Tuesday, April 21, 2009

Big Changes in a Crisis: State and Local Government

Late this past December, I inaugurated what I hoped would be a series of posts discussing some large changes that we could make in various areas of the economy and society, changes that might only be possible in a time of severe crisis. I did not realize it at the time, but the basic idea was captured by Rahm Emanuel, soon to be the chief of staff of the Obama White House, in his pithy observation that "you never want a serious crisis to go to waste." Some interests are so entrenched that our only hope for ever dislodging them is to ride the wave of an era-defining change in attitudes and expectations.

After my initial promise to write that series of posts, I wrote one post in which I discussed changing the automobile industry in the United States to be more environmentally responsible and customer-friendly. I then let the "big changes in a crisis" series lapse, in part because of the whirl of news and events surrounding the new administration, but also in large measure because it seemed that the Obama administration was taking to heart Emanuel's suggestion to think big. If anything, in fact, President Obama has been criticized for thinking too big about too many things, criticism that might tend to prove that the current crisis is not so severe as to have shaken loose the do-nothing tendencies in the political culture. Even some of his medium-sized (but very good) ideas, such as his plan to limit the tax deductibility of various items for higher-income taxpayers (which I discussed here and here), have already been beaten into submission.

Moreover, there are some big ideas that become less desirable (or politically plausible) during a big crisis. My strong preference that the country move away from home ownership and toward stable rentals of both apartments and houses (discussed here and in posts linked therein) is rightly not on the table, given that the collapse of home-building is one of the major reasons that the economy tanked last year and that there is no plausible substitute for a rebound in the housing industry as a necessary part of bringing the economy back to health. (Disclosure: My mother's father and brother were home builders, so I was partly reared on concrete blocks and 2x4's.) Changing the mix of owning and renting is an important project that could bring major benefits to middle-income families, but this must be a slow process that begins during relative prosperity.

Even so, it continues to be important to think about what can be done during a time that uniquely calls out for big thinking. In a guest editorial in yesterday's New York Times, the journalist Tom Brokaw suggests that it is time to re-think the number and organization of sub-state governments. (Brokaw is no more qualified to opine on this subject than any reasonably well-informed person, but why question the parentage of a good idea?) Brokaw suggests, in a nutshell, that there are simply too many county and municipal governments and school districts in this country and that it is time to combine them in a way that could save huge amounts of money. (He does not offer any numbers regarding plausible savings, and I would welcome comments pointing toward any estimates that have been made along these lines.) Doing so now might be possible because the states are having even more severe financial shortfalls than they usually face during an economic downturn, so that the same legislators who are reconsidering their previous embrace of get-tough prison expansions -- and even the death penalty -- on financial grounds might finally decide that it makes no sense to keep so many small-town mayors, police chiefs, and school superintendants on the job.

The problem of too many local governments is a classic example of simple institutional inertia. As the country grew, towns sprouted, and local governance was the norm. Brokaw talks about Iowa's 99 counties and the absurdity of the regional university system in his native South Dakota. Growing up in Ohio, I knew that there were 88 counties, most of which were less populated than my high school home room. When I lived in New Jersey several years ago, one of the most perplexing questions was why the state was continually in a budgetary crisis even while it was the most heavily taxed state in the country (and even while its highly educated and wealthy population should have been able to easily outweigh its urban poor in a budgetary sense).

True, New Jersey is legendary in its tales (and reality) of political corruption; but other states have plenty of corruption as well. What makes New Jersey's government more expensive to run than, say, Illinois' or Texas' or New York's? One explanation was that New Jersey supports more local governments and school districts than any other state. Even after living there for a couple of years, I was constantly amazed to discover on a very regular basis yet another town nearby of which I had never been aware. It was something of a miracle that my town, South Orange, shared a high school with its neighbor Maplewood, since there seemed to be a state-wide allergy to combining any local services.

Brokaw points out that New York State not only has its own version of this problem but that a bipartisan commission has already offered a list of suggestions to modernize sub-state governance and thus to both save money and rationalize an absurdly scattered and inefficient system. Given that New York is one of the states with an especially acute fiscal crisis (driven by its dependence on the financial sector, which is obviously one of the most depressed parts of the U.S. economy), one would think that politicians there would be especially open to big changes that could save money. Yet the commission's recommendations apparently have little chance of being adopted.

Why would this be so? One possibility is that state-level politicians were once local politicians, which inclines them toward protecting their roots and the friends they left behind. There ought to be at least some element, however, of embarrassment and contempt among those who have "made it big" for their grimy past, which might counterbalance the desire to preserve the old ways with a desire to prove that one is now above all that. A more likely explanation is that state-level office is not far enough away from the local and county levels to allow state legislatures to act independently. The same people who keep a state legislator in office have interests in county commissions and town councils. (Another explanation is that one should not cut jobs, even duplicative local government jobs, during a recession. That, however, is a reason to phase out the jobs, not an excuse to do nothing.)

This should not be a reason to despair. Any political system, public or private, is going to be filled with people who resist change. (See any law school faculty.) The longer this crisis continues, the more hope there is that it will result in at least some reform in our wasteful and antiquated systems of local government. That is not a reason to cheer on the economic decline, of course, but it gives us one more way to direct our energies toward improving our society going forward.

-- Posted by Neil H. Buchanan


egarber said...

A couple of random thoughts:

1. If you eliminate closer-to-home offices, might that not possibly have a negative effect on organic civic involvement? In other words, if my only option for public service is an upper tier position, that might deter me from taking part at all -- vs. having the opportunity to be elected as a small town mayor.

