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Et Tu, Arne?

by: Robert Cruickshank

Sun May 24, 2009 at 09:13:00 AM PDT


As the crisis in California worsens, the state that may have done more than any other to elect Barack Obama president - donating enormous sums of money and time, fanning out across the nation to push swing states into the blue column - is finding that the love is not being reciprocated.

First it was Treasury Secretary Tim Geithner rejecting a Treasury backstop for CA short-term borrowing. Now it's Education Secretary Arne Duncan, who is planning to head a $5 billion effort to improve public education in America - an effort he says California won't be a part of:

A handful of states will soon be chosen to take part an intense, $5 billion experiment to improve schools that the federal government is calling "Race to the Top" - but California will be lucky if it gets to participate, U.S. Education Secretary Arne Duncan said today during a visit to San Francisco.

"Honestly, California has lost its way," Duncan told dozens of the state's mayors and education officials who packed into San Francisco City Hall. "The long-term consequences of that are troubling."...

He said California's fiscal crisis - in which schools are being forced to cut programs and lay off teachers - means the state has a long way to go before it is regarded as a state that can show others how to make public education shine.

"I have huge hopes for what California can do," he said. "I'd love to have California at the table, but California has things it needs to change."

In itself those comments are totally reasonable. California has undeniably lost its way - under 30 years of conservative anti-tax policy, we have slowly starved our schools of funding and set up a day of reckoning that has finally arrived. Instead of leading the nation in education, as we once did, we're now bringing up the rear, as those who benefited from CA's generous education policies in the 1960s and 1970s now refuse to fund it for the next generation.

We can all agree with Arne Duncan that CA is facing a severe crisis and that our government's unwillingness to support its schools is detestable. And yet the troubling thing about Duncan's statement is that it suggests the federal government isn't going to to much to help.

This comes on the heels of a growing trend of liberals dismissing California's problems as something we created, and therefore something we must solve on our own. You can see the attitude everywhere from the comments section at Daily Kos to the editorial page of the New York Times. The general attitude is "you guys made your bed, why are you crying to us for help?" (Although to be fair, the NYT does support some form of federal aid.)

The Obama Administration, judged by the statements of Secretaries Geithner and Duncan, seems to agree. The administration that moved heaven and earth to rush bailout money to Wall Street is showing little interest in helping California avert meltdown, even though budget shortfalls like ours have blunted the effectiveness of the federal stimulus and that mass layoffs, a weakening of the safety net and a destruction of educational opportunity will undermine economic recovery. If Obama thinks he can have a national economic recovery with the largest state acting as deadweight, he's out of his mind.

Obama's emerging attitude toward the states - that they're largely responsible for themselves - is counter to the tried-and-tested role of the federal government in managing economic crisis. In fact, the entire reason we have the federal government we do is because of the failure of individual states to deal with the economic crisis of the 1780s. The Constitution was written precisely to provide a common national recovery strategy. President Franklin D. Roosevelt revived this model during another major crisis in the 1930s, using federal aid to help the states recover - but to also force changes in the way they did business.

In other words, to refuse to use the power of the federal government to meaningfully aid the states is to misunderstand the purpose of the federal government. And while Obama hasn't totally abandoned the states, neither does he seem to understand the need for a much more robust federal intervention. It's not just California - every other state has a budget crisis of varying severity. Left unchecked the 50 Herbert Hoovers that govern the states will wind up embracing deeper spending cuts, making it difficult to see where economic recovery will come from.

It's not just for California's sake, but for the sake of the nation as a whole, that the Obama Administration needs to reassess its attitude and policy toward the crisis in the states. The approach of "we'll give you some help but you have to do all the rest" might have worked in the 1990s, but it is a recipe for disaster today. It's time Californians who worked so hard to elect Obama saw a return on that investment, instead of a dismissal of our problems.

