In the Book of Genesis, Pharaoh had a dream where seven ugly, gaunt cows ate up seven fat, sleek cows, and seven thin, wasted heads of grain swallowed up seven good, healthy heads of grain. Joseph told Pharaoh his dream foretold seven years of plentiful harvests, followed by seven years of famine. Joseph advised Pharaoh to collect and store a fifth of the grain produced during the seven years of plenty so that Egypt would have enough food to make it through the famine to follow. We didn't have the benefit of Joseph foretelling the COVID-19 pandemic for us, but we can still learn from him.
While the catalyst for this post was the negative public reaction to the announcement that Plano's outdoor pools would be closed for the summer (read my explanation here), this has been on my mind since at least the beginning of April.
In Texas and some other states, we're emerging from the shutdowns. Many (mainly those who haven't lost their livelihood) seem to believe this means we'll simply resume pre-pandemic economic activity and employment levels. They're in for a really nasty shock.
I'll address the macroeconomic reasons for this in another article, but suffice it to say, the economic blow to this country--to the world--is severe, and will last far longer than the shutdowns themselves.
Until the pandemic, the economy was roaring. We were in the longest-running bull market in American history, the S&P 500 had increased 60% in just five years, and unemployment was at a fifty-year low. I hope everyone was socking away some money, instead of racking up ever-more debt (like the federal government), because the gravy train just came to a screeching halt. In Texas it's even worse because we were dealt a one-two punch simultaneously from the coronavirus shutdowns and the plunge in oil prices. The real national unemployment rate is now a staggering 22.5%. That's just 3.1% off the peak of the Great Depression itself, and many of those lost jobs are gone for good. Many others aren't coming back in a hurry. Those jobs, and those businesses are our economy.
This week, to address the coming "economic shock," Governor Abbott correctly instructed state agencies to look for ways to cut their budgets. Incorrectly, the ask was to cut by only 5 percent, and didn't apply to many of the largest agencies. With a host of huge exclusions, and with some agencies expected to increase their budgets, shooting from the hip, this will amount to a 1, maybe a 2 percent net reduction in state spending. With the dual coronavirus-oil price calamities, Texas's economy has suffered far more than 2 percent. We've suffered far more than even 5 percent.
To put it in perspective, if I weighed 500 pounds, and my doctor told me I needed to go on a transformational weight loss program due to the critical risk to my health, this would be the equivalent of losing 10 whole pounds, and punching in on the scales at a trim 490. We have to do much better, and the Texas Freedom Caucus had already made a start a couple of weeks earlier by launching the Texas Accountability Project to help taxpayers identify wasteful state spending.
In Plano, everyone knows (because I said so frequently during my campaign last year) that the Plano City Council had increased taxes on existing homeowners by 40 percent in just five years, until last year, when we adopted the Effective Tax Rate (now called the No-New-Revenue Rate), to keep property taxes flat from the prior year.
That's analogous to the seven years of plenty in ancient Egypt, and we're now heading into a figurative seven years of famine, though I pray it's much shorter than seven years, and there's no actual famine. With the economy in such straits, we've already seen sales tax revenue decline, and regardless with what happens to property values, many of our people can no longer afford to buy food, let alone pay the average $1,700 city portion of their property tax bill. The hole in our economy is much deeper than the CARES money appropriated by Congress can fill. After all, who do you think is going to pay for all those trillions of dollars in the end? Taxpayers.
While we didn't set aside a fifth from our seven years of plenty, we will need to take meaningful measures to remain the City of Excellence while not unduly burdening our people. Some taxing authorities are contemplating soaking their citizens to make up for their anticipated tax revenue shortfall.
Speaking only for myself, I feel that if the people we represent are having to tighten their belts, we can do no less. The outdoor pools everyone wants open would consume approximately one-tenth of one percent of our annual budget (and in these unique circumstances, if we were to charge enough in fees to break even, it would likely price the pools well out of most people's consideration). While some will say if it's only one-tenth of a percent, go ahead and open them. My perspective is that in the wake of this economic disaster, it's going to take many more tenths before we can strike the necessary balance.
Remember: the government has no money but what it takes from the taxpayers, and therefore every dime we save is money back in the pockets of our people at the very time they need it the most. The City Manager recognized early on the economic pain we were going to feel, and took measures to curtail less urgent spending needs. We are currently in the process of planning the budget for the next fiscal year, which starts in October, and I strongly feel we need to continue that exercise. To that end, I'll be looking for ways both bold and creative to stretch your tax dollars further, drive greater value, and ease the burden on the people and businesses who have been brought to their knees.
America became the most prosperous nation in the history of the world due to the drive and ingenuity of our people, and by government largely getting out of the way. With that same indomitable American spirit, discipline, perseverance, and a strong sense of community, we'll come out on the other side of this stronger than ever.