When Liberals Run Cities

Have you ever noticed how often cities where there are very few Republicans elect Republican mayors anyway? Or if they don’t elect a Republican, they elect a Democrat who acts like a Republican.

New York City is known for being a bastion of liberalism. But the city hasn’t had a real liberal mayor for almost 40 years. When Jersey City, New Jersey, elected Republican Bret Schundler as mayor, there probably weren’t more than five Republicans living in the whole city. Democrats have outnumbered Republicans in Dallas County, where I live, for quite some time. Yet Dallas has never really had a liberal mayor.

What brings this to mind is the coming mayoral election in New York City. The Democratic nominee, Bill de Blasio, is unapologetically liberal/progressive. His two main issues are clamping down on the New York Police Department’s “stop and frisk” policy and raising taxes on wealthy New Yorkers to pay for universal pre-K education.

Writing in The Wall Street Journal, Vincent Cannato reminds us all of what liberal governance looked like in years past:

Under Mayor John Lindsay, who embodied the promise and then the tragedy of Great Society liberalism, the city suffered through a tumultuous 1960s and early ’70s. While Lindsay was in office (1966-73), crime continued its dramatic rise, public-sector labor unions turned New York into “Strike City,” welfare rolls increased even amid an economic boom, swaths of the city were hollowed out by arson and abandonment, the city’s infrastructure began to deteriorate, graffiti proliferated, and the middle class continued its flight to the suburbs…

After years of chaos and tumult, New York no longer looked like a good investment. It nearly went bankrupt, and its finances were taken over by an Emergency Financial Control Board.

What happened in New York 40 years ago is not all that dissimilar to what has been happening in Detroit. As that city inched toward its own fiscal cliff, city services deteriorated, taxes rose and taxpayers fled. Now we learn that while all that was going on millions of dollars were being looted from city workers’ pension funds. As reported in The New York Times:

Detroit’s municipal pension fund made payments for decades to retirees, active workers and others above and beyond normal benefits, costing the struggling city billions of dollars and helping push it into bankruptcy, according to people who have reviewed the payments.

The payments, which were not publicly disclosed, included bonuses to retirees, supplements to workers not yet retired and cash to the families of workers who died before becoming eligible to collect a pension…

Most of the trustees on Detroit’s two pension boards represent organized labor, and for years they could outvote anyone who challenged the payments.

Why do some cities fall into this trap while other cities avoid it? And what does any of this have to do with liberalism as a political philosophy?

Are you reelin’ in the years
Stowin’ away the time
Are you gatherin’ up the tears
Have you had enough of mine

 

What I mean by “liberalism” is the political philosophy that apologizes for and defends the Franklin Roosevelt approach to politics. That approach encourages people to organize around their economic interests and seek special favors from government at everyone else’s expense (see here and here.)

To understand the mechanics of that process, we need to turn to public choice.

Groups versus individuals. Think of the political system as a marketplace. But unlike a normal market, where people purchase things as individuals, there is rarely ever a policy change that affects only one person. Policy changes usually pit two groups against each other ― those who favor the change and those who oppose it. A proposed increase in the wages of sanitation workers, for instance, pits sanitation workers against taxpayers and everyone who receives sanitation services.

Public goods and public bads. In economics, a “public good” is a good that can be consumed by everyone once it is produced ― even those that did not contribute to its production. By definition, public goods can’t be produced and sold to individuals. So if they are produced at all, they must somehow be paid for collectively. For this reason public goods are often described as a “market imperfection.”

In politics, almost everything that happens is a public good to those who favor the change and a public bad to those who oppose it. If a law passes that benefits me, I enjoy those benefits whether or not I contributed to the effort to pass it. If a law harms me, I suffer the harm regardless of whether I contributed anything to try to defeat it.

Whereas economic markets are occasionally imperfect, the political system is perpetually imperfect almost by definition.

Free riders. Because almost everything that happens in the political system is a public good or a public bad, each of us has an incentive to hold back and be a free rider. Various groups do various things to overcome this inclination.

In many cities, the sanitation workers have formed a union that collects mandatory dues and has an established communication network to help organize and motivate its members. On the other side, residential consumers of sanitation services generally have no formal organization, other than the occasional homeowners association. Business consumers of sanitation services may rely on trade associations and other organizations (such as the Chamber of Commerce).

On balance, though, the producers of city services are much better organized and their interests are far more concentrated than the consumers of those services. So even though the consumers outnumber the producers and can potentially outvote them, the political price the producers as a group are willing to pay in city elections is often higher than the price offered by their opponents.

Political prices. Just as there are prices in a normal market there are prices in the political system. The “price” people are willing to pay to elect a candidate or obtain a legal change is the effort they are willing to make per dollar of benefit they expect to receive. The effort may consist of voting, campaign contributions, get-out-the-vote efforts, lobbying, etc. But because of the free rider problem, the effort people make understates ― and in most cases greatly understates ― their real interest in the issue.

Would you be willing to make 10 cents of effort in return for a dollar of benefit? Of course. But in the political system, you never get the opportunity to trade a dime for a dollar as an individual. What counts is the effort entire groups are willing to make. And this creates a problem.

