisers that wear out earlier.
Such devils-in-the-details don’t change this fundamental issue: every once in a while, you have to ask why your’re doing what you’re doing. It’s a question for Gov. Strickland to ask now.
5 comments:
Would that count if we talked about a government body that wanted to build a multimillion dollar facility while other departments couldn't get AA batteries for their government issued property needed to do their jobs? And of course, who would decided what to cut? That could lead us into the next civil war. What a nightmare that could be. Probably why no elected official would want to be with in 100 miles of such discussions.
Dave,
"More details: Some items in the budget affect others – if you cut the budget to maintain trooper cruisers, you may spend more money to replace the cruisers that wear out earlier."
This example should be filtered through what Ludwig von Mises of the Austrian school of economics (think Ron Paul) proved almost 100 years ago: socialism cannot work since no one can calculate means or ends.
The above equation cannot be solved since there are no real market prices for the governmental activities noted.
Think public schools: where should the marginal increase be applied? Smaller classes? More foreign language offerings? Higher paid administrators? Etc.
Without a market -- without understanding the desires of folks willing to spend their own dollars -- no one can provide an answer.
So, the answer is always more of everything as the schools specific provide benefits to groups of constituents in return for votes at the polls -- insight from the Public Choice school of economics.
In the end the solution is this: reduce government and allow the citizens to provide for their own needs and wants.
The citizens really aren't bad folks, you know.
Jim:
The reason we have government is we tried anarchy. There are a limited number of things government should do - provide public order and common defense, for example.
These things tend to not have markets. The State has, and should have, a monopoly on the legal use of violence. Do we want to have competing police companies out there with arrest powers? Yet without both information and competition, there is no market.
Where there is no market, choices still must be made. Not choosing is still a choice. Those choices get made by elected officers.
Von Mises would have approved of the central point of this original post: Budgeteers must ask, What is government doing, and why is it doing it? His answer would be that where there is an existing market, government should stay out -- and he would have agreed with you on education.
Ron Paul should be highly complimented that you compared him to one of the great economic thinkers.
Dave
Dave,
"There are a limited number of things government should do - provide public order and common defense, for example.
These things tend to not have markets."
Tell that to Blackwater. Seems the US government considers it a market solution to police and security.
Mises would not have read through the list of governmental activities versus the available tax revenue in a "let's see what we can fund" exercise.
Mises, when asked what his first action would be if elected president, responded, "Abdicate."
You missed the essence of Mises, and you ignored the fact that there are market solutions for every governmental activity.
With government, we substitute the wants and desires of the (say) school board and administration for the wants and desires of everyone else.
In my lifetime. Paul has been one of the very few elected officials to embrace the ideas of Mises.
note: By the way, I do not necessary disagree with your order and defense comment. But, a statement that implies the market cannot provide for order and defense is false. As I say, I feel safer walking the streets of Disneyland after dark than just about any public street.
Hmmm... Jim, I think Blackwater demonstrates my point about why government should and does own a monopoly on the legal use of violence, at least domestically.
If there are market solutions for every government activity, what is the role of government?
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