American cities and states face financial situations that range from difficult to dire. The obvious cause of the problem is the deep recession that has reduced tax receipts and increased the need for public services. Recession always results in belt-tightening and reductions in service. But there is also something different going on this time.
Under the banner of “we’re broke,” the political right is engaged in an all-out assault on government and, in particular, on unionized government workers. The recession, a direct result of “conservative” policies, is being used as an opportunity to build on the gains that the reactionary right has made in recent decades. As a result, the likelihood of a very bad outcome and of a slide back into recession becomes stronger by the week.
Cities and states have imposed a range of cuts to balance their budgets. In the current political climate, the balancing has been almost entirely on the services side, the idea of raising taxes on the wealthiest people being, as they say, “off the table.”
Because the users of public services tend to be the less wealthy members of society, the political muscle to resist cuts in education, social services and health care isn’t there. And the impact of these cuts isn’t all that visible.
How do you measure the effect of adding five kids to a grade-school class? Or of making health care less accessible to poor people? What is the lasting damage of closing swimming pools during hot summer days, as is happening across the country?
The most obvious and direct impact is on the public workers who lose jobs or have their incomes reduced by freezes or benefits reductions. This process has been made easier on the mainland by demonizing these workers as “union thugs,” slackers and parasites sucking from the hard-pressed taxpayer.
But the most powerful argument has been that public sector workers should not get middle-class salaries and benefits when these things have been eliminated in much of the private sector. That is to say, the “former middle class” should be dramatically expanded.
So how is the U.S. Virgin Islands different from other places? And what do those differences tell us about the best path to take? In the most basic ways, the Territory’s situation is no different. It is spending more than it is collecting in tax revenues. It has long-term obligations, particularly pensions, that are not sustainable. And there does not appear to be a boom or a new bubble on the horizon that would solve the problem.
The same boat that everyone else is in. But there are also ways in which the Territory is different, and they are big ways. Let’s look at them:
Public Sector Impact: The driving idea behind President Obama’s stimulus program was to inject purchasing power into the economy, to “jump-start” it. Another purpose was to forestall massive public sector layoffs. It succeeded in the second area, but the weak recovery has placed public jobs in jeopardy across the country, especially as stimulus dollars run out.
It would be hard to find a city or state in which the public sector is as important to the overall economy as the U.S. Virgin Islands. Small place, lots of public workers. As a result, how cutbacks are handled can have a big impact on the economy, far bigger than elsewhere.
For example, the choice between layoffs and salary reductions will not only affect workers and their families. It will also affect the Territory’s entire retail sector by draining purchasing power from it.
Whatever the final choices, what is truly impressive so far is the willingness of decision-makers to look at alternatives and also to impose the same reductions on themselves. They have also raised certain taxes.
It is often easy to be critical of the V.I. government, but in this difficult situation, whatever the squabbling, leaders have done the right things. Look around the country. There are not many places that you can make this statement about.
In most places, the path of least resistance has been to throw the poorest people overboard and avoid the painful question of raising some taxes.
Low Productivity and its consequences: Now the bad news. In general, V.I. public sector employees do not work very hard. In this respect, they are hardly alone in the world. In Russia, the national slogan was “They pretend to pay us, and we pretend to work.” In Israel, when someone suggested going from what was theoretically a six-day to a five-day work week, the Prime Minister replied, “Let’s start with working two days, then build up to three and four and get to five.”
Whatever the cuts, the Territory is not going to suffer from a shortage of workers. If, however, workers take the attitude that, since my salary is being reduced, I am going to do even less work, the consequences are going to be bad. Public employee unions are under attack everywhere. They should not make defending them even more difficult by denying financial realities and digging in their heels.
In Wilmington, N.C., a city facing serious stress, police officers won’t get a raise for three years. The response: we will do only the minimum, nothing extra. If the Territory’s union takes this stance, it will end up doing lasting damage to the community and to itself. The union’s hallmark has always been rigidity. Things that don’t bend generally end up breaking.
Nuts and bolts: The boring stuff counts. The purpose of government is to deliver services to the public. The social contract says that people should get what they pay for in taxes. In the U.S. Virgin Islands, in general, they do not.
There are lots of reasons that the quality of public services is low. It is too hard to fire people who don’t perform. But there is also the problem of the nuts and bolts of delivering services. The Territory’s basic management systems and work processes are weak. There is ambiguity where clarity is needed. And there is a general lack of accountability.
Services generally deteriorate in hard times. Thirty years ago, the Reagan Administration told government, except for the military, to “do more with less.” The reality is that you do less with less. But—a very big but—for the Virgin Islands, this need not be the case. There are plenty of workers and supervisors. They lack effective systems of support and accountability.
This is the time to invest in those systems and processes. It is not glamorous. It will cost some money. But, in important ways, the future of the Territory depends on it. People who have choices about where they live will make those choices based on the quality of their lives. Similarly, the Territory’s “customers,” i.e., tourists, make choices based on their experience. If it is good, they come back. If it is bad, they don’t.
The old proverb, “For want of a nail, the shoe was lost…,” etc. has direct application in this situation. Attention should be paid to the nails, especially in what is going to be difficult transitional period.
Next: Long view or short?
