The Iron Triangle Roots of Toronto’s Budget Crisis

Commentary, Taxation, Steve Lafleur

Toronto’s current budgetary crisis has demonstrated yet again how dysfunctional politics can be — especially Toronto municipal politics. The July 28 executive committee meeting ran all through the night, as hordes voiced their displeasure with potential cuts. At the core is a fundamental division. Not so much the division between urbanites and suburbanites, but the division between interest groups and the rest of the population. And they’re on both sides of the political spectrum.

Listening to politicians, it is easy to get the impression that there is one side that wants the government to spend as little money as possible, and another side that wants the government to spend every nickel it can find. In reality, the right and the left both want the city’s government to spend a lot of money. They just want the government to pay for things they like, while cutting the things the other side does.

The right likes to see money go toward roads and hockey rinks. The left prefers bike lanes and urban agriculture. The right may be more likely to support lower property taxes, but it seems no more willing to allow for spending reductions on services it values. But if either side could be assured there was a way to finance the things it values at a lower cost, many from each side would be willing to explore that option. Few people like to pay more taxes than necessary.

This is where interest groups come into play. In the most famous study of the dynamics between interest groups and the electorate, Mancur Olson identified a troubling incentive problem. The benefit to interest groups of getting their way is large, while the cost to each taxpayer is small. Since voters have broader interests, they aren’t motivated to push back against every ill-conceived subsidy.

Further complicating matters is that interest groups tacitly collude with bureaucrats and politicians. They form what social scientists know as an “iron triangle.” Politicians are motivated by votes, which interest groups can help garner, and bureaucrats are motivated by keeping their jobs, which require public support. Where interest groups and bureaucrats are one and the same, their relationship with politicians gets even cozier.

Since there are many iron triangles on both sides fighting for resources, balancing the budget can be extremely difficult. There are ways to provide better services for less money. Since neither side wants to give up power and money, each has an incentive to convince the public it can’t afford cuts.

Two prominent examples of this right now are the police on the right and the libraries on the left. It should be noted that neither of these services is exclusively the domain of the left or the right, but that just happens to be where the most vocal support for each originates.

Much has been made about the substantial overtime pay that police get for duties that include directing traffic and working special events. This could easily be done by construction workers and security guards, which would help the city save money. But right-wing voters are easily persuaded to “support the police,” so it’s unlikely this will happen.

The potential closure of library branches has unified the left in the city against the administration. There have been emotional appeals to keep branches open, and some councillors have even included pictures of their branch in their Facebook pictures. But given the fact that there are many neighbourhoods where there are multiple libraries that are easily accessible, and that the Internet has largely replaced libraries, it seems likely that closures or cutbacks would be relatively painless for the public.

One opponent of the Ford administration asked the mayor where “Ford Nation” has been during the public consultations. Ford wrote off the absence of his supporters by pointing out they’re busy raising their kids and going to work. That’s a fair point. After all, few people have time to sit through city council meetings. But people who have a vested interest, or those who feel strongly about a particular service, are more likely to make time.

Besides, most people are too embarrassed to go to city council and say they want less spending on police or libraries. No one wants to be seen as the person who is against literacy or law enforcement. Until the majority is willing to look at both sides with equal skepticism, interest groups will maintain their stranglehold over the city.