The looming insolvency of many states and municipalities is getting more and more attention. CBS’ 60 Minutes highlighted the problem Sunday, and everyone concerned about Virginia public policy needs to watch this video.
Needless to say, Virginia is in far better shape than Illinois, New Jersey and California, but it would be foolhardy to think that we are immune from their difficulties. The fact is, we don’t have a good handle on the financial strength of all Virginia’s municipalities and all the independent authorities that have issued debt. We don’t know how much publicly backed debt there is, we don’t know what potential liabilities governments are potentially liable for, and we don’t know how well covered the debt is. We don’t know what impact declining property values will have on municipal revenues, what impact consumer deleveraging will have on sales tax revenues or laggardly economic growth will have on income taxes.
Meanwhile, we face massive cutbacks in federal aid when the “stimulus” package expires, continuing increases in Medicaid spending, and more cuts of unknown magnitude when the newly elected Congress gets serious (or semi-serious) about closing the federal budget gap.
The 50 states, metropolitan regions and municipalities are coming to the end of an the expansionary era that has prevailed since World War II. Spending will be painful to cut. Much of it is baked into the dysfunctional human settlement patterns — scattered, disconnected, low-density — that we have built over the past 60 years. More spending is tied to our dysfunctional, privately-owned-but-highly-regulated health care system, and yet more is tied to our dysfunctional, hyper-bureaucratized public educational system. The days of blindly shoveling more money at roads, schools and health care are over. We cannot afford this madness anymore.
Our major public institutions have evolved as far as they can usefully evolve. They have reached a dead end. Collectively, they are nearing collapse. Virginia has been less profligate than other states, so that foundational truth may not yet be self evident to everyone. But the design flaws in our institutions are endemic — Virginia is only a few years behind the rest.
Government As Usual will not work. We cannot solve our problems by trimming a bit here and there, jacking up taxes and fees but spreading the pain so no one notices, implementing private-sector processes in the search of ephemeral efficiencies, borrowing up to our AAA debt limit, diverting the public’s attention with culture-war issues, and hoping that some economic miracle from source unknown will deliver a revenue windfall from the heavens. No, we must fundamentally re-think the way we deliver and pay for every major public services at the state and municipal level.
Just as we need a new compact between government and citizen at the federal level, we need a new compact at the state, regional and local level. Either we devise the new compact through a deliberative democratic process informed by reasoned debate, or it will be imposed upon us in a panicked crisis mode by remorseless creditors.
