Strategic Planning vs. Credit Card Government

The gargantuan deficits coupled with massive tax cuts tend to show that Jonathan Chait at the New Republic is right when he recalls a 1964 psychological study that suggested,

“Americans are ideological conservatives and operational liberals. Everybody's for less spending and regulation in the abstract. When you try to translate that into specifics--say, lower Medicare benefits or looser standards on pollution--voters run screaming in the other direction.”

This phenomenon is further backed up by William Niskanen’s work at the Cato institute. In two papers from 2002 and 2004, he stated that “Starve the Beast” fiscal policy- that is cutting tax revenues in order to force a reduction in programs due to deficits – does not work because conservatives don't have the political will to cut programs.

In a nation saturated with credit card debt and zero-principal mortgages, our approval of government that spends more than it takes in should not be surprising. The consequences of individuals’ desire to “have it now but not have to pay for it” are bad enough – millions of people get in over their heads with debt and face bankruptcy and the emotional stress that comes with it.

But these consequences pale in comparison to what could happen if we continue to apply this same attitude to government. We have a local example here in Milwaukee, as the County careens towards insolvency thanks to exorbitant long-term fringe benefit costs. Daily the public is bombarded with stories about how it is going to lose access to pools, cultural amenities, 911 service, and who-knows-what-else-is-next. Worse, our federal government faces the same problem. As Washington Post columnist C. Fred Bergsten points out on Monday , our federal fiscal situation is close to being Milwaukee County magnified a few hundred times. The difference of course is that Milwaukee County’s insolvency probably would have little effect on anyone not reliant on its services; while the federal government going insolvent would have ruinous effects on our economy.

A movement is underway in public-sector budgeting, however, that just might pull governments back from the brink. It involves coupling taxing and spending with strategic planning.

It works much like strategic planning in the private sector, but instead of income growth the goal is practical and sustainable use of taxpayer resources. In the hands of intrepid and dedicated politicians and public administrators, it has the opportunity to give the public the ability to – maybe for the first time – have a real debate where it will decide which government services it wants and how to pay for them.

The short story on how it works is this: Elected officials poll the public to determine which service areas it thinks are most important. They then determine, based on current political dynamics, how much tax revenue they think they want to raise. If they are fiscally conservative, they will keep tax revenue increases low or perhaps cut revenues. If they are liberal, they may propose significant increases. Next, the elected officials determine how much each program and service in their government will cost to provide. Once this information has been estimated as accurately as possible, it becomes an exercise in shopping. With X number of dollars available, the elected officials can choose which services they will fund based on their estimated costs, prioritized according to the polling information gathered. Really thoughtful officials will seek to provide high-priority services as efficiently as possible, because reduced costs for higher priority programs means more resources remain for lower-priority services.

This system is not easy to implement. Obviously low-cost should not be the primary criteria for choosing how a high-priority service will be provided. The Governor for instance would find himself in the unemployment line for replacing State Patrol officers with a rented security force. This process will also create winners and losers: lower-priority programs will see their funding reduced or eliminated altogether, while higher-priority programs could receive a greater share of resources than they already get.

The good news is that the public knows what it is going to get with its money. A good budget will explicitly and simply inform the electorate how their money is being spent. Elected officials in passing a budget will make clear to the public what their priorities are. In a County Government that may mean choosing to fund the Sheriff and Human Services over parks and recreation.

This gives the public an opportunity to demand reprioritization either in next year’s polling or in next year’s elections. If the elected officials are too stingy and don’t fully fund the public’s priorities, or likewise if the elected officials choose to fund too many low-priority programs with too much tax money, the public has the opportunity to make that very clear come election time.

Naturally government acceptance of strategic budgeting is going to be slow. Unions and fans of social spending will be loathe to adopt this process if their programs are deemed low-priority by the public and subsequently funded appropriately. Constituent groups will apply pressure to keep the flow of resources going. Turf battles will become more intense.

If successful however, widespread and competent acceptance of these principles can hopefully make the public’s choice between taxes and services an easier one. It is then up to the electorate to finally accept that they have to pay for what they want.