Financial Priorities (Gwen Moritz Editor’s Note)

“How many antipsychotic med injections could have been purchased for the cost of the replacement of the monument?”

I was mostly lost in the one college economics course I took, but I totally grasped the part about economics being the allocation of limited resources among unlimited wants. I grew up watching my mother double-check the Safeway receipt in the days when prices were keyed in by hand and use a straightedge to mark through an extra principal payment on the mortgage amortization printout.

Allocation and competing demands were concepts I already understood.

The question above came from a woman who read my last column about the mentally ill man who smashed his car into Ten Commandments monuments in Oklahoma and Arkansas. It’s a standard sort of comment meant to illustrate messed-up financial priorities, except it’s fraught with logical fallacies. The money spent on the ill-fated monument was never going to be spent on that particular man’s medication; no one chose one over the other. “Do you walk to school or carry your lunch?” as Your Old Pal Bozo said.

But we do make either-or financial decisions all the time — in our families, in our businesses and at every level of government. In this week’s Executive Q&A, Hot Springs Mayor Pat McCabe says “balancing the unlimited needs and desires of our community with our available revenue streams” is his city government’s biggest challenge. Researchers say arguing about money is the No. 1 predictor of divorce. If two people who love each other can’t agree on financial priorities, it should be no surprise that taxpayers have millions of different priorities as well.

Politico Magazine reports in its current edition that conservative Colorado Springs, after a decade-long experiment in running government “like a business,” has voted to raise taxes. Meanwhile, Oklahoma’s 2016 Teacher of the Year announced that he and his wife, also a teacher, were moving to Texas, where their household income would increase by $40,000 a year.

In Arkansas, we can’t seem to figure out a solution to highway funding — not because we don’t agree roads are a priority, but because we can’t agree on which other things have ceased to be priorities. Raising taxes — in fact, anything but lowering taxes — is a non-starter.

One of the few things Republicans in Congress agree on is repealing the taxes that pay for the Affordable Care Act. The left-leaning Center on Budget & Policy Priorities estimated that the 400 American households with the highest income would enjoy $33 billion in tax cuts over 10 years — tax relief averaging $8.25 per family per year in 2019-28. Not coincidentally, that $33 billion is the equivalent of the amount spent over 10 years to expand Medicaid to some 725,000 people in Alaska, Arkansas, West Virginia and Nevada. That’s a tradeoff.

It’s the opposite of what Candidate Trump promised to do — cheaper, better health insurance for everyone — but it’s abundantly clear that the party’s promise to repeal the Obamacare taxes was sacred while Trump’s promise was cavalier at best and cynically dishonest at worst.

No surprise: Health care providers have a different set of priorities.

Last week, MarketWatch.com published an article about a Deutsche Bank study on luxury purchases by income class. The headline was provocative — “Low-income families spend 40% of their money on luxuries” — and more than a little misleading. By the next day, the headline had been softened — “Lowest-income families spend 40% of their money on what economists label luxuries” — and readers were belatedly warned that the researchers didn’t define luxuries the way most of us would.

“It’s worth noting,” the revised story said, “that by the specialized nomenclature of the dismal science, even eating at McDonald’s is a luxury — that is, we do it more as our incomes rise — while smoking and lottery-ticket buying are categorized as necessities.” That’s because Deutsche Bank defined luxuries as “goods or services consumed in greater proportions as a person’s income increases” while necessities “make up a smaller proportion of spending as a person’s income increases.”

Even by that definition, the lowest quintile of Americans spend a smaller proportion on so-called luxuries than anyone else — and it’s still undoubtedly more than they should. Poor allocation of available resources is epidemic among American households, which is not surprising since perpetuating the monthly payment mentality is a cornerstone of the American economy. A lot of people have committed more money to their teenagers’ cars than to their college savings.

The cost of a Ten Commandments monument (or two) is negligible in the big scheme of things. The money is coming from private donors, and I hope the only argument it causes is in court and not with their spouses. It’s the much bigger economic priorities that worry me.

Gwen Moritz is editor of Arkansas Business. Email her at GMoritz@ABPG.com.