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The Cost of Government

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Richard Clay Wilson, Jr.
July 24, 2015

Taxes are levied to pay for government. But the cost of government is a separate, independent variable. This bears thinking about.

33-12012699330W1FConsider a very simple example: a bridge. There is one very big cost decision to be made about a bridge and that is whether to build it or not. The costs of building and owning a bridge can be modified somewhat, but only within limits. Moreover, it is self-evident that the costs of bridge ownership do not vary in accordance with decisions to raise or lower bridge tolls. The decision that matters the most, and will matter the most as long as a bridge stands, is the original decision to build it.

Countries, like bridges, come with certain costs. Holland, for example, comes with the cost of dikes. Every entity of government comes with a host of costs that are givens. That is, every entity owns the equivalent of many — usually a great many — bridges.

When people come together to create governments, they do so with a resolve to bear these costs. (Think of the independence movement in Scotland, which lost the last election but is determined to keep trying.) They see these costs as good things to be celebrated, not bad things to be avoided. But from time to time, every society will also question its purposes and costs. We are doing this, in a fashion, at every level of government.

The people of Kansas, for example, are engaged in re-thinking what it means to be a state. In Kansas, the salient question is not “What is required to be a viable state?” but “How much in taxes are we willing to pay to the state government?” followed by “Given how much we are willing to pay, what kind of state can we have?” Kansans have decided in successive elections to have a smaller state government than they used to have, but have not decided what that will mean in practice.

Exactly like tolls and the cost of a bridge, the levying of taxes and the underlying costs of government entities are independent of each other. Nevertheless, financial reality often dictates that spending cuts follow tax rate cuts. Quite often the purpose of lowering tax rates is to force spending cuts.

Whether spending cuts actually reduce the long-term costs of government is another matter. It may seem strange, but we don’t know very much about managing the overall costs of government. We cut taxes and spending one entity at a time, with little regard for the impacts on other entities and other levels of government. In truth, we are much better at postponing spending and transferring costs to others than we are at reducing, much less eliminating, underlying and ongoing costs.

We are like bridge owners who decided to stop performing maintenance and repairs with the goal of cutting current spending. We decline to ask whether or not there are real long-term savings to be had, much less how much. Nor do we worry that what we are doing might actually increase future costs.

The plain fact of the matter is that many costs can’t be controlled at all. Other costs appear to be controllable, but in practice prove highly resistant. Think of the complex relationships between education and criminal justice system costs, pollution control and health care costs, transportation spending and transport activity, the cost and economic benefits of civil courts, disaster preparedness and disaster response and recovery. There are thousands of complex examples like these. Government spending is seldom a stand-alone proposition: what is spent or saved here is usually connected to what is spent or saved there. This is true within the federal, state and local levels, and also between and among them. The sum total picture defies understanding.

Consider that there isn’t a family anywhere that controls what it costs to be one. The costs of family reflect accidents, illnesses, weather, longevity and myriad other factors beyond any family’s control. These costs are more complicated than of a bridge, but trace to origin in the same way.

It is a fine thing to imagine that we are in charge of the full range of costs we incur as country, state or community. But it isn’t true. Once we have created those entities, the built-in costs associated with them are more in charge of us than we are of them. This is why it is so urgently important that we identify, and wisely manage, the costs that are within our reach. When we fail to do so, we compound the difficulty of handling the built-in costs, which in turn compounds the difficulty of sustaining country, state and community.

Author: Richard Clay Wilson, Jr. is a retired city manager with 38 years of local government experience. He is the author of the book Rethinking Public Administration: The Case for ManagementEmail: [email protected].

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