In 2000, The Perfect Storm was just a movie.
Today it is a metaphor that describes dire budget circumstances across the country. This perfect storm budget scenario typically involves the confluence of:
Rising risks, including terrorism and legal exposures;
Reliance on the unreliable, including capital gains and one-time windfalls;
Runaway Medicaid costs and a spike in benefits-related spending;
Retirement bow wave and layoffs; and
Ramifications of governments in transition.
As legislatures patch together balanced budgets this session, they will find no shelter in rainy day funds -- state reserve funds were drawn down by what the National Governors Association calls "a spectacular 70 percent" since fund balances peaked in 2000.
What's worse is that fiscal woes are structural -- not cyclical -- and resistant to the upward draft of a recovering economy. But structural change is nothing new. Two decades ago, the United States, Canada and Mexico signed the North American Free Trade Agreement (NAFTA). Supporters and opponents agreed with Ronald Reagan on the magnitude of structural change that was about to occur; the former president got no argument on his assessment that NAFTA was as "an economic constitution of the Americas."
Bill Emmott, editor in chief of The Economist and author of 20:21 Vision, writes about 20th century lessons from which the 21st can learn. Among them is the importance of adjustment assistance concerning structural changes, such as NAFTA. His case hinges on institutionalizing change by enabling people and organizations to cross the bridge -- then burn it.
If adjustment assistance had its failings in the past, it has often been a half-measure or compromise negotiated after the fact rather than a central part of the transition plan from the outset. A deliberate adjustment assistance strategy would correct that historical oversight and help connect some very important dots.
The strategy is anchored in three principles:
1. Close to the Ground: Apply assistance where needed most -- make the person or organization in transition the focus.
2. Temporary and Transitional: The classic FEMA model, which focuses assistance on making people and communities whole in a changed environment, settle up once and for all, and get out of town.
3. One-Way Street: The change is permanent; there is no opting out. Adjustment assistance helps ensure no one is left behind, but is recognition that part of the past is sacrificed for promise of the future.
The strategy might apply to the digitization process in the following ways:
Government in Transition
A deliberate adjustment assistance strategy is absent, setting the stage for serious conversation about channel rationalization, core functions of public entities, and movement of business to where people are going. Such rationalization is the return on investment in adjustment assistance.
Employees in Transition
The adjustment assistance strategy properly cascades through public service. Staff positions are under intense scrutiny. Concerns about losing civil-service jobs to technology are replaced by prospects of deficit-induced layoffs.
People in Transition
The digital divide is continuously politicized, despite merits of universal access to the networked world. When it works, an overarching adjustment assistance strategy mainstreams activity, shields it from being marginalized as a narrow special interest and accounts for so-called market self-correction.
Of course, a wider strategy of adjustment assistance is potentially at odds with short electoral cycles and entrenched interests. Then again, it may also hold the key to finishing what we started and getting us across the bridge before the next storm blows through.
Check the forecast, then decide.