Robert Cruickshank :: Et Tu, Arne?
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Et Tu, Arne? | 31 comments
that quote by duncan stunned me (5.00 / 1)
and it is indicative of the utter unmitigated failure of all the merit pay, perpetual testing education "reform" that has been pushed for decades now - it's shock doctrine for people in trouble, and bonuses for anyone who can show high marks. totally bass-ackwards IMO.

if someone's fucked up, struggling, dysfunctional, or in CA's case, underfunded for decades, you help them out, you don't kick them when they're down, tell 'em to pull themselves up by their bootstraps, they're not worth the investment.

education in CA is struggling, and it needs help. attach it to demands that the state govt not slash it, fine, but jesus it is short-sighted to deny aid, be it california or anywhere else for that matter.

surf putah, your friendly neighborhood central valley samizdat


yes, why not give federal money specifically for staff (0.00 / 0)
I understand a hesitation to give it to Arnold, but why not mandate a retention of essential staff and services?  We'll lose a generation of kids by shafting them in the next few years.  

Disclosure: Union staff, former staff for Manuel Perez, elected DSCC delegate for 80th AD, board of Democrats of the Desert

[ Parent ]
Agree With Obama Administration (0.00 / 0)
As a liberal Californian it pains me that I have to agree with Obama. I realize the cuts coming down will hurt the poorest and modest means Californians the most, but what's the point of the Feds coming in trying to help when California conservatives will just tear it down.

It's time for the California Democratic Party to take a stand. They've muddled through for a decade marshaling support. We are the clear majority party in this state and if they can't fight for real change now, they never will.


In a federal system, we can't expect much (4.00 / 2)
I have a lot of problems with Obama's policies, but I have to agree here anyway.

The problem with a federal system, especially one augmented by a Senate that gives states equal representation, is that you can't bail out one state without bailing out everyone else.  The politics don't scan otherwise.  There's no way in hell the Obama administration can get a major bailout package for California through the Senate, at least until it's very clear that we have a disaster here.  And as sad as I am to say it, mass layoffs and worse would be needed before the administration feels it has the leverage it needs to sell an aid package.

So we're on our own.  If we want to avoid mass layoffs and 1930s levels of unemployment and misery here, we're going to need to fend these things off on our own.

I also agree that getting the state Democrats to fight on these issues is the path of least resistance.  Herr Governor's instincts are just to fire people and keep corporate taxes low.  The GOP is worse.  So that leaves our sorry excuse for state leaders -- it's time to light a fire under their collective asses.

At a minimum:

* Do everything we can to put forward the "end 2/3 or bust" message so that it's at the center of the conversation.
* Contest, vigorously, every currently Republican seat that can potentially be turned over.
* Punish state politicians who would rather trash the working poor and the middle class than fix the state's tax structure.

I think that we're being unrealistic to expect federal help here; it's just not something that Obama can do for a single state, no matter how large.


[ Parent ]
It can't be a single-state response (8.00 / 1)
I agree with your assessment of the politics, and any solution would have to be available to all 50 states. Of course, the US Senate is directly responsible for this crisis by stupidly cutting the state stabilization funds out of the stimulus - at this point I think we need total turnover in the Senate to even have a chance at getting the country through this crisis.

But there is no way CA can solve this alone. I totally agree with your 3 suggestions and I suspect we will see each of them employed. And yet the recession is so deep that even if we succeed at all three, we'll still wind up closing schools and kicking kids off of healthcare.

You can check out any time you like but you can never leave


[ Parent ]
And to preempt (0.00 / 0)
Mr. Dayen, who I'm expecting any minute to point out that the Treasury has enough funds on hand to fill the hole, let me point out that so does the VA, but the point is that that in either case, that's not remotely what those funds were appropriated for.

Disclosure: I'm awesome.

[ Parent ]
depressing (4.00 / 1)
This is the problem with confusing "backstop" with "bailout," which has destroyed any hope of getting the former.  I personally have enough funds in my wallet to fill the objective that California seeks, because it would cost no money.  It frankly should be extended to all states, because 50 x 0 = 0.  The objective is to lower the ability of banks - who've received $11 trillion of their own - to gouge states, and in California's case, the ability to secure the loans at all, because without some guarantee investors won't offer them.

[ Parent ]
fair enough (0.00 / 0)
Okay, no, you're right, you have been pretty dedicated about making the bailout/backstop distinction (though it might help if you emphasized the distinction between the temporary cash-flow crunch and the deficit - I think you just want short-term cash-flow bonds backstopped, but I'm not sure), and I did kind of unhelpfully blur it there.

