Starving Leviathan

Deficits Can Be an Effective Lever

Don't let a good crisis go to waste. This has been the view of the Obama White House as it used the credit crisis in the US as a pretext for a massive expansion of government spending and record multi-trillion deficits. But the crisis is working in the other direction as well. All over the US at state, municipal and local levels deficits have ballooned--largely due to falling tax revenues, coupled with a legacy of decades of rampant state and local government spending on itself.

Suddenly the cupboard is not only bare, it has been pawned. Now the drive is on to cut, cut, cut. As we would expect the local solutions are diverse and some quite novel. Some cities and towns, according to the NY Times, are giving away surplus public land: they have reasoned that development by the private non-government sector at least offers the prospect of more tax revenue down the track, and in the meantime the maintenance costs for the city go down.

Around the nation, cities and towns facing grim budget circumstances are grasping at unlikely — some would say desperate — means to bolster their shrunken tax bases. Like Beatrice, places like Dayton, Ohio, and Grafton, Ill., are giving away land for nominal fees or for nothing in the hope that it will boost the tax rolls and cut the lawn-mowing bills.

Lesson for New Zealand: stop funding the government via debt. If we don't we will end up selling, or giving away national parks and surplus government land. (This, by the way, would be a good thing. Far too much land has been locked up by the state for minimal return, but we would rather avoid the fiscal debt crisis in the first place.)

Other cities are virtually giving away vacant lots or foreclosed properties. Dayton, Ohio for example:

In Dayton, officials are offering thousands of vacant, foreclosed or abandoned properties under certain conditions for nominal fees — $500, in many cases, to cover the cost of recording fees or $1,200 if the city must initiate tax foreclosure proceedings. The prospect of city savings on mowing fees alone is enormous: each year, Dayton spends $2 million to cut grass on the properties.

Lesson for New Zealand: municipal council taxes and rates could be frozen or reduced by the councils giving away land and buildings which currently are not used and yet cost the ratepayers to maintain. Don't try to sell them: just give them away as long as the transactional costs are covered. It will be better for all of us in the longer term.

In the UK the government is starting to take an allegedly hard look at state funded Non-Government Organizations ("NGO's".) The NGO sector has fed Leviathan on concentrated steriods over the past twenty years. They have been a curse. The idea has been a favorite of modern statism: the government facilitates the establishment of a quasi-independent NGO which then does research and undertakes advocacy in particular areas. Inevitably this state-funded advocacy ends up advocating more and more government spending and involvement.

Most of the advocacy groups operating in New Zealand today are government funding: most relentlessly call for more and more regulation and state expansion. (The Law Commission is a classic example: it has become the leading vehicle for advocating expansions of state powers in the liquor trade. How did that happen, you may ask? How, indeed? Another example is Forest and Bird--which has effectively controlled the Department of Conservation for years.)

Well, in the UK, the "NGO" model is now under the gun. Forthcoming in the Budget will be the biggest spending cuts in the history of the UK government--it is claimed. Questioned in Parliament recently as to which NGO's were "under the cosh" a Conservative is reported to have growled back, "All of them." Let's hope so. Actually, we believe this is the right idea. If the government were to try to "pick losers" amongst NGO's, rather than defunding all of them, it would unleash a chorus of outraged howls of unfair discrimination and of the government devaluing the particular causes being represented in the out-of-favour NGO's. If they are all cut, no-one NGO can claim the government is anti-X, whatever X might be.

Lesson for New Zealand: NGO spending is non-essential and unnecessary. It does not deliver front line government services. It leads to an exponential expansion in government over time.  Cut it now. Starve the beast.