July 24, 2013
As originally published in the New Hampshire Union Leader
The hardest thing for any government to do is to pay attention to the long term. The system creates incentives for politicians to focus on short term solutions and ignore long term outlooks. The inability to look beyond this morning’s political fight defines the dysfunctional entity that passes for a federal government but has also crept into our state politics as well.
Policy is made by elected officials, usually in two year increments. Whether the particular elected official serves for just two years or longer, he or she is nonetheless focused on the next biennial election. Things that will turn out beneficial five or six years from now are of less interest.
The federal budget is case study in short term thinking. Every federally elected official believes that the United States should balance its budget. But there is no actual requirement to balance the budget so they don’t. As a result the country’s debt has grown every year since 1957 — growing from $5.8 trillion to $16.9 trillion just in the last twelve years.
Automatic spending reductions were enacted because no elected officials could possibly withstand the electoral onslaught of any reduction in the growth of spending. Mind you, the reduced increases (or automatic cuts depending on your perspective) wouldn’t come anywhere close to balancing the budget. Nonetheless they were portrayed as draconian austerity which no politician could withstand.
The benefits of balancing the budget would accrue over time as they kept us from a fate similar to some European nations whose fiscal house has collapsed. That sort of benefit is long term and subtle. The pain of even the smallest reductions is considered too much to openly advocate. So an automatic reduction is crafted that politicians can all be annoyed with but that does their job for them.
At the state level, we don’t have any such option. The federal politicians are incapable of balancing the budget because they don’t have to. At the state level, we have to. We may not shrug our shoulders and run a deficit. The budget must balance. But even in that construct, some decisions are passed off.
An example of what we can’t avoid was the 2011 state budget. One elected official explained to me “we spent every dime had. We just didn’t spend any we didn’t have.”
Whatever cuts were made, were dictated not by a policy choice but budget necessity. There was an argument over whether revenue projections were set high enough (the final budget was as close to spot on as they come). However, once that number was determined every dime was spent and no more.
Previous budgets had been at higher levels through the introduction of borrowing and two federal bailout programs for state budgets. Those sources were gone and the budget had to come back to reality. Many politicians knew they would be politically attacked for it and they were. But the new balance formed the basis of the next budget too.
There are two areas, though, were the incentives don’t align: state debt and infrastructure.
The state’s debt skyrocketed in the period from 2007-2011 after having been steady for more than a decade under governors of both parties. The debt explosion saw the state’s debt climb from $654 million to $939 million in just four years. New Hampshire’s debt is still good by national standards and the growth has slowed since. But it was easier for some politicians to borrow money than to not spend it. New Hampshire should guard against that Washington mentality.
Transportation spending is also an incentive problem. In general terms, we don’t raise enough money to pay for maintaining the current system of roads. Pavement conditions deteriorate more and more each year (replacing costs a lot more than maintaining) and our bridges were rated 41st worst in the country by the libertarian Reason Foundation.
Gas tax receipts are almost identical to what they were 10 years ago before adjusting for inflation even though spending increased 72%. Gimmicks have made up the difference – the turnpike paid $100 million to the highway fund for a few miles of highway and accelerated the payments over a few years. In addition, a temporary and regressive motor vehicle surcharge plus a one-time federal stimulus grant plugged holes temporarily.
The difficulty is that bridges last 75 to 100 years and no one can campaign on “we completed routine maintenance that will extend the bridge’s life to 2040.” It benefits some guy running 30 years from now but does nothing for me.
Sound fiscal management is boring and boring doesn’t win elections. I wish it did.