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Crumbling Infrastructure and Local Taxation: Asking Voters to ‘Ignore the Blonde’

January 2, 2014

Many older American cities have aging roads, sewers, bridges, dams and other public works commonly called ‘infrastructure’ in public debate.  Local taxes, often in the form of ‘millages’ on property but sometimes assessed on income, pay for infrastructure maintenance in many places; these are often the only taxes that voters have a direct say about. With stagnant real wages since the 1970s and rising levels of taxation (at all levels), inflation and public debt, many voters are wary of entrusting more of their hard-earned money to government, even though local government, composed as it is of their neighbors, is the one closest and most accountable to them. What, then, should citizens ponder when faced with the need for maintenance funding, either as voters and tax-payers or as local officials?

(Budget cutting is a popular choice for many limited government advocates, but smaller communities like the author’s – Charlotte,Michigan – have experienced the whipsaw of declining property values, which means lower tax revenue,along with state revenue-sharing cuts, even as inflation and pension-related legacy costs have risen.  The easy cuts were made years ago; in our case,60% of the municipal budget pays for 16 police officers – enough to man a 24/7operation with no excess,and  five firemen to anchor a volunteer department.  Add the public works department – the folks who,among other things, repair the roads, and you’re up around 80%; the city manager, treasurer, city clerk and assistant, a downtown development authority director plus a shared secretary account for most of the rest.  City employees make an average of $47,700 a year, their salaries are fairly modest and cutting them further than they have already been would cause hardship and possibly an exodus of those able to leave.  A city like ours would have to eliminate retiree benefits and run a bare-bones operation incapable of anything but basic day-to-day operations to achieve significant additional savings to devote to street repair; thus the focus of this study is on raising additional revenue.)

Tullock (1959) asserted that one of the problems of voting behavior was the tendency of majority voting systems to favor those who vote in their own narrow self-interest, in coalition with others who do the same, in a process that he termed ‘log-rolling’ or the trading of votes for what favors one for that which favors another, to the detriment of others who display greater, more disinterested public felicity, whom Tullock termed ‘Kantian’ voters.

Since most people, including those who hold office, elective or otherwise, in government, act in what they perceive to be their own interest, sub-optimal policy outcomes are not only a possibility, but a near certainty in situations where decisions are made, directly or through elected representatives, by majority voting.  Majorities form to benefit themselves at the expense of all community members, and as their interest in maintaining their peculiar advantage generally outweighs that of any individual who does not so benefit, they can easily band together to maintain their privileges by direct opposition to attempts to roll them back, or by banding together with other interest groups to trade support for the rents that  each collects from the general population.

In terms of road funding, while contractors benefit from construction activity, their numbers, at the small-town level, will be dwarfed by those who prefer to use a public good – the streets – without having to pay for them. Tullock’s theory would predict that those who are asked to pay taxes for road maintenance might conclude that their tax payments would exceed their estimation of the benefits they would derive from better roads and therefore would vote to oppose funding repairs, at least for so long as the roads were drivable.

Regan (1989) examined the problems of infrastructure maintenance and identified two tendencies that worked against rational policy-making.  The first is, ‘Cut the ribbon and run,’ where the positive press generated by new public works motivates their construction, but regular maintenance does not.  The second problem is the existence of, in a typical municipal setting, two budgets: a general fund and a capital budget.  The former pays for current expenses out of tax revenue while the latter is often bond-funded, with costs deferred over a period of years but with the borrowed money available for immediate use.  This creates a scenario where maintenance is deferred and where there is more motivation among policy-makers to replace aging and under-maintained infrastructure with new public works, generating the ‘ribbon-cutting’ moments prized by politicians.  Thus, it makes political, but not economic sense, to let infrastructure decay and be replaced before its normal service-life would otherwise dictate instead of prolonging its’ existence through regular maintenance, as these same political leaders might be expected to do with their homes and other personal possessions.

