If We Were a Rich Town

I used to wonder why government was so dysfunctional.  Over the last two years, I figured out a large part of the reason.

But, to back up.  In the Old Days, I happily ignored town politics.  I live in Granby, a town with a population of 6000.  It’s an old farming town.  Our house is an old farmhouse.  In other words, the town in which I live is absolutely nothing like the California suburbs in which I grew up.  I knew there were all sorts of political discussions in my new home town, but I didn’t really care.  As George Will once noted, one of the many amazing things about America is that one is free to ignore politics—after all, the issues in small-town American politics are hardly the stuff of Great Moral and Political clashes.  Janet used to tell me I should be involved in Town Politics.  I am not sure why she used to tell me this: on the one hand, as she rightfully noted, I am an economist and I do know a lot about government finance, but on the other hand, Janet always thinks I am wrong about everything (“a prophet is without honor in his own hometown” and all that). 

About two years ago, Janet won out.  I joined the Finance Committee in town.  That is the committee in charge of putting together the town budget and offering advice to the town on financial matters.  All in all, it is a committee right up my alley.  I figured it would be pleasant enough—I could offer advice if anyone cared, and life would go on.

Nobody wants my advice as it turns out.  That’s fine; I am a college professor after all, so I am well used to talking and having nobody pay any attention.  But, I have learned something along the way.  Our little town of Granby has an utterly absurd manner of deciding how to spend tax revenue.  There are constant demands to spend more on this or that item, and few people feel the need to actually justify why money should be spent on this or that item.  The problem is fundamental and runs deep in the town.  The problem is, as it turns out, is not actually a difference of opinion about how to spend money, nor is it an ideological clash, nor is it anything else I would have thought.  Instead, the fundamental problem with government, at least the small-town variant, is (drum roll, please):

People don’t understand budget constraints.

Seriously, and surprisingly, the simple idea that a town like Granby has a fixed amount of money it can spend and thus if it spends more in one area, it necessarily has to spend less elsewhere is an idea that I have realized people really and truly cannot comprehend.  And if you can’t comprehend the idea of a fixed maximum spending amount, then you can’t comprehend the idea of trade-offs.  We have for example a member of the Board of Selectmen who argues 1) spending more on school buildings in the top priority in town so we should spend tens of millions more on that, 2) fixing up town hall is the top priority in town so we should spend a few million more on that, and 3) we should really spend a million on our top priority of building a new library.  Now, what interests me here is that there is no way our small town can raise that sort of revenue, so it is literally impossible to spend that much—and yet everything is the top priority.  Then I found out last night that this same member of the Board of Selectmen is proposing 1) hiring another full time government employee (a “planner” at $60K per year—don’t ask me what a “planner” is; I have no idea) and 2) hiring some high school graduate to “put stuff on the web page” (because, as you know, putting something on an a web page is really, really hard, so we need to hire someone to do it rather than, you know, learning how to do it yourself.  (I am thinking that I should probably hire someone to put my ruminations on web for me since this is apparently harder than I thought.))  And, as you would suspect, the list of new things on which to spend money doesn’t end there.

In the last two years, I have run into people exactly like this in town on a regular basis.  I was quite shocked at first, but I have become used to the idea that many of the people with whom I am talking do not understand the idea that there is not unlimited amounts of money to be spent and thus the town needs to make choices about how to spend what funds it does have.  Why is this idea so hard to understand?  (And don’t get me started on how long it took to convince people in town that the Town was not going to be able to borrow large sums of money at a 0% interest rate no matter how much we might like it if someone would lend us money without charging interest.)

I suspect the reason people don’t understand budget constraints is because they have subconsciously absorbed the lesson of the rhetoric surrounding federal government spending.  The United States can borrow a lot at very low interest rates, so the federal government can spend more on everything.  But State and especially local governments aren’t like that—and I am beginning to realize that the distinction here is not widely understood. 

And since economists like to name things, I hereby dub this the Tevye Syndrome of Local Government.

So, anyway, I have another year in my term on the Finance Committee, offering advice to nobody in particular.  I have no idea if I would accept another term on the Finance Committee.  I don’t have any illusion that my presence on this committee is having any effect whatsoever, but it’s amusing in its own way.  But, then again, I am easily amused.