Political equilibrium. Just as economic markets have a tendency to gravitate toward equilibrium prices and quantities, the same is true in politics. I won’t go into details here, since I have done that elsewhere. But let’s jump to an important bottom line. In order to get optimal government, we need the political prices paid by every pair of opposing groups to be the same, for every issue. When this doesn’t happen, we get bad government. And the greater the dissimilarity in prices, the worse the governance will be.

Absent a counterforce, Detroit’s experience is almost inevitable. As taxpayers escape to other jurisdictions, the political imbalance grows, leading to higher taxes, deteriorating services and more taxpayer migration. The ultimate end is a “corner solution” in which a bankrupt city falls under the control of a judge or some other non-democratic entity. This result is in no one’s interest. But no single group is in a position to stop it. If all the interest groups could get together and agree to show restraint (by asking less from the system and taking less), the unfortunate demise could be avoided. But there is no mechanism that allows this to happen.

A discontinuity. Each of us is a member of more than one group. In fact we are often members of groups with opposing political ends. Sanitation workers, for example, are consumers of sanitation and other city services as well as producers of city services. It is in their role as producers that they tend to be organized and in a position to exert political influence. But that doesn’t mean they lose their consumer interest.

There is one thing that city workers can do as individuals to derail the demise I just described. Even though their union dues and their organized activities are supporting more of same, they can enter the voting booth and secretly vote for the opponent. When this happens, there is a major discontinuity in the normal political process.

The result is the election, for example, of Republican mayor Michael Bloomberg in New York. And because he doesn’t get to be mayor through the normal processes, he arrives in office owing hardly anyone anything. Thus he can take on the teachers unions and reform the schools and institute other reforms, just like his Republican predecessor, Rudy Giuliani.

For this to happen, however, there must be enough voters who put the general interest above their own union’s special interest. New York had enough such people 40 years ago. In more recent times, Detroit did not.

Comments (15)

Trackback URL | Comments RSS Feed

  1. Buster says:

    It’s hard to fathom how politicians can in good conscience driving spending on programs that harm future citizens and are unsustainable. Liberals are worse than Republicans; but Democrats by no means have a monopoly on unsustainable spending. I suspect if you were to go back in time and show Roosevelt-era liberal Democrats the results of their handiwork, many would oppose the programs they championed 80 years ago. I’m not so sure the political hacks in cities would care if they could go forward in time and see what they have caused.

  2. Ron Bachman says:

    Great lesson in political economics. The only missing piece to me may be the fact that the liberal politician under pressure to provide the bad goods under pressure is not using his own money. It is easier to grant public bads when it is someone else’s money and the political payoff is organized votes.

  3. Ken says:

    Excellent analysis.

  4. Roger Waters says:

    Great article, makes sense. Although I thought the opposite, that Republicans tend to stay out of office as they are private sector oriented, while Democrats tend to stay in office because they are more public sector oriented (or, perhaps, can’t get a job in private sector other than something like “community organizer”). Given the private sector proclivities of Republicans, they become better managers, and therefore get elected because the cities can immediately see if they are being well managed or not? Your explanation makes more sense.

  5. Dewaine says:

    “What I mean by “liberalism” is the political philosophy that apologizes for and defends the Franklin Roosevelt approach to politics. That approach encourages people to organize around their economic interests and seek special favors from government at everyone else’s expense.”

    This kind of system cannot work. It doesn’t take studies to prove that, just logic. If everyone is trying to get their “piece of the pie”, the people who can’t will be hurt.

    • JD says:

      “Whereas economic markets are occasionally imperfect, the political system is perpetually imperfect almost by definition.”

  6. JD says:

    “If all the interest groups could get together and agree to show restraint (by asking less from the system and taking less), the unfortunate demise could be avoided. But there is no mechanism that allows this to happen.”

    Unfortunately, no one has an incentive to show restraint.

  7. Adam says:

    “What I mean by “liberalism” is the political philosophy that apologizes for and defends the Franklin Roosevelt approach to politics. That approach encourages people to organize around their economic interests and seek special favors from government at everyone else’s expense”

    The problem is that most people, left or right, seek this. No one is actually disagreeing with the principle, they just disagree about who the favors should go to. It’s disingenuous to say that America stands for anything other than a plutocracy.

  8. Bubba says:

    The title of this Health Alert should have been:

    When Liberals Run Cities…Into the Ground!

  9. BHS says:

    If only Bloomberg were more like Giuliani. Instead, he’s too busy telling people how much soda they can drink.

  10. Wanda J. Jones says:

    John–This is a very wise essay, one that begs the question “Why don’t liberals learn from the experiences of others? It makes me wonder whether there should be a journal that reports on cities from the standpoint of political philosophy, law and, gulp, crime.

    Wanda J. Jones

  11. Andrew says:

    Immigration reform is another excellent example. According to the Sunlight Foundation, pro-amnesty and increased immigration forces have spent $1.5 billion in the last five years lobbying to pass a big, comprehensive bill. It isn’t in the general interest, of course, but if the group of Americans don’t hold back their Congressional representation the smaller, but more concentrated interests will win the battle.