Source: Continuous Improvement Associates

Social Issues
The Growth Trap
By Bob Powell, 11/21/05

Question: Who's correct? Growth supporters or opponents? Answer: Both! And they're also both wrong!

How can that be? The conflict is confusing, but when you finish reading this, you'll understand it and what to do about it.

Both sides are logical, but one uses "individual logic," the other "collective logic." Individual logic: "Do what's logical for me." Collective logic: "Do what's logical for the whole."

Now libertarians believe that doing what's logical for the individual is always logical for the whole. But it's not true. In many situations, individually logical actions are collectively irrational and we fall prey to the Fallacy of Composition: acting as if what's true for a part is true for the whole. Growth is such a case.

Individual logic: To compete with other regions, cut taxes and regulations. Regions must compete because Federal Reserve policy assures there are always more people than jobs (note: "effective unemployment" is 9%). Don't charge impact fees to pay for the long-term costs of growth. Otherwise jobs will go elsewhere. As EDC president, Michael Kazmierski, said, "We're in a global economy competing against other communities;" an economic crackup could occur if the city becomes unattractive to business. True.

Collective logic: Regions shouldn't compete by reducing taxes and regulations because that creates infrastructure backlogs and an increasing burden on the public to pay for the long-term costs of growth. As SaveTheSprings founder, Dave Gardner, said, the result is that residents and businesses already in Colorado Springs will see [utility] bill [and I add, tax] increases to subsidize growth. Also true.

Colorado's radical individualism follows individual logic, which leads to infrastructure backlogs, traffic congestion, declining quality of life, pressure for more taxes, and TABOR.

Some statistics: Population growth from 4/1/00 to 7/1/03 was 6.5% for El Paso county, 5.8% for Colorado and 3.3% for the U.S. The Colorado Springs infrastructure backlog has increased from $308M in 1996 to $468M in 1997 to $1B in Nov. 2000 when Dave Zelenok, Group Support Manager Public Works, said, "If things keep going the way they are, we'll be facing a $3 - 4 billion backlog [10 - 20 year]." This isn't a local problem: the nation's five-year backlog is $1.6 trillion! Each year Americans spend 8 billion hours stuck in traffic; lost productivity cost $43 - $168B.

This increases pressure to raise taxes. Kazmierski was cited as saying "today's infrastructure was paid for by the past generation." The logic therefore: current residents, not newcomers, should pay for much of tomorrow's infrastructure.

The trap: Taxes cover short-term, but not long-term, costs. So we need even more growth for more taxes. But no one can sell at a loss and make it up in volume. Doing what feels better short-term, but makes things worse long-term, is called "addiction." Competition between regions is individually logical and collectively insane.

When pressure to provide infrastructure increases enough, we get Referendum C and a schizophrenic Republican Party with anti-taxers (who don't believe in public services) against developers (who'd rather increase everyone's taxes than pay impact fees for the infrastructure that allows them to sell their product).

So what to do?

Realize individual regions can't escape. With free migration, no place can long remain more attractive than any other place (note: attractive doesn't mean "prettier"). Anything we do to raise quality of life in Colorado Springs may work for a time, but it eventually attracts more people who overwhelm the improvement. Programs aimed at improving regional quality of life can succeed long-term only if they raise average quality of life for the whole nation. Read that again.

Also: Declare a national “tax war” cease fire. Fully internalize costs so prices fully capture the marginal costs of growth to allow "the market" to correctly value choices. We'll know costs are fully internalized when infrastructure backlogs stop growing without taxes to pay for new infrastructure. Base competition between regions on quality of life.

So both sides are right and wrong. And this describes what to do about it. Fat chance we'll do it.

© 2003 Continuous Improvement Associates

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