Making Sense of 3% in a 1% World
By: Andrew K. Boyle
In a normal world, the news of Oklahoma's declining state revenue would be easy to process.
Einstein once remarked that the most powerful force in nature was that of compound interest. I first heard of this from a well meaning Algebra teacher. Subsequent homework assignments reinforced this truth; I discovered that if a person received one penny on the first of the month and then double the amount each subsequent day, by the end of January said person would be $10.7 million dollars richer. Yet, despite the mathematical assurance of great riches, the heart still was tempted by the alternative offered on page 73 of that math book, $1,000 each day for the entire month. There is just something about that bird-in-the-hand offer which clouds the mind - tragically.
Today, simple mathematic realities are being challenged by matters of the heart. Matters of simple numbers are pushed aside by fallacies which no longer pretend to produce a sum, only a shot at Utopia.
In a normal world, the news of Oklahoma's declining state revenue would be easy to process. As you will read elsewhere in this fine paper there has been a slight dip in oil prices of late, and by slight I mean of the magnitude by which the actuarial projections that said ObamaCare would reduce the national debt were slightly off. The State Board of Equalization reported that revenues for FY 2017 were going to be $900.8 million less than FY 2016 - at a minimum. This news was followed quickly by State Finance officials reporting that the current fiscal year would be short $157 million over the next 6 months.
Welcome back to the 1980's Sooner State.
Editorials and "news articles" quickly began to recall past hardships and prognosticate future school districts failing, towns abandoned, services vaporizing into the etherâ€¦ standard government reductions spawning apocalypse stuff. Grab your tinfoil hat, buy gold and saddle up-its gonna get rough.
In the month that has followed math-pocolypse, relative calm has settled across the red-plains. State Agencies have been informed of an across the board 3% reduction in allocations for next year. The oil industry has shed about 13,000 jobs, but state wide total job count is only down about 1,200 total. Several large construction projects have been shelved. Buyouts are reducing government workforces, and are expected to continue.
This is governing of, for and by the people. A sensible plan is implemented to deal with revenue shortfall, much as a household would, and life goes on. There is even wisdom to comfort the anxious heart:
"Every country goes through peaks and valleys. Every State. Every City. You have to maintain a positive attitude and keep doing everything you can to keep it steadyâ€¦You need a positive attitude -- hold on, this will work out."
The above makes me want to bring Governor George Nigh out of retirement. If an 89 year old former Governor could say such a thing, surely we as a people could convince him to run for the next available statewide office.
But this is not the case. The comfort of Gov. Nigh's words quickly fade from sweet melodies of self-governing reasonableness into hollow clangs of apocalypse. This doesn't feel like a 3% reduction in allocations, it has the general tenor of Amity Shales Forgotten Man -- 2.0.
This red dirt story of 3% is quite alien to a 1% world. This is a side story, a brief rabbit trail in a much grander fable. The big math word problems; $19 trillion national debt, plus $120 trillion in unfunded liabilities, $150 billion in blood money returning to Iran, the 1% pillaging, the 99% revolting, Bernie Sanders simple payroll tax to cover single payer healthcare, Donald Trump's beautiful wall paid for by Mexicoâ€¦it has all severed whatever simple comfort we used to gain from quantifying issues into mathematical equations.
Over time the math began to move further and further from reconciling figures, and at some point we no longer cared, or no longer comprehend that we should care. That most likely happened sometime in the late 70's. Since then, as we focused upon STEM in our education system, we increasingly bought into the lie that the growth-fairy would repay our debts; that in the end the math wouldn't matter because "â€¦'MERICA always wins!!!"
Eventually our mathematical arrogance became so destructive that we even had to re-engineer math concepts into the cleverly disguised Common Core Standards. Whereas a $1billion revenue shortfall used to require a 3% appropriations reductions, now a $19 trillion deficit means Uncle Sam is a tight-wad who won't pay his fair share -- mathematically speaking he's a greedy bastard.
The most amazing thing about this story of accounting and basic governance inside Oklahoma is that it is overpowered by a narrative of insanity.There is no prudence in revenue failures when candidates for President, in both parties, are serious when they propose increasing federal obligations to a litany of programs.
My mind can understand a 3% budget reduction, by my experience in the rest of political life very much is at odds with this mathematical reality. Likewise, leaving the newspaper world covering this news and going to Facebook, I quickly learn that a significant battle is brewing to seize the 3% from other sources. Petitions to take tax breaks back from this group or that and give them all to education are quite popular. Stories spew forth about how the mental health system will close their doors because they can no longer afford the bills, and Arkham asylum will spill into the streets of Norman. At the breaking of the news, potholes began to form out of despair and bridges began throwing themselves on college students. Sales Taxes, VAT Taxes, wealth confiscation, federal relief, raising taxes, lowering taxes, cutting tax loopholes, catching tax evaders, government efficiency, solar panels and other economically illiterate proposals all advance quickly on social media pretending to be viable alternatives to 3% allocation reductions -- many of them will probably become policy.
We used to be a people who could survive a 3% fluctuation in our means; today that is very much an open question. In a 1% world, 3% is unfathomable. A dark argument in response to this brave new world is that maybe progress should slow from time to time. A more hopeful argument is that maybe this 3% is a gracious opportunity to survive a small event before the well known substance hits the oscillating modern connivance -- so to speak.
I have no great hope that 2016 will bequeath any messiah in Washington D.C., history being what it is. I do, however, find hope in the fact that while no one is watching, Oklahoma may yet survive a minor disturbance in tax receipts. Your economy is much more diversified than in the 80's, but your people may prove to be just as strong.
There is an act of defiance embedded in shrinking government by the slightest bit, if only because it grows with unnatural haste elsewhere. In a wildly American move, Oklahoma may just restore our faith in self-government; or at a minimum in basic math. While our leaders try to teach our kids 3+7 = global warming; you can teach your children that you can only spend what you have; hence 3+7 = 10, nothing more. That self government, much like life, is hard sometimes. But life is not about unstoppable progress, but is more nuanced, and it involves forces much stronger than even compound interest.
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