Saturday, July 16, 2011

The state government shuts down......so?

For the past few days, the Minnesota state government has been shut down because of a dispute between the executive and legislative branches about how to pass the state budget. There is much hand-wringing, and a lot of national attention on the matter.

But when you ask: so what happens when a state government shuts down, the answer is likely to surprise. For instance, a few days into the Minnesota shut-down, NPR ran a story in which they reported (with a straight face) the following "impacts" of a shut-down :

1. State parks (i.e., recreational use) have been shut down
2. New road construction has stopped
3. Some alcohol vendors are having to stop selling since their licenses are not renewed
4. Some state workers have been laid off

Barring the last, where is a real impact on those individuals, state government shut-downs have little impacts (in the short term) on the general population.

The reason for this is the highly fragmented and autonomous way in which America is run. Most public services are provided either by local governments or private companies; both of which depend on user fees, not top-down tax revenues.

For instance, I explored what services a Minneapolis (a city in Minnesota) resident uses on a day-to-day basis and if any of these are at the mercy of the state of government:

1. Police protection: Forces are raised and managed by the city
2. Schools: Run by locally administered school districts
3. Roads: Most managed by city and county
4. Electricity: Excel Power, a private utility company
5. Gas: Centerpoint Energy, a private utility company

Some of these functions do get funding from state and federal governments, but local agencies run a lot of their operations on fees and/or assessments.  If there is an example of the benefits of decentralized governance, it is this.

Ditto with the federal government.  When a shut-down was feared earlier this year, the top-quoted example of an "impact" of a shut-down that many fear-mongering commentators came up with was that tourists would have to be turned away from federally-administered national parks.  Really?

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