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As Goes California, So Goes the Nation?

Paul Krugman has a very nice column on the fiscal disaster -- and "disaster" is not too strong a word -- facing California. The Golden State has, as Krugman argues, a survival-level economic threat that's fundamentally the result of a political crisis. And they're not going to be able to solve the one until they fix the other.

The same, he suggests, is true for the nation. There are a variety of economic dangers on the horizon -- notably, the overwhelming rise in health care costs -- but no evidence of a Congress that possesses either the incentives or the capability to make truly difficult decisions. The health reform being discussed now might improve the situation and delay the day of reckoning, but few suggest it will actually solve our problems. The filibuster is too powerful, the minority too ambitious, the majority too risk-averse. Policy, in this environment, must be cautious, and an insufficient victory is better than a noble failure. The probable outcome of that is not a hard equation to run. Just ask California how it's working out for them.

By Ezra Klein  |  May 26, 2009; 11:00 AM ET
Categories:  California  
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It is not a heartening sign when national polling shows that majorities support almost all of the programs currently in place or suggested (health care reform, climate change controls) by Obama, but even larger majorities want no taxes increased.

Spend more, but don't tax more. The California 'solution'. Worked well for CA, didn't it?

As state and local revenues continue to decline in our shrinking economy (and the Fed. gov't is out of will and money to help states and local governments), we are all headed down the drain. YouTube will need a sub-site for videos of the carnage that this financial disaster will bring: The DownTube.

Posted by: JimPortlandOR | May 26, 2009 11:11 AM | Report abuse

it seems to me that the key problem that CA faces and that the Fed. congress faces to a lesser degree (despite its many, many disfunctions) is that the thresholds for passing spending and for passing revenue increases are different. it is only a majority to pass a new program, but it is 2/3 to pass new revenues. so partisan issues aside, this is always going to be a recipe for disaster, as there will always be more people available to start a great new program than people who are willing to pay for it.

I think that my point is that CA is a particularly bad case, and not necessarily indicative of us congress, unless as you and yglesias have pointed out repeatedly the senate fully enshrines the 60 vote standard.

Posted by: brandow | May 26, 2009 1:36 PM | Report abuse

That guy is just a New York Times blogger, who cares?

Posted by: ajpiano | May 26, 2009 3:19 PM | Report abuse

If what I have read is correct, nothing in the Bankruptcy Code applies to states. Because of California's outsized influence, it probably will succeed in getting some sort of federal bailout.

The only way to keep this from happening again, as well as to keep other states in financial trouble from lining up for help, is to impose Bankruptcy Code-like provisions on the state no matter what claims are made about state sovereignty. If it wants federal money, it can be forced to accept federal conditions. That means the rejection of "burdensome" labor and other contracts, a curbing of the proposition process (to require, at a minimum, that every proposal for spending also provide a specific method for financing the program at issue other than the use of general tax revenue), the abolition of supermajority requirements for raising taxes, the elimination of differentials in property-tax rates, and everything else that distinguishes California from well-run states.

Of course there will be complaints. So?

Posted by: phillyreader | May 26, 2009 4:40 PM | Report abuse

more, but don't tax more. The California 'solution'. Worked well for CA, didn't it?

JimPortland is correct. You can't have your cake and eat it too. Where we differ is the solutions. Jimbo wants to raise taxes as he envisions the workers' paradise. I would ask any entity, including CA, to live withing their means just as I'm asked to do.

Posted by: ElViajero | May 28, 2009 9:45 AM | Report abuse

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