Regional governments...
The TU lead editorial takes up an issue we discussed a few days ago: regional governments. If you recall, an economic analyst told us we were living in the 18th century and a local mayor responded by calling him a socialist. Luckily, the TU brings a bit - just a bit, mind you - of reason to the issue today. Echoing the words of the analyst, the TU says:
A collective action problem or race to the bottom occurs when each locality, looking out for its own interest, takes steps to improve its own situation. As all localities do this, it ends up hurting everyone. The catch is that if they had worked together, the cooperation would have produced a better result for everyone. A classic example is business tax breaks. Since every town wants to have the new businesses move there, they each offer tax incentives, hoping the business will choose their town. However, once everyone offers tax breaks, the businesses have little incentive to choose any town over any other town, and all of a sudden the corporate tax in every town has sunk. If towns continue to lower their taxes to entice business, it eventually becomes a game of who can get to the bottom - literally and figuratively - fastest.
The TU identifies this as a problem, but that's nothing new. Economists have known about these problems for a long time. So what's the solution? Well, again, not much new here. One common solution is the one the analyst, David Rusk, and the TU seem to support:
But not our situation. The whole editoral is idealist daydreaming for two reasons:
1)It is political almost impossible. The TU basically recognizes this in the article. How in the world are you going to get the Democratic-run cities to cede their local autonomy to the suburban Republicans in Albany or Schenectady county? How in the world are you going to get the suburban Republicans to agree to take on the cities as governmental partners, knowing that it is just going to drain public resources from them?
2) It wouldn't stop any collective action problem. This is where I find the TU to be completely disingenuous. Shifting the center of gravity from the town to the county is not going to stop any collective action problem. Instead of pitting town against town, the counties will be pitted against each other. In fact, it's not clear that you can control this kind of problem until you get to at least the state level, and even then we see "races to the bottom" between states on such isses as pollution and tax breaks, which often requires the federal government to step in. But wait, we see this problem between nations as they try to attract corportations to their country - think of the complaints from American workers about countries that don't have minimum wages or national corporate taxes. The bottom line is that you are not going to stop the parochial problem by getting rid of town government and replacing it with county government.
But that's not the TU's agenda here, or Rusk's. They are interseted in improviong the quality of the cities - and that conveniently can be done by expanding the city limits to encompass the suburbs, which conveniently can be wrapped into a neat package of "regionalism" and sold as a way to counter the parochial problem. But the problems of the cities is not that they are being pitted against the towns - it's that people tend to want to work in the cities but not live there. Thus the tax base stinks, and all the economic production (i.e. paychecks) is driven out of the city at night. Again, you can try to solve this by expanding the city limits, but it's not clear that people won't just move to Saratoga county. Oh wait, they already have. But we could just expand the city to there, right?
See the problem?
Now, I'm a big fan of Albany. Anyone who reads this blog knows that. So don't take this as an attack on the city. I just don't see the political expansion of the city as either a politically plausibility or a sucessful solution to this problem. I would gently suggest that the only solution is to do things that make people want to live in the city - so that they spend their money there, so that business needs to return to support them, and so that both people and businesses pay taxes there. The only way to do that is to invest in the city and make it a better place to live. Obviously, resources are strapped and only so much can be done on limited budgets. But trust me, you can't fix Albany by simply expanding its boundaries. It won't work.
If anyone is interested in learning more about this topic, I can recommend two excellent books on the subject, which is just fascinating once you get into the details of tax policy and capital flight out of cities. Trust me. Start with Doug Rae's City, which is a riveting account of the long term processes that produced this problem in one city, New Haven, Connecticut. Then, if you want to get into the policy prescription details, try Metropolitics by Myron Orfield, which is the defining book on the subject, and a great read.
New York's rigid home rule laws mean that each of the 1,545 cities, towns and villages in New York are powers unto themselves, with no requirement to cooperate with, much less share resources, with their neighbors.
The consequences of these parochial policies are evident in the area's older communities. That's the case in the Capital Region, where the cities of Albany, Troy and Schenectady continue to lose population as homeowners and businesses move to the suburbs. At the same time, though, the cities must provide essential services even as their tax bases decline. Meanwhile, most of the residents in suburban communities commute back to their jobs in the cities. That means the cities are paying much of the bill for suburban prosperity.
