Local municipal governments may be hitting a wall when it comes to financing their empires.
We have the curious doings of the Front Royal-Warren County Economic Development Authority and the strangely vacant lot where Goodlatte’s vaunted $10 million IT center was supposed to go.
As a Shenandoah County resident, I have to say, “Thank goodness that’s not our county!”
Of course, Shenandoah County residents and taxpayers know that curious, corrupt and strange happens here, too. Corruption in the ranks of our appointed and elected officials has a long history. With just a few major and powerful business interests in the county, we have plenty of local debates about who is Boss Hogg.
A friend pointed out recently that in the 1970s, '80s and '90s local government seemed to be on autopilot – no real philosophy driving county growth and spending. No major difference between the political parties, our elected officials were just people doing the best they could, trying to keep public scandal and graft to a minimum.
Yet, in the past two decades, public borrowing on top of already accumulated debt (and the major public projects funded by this debt) has grown rapidly at the local level. “Helicopter money” policies from the Federal Reserve created low-interest rates that promote borrowing and penalize saving. It works the same way whether you are on a Town Council or on a Board of Supervisors, or a person looking to purchase a new car or a house. Buy now, pay later makes financial sense when Fed-controlled interest rates are significantly below what the actual market for money would offer.
What we have here may be a simple failure by both taxpayers and bureaucrats to understand how money works, and by extension how the economy works.
The era of “if you build it, they will come” is ending.
School buildings, for example. The student population in Shenandoah County schools today is about the same number we had in the mid-1970s. County population is way up, but many of the folks living here today are second homeowners and retirees, not making as many babies as a few generations ago, and increasingly, not allowing the precious kids they do have to see the inside of a public school building. Yet every school system in the valley has a major building plan, a debt proposal to fund it, and a plan to grow their bureaucracies and expand their services to “bring in” more taxpayers.
In every town and county, we see that the best jobs are government jobs, and the biggest, newest buildings are government buildings. Or like the imaginary ones in Warren County, completely dependent on government subsidies and deals.
Every one of these buildings, and much of the bureaucracy that will occupy them is being funded with debt.
If we could isolate the key difference between the attitude of people in and out of government in the 1970s, '80s and '90s, and today, it would relate directly to their attitude toward money in general, and public money specifically. If you grew up trying to save and feared bank repossession of homes, businesses, and cars, you may have one kind of attitude. If you grew up in (or embraced the logic of) the past 20 years of easy money and “free” debt, you may have another attitude.
As a public servant or elected official, it is this latter perspective that provides the wonderful rationalization for the irresistible urge to grow bureaucracy and bureaucratic power.
This is starting to change, although local politicians will be the last to know. Young folks across the board have seen what easy college money stole from them, their older siblings, cousins, and even parents. Burdened by debt that they never questioned, they are now denied home ownership, the ability to start a family and even to follow their dreams. A “small” tax increase can break their budget, and they know better than to even think about starting a local business.
As interest rates rise, antipathy to local government will rise. Incredulity of their claims on how much they “need” from us will grow. Anger at their habitual waste and poor economic decision-making will grow.
We may laugh at China’s ghost city projects, and we may pity dead and dying towns and cities in the Midwest. Some of us may also recognize that while the public debt gamble may have seemed like a winner, to paraphrase Herb Stein, things that can’t go on forever, don’t.