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Opening Arguments

Edge of a crisis

Question of the day: Can a common-sense Hoosier (former Indianapolis Mayor Stephen Goldsmith) teach Nyoo Yawkers a thing or two about the reasonable limits of government? Goldsmith has been hired by Mayor Michael Bloomberg as the new deputy mayor:

But if his red state politics stand out in a city of true-blue democrats, the appointment of Goldsmith is a clear indication that Bloomberg will make belt-tightening a key component of his third term in office.

[. . .]

The Bloomberg administration is grappling with how to cope with cuts both state and federal funds. Governor Paterson's budget cuts $1.3 billion in aid to the city, which the mayor has said will result in massive layoffs. On top of that, federal stimulus funds, which have been a $6 billion godsend for the city since 2009, will run dry by 2012.

 Now it's Goldsmith's problem. And it exactly this problem that Bloomberg hired Goldsmith to solve. As mayor of Indianapolis, Goldsmith aggressively found ways to shrink city government through privatization of city services and assets. He also introduced the concept of "marketization," in which public sector employees compete for their jobs against the private sector.

The story mentions Goldsmith's "Yellow Pages test" for government services in Indianapolis. If the phone book listed three companies that provided a certain service, the city probably shouldn't be in that business. If even New York City can consider the possibility that government shouldn't do everything, maybe there's hope.

Sam Staley, of the Reason Foundation and a consultant for the Indiana Policy Review, visited our office last week and talked about the notion of a "10 percent rule" -- it takes at least a 10 percent change in something to motivate a new direction or behavior. An organization can dance around a budget change of less than 10 percent. But if revenues grow by more than that, there tend to be new programs and priorities. If there's a cut of less than 10 percent, things are tweaked around the edges through attrition and small cuts here and there. But if the drop is bigger, then whole programs are cut. As more cities and states reach the 10 percent threshold, governments will do out of necessity (trying to stay on the outside edge of crisis) what they should have been doing all along.