Businesses, of course, do the opposite when facing a budget crisis. They cut as far back as possible while still delivering as many of the things that their customers care about as they can [3].
It always seems silly to me when people worry about private sector pseudo-monopolies when we haven't figured out how to fix the incentives of that singular cartel that currently controls about half of our GDP.
[1] In part they are just living up to the implicit promises they make when asking for the tax hike. The message is never, "we need to raise taxes or else we'll be forced to cut the salaries and benefits of overpaid bureaucrats and work to operate more efficiently." No, it's always, "we need to raise taxes or else the lights will go out, and you wouldn't want that." You wouldn't expect them to let people down?
[2] Another commenter here usefully pointed out that this is an example of the Washington Monument Syndrome:
http://en.wikipedia.org/wiki/Washington_Monument_Syndrome
[3] When I say 'businesses' above, I'm principally referring to the millions of private companies in the US, not the handful of attention-grabbing public firms where management can extract wealth from the shareholders (and the government, in the case of GM and the banks). There is a different set of perverse incentives operating there. An entrenched (government-supported) monopoly could act the same way, as could (to some degree) a politically entrenched department head of a private organization. The bad incentives derive from high switching costs resulting in monopoly economics.
[4] Regarding rigor (questioned below): 1) my claim about what is usual in these circumstances is based on my own personal observations working with local governments; 2) I cited the Wikipedia article for naming of the phenomenon, not for rigorous support of its existence (be your own judge for that), and 3) this is already more rigorous than I intended to be for a simple comment about a common phenomenon that others have observed and noted long before the internet was available for us to debate every ontological question at length.