Politicians’ need to be like puts us in a financial pickle

The initial economic consequence of this is a clash of goals.

Meredith Willson posed an interesting question in one of his songs in “The Music Man.”

“Where is the good in goodbye?” he asked.

Economics provides us with a similar question: What’s not to like about being liked? The answer is that it could be a lot, especially when a decision-maker puts being liked above his or her responsibilities.

Most of us enjoy being liked and generally avoid behavior that would cause us to be disliked or despised. That is a good trait; it allows our society to function without disabling levels of friction and conflict. For a leader, though, this tendency can, and does, produce a pattern of outcomes that are inefficient and often toxic.

When we look at the causes of today’s state and city crippling financial woes, for example, the culprit usually turns out to be the pension obligations to public employees. How did that happen in the face of the horde of pension accountants and actuaries available in today’s world? In most cases it isn’t fraud or corruption. It’s simply excessive need to be liked.

Politicians not only want to be liked, they have to be liked in order to survive and advance in their calling. As a practical matter, though, what that means is that they find it very difficult to say “no” to anyone or any group, especially those that do or could represent a bloc of voters.

The initial economic consequence of this is a clash of goals. Saying “yes” almost invariably means public funding, which involves higher taxes. Higher taxes are traditionally disliked by voters, who often include in their dislike the politician who proposed them. This clash of goals, though, is often resolved with a pincer movement: First, tax increases are disguised by describing them as responses to emergencies or for sympathetic groups. Increasing education budgets, then, are cloaked in causes like “it’s for the children,” or, “too many classrooms don’t have heat.” These reasons often don’t stand up to close inspection, but those who must be liked have discovered that voters’ dislike of tax increases doesn’t have staying power but dislike of the politician who said, “no” is more permanent.

Taxes are what they are, though, and their effect is very visible. The other arm of the pincer, in labor negotiations, is easy for the public to ignore, and thus is frequently the “go to” strategy for saying yes, staying liked, and spending more than current revenue.

Spending more than income, of course, usually means balancing the budget with debt. This is the way many individuals and households sustain their spending habits and it all too often ends badly. Many of our cities have taken that same route and now have debt levels that are threatening their credit ratings.

More insidious financially is a practice whose implications now haunt so many states and municipalities: padding public pensions. This technique is a way for a politician to appear to be stingy with the public purse while still saying yes to an important voter bloc.

It is straightforward and doesn’t require any exotic or creative accounting methods. The additional compensation agreed upon in the labor force negotiations is divided into two parts so that the wage increase is modest, and the bulk of the compensation increase goes to pension benefits. Pension benefits have the advantage, to those needing to be liked, of not often showing up in the headlines. And when they are reported in the news media, they do not have the same impact of payroll wages because they only become cash-like in the vague future.

Unfortunately for today’s office holders, the once undefinable future is now. Pension benefits are now coming due and they are choking many of our cities and states.

In fairness to politicians, they aren’t the only ones with problems stoked by being overly worried about being liked. The U.S. military has experience with this problem, especially with its young, inexperienced junior officers; higher education has found that its students’ course evaluation systems can erode academic standards; and the problem is not unknown in today’s corporation and even in our families.

For the financial mess in some states and municipalities, we need a remedy for now and a preventative to eliminate repeat performances. Recognizing the problem and identifying its causes are essential steps forward but we still need a solution … and it isn’t bankruptcy.

One way to help may be a federal regulation. If municipal bonds had to obtain federal approval in order to qualify for their income tax exemption, for example, it would be relatively easy to apply fiscal management standards to the system. That may be the route to restoring the financial health of state and local governments. That would be a good thing.

Talk to us

More in Herald Business Journal

FILE - In this Monday, March 23, 2020, file photo, a worker walks near a mural of a Boeing 777 airplane at the company's manufacturing facility in Everett, Wash., north of Seattle. Beginning in 2024, some 737 planes will be built in Everett, the company announced to workers on Monday. (AP Photo/Ted S. Warren, File)
With 747 out, Boeing to open new 737 Max line at Everett’s Paine Field

Since the last 747 rolled out of the factory, speculation has been rife that Boeing might move some 737 Max production to Everett.

IonQ will open a new quantum computing manufacturing and research center at 3755 Monte Villa Parkway in Bothell. (Photo courtesy of IonQ)
Quantum computing firm IonQ to open Bothell R&D center

IonQ says quantum computing systems are key to addressing climate change, energy and transportation.

