Fired Up

Why is it so hard to cut government spending?

One reason is what some have called the "March of Dimes" problem. Back in 1938, Franklin Roosevelt helped start the organization as a way to raise private money to fight Polio. They were tremendously effective: during the post-war Polio epidemic it is estimated that the March of Dimes aided over one third of all Polio victims nationwide.

After the development of the Salk vaccine, the number of Polio cases fell precipitously. Today, Polio has been all but eradicated. But the March of Dimes organization didn’t declare victory and disband. Rather, they adopted new causes and initiatives: mission creep.

The same thing can be seen in public budgets. An example is Fire Departments. In many major cities, the number of large fires has fallen dramatically. In Boston, in 1975 there were over 400; last year there were 40. But the firefighting budget has gone up from $140 to $180 million. So firefighters have taken on other causes like emergency medicine, as automatic sprinklers and better building codes reduce the need for their core mission.

But if the city tries to reduce spending, all the firefighters have to do is take a picture of a burned-out home and claim that if the budget is cut, children will die. It’s hard to negotiate with heroes.

But pubic budgets are subject to the same constraints as anyone else. If a government agency can’t be reigned in, it’s the taxpayers who will get hosed.

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2013-09-10T09:42:42+00:00 September 10th, 2013|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

Leave A Comment