Thursday, February 18, 2010

What a Spectacularly Bad Idea

Harold Meyerson, writing at the L.A. Times, discusses the idea of the European Union bailing out Greece or the federal government bailing out California. Now, of course, the problems that Greece and California face are largely of their own making and the decisions of the larger bodies are of course different. Of course, Meyerson tries to compare apples to oranges and tries to make California lemonade, but that is not nearly as shocking as Meyerson's suggestion:
Any talk of a California bailout raises domestic hackles, of course. With virtually every state raising taxes and cutting services to get through the recession, why should California get special treatment? As the backlash against Sen. Ben Nelson's healthcare-bill-cum-federal-aid-to-Nebraska deal demonstrates, having the feds help only one state out of a problem that the other 49 also confront is a classic nonstarter.

Some of the Democratic critics of the Nelson deal, however, didn't want it simply scotched. They proposed instead that every state get what Nebraska would get -- federal assistance to pay for the new Medicaid patients covered under the healthcare reform. And part of the answer to California's problems is exactly this kind of solution.

Under the American system of federalism, some functions are paid for by the federal government (defense and Medicare, for example), and some are paid for by states and localities (schools and local roads, for instance).

The difference, which becomes all important during major economic downturns, is that the feds can and do run Keynesian deficits, while the states, which must balance their budgets, can and do turn into (in New York Times columnist Paul Krugman's evocative phrase) 50 Herbert Hoovers. While the feds enacted a $787-billion stimulus, the states, according to the Center on Budget and Policy Priorities, were experiencing a two-year budget shortfall, which they had to close through program cuts and tax hikes of $350 billion.

So in the U.S. during downturns, the feds stimulate the economy and the states depress it simultaneously. In virtually every other major democracy, either the national government pays for most of the programs (such as education) that states and localities pay for here, or their states and provinces are allowed to run deficits during downturns.

I'll grant you that California can't get a bailout for itself, but that really shouldn't be its task. What it should be demanding is that the federal government assume responsibility (whether temporarily or permanently is a larger discussion) for important functions in every state -- functions such as education, so that grade-schoolers don't have to share their teacher with 40 other kids until the economy comes back.(emphasis added)
So California should be asking the federral government to take over traditional state functions (like Education) so that California can balance its own budgetary mess.

Talk about stupidity. In a time when the there are real concerns amoung lots of Americans (and not just the Tea Party) about the size, role and increasing instrusion into our lives of the federal government, California should just ask the feds to take over more of California's responsibilities? What happens when the federal government mucks it up? (and they will--just look at DC's schools and the federal government has a role in DC government) At what point does the federal government return control of the California education system or other major areas back to California? The answer to that question will be never. What about all those other states who have similar problems (pretty much all 50)? Does the government take over those roles as well?

Here is another major concern? At a time when a lot of my federal tax money goes to other things and other states, how am I supposed to feel about more of my tax money flowing to California? At some point the bills have to be paid, whether California pays them or Uncle Sam pays them?

Governor Schwarzenegger has to just simply tell everyone like it is. California has not lived within its means and because it hasn't California is going to pay the price. It will lose businesses, it will lose jobs and it will lose all over unless it starts to dramatically and drastically reduce government spending.

Meyerson's plan shifts the burden from Californians for their shortsightedness to all of the U.S. That is a bill I am not willing to pay.

1 comment:

Darren said...

Everyone knows California hasn't lived within its means. Now, how do we fix that? The lefties will say it's because we're not taxing people and corporations enough, and righties will say that government spends too much. Neither side will budge, so we continue on.

(BTW, the righties are right in this case.)