COLUMN RIGHT / BENJAMIN ZYCHER : Go Local and Private, California : Prop. 13 still needs its bias toward Sacramento corrected.

The Supreme Court decision upholding Proposition 13--correct both constitutionally and in terms of sound policy--preserves the immense benefits yielded by that initiative in terms of constraining the growth of local government spending. At the same time, one important adverse effect remains: Public sector taxation and spending have undergone a massive centralization toward Sacramento and away from more accountable and efficient local governments.

This general problem was masked until recently by strong economic growth and the 1986 federal tax reform, both of which yielded large increases in tax revenues available for state spending. Notwithstanding all the talk of California’s fiscal “crisis,” total state spending per person grew between 1983 and 1991 at an annual rate of 2.9% after inflation. And national economic growth hid the adverse effects of the increasing regulatory costs imposed on the business sector by state and local governments, as well as the large and expanding gap between those regulatory burdens and the social benefits of the regulatory activity.

Therefore, the appropriate fiscal agenda for California in the wake of the court decision is far broader than that represented by the current tug-of-war over the budget for the next fiscal year. That battle centers upon a number of short-term issues; important as they are, the longer-term goals of responsiveness, efficiency and selectivity must be addressed.

Those goals are paramount precisely because government institutionally is poor at achieving them and because centralization of government makes matters substantially worse. Responsiveness means a dramatic increase in the incentives for government to satisfy the demands of the taxpayers with respect to the amount of spending and the allocation of that spending among the services provided publicly. Efficiency means a reduction in the amount of resources consumed in the provision of given services. And selectivity means greater skepticism about the ability of government to solve several classes of problems; this skepticism implies an enhanced reliance on market forces and the private sector in the pursuit of given ends.

All three of those goals will require a dramatic shift to the private sector of the responsibility for provision of services now produced by government bureaucracies.

Public financing does not require public production; competition among alternative private providers will yield better service at lower cost, as the profit motive leads entrepreneurs to consider both the demands of taxpayers and the costs of service. In November, California voters will have a golden opportunity, in my view, to implement just such a mechanism: Passage of the Parental Choice in Education (voucher) Initiative will introduce competition into the provision of education, and will vest with parents instead of bureaucrats the final decision-making authority on the education of children.

Government simply will have to limit its goals. There is a multitude of problems that government institutionally cannot rectify, and its efforts to do so are doomed both to fail and to make matters worse. Foremost among them are the problems of the inner cities, which constitute primarily a moral crisis of individual behavior outside the ability of government to influence significantly.

The fashionable argument blaming budget cuts for the inner-city crisis is absurd; social spending over the last three decades has exceeded $2.7 trillion; would, say, $2.8 trillion have yielded a substantially different outcome? Far better, and cheaper, to subsidize the provision of talent and capital by private entrepreneurs, who have powerful incentives for such programs to yield profits--that is, to work. The bureaucrats’ primary concern is to see that their budgets increase, and policy failure provides a rationale for bigger budgets. And it would not hurt if government repealed the myriad policies--foremost among them the minimum wage and various licensure laws--that destroy job opportunities for the poor.

More intractable are the incentives of bureaucrats and politicians to use regulation as a hidden form of taxation and expenditure; these incentives grow more powerful as the time horizons of officials grown shorter. Perhaps the only hope in this regard is for enforcement by the courts of constitutional restraints on the behavior of government. In any event, not all problems can be solved simultaneously; the privatization agenda would constitute a significant step forward, and it would reduce the coercion and confiscatory power that define modern government.