We are accustomed to the notion that investors are subject to bouts of “irrational exuberance,” and that this is one of the contributing factors to the boom and bust cycles. When the good times are rolling, it is easy for those on the crest of the wave to assume that this can continue indefinitely. Not everyone assumes that, of course, but enough do to keep the wave going. When the idea takes hold that the very best predictor of tomorrow is yesterday, the investment strategy is pedal to the metal. So much for the private sector.
But it turns out the same thing is true in the public sector. People are people there too, and they also believe that tomorrow will be just like yesterday. And just as each bust catches more people by surprise than it really ought to, so also our public servants are caught flat-footed by tax revolts. They didn’t see that coming. They are like the fellow who thought he was going to live forever because day of his life thus far had been followed by another day.