Nathanael Engen, founder of Black Forest Mushrooms, sits in the lobby of Think Tank Cowork with his 9-year-old dog, Bruce Wayne, on Friday, Jan. 27, 2023, in downtown Everett, Washington. (Ryan Berry / The Herald)
Growing green mushrooms in downtown Everett

The founder of Black Forest Mushrooms plans to grow gourmet mushrooms locally, reducing their carbon footprint.

Barb Lamoureux, 78, poses for a photo at her office at 1904 Wetmore Ave in Everett, Washington on Monday, Jan. 23, 2023. Lamoureux, who founded Lamoureux Real Estate in 2004, is retiring after 33 years. (Annie Barker / The Herald)
Barb Lamoureux, ‘North Everett’s Real Estate Agent’ retires

A longtime supporter of Housing Hope, Lamoureux helped launch the Windermere Foundation Golf Tournament.

AGC Biologics in Bothell to produce new diabetes treatment

The contract drug manufacturer paired with drug developer Provention Bio to bring the new therapy to market.

FILE - In this file photo dated Monday, March 11, 2019, rescuers work at the scene of an Ethiopian Airlines plane crash south of Addis Ababa, Ethiopia.  The number of deaths in major air crashes around the globe fell by more than half in 2019 according to a report released Wednesday Jan. 1, 2020, by the aviation consultancy To70, revealing the worst crash for the year was an Ethiopian Airlines Boeing 737 MAX on March 10 that lost 157 lives. (AP Photo/Mulugeta Ayene, FILE)
US board says Boeing Max likely hit a bird before 2019 crash

U.S. accident investigators disagree with Ethiopian authorities over the cause of a 2019 Boeing 737 Max crash.

Store owner Jay Behar, 50, left, and store manager Dan Boston, 60, right, work to help unload a truck of recliners at Behar's Furniture on Monday, Jan. 16, 2023. Behar's Furniture on Broadway in Everett is closing up shop after 60 years in business. The family-owned furniture store opened in 1963, when mid-century model styles were all the rage. Second-generation owner, Jay Behar says it's time to move on. (Annie Barker / The Herald)
Behar’s Furniture in Everett closing after 60 years

“It’s time to move on.” The small family-owned store opened in 1963 and grew to cover an entire city block.

Katy Woods, a Licensed Coach, Branch Manager, and experienced Banker at Coastal Community Bank.
Coastal Community Bank Offers Classes for Businesses

To support local business owners and their teams, Coastal offers complimentary Money… Continue reading

Innovative Salon Products online fulfillment employees, from left, Stephanie Wallem, Bethany Fulcher, Isela Ramirez and Gretchen House, work to get orders put together on Friday, Jan. 6, 2023, at the company’s facility in Monroe, Washington. The company began including pay, benefits and perks to its job listings over a year ago, well ahead of the new statewide mandate to include a pay range on job postings at companies with over 15 employees. (Ryan Berry / The Herald)
New state law requires employers to give pay range in job postings

Washington’s new pay transparency law aims to narrow wage gaps based on race or gender — though some companies may seek loopholes.

Paddywack co-owner Shane Somerville with the 24-hour pet food pantry built by a local Girl Scout troop outside of her store on Tuesday, Dec. 20, 2022 in Mill Creek, Washington. (Olivia Vanni / The Herald)
An out-paw-ring of support: Mill Creek pantry feeds pets, day or night

With help from local Girl Scouts, the Mill Creek pet food store Paddywack is meeting the need for pet supplies in a pinch.

Kelly Cameron is the woodworker behind Clinton-based business Turnco Wood Goods. (David Welton)
Whidbey woodworkers turn local lumber into art

In the “Slab Room” at Madrona Supply Co., customers can find hunks of wood native to the south end of Whidbey Island.

Siblings Barbara Reed and Eric Minnig, who, co-own their parent’s old business Ken’s Camera along with their brother Bryan, stand outside the Evergreen Way location Thursday, Dec. 15, 2022, in Everett, Washington. After five decades in business, Ken’s will be closing its last two locations for good at the end of the year. (Ryan Berry / The Herald)
Print it or lose it: Ken’s Camera closes after decades caught on film

The local legend, processing film photos since 1971, will close its locations in Mount Vernon and Everett at the end of 2022.