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