And no, backstopping wouldn't require any direct expenditures; but guaranteeing state debts, especially such huge, badly rated ones as CA's would cost by endangering the federal credit rating. (And it's going to be hard to draw a line against backstopping any type of debt from any state, once you set up a program to do it for one kind in one state.) I think you underestimate how even questions about its AAA would make a lot of incredibly critical things come crashing down, and we don't really know how close we are to that cliff. (& yes, we tossed a shit-ton of money at the banks, but on balance that made the markets less afraid everything would fall apart, and that's a critical difference)

But okay, in order to actually backstop something such that credit buyers consider the loan actually secured, you'd need to demonstrate an ability to fill the hole in case it all went to hell - after the monoline fiascos, people aren't giving free passes here. And that brings me back to my first point - yes, the Treasury has enough money should the apocalypse come, and could wave it around as bond against default, but so does the VA, but that's not what the body in charge of dedicating money towards things has dedicated that money for.

Disclosure: I'm awesome.


[ Parent ]
So we're on our own! (0.00 / 0)
Doesn't that give us the freedom to go our own way? We now have the opportunity to change the way we educate our children and we should take advantage of it. Let's begin by leaving "No child left behind," behind and stop the damned testing. It's a cost we shouldn't shoulder. For another, let's stop buying those expensive text books from private publishers and begin producing them ourselves. My daughter lost one of her textbooks and it cost us $90 used! The kind of money we spend on the damned things would go a long way toward making improvements in our classrooms. We still have one of the best university systems in the world and we should use it in our drive to improve k - 12 education while lowering its cost.

Governor Perry wants Texas to secede from the union, but California has a better case for it. Every year Californian's pay much more in taxes than is returned to us in various forms of aid. I've seen figures as high a $50 billion. We are a donor state! As a nation, we would have the eighth largest economy in the world and wouldn't $50 billion cure our fiscal problems? They need us much more than we need them.      


[ Parent ]
it'd be more sanguine about that (0.00 / 0)
were california doing a better job of managing our own shit. we've got a ways to go before we can credibly claim we'd be better off independent.

on the other hand, if it got us out from under that constitution...

surf putah, your friendly neighborhood central valley samizdat


[ Parent ]
The Dem Party will have to take a stand (0.00 / 0)
But it does not automatically follow that Federal assistance would be undermined by CA conservatives, especially if that Federal assistance comes with the right strings.

Of course, it doesn't help when Obama gives in to Arnold's pleadings to be let out of the stimulus rules.

You can check out any time you like but you can never leave


[ Parent ]
i'll keep this in mind (8.00 / 1)
I'll keep all of this in mind when Obama's machine asks me for more money.

I can see not sending aid to a state government that would replace state dollars with federal dollars so Arnie and the California Legislature can play funny money games.

But to basically say to the biggest state "fuck you, you're not worth helping" while they bail out those criminals on wall street is really galling.

Change We Can Believe In! Yes We Can!

Whatever.

--
www.gregdewar.com


Totally agreed (0.00 / 0)
The colonization of California is a very disturbing turn of events, and while Obama isn't its initiator, neither is he doing much to change it.

You can check out any time you like but you can never leave

[ Parent ]
My father needs to co-sign (0.00 / 0)
I called my Congressman (ugh- Buck McKeon), Boxer and Feinstein on Friday asking them to support legislation that would allow the Feds to guarantee short term loans we need to pay our bills.  That is the very least the Feds can/should do.  If they can give $11 trillion to the banking industry, they can surely help us.

Another, better precedent (8.00 / 1)
Would be Alexander Hamilton's policy of assuming state debt to help the nation pull out of probably the worst economic crisis in its history in 1790.

The federal government was created precisely for a moment like this - a nationwide economic crisis that the states are unable to solve on their own.

You can check out any time you like but you can never leave


[ Parent ]
That deal involved at least the location of the capitol (0.00 / 0)
and to some extent, I'm guessing also tolerance of slavery.

Hamilton had to pay for the privilege, in other words.

The real irony, of course, is that the whole financial program that Hamilton championed, and that became the ideological underpinnings of both the Whigs and the Republicans, have become an anathema to the modern GOP.  After having ditched Abe Lincoln and replaced him with Jeff Davis, the GOP is throwing Hamilton over the side too.

I'm not sure what that leaves them with, save racism and pure nihilistic rage.  And frankly, I think most Americans are beginning to wonder too.