What the TU is describing here is two related problems often referred to in political science as a "race to the bottom" and a "collective action" problem.The consequences of these parochial policies are evident in the area's older communities. That's the case in the Capital Region, where the cities of Albany, Troy and Schenectady continue to lose population as homeowners and businesses move to the suburbs. At the same time, though, the cities must provide essential services even as their tax bases decline. Meanwhile, most of the residents in suburban communities commute back to their jobs in the cities. That means the cities are paying much of the bill for suburban prosperity.
A collective action problem or race to the bottom occurs when each locality, looking out for its own interest, takes steps to improve its own situation. As all localities do this, it ends up hurting everyone. The catch is that if they had worked together, the cooperation would have produced a better result for everyone. A classic example is business tax breaks. Since every town wants to have the new businesses move there, they each offer tax incentives, hoping the business will choose their town. However, once everyone offers tax breaks, the businesses have little incentive to choose any town over any other town, and all of a sudden the corporate tax in every town has sunk. If towns continue to lower their taxes to entice business, it eventually becomes a game of who can get to the bottom - literally and figuratively - fastest.
The TU identifies this as a problem, but that's nothing new. Economists have known about these problems for a long time. So what's the solution? Well, again, not much new here. One common solution is the one the analyst, David Rusk, and the TU seem to support:
Unlike many advocates of regionalism, Mr. Rusk believes the best solution to New York's parochialism lies in strengthening the role of the counties, rather than in independent regional authorities.
This is an example of the classic solution to collective action - unite the individual localities and make them one larger locality. Think back to the tax example. If all of the local towns were centralized under one government, the tax rate could be uniformly set, and the businesses could not get lower taxes by piting the towns against each other. Makes sense, and in many situation it is a good solution.But not our situation. The whole editoral is idealist daydreaming for two reasons:
1)It is political almost impossible. The TU basically recognizes this in the article. How in the world are you going to get the Democratic-run cities to cede their local autonomy to the suburban Republicans in Albany or Schenectady county? How in the world are you going to get the suburban Republicans to agree to take on the cities as governmental partners, knowing that it is just going to drain public resources from them?
2) It wouldn't stop any collective action problem. This is where I find the TU to be completely disingenuous. Shifting the center of gravity from the town to the county is not going to stop any collective action problem. Instead of pitting town against town, the counties will be pitted against each other. In fact, it's not clear that you can control this kind of problem until you get to at least the state level, and even then we see "races to the bottom" between states on such isses as pollution and tax breaks, which often requires the federal government to step in. But wait, we see this problem between nations as they try to attract corportations to their country - think of the complaints from American workers about countries that don't have minimum wages or national corporate taxes. The bottom line is that you are not going to stop the parochial problem by getting rid of town government and replacing it with county government.
But that's not the TU's agenda here, or Rusk's. They are interseted in improviong the quality of the cities - and that conveniently can be done by expanding the city limits to encompass the suburbs, which conveniently can be wrapped into a neat package of "regionalism" and sold as a way to counter the parochial problem. But the problems of the cities is not that they are being pitted against the towns - it's that people tend to want to work in the cities but not live there. Thus the tax base stinks, and all the economic production (i.e. paychecks) is driven out of the city at night. Again, you can try to solve this by expanding the city limits, but it's not clear that people won't just move to Saratoga county. Oh wait, they already have. But we could just expand the city to there, right?
See the problem?
Now, I'm a big fan of Albany. Anyone who reads this blog knows that. So don't take this as an attack on the city. I just don't see the political expansion of the city as either a politically plausibility or a sucessful solution to this problem. I would gently suggest that the only solution is to do things that make people want to live in the city - so that they spend their money there, so that business needs to return to support them, and so that both people and businesses pay taxes there. The only way to do that is to invest in the city and make it a better place to live. Obviously, resources are strapped and only so much can be done on limited budgets. But trust me, you can't fix Albany by simply expanding its boundaries. It won't work.
If anyone is interested in learning more about this topic, I can recommend two excellent books on the subject, which is just fascinating once you get into the details of tax policy and capital flight out of cities. Trust me. Start with Doug Rae's City, which is a riveting account of the long term processes that produced this problem in one city, New Haven, Connecticut. Then, if you want to get into the policy prescription details, try Metropolitics by Myron Orfield, which is the defining book on the subject, and a great read.
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on Friday, May 27, 2005 at 6:12 AM.
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