What did I mean by ‘value’?

At the end of my last post I talked about value. Specifically I said:

In the mean time, the Council needs to think long and hard about their ideas of revenue, expenditures, long-term liabilities, rate and most importantly, value.

…phrases used in this and previous budget negotiations are empty political rhetoric unless they include specific proposals backed by accurate data that adds real measurable value to the citizens of Memphis, not conventional wisdom or ideological flights of fancy.

What did I mean by that?

The short answer is, does the proposal fulfill some kind of need in a meaningful way that adds value to the community without causing undue harm?

That probably seems like a long answer, but the truth is, there are many considerations that must be taken into account to determine ‘value’.

For instance: Some feel that outsourcing certain City functions would reduce spending, and thereby create ‘value’. At the top line level, this may be true, a private contractor may cost less to provide a service, and that may seem like value creation.

However, that savings on the top line comes with a cost…usually to employee pay, which means less income for the family, which translates to less spending and ultimately less revenue for the city in a heavily property and sales tax dependent environment.

The “value” is determined by a formula that looks at both savings to spending and reductions in revenue as a result of the proposed plan.

You can’t cut a number of employees and pay the rest less privately without a hit to your revenue collections. The families impacted will have to react to the new conditions. They may have to sell or otherwise lose their home. They probably will have to cut back on spending themselves…which in turn means less revenue and perhaps an empty house. The amount per person may seem negligible, but multiplied by tens or hundreds of employees, it can turn into an awful lot of lost revenue.

Whats more, the reduction may not be just a portion of the revenue collected. Depending on the job, the person may have to move away to find work, meaning that revenue is gone until the economy organically produces a job of equal value…which in a slow economy could take a while.

If that top line savings is then offset by a tax rate reduction, you’ve just cost yourself rather than saved anything other than a few pennies on the dollar dispersed across the economy in a way that will never create a return. This not only doesn’t solve long-term budget issues it most likely leads to more problems in the future.

Short answer: You cannot cut your way to prosperity or health. That’s why we stopped the practice of bloodletting.

The danger of easy words seeking difficult deeds

There are a bunch of words that are easy for people to say in political rhetoric. “Cut spending” or “cut taxes” are two of the most popular, especially now in the wake of 30+ years of Neoliberal economic policy. This idea basically says that cutting spending, and seeking savings from privatizing public functions creates intrinsic value.

Adherents of this neoliberal economic ideal aren’t restricted to a specific party or ideology. Both sides have used the argument to further political aims, primarily to reduce spending for things they don’t like as a part of their ideology.

The chorus of conventional wisdom has become so loud, the notion that cutting spending/taxes is a good thing is largely unchallenged in the media or by the electorate, even if the ultimate outcome is negative.

The net negative literally slides by most people, completely unnoticed. When it is discovered the problem remains, faith in government and civic institutions erodes. – Wash. Rinse. Repeat.

When looking at the top line math of policy, spending alone has no value. Increasing or decreasing spending alone has no positive or negative value. The ultimate effect of that increase or decrease is where the positive or negative value lies. And that is the part of the conversation conventional wisdom that has become popular mythology ignores.

Neoliberal economic policy assumes it is correct to reduce spending without proving it. Now, some 30+ years after the wholesale adoption of such policies, there’s a great deal of evidence to suggest harm. Since the dawn of wholesale neoliberal economic policy during the Nixon administration, wages have been stagnant or decreased across nearly all sectors. Income inequality has skyrocketed creating more have nots than haves.

I should note, one of the conditions that allowed this economic philosophy to so enthrall the conventional wisdom of the nation is the ease with which it is spoken. Presented as “kitchen table” discussions, when budgetary issues on even a local level bear no resemblance to said discussions does a disservice to us all.

Further, the conditions present at the inception of this economic philosophy…in a time where there were few controls for efficiency, helped expedite the adoption of this philosophy.

Rather than a simple +/- math question, we need to be willing to explore the overarching, and underlying math that determines the value of economic decisions.

No one seems to be really asking those questions or even acknowledging they are valid…which is a very large part of the problem with the long-term outlook of the City of Memphis budget.

How do we create ‘value’?

Value doesn’t have to cost more. It doesn’t have to cut spending. It just has to have a net benefit to the community.

It has to be as efficient as possible (though some things are inherently inefficient but vital, like education, and plumbing). It has to seek to meet a need. It has to work. It should have sound metrics and math, rather than belief or mythology regurgitation at its core.

The items that one seeks to address cannot be looked at from the simplest levels. The equivalent of an economic MRI is required…to see what’s happening on the inside, to get to the things people immediately see on the outside.

There’s a great deal of data available at your fingertips for people with the knowledge and willingness to use it. Not all of it is specific to Memphis, but we can and should work to use it to inform our decisions and try to get ahead of the challenges we face as a community.

It has to be comprehensive. You can’t look at one piece of the pie to get to the number of cherries in the whole pie. You have to look at all of it, honestly, dynamically, with an eye toward solutions that last longer than political fortunes. With a commitment to presenting those solutions to the public, not overselling them, and seeking a commitment in return.

It is neither politically expedient, nor easy, but that’s how you get true value, true growth, and eventually, community buy in.

If that’s happening, I’m not seeing the effects which means we’re either not talking about it, not talking about it effectively, or we’re just doing it wrong.

We create value both by doing this kind of honest and deep investigation, and finally, by seeking to enrich our community by investing to reduce the impact of our net negatives…knowing we will never fully eradicate them.

Instead, we’ve chosen to be paralyzed by our challenges. We speak of them as existing in perpetuity…as impossible problems to tackle.

When we do that, we place our community in a position where nothing is possible but decline…decline in wages, and property values are the result…decline in spending is heralded as the only solution to jumpstart the economy.

But that’s not the case here, or anywhere else. Just as blind additional spending isn’t the answer.

The answer is to stop focusing on the top lines or the beat up exterior and start seriously looking under the hood. That’s where you find the tools to build value…both in a budget, in an economy, and in a community.