[ Parent ]
What in some ways I'd love to see them do -- (8.00 / 1)
and this is such an Obamaesque move, reserving the prospect of sadly not having to do anything, that it might happen -- is to condition aid to California on our getting our fiscal house in order by eliminating the 2/3 provisions.  Dangle a carrot as well as a stick in front of state voters and see how they respond.  At least they can talk about this, raising the issue in the public mind.

In the meantime, though, bond guarantees out to be a no-brainer, no matter what.  We'll still be in plenty bad enough shape even without them; they just take away some of the hurt.


That might be useful (5.00 / 1)
Part of the problem here is shaping the conversation.  That the administration can do.

As long as the only people with good access to the press are pushing mass layoffs, mass layoffs is what you're going to get. But helping us push the 2/3 fix would be Help You Can Believe In.


[ Parent ]
Totally agreed (5.00 / 1)
And your excellent Daily Kos diary makes that argument quite well.

You can check out any time you like but you can never leave

[ Parent ]
The arguments against the constitutionality (0.00 / 0)
of a direct federal government or court intervention into state rules were well taken, but even though that is the answer I'd expect to get from someone I don't consider it decisive.  There are any number of things that the Bush Administration did that I and most other lawyers would have said were obviously unconstitutional -- and yet they got away with them.  I'd like lawyers to get together and see if there's a way around them, if the pat answer perhaps doesn't preclude all possibilities.

Obama could play hardball if he wanted to and do something like try to set up a receivership for California (given our inability to declare bankruptcy even if bankrupt.)  But short of that, he could just hold the state hostage -- and he probably should.  If public schools are going to close, he can demand that, in exchange for 1/3 of the aid, he wants us to schedule a special election for the day after schools fail to open, and if we eliminate simply the 2/3 budget requirement -- after which the ball is in our court -- we get the other 2/3 of the aid.

He just doesn't yet think that California's problems affect the fate of the nation (and the party.)  He will eventually figure out that when we sneeze, he'll get a cold.  Until then, at least play softball, if not hardball.


[ Parent ]
On the other hand (4.00 / 1)
If you think the out-of-state money on Prop 8 was unseemly, wait until billions of dollars of the federal budget hinge on a California referendum.

Disclosure: I'm awesome.

[ Parent ]
And back on the first hand... (0.00 / 0)
Huh, dang, this is the second "on the other hand" comment on this post. And it's not really all that other-handed.

Disclosure: I'm awesome.

[ Parent ]
Moral hazard isn't just for corporations (0.00 / 0)
To begin with, I doubt that the administration is actually anti-CA aid in the extreme.  I think they've probably just reached the same conclusion that the rest of us have--judging from the outcome of ballot propositions over the last 5 years, there's never going to be public will to fix CAs problems until the situation gets really bad and the voters have to reexamine the high services/no tax mentality.

Have you read the polls? (5.00 / 1)
There is absolutely a public desire to produce change. The most distressing outcome of the May 19 election is the narrative that it shows Californians don't care or won't embrace change. That's total nonsense, and not backed up by evidence.

You can check out any time you like but you can never leave

[ Parent ]
L.A. Times Article (6.50 / 2)
LAT 2009-05-24 pg A43 Title "The state goes in search of a leader"

In 1991, when he became governor, Republican Pete Wilson was faced with a $14-billion deficit -- at the time one-third of the state's general fund. The most potent Democrat in the state was Assembly Speaker Willie Brown of San Francisco. In bouts of negotiating that one bystander said resembled an Ali-Frazier match, the two came to a deal that basically split the difference between taxes and program cuts.

Each took tremendous heat from his own party and opponents. Wilson's approval rating fell at one point into the low teens -- for perspective, that's twice as bad as Schwarzenegger's current low ratings. But the state ultimately rebounded.

This is NOT a fiscal crisis. At least it didn't start out that way. This is a political crisis. State politicians are incapable of doing what has been done time and time again in the past; create a workable solution.

As for the Feds, an organization called the  California Institute used to issue a report called "California's Balance of Payments with the Federal Treasury". The last report I can find listed data to 2003.

To quote from the report:

In fiscal year 2003, Californians' tax payments to the federal treasury exceeded federal spending in the state by $50 billion, a record high.  Much of that discrepancy, however, may be attributed to demographic factors such as youth and wealth.  For every tax dollar paid by Californians in 2003, the federal government spent 79 cents for grants, wages, contracts, retirement benefits, etc.  It was California's 18th year in a row as a net donor state.

