Read this from today's New York Times. It concerns you.
Yes, it's about California; most of you aren't from here. Nevertheless, as an American and as a Democrat (if you are), this concerns you plenty. California is poised to drag down the national economy. Its failure is also poised to drag down the Democratic Party, because we not only fund the national government (1/8 of the population that puts $1.35 into the federal Treasury for ever $1 in services we receive), but also the national party. We pay for your campaigns.
We're going broke because our political rules make no sense, giving 1/3 of the legislature -- a threshold Republicans barely exceed -- a veto over both new taxes and a new budget. Our Governor is a preening bumbler; our Democratic legislators seem content to blame the voters and pass an anti-poor austerity budget that will rocket us into a depression.
We are a failed state. We need to be taken over.
Joe Mathews, a think-tanker with the centrist and non-partisan New America Foundation (with which I sometimes do and sometimes don't agree), has a powerful piece up in today's New York Times. He makes the point that California is collapsing, in which case it will likely take the rest of the national economy with it, and that the state's political rules leave it completely unable to address its own problems.
Those problems derive from a long list of actions -- an initiative system that has been abused by monied interests so that we face a see-saw of conservative measures (which make governing impossible where one party, in this case the Republicans, thinks that it profits from disaster) and populist responses that try to protect certain interests. We require a 2/3 vote to pass a budget. We require a 2/3 vote to raise taxes. Our property taxes are fixed at 1978 levels, with minimal adjustments, for people or corporations who owned houses in 1978 -- and of course corporations can live forever. Our current Governor was elected as part of a successful recall drive against the previous Governor for taking an unpopular (but, in retrospect, clearly necessary) step to retain discal sanity by increasing vehicle licensure fees. Republicans are trying to recall two Republicans legislators whose ultimate willingness to compromise gave us our last budget.
This is madness. We cannot govern ourselves in the area of fiscal policy.
Our problems have lasted so long that our reserves have been depleted. we will run out of the funds we need to pay our bills by late July. Our tax revenues, like those elsewhere, have cratered. We've been shifting cash around the budget -- and now that cash is gone. Given the lowest credit rating of any state, and the horrible state of credit markets overall, we can't even borrow our way out of this.
Mainstream political leaders talk about the prospect of bankruptcy -- but there is no provision for state bankruptcy under federal law. Right-wingers talk about just refusing to pay salaries and such; their aim is to destroy public employees unions and public education, of course. This would further destroy our bond ratings and likely push localities -- who would not receive state support, but whose coffers the state could raid -- into bankruptcy. What money we have could simply go into court costs -- and judgments. We're seeking federal aid, but many understandably don't want to reward our bad behavior -- and Republicans look forward to California being Exhibit A in their "see, government doesn't work!" case, as well as seeing all those sources of Democratic money dry up.
Something is going to have to give -- the only question is when. Mathews's argument is: better sooner than later. I'm inclined to agree. Here, to me, is the meat of his argument:
[A]s a condition of any assistance, the federal government should charge the state a fee that includes penalties if it fails to make major changes in its budgeting process. At a minimum, California should be required to submit for federal approval a multiyear plan to meet its obligations and to eliminate its structural deficit. Washington might also require the establishment of a board to oversee state finances. (Federal loan guarantees to New York City in the 1970s provide one model.)
There would be fierce resistance to federal aid. Other states may wonder why California deserves special attention — it’s a fair point, and it might be wise for the government to offer similar guarantees to other states in distress. California officials might worry about the loss of sovereignty. And Democrats in the administration and Congress, many of them Californians, may be tempted to help a Democratic state without conditions.
But they shouldn’t. By attaching strings to any aid, the federal government would give the state its best chance at saving itself.
Most important, President Obama should press California’s elected officials and its voters — 61 percent of whom supported him last November — to make constitutional changes. Among these would be the elimination of the gridlock-creating two-thirds vote for budgets and tax increases, and new curbs on ballot initiatives that mandate spending for popular programs without identifying new tax dollars to pay for them.
I'm not sure what the legal basis for, in effect, federal receivership of the state -- during which time our laws might be rewritten more quickly and surely than could be obtained through a Constitutional Convention -- would be. I do think that we should be exploring that question quickly and aggressively. My guess is that what could end up being the push to receivership may be some federal court order: after all, if California can't go bankrupt, but does go bankrupt, the appropriate judicial remedies would probably be something like setting up an equitable trust to manage its affairs -- and the federal government is the likeliest trustee. We progressives all know what basic things need to happen: eliminating the 2/3 requirements for taxes and budgeting, exempting commercial property (either overall or where there has been a 50% cycling of shares) from Prop 13 property tax, and reforming the initiative system (both in terms of process and substance, meaning limiting corporate efforts to capitalize on it and probably, as a sop to the right and center, limiting "dedicated funding" initiatives for given spending priorities.) We just aren't sure how to do it.
We've talked about a Constitutional Convention -- maybe in 2011 or so, if we get our famously balky electorate approve a bunch of necessary votes. It may be time for a shortcut -- federal receivership, perhaps deriving from a federally imposed equitable trust. Get the federal government in there, have it aid us with our short-term debt problems, let it make the structural changes we need to pull ourselves back onto our feet, and then get out of the way and let us start to govern ourselves within the newly set limits. It's not that different from what has been done with GM and Chrysler.
This is a conversation we have to have -- and it should start today. The time for anything less than radical reform is past. We need Presidential leadership -- from a leader who is wise enough to do as little as possible with the power he'd have beyond setting us back on our feet and laying down some new rules -- and we need it right now. This is the time and place for Obama to be FDR and show us the power of the federal government. The state Constitution, like the federal one, is not a suicide pact. This is the time to bend it in order not to let it break.