There are numbers, and then there are numbers. In the recent four-game series between the New York Yankees and the Boston Red Sox, for example, Boston scored a total of 30 runs while the Yanks could come up with only 21.
Do these numbers mean anything? Absolutely not. Outscored but not outplayed in the series as a whole, New York won three out of the four games. The explanation for the numbers is that the Red Sox accumulated over half their total runs in one game, a lopsided 17-1 victory.
In baseball, total runs scored in a season rarely matter. Mostly, they are just numbers.
There are numbers in the economics of public finance, too, and some of them are important. Unlike baseball, though, in public finance it is increasingly hard to sort out which numbers are real, let alone which ones mean anything.
It turns out, for example, that the Seattle monorail project, which is financed in part by a statewide tax, will cost either $2 billion or $11 billion, depending on how you calculate it. And Sound Transit rides might require a taxpayer subsidy of either $30 or $100 a trip, also depending on how you calculate it. Now the replacement or reconstruction of Seattle’s Alaskan Way viaduct has added new numbers to the billion-dollar guessing game.
The huge differences between these numbers make it difficult for ordinary people to get any sort of picture of the actual costs of these publicly financed transportation systems. Ultimately, this uncertainty can undermine public confidence, as it did recently in the monorail project. There, the public was abruptly made aware of a number it could relate to – 50 years, which is how long it would take to pay for the thing. People began howling.
Public discontent over a temporary tax that would last a half-century resulted in the resignation of two of the monorail’s top executives and a review of the project’s financial plan. But it is not at all clear that the review will cover the fundamental lunacy of trying to superimpose flat-land transportation technology on a hilly city. As just one example, the proposed monorail route over the West Seattle Bridge, if it works at all, would undoubtedly appeal more to thrill-seekers than commuters.
Much the same criticism can be aimed at Sound Transit’s light rail project, whose technology certainly works best when it is not coping with hills. The fact that it is technically possible to burrow deep into the earth to create a subway system that can scoff at natural terrain doesn’t mean it makes any sense to do so.
But as questionable as these projects might be from a technical or common-sense standpoint, it is the changing economic structure of public finance that is more worrisome.
Economics, when it is working right, involves a market where buyers and sellers have access to the information they need to make a decision. Generally speaking, when the price goes up, it becomes less attractive to buyers, and vice versa – and they make their decisions accordingly.
In the case of publicly financed projects, there are only two participants, really: a seller – government in some form – and a buyer, which is the public, acting collectively. Despite this difference in participation, the market can still work efficiently, but only if the public has the information it needs to make a reasonable decision.
The difficulty we are coming up against in publicly financed major projects is that taxpayers are being asked to make a decision before the cost data are firm enough to support informed consent.
There is nothing inherently inefficient in this from a market economics standpoint; similar decisions are made all the time in the private sector, usually subject to revision or recourse if the underlying facts change.
The problem is that the public’s initial market decision to go ahead with a project is increasingly viewed as irrevocable. Projects, and government spending in general, are impervious to review. The state Supreme Court’s most recent decision on this subject is particularly disturbing, for it sustains the current circular logic of public finance.
If voters demand a supermajority of 60 percent to raise taxes, for example, the fact that the Legislature cannot come up with enough votes to do so now constitutes an “emergency.” And this definition of an emergency, in turn, allows the Legislature not only to raise taxes with a simple majority but also to do so without risk that a referendum might roll them back.
This changes the marketplace and further impairs the ability of the public to give its informed consent in matters of public finance.
Whatever else it may be, it isn’t good economics. In baseball it’s called an error.
James McCusker is a Bothell economist, educator and consultant. He also writes “Business 101,” which appears monthly in The Snohomish County Business Journal.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
