The Global Pastime Of Kicking The Can Down The Road

Delaying Payment Does Not Make Lunch Free!

Nowhere is the trend of kicking the can down the road more prevalent than in government. Consider this a tribute to politicians and governments everywhere that postpone and delay taking necessary actions. Frequently for politicians, the goal of being reelected takes priority over doing the right thing. This is why  those in office often surrender their better judgment as they go seeking jobs and economic growth at any cost. The idea of paying later for a hamburger today is very seductive for those in this state of mind.

This explains why we constantly see government bargaining with, and making concessions to companies like Amazon to locate facilities in their State. This is done to gain a few jobs with little thought to the long-term consequences. Sometimes it is exempting sales tax, sometimes it is giving the company free utility build-outs, forgiving property taxes, or seeing they are granted special pricing and privileges when it comes to delivering their goods. I use Amazon as an example because it uses all these methods to gain an advantage and exploit its competitors. Sadly, the toll Amazon takes on the brick and mortar stores that line the streets of our cities and neighborhoods is just now becoming apparent.

The sweet allure of getting and receiving the benefits while setting back the negatives is not new or is the desire from which it flows. Getting something for nothing is often the catalyst for bad policy. This is apparent in our healthcare system when it comes to the Affordable Care Act or what is still commonly known as Obamacare. After promises the ACA would lower healthcare costs while extending coverage to millions of Americans the decision was made to phase it in.  In just a few years we have seen healthcare cost soar moving Obamacare towards the brink of failure. As usual, those handed the task of cleaning up such a mess are faced with the unpopular job of making many people unhappy so they do nothing.

When politicians give one company an advantage over another you could say the government has entered the game of choosing winners and losers. States are also lowering the ability of some companies to compete and in the long run can lose more jobs than are created in the short term. In Fort Wayne, Indiana years ago the city backed a bond and the loan to build a massive hangar at the airport for an air-freight company named Kitty Hawk. In return the company promised a slew of new jobs when they located their hub in the city, Kitty Hawk is now bankrupt and the jobs are gone. With the taxpayers of Fort Wayne now paying for an empty hanger that they are trying to lease at an aggressively low price. this means private investors and property owners that lease building space are taking a hit as they are forced to compete against the government to which they are forced to pay taxes. This goes past the issue of fairness and into an area where companies are disincentivized to invest.

National Debt Now Almost 23 Trillion Not 12!

The Devil is in the details when these so-called "pay you later" deals are crafted. When dealing with the Devil we often pay a price far greater than anticipated. It is not uncommon to find promises broken and estimates way off the mark as to the final cost. Sadly, the National Debt Clock is rapidly moving towards the 23 trillion dollar mark. The chart to the right predicted that by 2019 the national debt would top 12 trillion dollars, boy they really missed that one! Projections made by the government or any group predicting budgets based on events that may or may not happen at some future date are simply predictions and not fact. This means that such numbers are totally unreliable.

Another place the effort to obtain a free lunch or at least to get a big discount on it can be seen in the explosion of Public-private partnerships. Over the years we have been hearing a lot of good things about "Public-Private Partnerships" and how they can propel forward needed projects by adding an incentive for the private sector to undertake projects they might choose not to do alone. Often this is because the numbers often simply don't work. These collaborations between government and a private-sector company while touted as our salvation tend to create boondoggles and white elephants.

These projects are often haunted by problems that go from one extreme to another ranging from over-engineering to shoddy work with little oversight. Risks are frequently distributed between the public and private partners according to the ability of each to assess, control and cope with them. The risk-sharing may be in the form of "guaranteeing" a certain occupancy such as was the case of a hotel recently constructed where I live, or the government may pick up part of the cost of the project by providing low-cost loans or supplying part of the infrastructure needed for the project to proceed.

Expensive studies paid for by the government to determine whether a project is viable or needed by a community is often the first step down this slippery slope. Public officials constantly promote and undertake glorious and unsustainable projects to better their communities at little or no cost. This can be seen in situations where the public partner agrees to guarantee a minimum occupancy or income if it turns out that there are fewer users or demand for the service or infrastructure than expected. Fortunately for the public officials involved it generally takes years before anyone notices how toxic many of these projects are and voters seldom are focused enough to hold them accountable. 

The lesson is that there is no such thing as a free lunch. Delaying payment should be viewed as sidestepping reality rather than a solution. Short-sighted attempts to sidestep real structural failures and problems are usually doomed to fail. Real problems must be addressed with real solutions not just promises of future action or put off until a later date. Not taking the proper steps to set things right often causes more problems down the road. Winston Churchill said, "The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to a close. In its place, we are entering a period of consequences." My point is that sooner or later the piper always demands his due. 



Footnote; This post dovetails with many of my recent writings, other related articles may be found in my blog archive, thanks for reading, your comments are encouraged.