Defining the terms

I want to thank the contributors to this blog for their input. This blog has really worked out better than I had hoped, mostly due to your input. I have found writing this blog has helped to organize and clarify my thinking about issues in the town. Without your comments and questions, I would not have continued writing. And so, I would not have refined my thinking. Thanks and I hope the continuing dialog is useful to you as well.
I think it is important to define the terms in the debate over our fiscal troubles. It is easy to get bogged down in details and numbers. So I want to start by defining the problem. It is impossible to agree on a solution without defining the problem. While it may seem obvious, it must be clearly stated and understood. The problem is that our spending exceeds our revenue.
Having defined the problem, we need to understand how we arrived at this state of affairs. Taxes (revenues) are increased nearly automatically by 2-1/2% per year, so our revenue grows every year. Dartmouth experienced a period of growth over the last few decades that added new growth revenue on top of the 2-1/2% increase. That new growth is slowing and so the rate of increase of revenue is slowing or falling. Every year, the town's expenditures also increase. For several years now, the rate of increase of spending has accelerated.
We can now define the cause of the problem - the rate of growth of expenditures exceeds the rate of growth of revenue. Notice that I am talking about the rates of growth for revenues and expenses, not just their growth in absolute numbers. This is a very important distinction. If the rate of growth in revenues and spending were equal, we could solve our problem by simply cutting expenses or raising revenue. That is not the case currently in Dartmouth.
Instead, what we see is that the rate of increase in spending is higher than the rate of increase in revenue. Let me state this another way, if our revenue is growing at 3% per year but our expenses are growing at 5% per year, the gap never ends. At the above percentages, the revenue shortfall for a $66 million dollar budget is $1.3 million for the first year. For the following year, the shortfall is $2.8 million. This gap continues with higher and higher deficits year after year. When you hear the term "structural deficit", I think that it is this differential in growth rate of expense and taxes that is being referred to. Now having defined the problem and the cause of the problem, we can start looking for solutions. I'll present my thoughts on that in my next post. Do you agree with my formulation of the problem and it's cause? If not, why not? Leave your comments below.