By S.D. Plissken | October 18, 2018
At last Monday’s Board of Selectmen’s (BOS) Meeting, a silent alarm was triggered. Did you see the flashing red lights behind the dais? During that meeting, the proposed budget totals departed from the actual 2.1% rate of inflation to their usual unsustainable doubling of that, at 3.8%. That is not news. But then, they proceeded from there to an insane near-quadrupling of inflation, at 7.5%. Warning! Collision Alert!
In so doing, the proposed budget increases changed upwards from an Arithmetic Progression into the beginning steps of a Geometric Progression.
Arithmetic Progression
Arithmetic Progression occurs when a number, such as taxes, increases over time at a constant rate. Milton’s tax rate has been following such an arithmetic progression for a very long time. A problem has emerged recently by which the slope of that increase line has been increased. Since that happened, the tax rate has increased by about 5% per year, which has been approximately double the rate of inflation. The function of this would be y = nx, where n = 5 and x = the sequence number of the year. It would chart to the right as a steadily increasing straight line.
A problem arises when wages, i.e., the ability to pay, do not rise either at or above the same rate. A chart of the two lines together would show a gap emerging between them. That gap increases in size as the chart extends out rightwards over time. Each year, the increase amount comes more and more out of the taxpayer’s disposable income, i.e., their “capital.” At each step, the tax burden becomes less sustainable, but in a steady way.
This is bad. This increasing gap will drive you out of your home at sometime in the future. Exactly when will depend upon the rate of increase (the slope) of your particular pay envelope. But, unless your pay rate line is running above the tax increase line, you may run your finger out along the chart from left to right and find the date when you will be driven out.
Geometric Progression
Geometric Progression occurs when a number, such as taxes, increases over time not at a steady rate, but at an increasing rate.
Milton progressed to this type of increase last Monday night. Inflation ran at 2.1% last year. That is where our increase should be, below would be even better. Milton’s Town government budget increases at the end of the prior meeting, by which time they had added up the first two tranches of proposed departmental budgets, were projected to be a 3.8% increase. That is to say, they were on their usual straight line of arithmetic progression, at an unsustainable double the rate of inflation.
But, the addition of those final departmental budgets, as well as receipt of the increases in insurance and retirement rates changed the rate of increase radically. The new rate being discussed was suddenly a 7.5% increase. This begins to be a Geometric Progression, specifically y = 2^x, or 2 raised to the power of x, and the resulting y is successively = 2, 4, 8, etc., times the rate of inflation. (Sorry, this software doesn’t do superscripts). It would chart as a curved line, rather than straight, and curving upward.
The difference between an Arithmetic Progression and a Geometric Progression has to do with the rate of increase. An Arithmetic Progression increases constantly, but at a steady rate, while a Geometric Progression also increases constantly, but at a constantly increasing rate. You are getting into trouble faster.
Will Robinson’s robot should have been shouting “Danger! Danger!” in the background. If you run your finger out along the gap on this new chart, you will find that the gap is getting wider much, much faster. Your home exodus happens much further to the left, i.e., much, much sooner.
This is very bad and getting worse. It is the difference between you driving towards a collision with another car and you driving towards another car that is also driving towards you.
Exponential Progression
Exponential Progression is where the exponent, or power, in the equation is the variable. It would be ever so much worse than Geometric Progression. We probably need not dwell on its mechanics. Essentially, this is where both you and the car driving towards you are both stomping on the gas. And have nitrous turbo boosters or something. Think Venezuela or Zimbabwe, but with snow and no zoo animals to eat. We are on track to be New Detroit, but not yet on the track to be Nueva Venezuela. Not yet.
Is the End Near?
That depends. The breaking point is certainly approaching much more quickly now. Usually, when you arrive at this point, the more rational politicians have long since been blathering about “bending the cost curve.” That is to say, bending it back down to where it should have been all along – back below the rate of inflation.
If you wish to change the course of an ocean liner, or a Town government, the best way is to begin turning very far in advance. (Trucks often have signs that warn the vehicles behind them of their Wide Turns). Town governments have very large turning radii. To turn closer to an obstacle requires a much more exaggerated, even alarming, degree of turn and the application of much greater motive power. Delayed too long, it becomes impossible to turn enough. You hit the iceberg.
To bend the cost curve, the BOS would have to reduce their costs, by a lot. There is no other way. We are far past wide, gentle turns back to reality.
Yes, the various BOS administrations of the past decade or more – all those that approved increases that were double inflation rates – have completely failed us. They should have turned back on the right course long ago – and certainly turned back hard when the recession took hold. But the taxpayers are to blame also for not overriding the Town government. Adult supervision is required.
The last administration might have endorsed the Deliberative Session motion for a 10% cut instead of fighting it. Had they done so, what we face now might be less painful. Instead, they staged a sort of dog-and-pony-show to keep the game going, just a bit longer. It is now apparent that we needed that 10% cut, desperately, in order to turn the ship more smoothly.
Even this current administration wasted the first half of their tenure voting unanimously for every shiny thing. By-Laws, CIP Plans, GIS systems with ongoing annual fees, memberships, lawyers, websites with ongoing annual fees, hiring, more hiring, even COLA.
COLA? Wake up: few in the private sector have experienced COLA for a generation, maybe two. Social Security recipients maybe, but for that they use a special “Chained” CPI that intentionally understates inflation. Their COLA increases, if any, are largely paid over for their Medicare increases, which do not use “Chained” CPI.
This late in the game, the necessary course change will be a jarring lurch. But this runs completely counter to what politicians deeply desire and believe, which is that handing out stuff is beneficial. And organizing the world around them. The French economist Frederic Bastiat famously explained that
The State is the great fiction through which everyone endeavors to live at the expense of everyone else.
Margaret Thatcher put her finger on the problem of this great fiction: eventually you run out of other people’s money.
Will the BOS grit their teeth and turn the wheel hard over? There is reason to doubt it. They might instead use the $1.4 million taken last year – the taxation without representation – to kick the can down the road just a little further. That particular trick might buy as much as two years, longer perhaps if they made changes. But then we would be right back here again when the stolen money ran out, still on the wrong course.
We shall see.
As I write this, I am informed that Ms. Lynette McDougall has called for a brainstorming session at Dunkin’ Donuts, Saturday, at 9:00 AM. She is seeking constructive suggestions, rather than generalized whining. (Not her words).
References:
Wikipedia. (2018, September 5). Arithmetic Progression. Retrieved from en.wikipedia.org/wiki/Arithmetic_progression
Wikipedia. (2018, October 14). Geometric Progression. Retrieved from en.wikipedia.org/wiki/Geometric_progression
Wikipedia. (2018, October 13). Exponential Growth. Retrieved from en.wikipedia.org/wiki/Exponential_growth
Milton Observer 