But last week I read an article in Forbes that explained why my entreaties are falling on deaf ears. It even has a name, the "Curley Effect." Coined by Economists Edward Glaeser and Andrei Shleifer in 2002, it is the political strategy of “increasing the relative size of one’s political base through distortionary, wealth-reducing policies.” Here is how it works:
... Let’s say a mayor advocates and adopts policies that redistribute wealth from the prosperous to the not-so-prosperous by bestowing generous tax-financed favors on unions, the public sector in general, and select corporations. These beneficiaries become economically dependent on their political patrons, so they give them their undivided electoral support—e.g., votes, campaign contributions, and get-out-the-vote drives.
Meanwhile, the anti-rich rhetoric of these clever demagogues, combined with higher taxes to fund the political favors, triggers a flight of tax refugees from the cities to the suburbs. This reduces the number of political opponents on the city’s voter registration rolls, thereby consolidating an electoral majority for the anti-wealth party. It also shrinks the tax base of the city, even as the city’s budget swells. The inevitable bankruptcy that results from expanding expenditures while diminishing revenues can be postponed for decades with the help of state and federal subsidies (“stimulus” in the Obama vernacular) and creative financing, but eventually you end up with cities like Detroit—called by Glaeser and Shleifer “the first major Third World city in the United States.”
Its the incentives, stupid, which are similar in Nashville, in Detroit, and in Washington DC.
HT: John Tamny