A Quick Explanation for Pat
I haven’t had a chance to work through my Sunday paper, yet, so I’ll offer no comment on the bulk of that to which Pat is responding in this post, but he does construct a question in such a way as to merit correction. Arguing for increasing taxes and government-induced costs of doing business in Rhode Island, he writes:
Let me ask the business folks reading: is it a successful business model to lower your prices year after year even if your production costs rise each year? I mean, you want to run government like a business, right?
The flaws in these questions are multilayered, but the core error probably comes with Pat’s failure to account for the fact that much of what Rhode Island “produces” — and therefore much of its expenses — is separate from the activities that bring in revenue. Businesses will not relocate to Rhode Island based on its social safety net, for example. As for items of direct utility to businesses and productive residents — such as transportation infrastructure — the insidious tendency of modern government is to treat them as additional to general expenses, with annual bonds and supplemental fees and taxes.
The next most significant error centers on the related implication that the government’s “goods” are limited and distributed in a “one per customer” fashion. If the government is to be seen as a business, most of its products are actually services, and the incremental cost of accommodating an additional customer is minimal. Adding a few cars to a highway’s burden doesn’t affect the cost of maintenance tasks and barely affects the frequency, yet the increased revenue of several new residents working for a productive company is likely to be significant.
In this regard, the state-as-business is more like a movie theater. The costs associated with acquiring the films, maintaining the building, and offering concessions may be going up, but if the owner finds that fewer customers are taking in the flicks, and that those who do come buy less popcorn and soda, every year, increasing the price of tickets is not a very farsighted strategy. Rather, the owner should pare down expenses not related to revenue, streamline excessive costs (e.g., if there are more ticket-rippers than attendance justifies), and redirect resources toward changes that might attract more viewers — whether that means upgrading the seating or offering discounted Jujubes.
In reality, what government entities such as Rhode Island seem to tend toward is a shifting of their “business model” toward a focus on the expenses column as their core purpose. It becomes less their business, in other words, to foster a wealthy, secure, and productive society, and more their business to mandate charitable services for the unproductive and to protect and advance the wealth and security of public-sector employees. The state undertakes to increase “production costs” (to use Pat’s phrase) as its raison d’etre.