2. Because of (1), is there not a risk that such a plan might dilute the democracy component of representative government, making everything more like a "Senate" than a "House"?

Of course, these concerns might not be compelling enough to avoid such streamlining, but I think they do offer insight into how governmental change comes with unique considerations.

Go Hawks...

Neil H. Buchanan said...

egarber raises an interesting point that ultimately is about the optimal structure of government. That is, if we were to take his concern seriously, we might end up concluding that we need to have even more and smaller localities within each state to increase the number of grass-roots activists who might one day become state legislators and members of Congress. That is, we don't know whether we're currently doing too much or too little in the way of nurturing future officeholders.

Just as a thought experiment, imagine that we cut precisely in half the number of localities and counties in the country. Then imagine halving the number again. Iowa still has 25 counties, Ohio has 22, and New York has 17. Rhinebeck, NY (pop. 2800) now is part of a local government of a town with pop. 10,000 or so. It's true that we have only 1/4 as many small town mayors, but does that dilute the desire to participate? I don't know, but I feel comfortable saying that we're currently too high rather than too low on the number of local offices.

The pre-elective career of the current President suggests that there are plenty of local ways to provide local public service that would not be affected by the elimination of tens of thousands of city council positions (as well as assistant school superintendants).

Chris Palermo said...

It seems to me that there are two different issues raised by the proposition of consolidating local governments.

The first issue is how to address the inefficiencies of identical programs duplicated by many small, local governments.

If you consider that many financial inefficiencies created by the duplication of services are the result of state mandates, two possible solutions come to mind. First, the state could consolidate local governments, thereby eliminating the number of duplications, making the delivery of mandated services somewhat more efficient to the extent that consolidation occurs. Alternatively, the state could decide that when a particular function or service is important enough to be provided state-wide, at state-mandated levels, the state itself should be the government to initiate, fund, and manage that particular program or service.

County jails are a good example. In New York, each county is required to operate and maintain a jail. Yet in so mandating, the state regulates almost every aspect of how a jail is to be run. In this case, it makes far more sense for the state to step in, assume the responsibility for operating jails state-wide, and provide one central point of administration. This is doubly true when you consider that the state already operates the state prison system.

Of course, you could consolidate every four counties into one. Yet this still doesn’t eliminate the duplication of providing state mandated jails according to state regulation, but rather only reduces it. It only mitigates the burden of having to provide at the local level what would be more efficiently provided for, and is demanded from the state level.

Other examples of state mandated services at the county level in New York are social services, juvenile detention programs, county courts, district attorneys, assigned counsel programs / public defenders, public health, probation, mental health programs, and education of handicapped children. Each of these programs is duplicated 62 times, in addition to the levels of state government that are necessary to provide oversight of each of the 62 implementations. Whether we consolidate counties at 4:1, 5:1, or 10:1, there would still be unnecessary duplication and added cost when compared to the state implementing those programs on its own.

The second issue raised by consolidation of local governments is to what extent a community has the ability to exercise self-direction in deciding its own character and future. The fact that there are a large number of areas where consolidation of services would eliminate inefficiencies does not equate to a lack of issues best suited to local government. Local matters such as zoning, parks, police protection (beyond the minimum level provided by the state), historical preservation and civic institutions are much better managed locally, according to local needs and resources.

If a village of 500 residents decides it needs a village police officer who works on Friday and Saturday night, and the village residents are willing to pay for it, why shouldn’t they be entitled to make that decision? Isn’t that what self-governance is all about?

By choosing to consolidate local governments, areas with high population densities will gain defacto control over distinctly different and independent communities of lower population. Moreover, this will inevitably diminishing the ability of small communities to self-govern and choose appropriate courses of action based on their unique needs.

What is really needed is smaller local governments, not less of them. Local governments need a way to free themselves from the burden the state has placed on them. Provided that freedom, local governments can do what they do best, govern locally, at a reasonable cost.

The reality is that the elected state officials have a strong interest in satisfying constituents’ demands for services, while at the same time, avoiding responsibility in paying for those demands. It seems counter-intuitive to me to deprive local municipalities of their right to self-governance at the very smallest levels, in exchange for mitigation of the excessive expense incurred for political expediency at the state level.

Odanneyboy said...

I am in the opinion that it should work the opposite as stated. Reduce the power of central government and grant more power to local government.

As stated by egarber civil involvement, closer offices, and to add chosen leadership by fewer voters demands accountability. The federal growth has shown a tendency to entitlement of power thus becoming self serving instead of serving the public as should be. The issues of one community differ from others being circumstances of location, concentration of population, environmental standards. As power becomes more centralized often broad based address of issues may remedy one community but be the cause of problems for another.

The economic downturn is a direct result of mettle from power brokers from the centralized power of government example The Community Investment Act. This looks good, sounds good but forcing sub prime mortgage lenders bad paper creates what we are experiencing as of now.

egarber said...


Whatever one's opinion on home ownership, it's simply not accurate to pin the downturn on the CRA:

1. The bulk of the nasty, toxic subprime lending and securitization was underwritten by entities that fell outside of the law's scope.

2. CRA lending came with strict safeguards to ensure that only reliable loans were made. Of course, the Bush White House went to sleep on enforcement, but that's a reflection of executive incompetence, not the CRA itself.

3. The CRA didn't "force" anybody to make high-risk loans. Again, it came with safeguards that should have resulted in decent-quality securities for the secondary markets.

4. The CRA had nothing to do with the massive failure of ratings agencies to do their job. Of course, they're paid by the very issuers of the securities they rate, so maybe we shouldn't be surprised.

peter.w said...

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