Stanley
Kurtz's new book, Spreading the
Wealth: How Obama is Robbing the Suburbs to Pay for the Cities describes
political forces closely tied to President Obama who have pursued an agenda to
destroy the suburbs for many years. He expresses concern that a second Obama
term will be marked by an intensification of efforts to destroy the suburbs
through eviscerating their independence thought the imposition of
"regionalism". The threat, however, long predates the Obama
administration and has, at least in some cases, been supported by Republicans
as well as by Democrats.
Smart
Growth
Regionalism
Another,
less well-known anti-suburban strategy is regionalism, to which Kurtz grants
considerable attention. Regionalism includes two principal strains, local
government amalgamation and metropolitan tax sharing. Both of these strategies
are aimed at transferring tax funding from suburban local governments to larger
core area governments.
Social
welfare and differing income levels are not an issue at this level of
government. Local governments, cities, towns, villages, boroughs and townships,
finance local services principally with their own local taxes.
The programs aimed at social welfare or providing income support are generally
administered and financed at the federal, state or regional (county) level. Any
suggestion that local suburban jurisdictions are subsidized by core local
governments simply reveals a basic unfamiliarity with US municipal finance.
Local
Government Amalgamation
Opponents
of the suburbs have long favored amalgamating local governments (such as
cities, towns, villages, boroughs and townships). There are two principal
justifications. One suggests "economies of scale" --- the idea that
larger local government jurisdictions are more efficient than smaller
governments, and that, as a result, taxpayers will save. The second
justification infers that a larger tax base, including former suburbs, will
make additional money available to former core cities, which are routinely
characterized as having insufficient revenues to pay for their services. Both
rationales are without foundation.
Proponents
of amalgamation incessantly refer to the large number of local governments in
some states, implying that this is less efficient. The late Elinor Ostrum put
that illusion to rest in her acceptance speech for the Nobel Prize in economics
in 2009:
Scholars criticized the number of
government agencies rather than trying to understand why created and how they
performed. Maps showing many governments in a metropolitan area were used as
evidence for the need to consolidate.
The reality is that there is a single measure of
efficiency: spending per capita. Here there is a strong relationship between smaller local
government units and lower taxes and spending. Our review of
local government finances in four states (Pennsylvania, New York, Indiana and Illinois)
indicates that larger local governments tend to be less efficient,
not more. Moreover, the same smaller is more efficient dynamic is evident in
both metropolitan areas as well as outside. "Smaller is better" is
also evident at the national level
Yet
the "bigger is better" faith in local government amalgamation remains
compelling to many from both the Right and Left. Proponents claim
that smaller local governments are obsolete, characterizing them as being from
the horse-and-buggy era. The same logic could be used to eliminate county and
even state governments. However, democracy remains a timeless value. If people
lose control of their governments to special interests (which rarely, if ever,
lobby for less spending), then democracy is lost, though the word will still be
invoked.
Support
of local government amalgamation arises from a misunderstanding of economics,
politics and incentives (or perhaps worse, contempt for citizen control). When
two jurisdictions merge, everything is leveled up, from labor costs to service
levels. The labor contracts, for example, will reflect the wage, benefit and
time off characteristics of the more expensive community, as the
Toronto "megacity" learned to its detriment.
Further,
special interests have more power in larger jurisdictions, not least because
they are needed to finance the election campaigns of elected officials, who
always want to win the next election. They are also far more able to attend
meetings – sending paid representatives – than local groups. This is
particularly true the larger the metropolitan area covered, since meeting are
usually held in the core of urban area not in areas further on the periphery.
This greater influence to organized and well-funded special interests – such as
big real estate developers, environmental groups, public employee unions – and
drains the influence of the local grassroots. The result is that voters have
less influence and that they can lose financial control of larger local
governments. The only economies of scale in larger local government
benefit lobbyists and special interests, not taxpayers or residents.
Regional
Tax Sharing
Usually
stymied by the electorate in their attempts to amalgamate local governments,
regional proponents often make municipal tax sharing a priority. The idea is
that suburban jurisdictions should send some of their tax money to the core
jurisdictions to make up for the claimed financial shortages of older cities.
