Does Growth Pay Its Own Way?

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September 25, 1996

Opinion Editorial

By Dwight Filley

Growth has always been a hotly debated topic in Colorado.

Unfortunately, hotly debated topics often generate more heat than light. Chuck Green's Denver Post column (8/25/96) "The cost of growth is hidden," is a case in point. In the course of discussing growth in general, he states flatly: "growth doesn't pay its own way," but then goes on to prove his assertion with-nothing at all. It's true he repeats his assertion several times, but repetition is a poor substitute for logic or evidence.

Since Mr. Green chooses not to enlighten us with his logic or evidence, if indeed he has any at all, let's attempt to explore the subject so as to shed light instead of heat.

Does growth pay its own way? When the question is asked this way, it avoids the impossibly subjective debate over whether growth is good or bad. Whether it pays for itself is not subjective but economic, and knowing whether growth pay for itself will help decide if it is good or bad.

Consider a cow pasture that becomes a housing development. Clearly the new families that move in have to have schools, roads, police, and all the rest, and clearly all this costs tax money. But just as clearly, all those new families pay the same rate of property tax, sales tax, income tax, every other kind of tax as families already here. So there is just as much new tax money available as there are new services demanded. If the tax rates paid by old residents are enough to pay for their government services, it seems obvious that the same tax rates paid by new residents will pay for their government services. It comes out even.

Then Mr. Green saying that it costs the Highlands Ranch suburb more to buy a fire engine than it costs Denver? If so, then the fault lies with Highlands Ranch for not shopping carefully, not with the growth itself.

Unfortunately, Mr. Green never mentions such details. He just states his premise again and again, using phrases such as: "infinitely more expensive" and "enormous, unbearable cost of growth." Hyperbole, wouldn't you say, Mr. Green?

In college, we used to call that "proof by violent assertion"-an entertaining but ultimately unconvincing form of logic.

In fact, the argument can be made that growth does pay its own way and more. Economists call it economies of scale, and businesses take advantage of it all the time. Bill Gates knows all about the advantage of size, as did Henry Ford, John D. Rockefeller, and all the rest. Would Mr. Green have us believe that big businesses can out-compete small businesses, but that big cities cannot compete with small suburbs?

Actually, big cities do enjoy economies of scale. Denver can almost certainly get a better deal buying ten fire engines than can Highlands Ranch buying one. So in this sense, growth can pay its own way.

Chuck Green is entirely correct when he states that "the cost of government inevitably goes up." Where he goes wrong is to blame that increasing cost on population growth. The City and County of Denver's population has been essentially stagnant for decades, yet Denver County taxes still go up. The cost of government inevitably goes up; not because new people demand services, but because the same people demand more services. And the cost of government goes up because of waste, and it goes up because politicians buy votes with tax dollars.

Growth may be good or bad-it's a reasonable and necessary debate. But to state baldly that it doesn't pay for itself, without any logic or evidence to support the statement, is neither reasonable nor necessary.

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Dwight Filly is a Senior Fellow of the Independence Institute, a free-market think-tank in Golden, Colorado

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