Sheila Kennedy: America is being penny wise and pound foolish

Keywords Opinion / Viewpoint
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I am writing this column the weekend before the election. I hope that, by the time it is published, we will know the results and have a better (albeit far from perfect) idea of the sorts of national policies that will be pursued over the next four years.

Even assuming the restoration of more traditional and less corrupt approaches to governance, the victors—at all levels—will be constrained by the prevailing political culture.

At the state level, there’s quite a bit of variance; nationally, that culture has been characterized by a focus on immediate gratification. Congress seems fixated on policies that will be perceived as positive in the “here and now”—policies that will benefit members personally when the next election rolls around. We can see the result in such actions as huge subsidies for fossil fuels (despite their environmental impact) and neglect of infrastructure (let the next guy worry about the highways, bridges and national electrical grid).

Long term, as the political saying goes, is until the next election.

The pandemic presents us with an urgent challenge to this national inability to connect the dots, to recognize that enlightened self-interest must be defined long term. Nowhere is this challenge more dire than in America’s cities and states, where tax revenues are in the toilet.

Local governments depend heavily on sales taxes, but people have dramatically curtailed outings to restaurants and other establishments. Americans aren’t spending as usual—which means they aren’t generating sales taxes. (Transit authorities are facing similar problems.) Businesses are hurting badly, translating into lower income taxes in jurisdictions that impose them. Declining income is forcing local governments to curtail vital services, lay off employees and postpone critical infrastructure repairs.

As Ryan Cooper pointed out in a recent article in The Week, the federal government could rescue states, cities and transit authorities with only a small fraction of the money it has spent on rescuing businesses and individuals so far. That would help the national economy by keeping public employees in their jobs and by maintaining those “socialist” public services that everyone relies on to some degree.

As Cooper says, when local governments have to gut their budgets, potholes proliferate, garbage piles up, water mains break, already inadequate transit becomes worse. When state and city workers are laid off, they become part of the unprecedented burden being placed on our already insufficient social safety nets.

Despite Donald Trump’s sneering disinclination to help “mismanaged blue cities,” the current crisis is a result of the pandemic, not incompetent governance. And as Cooper points out, this crisis isn’t limited to Democratic jurisdictions. Wyoming is evidently facing a budget deficit of a quarter-billion dollars, even after making severe cuts to public services. State governments in general are facing budgetary woes that are worse than at any time since the Great Depression.

If the federal government fails to help, we will see the effects for a generation or more. Three hundred and fifty thousand teachers were laid off in September alone. Bus drivers, sanitation workers, DMV clerks, road repair crews, public health nurses, food safety inspectors and thousands of others are truly essential workers; they make the country function.

Liberal and conservative economists alike confirm that austerity during a depression is the definition of insanity. Failure to shore up city and state finances, like failure to pass another pandemic relief bill, will be far more costly long term.

To pursue austerity now would be the epitome of penny wise and pound foolish.•


Kennedy is a professor of law and public policy at the Paul H. O’Neill School of Public and Environmental Affairs at IUPUI.

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One thought on “Sheila Kennedy: America is being penny wise and pound foolish

  1. It may be beneficial for public entities of government to approach current budget decreases like private business and industry approach change. When circumstances change, well managed businesses make unpopular decisions to reduce payroll and all but mission-critical expenditures immediately. Waiting postpones the inevitable and digs a deeper hole. Executives making these decisions understand the impacts on workers and families and while that makes decisions very difficult, they take action as a means of sustaining the organization “in the long term”. Often, new approaches to deliver the work are discovered that are more efficient. Tasks that don’t add value to customer products and services are identified and eliminated. Outsourcing some tasks to companies and individuals that specialize in those tasks often delivers better bang for the buck. In most cases, these companies transition to more efficient and profitable conditions, “in the long term”. Businesses don’t have the luxury of “throwing more money they can print” at decreased budgets when the tough times hit. A term often heard in discussions about business, the environment, and the economy is “sustainability”. Perhaps it is time to discuss “sustainable public services”. The pandemic has reduced liquid fuel consumption and the emissions from the reduced consumption, which has been a benefit to air quality and the atmosphere. Working from home and remote learning have caused many individuals and organizations to reevaluate how to accomplish important outcomes like education. Public education has started this ball rolling. Is it time for other government and public entities to reevaluate the services they provide, and how they are delivered, as well? The traditional approach to “throwing more money at it” is no longer “sustainable”.