Yet this ignores the fact, as Figure 1 indicates, that larger jurisdictions
generally spend more per capita already and generally tax more, as our state
reports cited above indicate. Larger jurisdictions also tend to receive more in
state and federal aid per capita. A principal reason is that the labor
costs tend to be materially higher in larger jurisdictions. In addition to
paying well above market employee compensation, many larger jurisdictions have
burdened themselves with pension liabilities and post employment health
benefits that are well above what their constituencies can afford. The
regionalist solution is not to bring core government costs in line with
suburban levels but force the periphery to help subsidize their out of control
costs.
Howard
Husock, of Harvard University's JFK School of Government (now at the Manhattan
Institute) and I were asked to evaluate a tax sharing a plan put
forward by former Albuquerque mayor David Rusk for Kalamazoo County, Michigan (The Kalamazoo
Compact) more than a decade ago. Our report (Keeping Kalamazoo Competitive)found
no justification for the suburban areas and townships of Kalamazoo County to
share their tax bases with the core city of Kalamazoo. The city already spent
substantially more per capita, received more state aid per capita and had
failed to take advantage of opportunities to improve its efficiency (that is,
lower the costs of service without reducing services). We concluded that
the "struggling" core city had a spending problem, not a revenue
problem. To the credit of the electorate of Kalamazoo County, the tax sharing
proposal is gathering dust, having been made impractical by suburban
resistance.
Spreading
the Financial Irresponsibility
The
wanton spending that has gotten many larger core jurisdictions into trouble
should not have occurred. The core cities are often struggling because their
political leadership has "given away the store," behavior that does
not warrant rewarding. Elected officials in the larger jurisdictions had no
business, for example, allowing labor costs to become higher than necessary or
granting rich pension benefits paid for by private sector employees
(taxpayers), most of whom enjoy only much more modest pension
programs, if at all (See note below).
The
voters are no match for the spending interests with more efficient access to
City Hall. The incentives in such larger jurisdictions are skewed against
fiscal responsibility and the interests of taxpayers. Making an even larger
pool of tax revenues available can only make things worse.
At
the same time, the smaller, suburban jurisdictions around the nation are often
the bright spot in an environment of excessive federal, state and larger
municipal government spending. Their governments, close to the people, are the
only defense against the kind of beggar-the-kids-future spending that has
already captured the federal government, state governments and some larger
local jurisdictions.
Either
Way the Threat is Very Real
Even
if President Obama is not re-elected or if a second Obama Administration does
not pursue the anti-suburban agenda, the threat to the suburbs will remain very
real. This is not just about the suburbs, and it is certainly not some secret
conspiracy. What opposing regionalism means is the preservation of what is
often the last vestige of fiscal responsibility. It is not that the elected
officials in smaller jurisdictions are better or that the electorate is
better. The superior performance stems from the reality that smaller governments
are closer to the people, and decision-making tends more to reflect their
interests more faithfully than in a larger jurisdictions.
Note:
A report by the Pew Charitable Trusts (Promises with
a Price) indicated that "... in general, the private
sector never offered the level of benefits that have been traditionally
available in the public sector." The report further indicated that 90
percent of state and local government retirees are covered by the more
expensive defined benefit pension programs, compared to 20 percent in the
private sector. The median annual pension in the state and local government
sector was cited at 130 percent higher than in the private sector. While 82
percent of state and local government retirees are covered by post-employment
medical benefits, the figure is 33 percent in the private sector. According to
the Bureau of Labor Statistics, after
accounting for the one-third higher wages per hour worked among state and local
government workers, employer contribution to retirement and savings is 160
percent higher than in the private sector (March 2012). A just published Pew
Center on the States report (The Widening
Gap Update) indicates that states are $1.3 trillion short of the
funding required to pay the pension and post employment medical benefits of
employees. This does not include programs administered by local governments.
Source:
New Geography, Wendell Cox is a Visiting Professor, Conservatoire National des
Arts et Metiers, Paris and the author of “War on the
Dream: How Anti-Sprawl Policy Threatens the Quality of Life.”
