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Spending cuts are more ‘empowering’
As the effects of the economic recession on tax revenues linger, one ought to wonder when state and local government will feel the squeeze enough to take actions that reduce the growth rate of spending over the long term.
Cutting spending through stopgap measures while awaiting an upturn in tax revenues is clearly necessary, but is it sufficient to avoid having spending outpace revenues once the recovery takes hold?
As several of our government bodies search for ways to expand our local economy, they sometimes seem to be grasping at straws in their efforts to do something for economic development.
Attempting to put in place things like a “community empowerment zone” in Port Orchard to lure businesses once the economy is expanding again is a good idea, but a similar zone in Bremerton seems not to have made any significant difference even in good times.
Trying to find a way to use a federal grant that requires matching funds from Port of Bremerton taxpayers may likewise be a good idea, but building on speculation has a potential for return on investment, not a promise.
Guaranteeing a loan to a startup business wanting to locate in North Kitsap may be a good thing for the county to do, but again the potential for success is speculative.
Of course, having more businesses and therefore more jobs for our residents would be good, not only for the effect on our standard of living but for the tax revenue that would help pay for government.
Trouble is, paying for government activities seems to require a bigger share of the income generated in the private sector whether the economy is growing or not.
Once spending in the public sector ramps up during good times, cutting back during lean times faces enormous resistance.
There is probably little we can do about this ratcheting effect of spending increases that face little resistance and spending reductions that come only when there is no other choice.
Naturally, the other choice instead of spending cuts is either to raise taxes or to borrow — or both. The federal “stimulus” funding was in part an instance of borrowing to provide funds for state and local spending.
Just as the business cycle of growth and recession is beyond our control, eliminating the upward ratcheting of government spending is probably not possible.
But there is another part of government spending that may be controllable in good times or bad — the increases in total compensation paid to government employees.
This aspect of spending growth isn’t the same as the increases in numbers of public sector employees when new programs are created or old programs are expanded.
New or expanded programs that increase spending through hiring more government employees are part of the upward ratcheting effect. If it sounds good, the new spending is approved with little or no resistance when funding is available.
Increased compensation from wage and salary hikes, pensions, and health insurance premiums paid by the government employer occurs whether or not the number of employees goes up.
And, total compensation can only increase faster than revenues over the long term if greater productivity leads to fewer employees.
When was the last time you heard of greater productivity and efficiency in the public sector that reduced the need for more employees? It happens, but apparently not often enough.
Since employee compensation is by far the biggest part of the budget for state and local governments, keeping the increases in balance with revenues over the long term is essential.
Otherwise, tax increases have to cover the rising costs.
At one time, the common understanding was that public sector compensation would often be lower than in the private sector, but there would be greater certainty that current income and future benefits would be secure.
If this is no longer the case — and it seems not to be — then taxpayers and their public sector employees need to figure out where to go from here.
In the absence of a balance between compensation increases and revenue, we may get the “smaller government” some people say they want, but only because it’s all we can afford.
Bob Meadows is a Port Orchard resident.