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George Pyle: Government is not like a business. Especially now.

Al Hartmann | The Salt Lake Tribune Three-time Utah Governor Mike Leavitt speaks of his friend and inspiration, former Utah Senator Bob Bennett at the Hinckley Institute of Politics at the University of Utah Wednesday Jan. 27. Bennett was inducted into the Hinckley Hall of Fame.

“If you don’t know jewelry, know the jeweler.”

— Warren Buffett

Many political leaders, especially in conservative circles, tout their expertise in private business as evidence that they would be good at running public services.

There are similarities. Managing people, hiring and firing, finding efficiencies, setting goals, EEOC and OSHA and FICA and hostile work environments and time-and-a-half.

Some folks are just natural born leaders and can thrive in any surroundings. But not every set of experiences is transferable to every other operation, public or private.

Bringing in, for example, the guy who used to run Pepsi to be the CEO at Apple didn’t work out all that well. And, as in the example given above, gazillionaire investor Warren Buffett’s style is to put each of his various business interests under the management of people who know that particular dodge and let them run it.

In the coming days and weeks, the elected officials who run the state of Utah are going to be faced with some tough business decisions about how to keep the lights on and the trucks running with significant shortfalls in revenue.

The ongoing COVID-19 pandemic has caused government income at all levels to drop like a stone. State budget soothsayers expect the shortfall in this year’s budget to go as deep as $600 million and the gap in the next fiscal year, which begins July 1, to perhaps be as much as $1.3 billion.

The most obvious targets for budget-balancing are education and social programs because, as the bank robbers say, that’s where the money is. Legislative leaders say the maximum cuts they might have to make could be 10%.

That’s not as draconian as it might be but, when those funds are already short of what is needed to do the job properly, certain to hurt. And, of course, certain to hurt low-income households and already marginal existences the most.

And following through on such budget cutting is, of course, wrongly applying private business thinking to a public service world.

The difference was explained about a decade ago to The Salt Lake Tribune editorial board — and anyone else who would listen — by then-Gov. Mike Leavitt. As he rightly put it, government is different from private business.

When economic times are bad, restaurants and real estate agents and construction contractors and jewelry stores and auto dealers and haberdashers have fewer customers. So they have to cut back, on payroll, on advertising, on inventory, on everything. And even then they might not make it.

But, when economic times are bad, government agencies of all sorts have more customers. More people need help paying for food and housing. More people need job retraining. Teachers find their students in more need of extra help, from meals to tutoring to counseling. Mental illness increases and crime goes up.

Cutting back on government the way it makes sense to cut back in the private sector is pure folly. Not only does the availability of government services go down just as demand goes up, but states and nations will find it that much more difficult to pull out of their economic tailspins as the distribution of wealth dries up.

States and cities, of course, don’t have the toolboxes that nations do. They can’t borrow large amounts, inflate their currency or do other tricks that amount to printing money.

They can pressure their national government to do the prestidigitation necessary to counter economic woes. They can lean on Congress to prime the pump with more cash flow, to individuals, businesses and state and local governments. States can also dip into whatever reserves the good business-minded state officials have set aside over the years.

Completely zeroing-out the reserves, which could happen if the downturn is as bad as expected, would not be a good idea. But any money that had been earmarked for any kind of construction project should instead be moved over to operating expenses.

Capital improvement projects that are needed or just good ideas — mostly highways and new buildings on college campuses — can be financed with bonds. Which are, in these days of effectively zero interest rates, practically free.

Leavitt’s wisdom on the countercyclical nature of government spending may rise from his own business experience, which was in the insurance game. That’s where money comes in in good times and goes out in bad times.

Utah taxpayers have paid a lot in fiscal insurance premiums over the years. It’s time to make a claim.

George Pyle

George Pyle, editorial page editor of The Salt Lake Tribune, technically worked for Warren Buffett for four years. But never met him.

gpyle@sltrib.com

Twitter, @debatestate




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