Rethinking the Model
There is a great scene in the 1995 movie Apollo 13 where they realize that the air filtration system on the spacecraft is not designed for the length of the flight and the carbon dioxide levels are getting too high for Tom Hanks and Co. to make it back. The flight control staff is given the impossible task of adapting the existing system to work using only the limited supplies that were available on the ship. Here is that scene:
This past week I was made aware of a commercial property in a community we work in that was bought at auction for less than half of its assessed price. Step back and put that in the context of a Minnesota city, where government revenue comes directly from the overall tax base. If market values decline by even 25%, which has already happened, the ultimate result will be a dramatic decline in the assessed value and, by association, a dramatic decline in tax base. What if the slide continues and we see 30%, 40% or even 50% drop in values in some key properties.
In a way, it will force our small towns into the situation of the flight controllers in Apollo 13. This is far different than the present belt tightening or attempts to improve efficiency. It is completely redesigning a new system, and doing it under pressure. What happens?
What if our states had to do this? California may be in near meltdown mode, but remember they received billions of dollars from the federal stimulus and declines in property tax have not yet become reality as they take a couple of years to work into the system. My state of Minnesota had a six billion dollar deficit - roughly 20% of the budget - before the federal money. What happens when the next budget is double that?
What happens when the federal government runs out of money, for real. The Director of the Congressional Budget Office indicated in a blog post what we all know: that the federal levels of spending and borrowing are unsustainable. What happens when unsustainable becomes unsustained?
I look at families I know that are going through hard times. You can really put them into four categories:
- Those that have made no changes to their lives and instead drawn down savings or borrowed to make ends meet.
- Those that have made minor changes to their lives, relying somewhat on savings and borrowing to make ends meet.
- Those that have been forced to make major changes in their lives, perhaps even through bankruptcy or foreclosure.
- Those that have preemptively adapted to a changed reality by making dramatic changes to shore up their position.
How many families trying the first two wind up forced into the third? My guess would be far more than ever choose the fourth option.
I think it would be a valuable exercise for all levels of government to at least ponder what life would be like with 50% less revenue than exists today. In other words, if we were forced to start over, but with a huge debt load, what would our government look like? Would it have to be worse or would it simply be a painful transition to something different?
Sadly, nearly all governments in this country have adopted the first or second approach to their budgets. This becomes even more absurd in retrospect when you realize how good times really were and how much wealth we once had. It might be time to stop acting like we are a wealthy country, especially since we are not, and starting seriously looking at how bad it could get and what it would take to truly do with less.
If we threw all the stuff we had down on the table and were told we had no choice but to make it work, could we?