01 July 2009

Sink With California

The unsurprising news that once again California can't agree on a budget and/or come up with enough money to pay even its most essential bills has Time Magazine wondering if the federal government needs to step in, i.e., if the nation's biggest state is, like AIG and Citibank, "too big to fail."

The article sketches out two grim scenarios: if the feds let the fruit, nut and flake state go its merry way to perdition, i.e., bankruptcy, the failure of the world's eighth largest economy could and probably would endanger the entire global financial system. If, on the other hand, the US does as the wingnuts allegedly governing California are asking and acts as co-signer on the state's outstanding loans, the credit of the entire US could be undermined and possibly wiped out.

California, once one of the most progressive and best-run states in the nation, is largely the author of its own misfortunes; the current troubles had their origins back in the Me Decade, when voters, befuddled by too much dope smoking and/or naked self-interest, used the referendum process to give themselves a big and poorly thought out tax cut.

Actually, it wasn't so much poorly thought out as it was maliciously; Proposition 13, which limited property taxes to 1% of assessed value (not necessarily a bad idea in itself) was the brainchild of right-wing "government is the problem, not the solution" forces, and it did its real damage by a) preventing property values from being reassessed until such time as the property is sold, creating the ludicrous (if it weren't so tragic) situation where billionaires can be paying a couple hundred bucks a year tax on a multi-million dollar property just because they happened to buy it before California's real estate boom. Secondly, Prop 13 required that any significant change to the tax code had to be approved by two thirds of either the Legislature or the voting public, with the result that the anti-government crowd, a perennially strong minority in California politics, can short-circuit just about any kind of tax hike or reform.

But just as it took a coalition of right-wing ideologues, apolitical greedheads, and left wing space cadets to pass Proposition 13 in the first place, a similar logjam of conflicting but mutually oblivious interests has produced the impasse which may soon force California to slash some of its most fundamental services and start issuing IOUs in lieu of cash payments. The Republican dingbat faction has its fingers in its ears while it chants "La la la, no new taxes" and their Democratic counterparts can only respond with, "But you can't cut THAT program, think of the children/illegal immigrants/endangered lemonthroated warblesuckers...etc."

In short, California is burdened, and has been for some time, with a wholly dysfunctional body politic which, if not beyond redemption, is nonetheless unlikely to respond to any conventional remedies. The only way the federal government should even consider becoming involved in this mess is if it effectively nationalizes the state and starts running it direct from Washington. The people of California have demonstrated conclusively and definitively that they're incapable of governing themselves; handing them more money and/or credit would be like furnishing a wild-eyed drunk with another quart of whiskey and a loaded gun.


Kendra K. said...

I'm essentially a state employee and it's quite nerve racking. We'll probably get IOUs instead of pay checks. I hope I still have a job in a couple of weeks.

Anonymous said...

Lar's analysis is on point, though to be clear, the Prop 13 push was from the right, NOT the left.

What's interesting is that a revision of Prop 13, affecting only the business & non-profit property owners- NOT residential property owners- has been gaining mainstream political support over the past few years.

Stay tuned... California cannot continue with the budget & tax structure it currently has. We have to raise some taxes, mostly (all?) on corporations & the well-off, at the state level. Sacto lawmakers have so far been unwilling to do so. The 2/3rds requirement is atrocious.

-Jesse Luscious

Anonymous said...

Its bad, all I can think is "aren't you glad you live in NY, Larry?"

Anonymous said...

Hi Larry,

Is green day aware that they are the ad music for Rush Limbaugh's show on the radio? i am not kidding, listen to 770am in nyc in the morning...i hope they are getting a hefty check for it.