Regan argues (p. 184) that an explicit covenant be included whenever the full faith and credit of the public is put behind a bond issue intended to fund infrastructure: Funding for regular maintenance should be mandated, so that bond-holders have better assurance that their interest and principal will be repaid from the revenues generated by the public works they financed and that the tax-payers only have to pay of infrastructure once over its expected service life. The major downside to this approach, according to Regan (p. 185) is that non-discretionary budget items lessen public officials’ freedom of action, and thus their accountability.  The existence of multiple, significant non-discretionary line items may lead to greater ills than deferred maintenance does, at least in the short term. Regan’s proposed solution, based on New York City’s charter reforms of the late 1980s, is to require a multi-year capital maintenance plan, with specific responsibility for each piece of infrastructure assigned to the appropriate agency, and a price tag for maintenance calculated by professionals from the field of work in question. This process would allow for open discussions and decisions to be made, and if funds available for all uses do not rise to the level necessary to pay for them, then a decision to cut maintenance, as ‘the lesser of two evils,’ would be made with complete foreknowledge of what that means for the future.

Public Sector Failure

The late James Buchanan, the co-author of Public Choice Theory use the term ’public sector failure’ to describe situations where sub-optimal outcomes occur as a result of the operation of the political process.

Alternative scenarios to this involve voters acting with something akin to ‘enlightened self-interest,’ which requires an initial act of trust and altruism that they expect to be reciprocated by others.  Or, to borrow dialogue from a scene from the movie A Beautiful Mind where several college students gathered at a local bar are admiring a beautiful blonde woman, collective benefits can derive if everyone will cooperate and ‘ignore the blonde:

If we all go for the blonde and block each other, not a single one of us is going to get her. So then we go for her

friends, but they will all give us the cold shoulder because no one likes to be second choice. But what if none of us

goes for the blonde? We won’t get in each other’s way and we won’t insult the other girls. It’s the only way to win.

(Source: http://www.imdb.com/title/tt0268978/quotes)

Ground Truthing the Theories:

‘Ground Truth’ is a military colloquialism for knowing what is actually happening as opposed to what is reported in intelligence estimates.  The term is similar in meaning to what one finds when a variant of it is used in social sciences.

Glaser and Strauss (1967) formulated an inductive method of social science research the termed ‘ground truthing.’ The concept is, simply, that, validating data from physical observation and measurement helps to support or call into question what modeling based on samples and statistical processing purports to be reality. Aaron Strauss (2009) developed their theory further and applied it specifically to voter perceptions of candidate statements during elections.  He argued that voters validate those campaign statements on topics with which they are familiar against their own experience, effectively ‘ground truthing’ them as they weigh their choices.

What Strauss’s research suggests aligns with both experience and common sense:  Voters are more likely to support proposals for projects they have some knowledge of and whose reasonableness is evident.  That does not mean that asking for money will become easier, only that the chances of success in getting  voters to ‘ignore the blonde’ and accept loss of income likely in excess of their individual benefit from the infrastructure it funds increases with the clarity and simplicity of the proposal being made.  If we intend to continue expecting a quality of life that good infrastructure supports, absent an economic boom, then local leaders will have to convince people that the decay they see will be mended by the proposals they are asked to approve, even at the risk of being unpopular for doing so.

Sources:

Buchanan, James. (1962) The calculus of consent. Liberty Fund, Inc. Indianapolis, IN.

Crawley, Western Australia. Regan, Edward. (1989) Holding government officials accountable  

     for infrastructure  maintenance.

Proceedings of the Academy of Political Science, Vol. 37, No. 3: Restructuring the New York City

Government: The Reemergence of Municipal Reform.

Strauss, Aaron. (2009)  Political ground truth: how personal issue experience counters partisan

     bias. Princeton University doctoral dissertation. Princeton, N.J.

Tullock, Gordon.  (1959) Problems of majority voting.  Journal of Political Economy, vol. 67,

no. 6 (Dec.)

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