Following the Money

     I used to shrug off as cynical the recurring accusations about the influence of money in politics. Now I don’t.

     I am not referring to the corrupting influence of campaign contributions, of which the recent (and growing) Abramoff scandal is the most recent example. I’m talking about more subtle forms of dishonesty, prompted by lawmakers’ desire to be re-elected and enabled by voters’ belief that we can—and should—get something for nothing.

     Recently, the Indianapolis City-County Council authorized borrowing up to $35 million dollars against anticipated County Option Income Tax (COIT) revenues to help “fill the gap” in the 2007 city budget. The funds are presumably to be repaid in 2008 from reserves that the state has withheld. (The state says the withholding is intended to guard against “swings” in COIT collections; local officials say the real reason is so that the state will get the interest earned on those funds in the interim.) 

     Indianapolis isn’t the only municipality borrowing to meet current obligations. Cook County recently borrowed $200 million dollars to meet operating expenses. The 18-month line of credit carries an above-market interest rate of 10%. 

     Evidently, lawmakers would rather pay millions in interest later than face the need to cut services or raise taxes now.

     Government borrowing is not the problem—the problem is government borrowing to meet current operating expenses. Well-managed businesses will often borrow in order to invest in capital improvements—to amortize the costs of new facilities or to upgrade manufacturing equipment. Borrowing to make payroll, or to pay the rent, is a far dicier proposition.

     You can reasonably argue that government should borrow in appropriate circumstances. The question is: what circumstances are appropriate? 

    Unfortunately, political game-playing frequently trumps good public policy. Much has been written about Governor Daniel’s seventy-five year lease of the Indiana Toll Road. Whatever the merits of that decision, it was clearly prompted by the unwillingness of members of the Indiana General Assembly to raise tolls. After all, the State could have issued bonds to be repaid from future tolls, retained control of the asset, and realized more money than a lessee—who needs to make a profit—could pay. But then it would be obvious who raised the tolls, and some lawmakers might suffer at the polls. The Governor and General Assembly essentially “outsourced” authority to levy taxes (which is what tolls are), hoping they would thereby escape responsibility. 

    We see this privatization of taxing authority in other contexts. Homeowners’ associations are given responsibility for local streets, garbage collection and other services that were once public responsibility. The homeowner pays for those services through fees collected by the association, allowing the local government to claim it didn’t “raise taxes.”

    Ultimately, We the People are responsible for all these evasions of responsibility. Until we are willing to pay for the services we receive, until we stop thinking we can get something for nothing, we are just electing people to lie to us. And we are paying extra for the delusions.