The Federal Government shouldn't kill the goose that lays so many Golden Eggs for it. Barack Obama better remember that California voters supported him 60% to 40% in 2008.  


Abusive Founding Fathers (4.00 / 1)
I'm with you on the problem, but I have to point out that the reason a big state like California is carrying the rest of the country is that the Constitution designed things that way.  The design of the Senate pretty much guarantees that if you give a cookie to California, you better have plenty of cookies for the other 49 screaming kids as well.  Whether or not the other kids are even hungry.  It's only fair, right?

This sucks big time, but it's not something we're going to change any time soon.

Put it under the category of "Founding Father Abuse".


[ Parent ]
On the other hand (0.00 / 0)
As I noted above, the reason they wrote the Constitution in the first place is because the states were unable to pull the new nation out of the crippling economic crisis of the 1780s.

You can check out any time you like but you can never leave

[ Parent ]
Makes no sense (8.00 / 1)
Nobody cares about the 18th century.

I'm sure there have been plenty of state bankruptcies and state and local fiscal emergencies in the past 233 year history of the American Republic.  There must be lots and lots of precedents both political and legal. I don't think there is anything unprecedented about the current fiscal mess CA is in.

This new "federalism" Obama seems to be touting looks more like the fine print on a appliance warranty. The sort that the store salesman somehow forgot to tell you or did tell you but you didn't quite understand right. You thought you were covered, but SURPRISE!, You didn't notice the fine print at the bottom of page 27...

What it means is, they sold you a lemon.  They knew they were selling you a lemon and they covered themselves with this bad warranty cause they knew you would be back. The warranty was to protect them, not you.

Well, that politics. Tough cookies.

This argument that if assistance is given to one state it must be given to all...

If a state of emergency is declared because of Hurricane Katrina and billions in federal aid is sent to Louisiana and Mississippi then billions would need to be sent to every other state in the country at the same time. That's what I seem to be reading here.

I seem to recall in the aftermath of the Northridge quake, billions in federal aid was sent to California and Clinton got out here posthaste. I don't recall any anti-CA bashing at the time.

Obama is misreading the situation very badly.  Bodes ill for the future. Maybe he thinks that since he won in CA with such an overwelming landslide he can ignore the state and concentrate on states where he didn't win or just barely won.


[ Parent ]
Those were acts of "God" (3.00 / 1)
We brought this on ourselves.

[ Parent ]
Where is FDR when we need him? (0.00 / 0)
I don't see why the Feds have to restrict necessary aid to California. The fact is, the so-called "Stimulus" was half-baked, compared to what FDR did to get people back to work, and to do it immediately. Right now, even without the VERY necessary changes in our tax system here, and in the budget process and property tax reform, if we could put people back to work to get us to 6 percent unemployment, taxes of all kinds would begin to flow into the treasury. That would be a huge step toward taking care of the immediate cash problems.

The stimulus money is taking too long to get to the states, and there is too much red tape. The Feds need to stop worrying about all the details and just get people to work, NOW. Advertise immediate jobs for people to clean up parks, do repairs on park buildings, paint school rooms, cut fire breaks (in advance of the summer fires), work in food banks, etc. Send two or three aids to every non-profit in every state. Put aids in every summer school classroom. In other words, put together huge works projects that don't take a lot of skill for the most part, don't take a lot of training, and can be easily supervised. Act as if the country is under attack and do it NOW. That way you don't have to worry about years-long environmental report requirements or building permits.

As for California, the Obama team sucked up every bit of volunteer energy during the last election and used it outside California. I warned the crew in the headquarters I was in charge of that we would lose California if they wouldn't give any time to our state legislative election, and they would not listen. The OFA "listening tour" I attended didn't give me any hope that they were interested in the confluence of federal and state politics. I say put all your energy in the state. Don't send money to OFA or the DNC. We need every ounce of genius, energy and money that we can gather up right here.

Sharon Toji
70th AD DAC


"No on Hate -- Repeal Eight!"


I think that that reaction goes overboard (0.00 / 0)
I worked in Nevada for the election and don't regret it.  Had Lehman Bros. not collapsed, the election might have been much closer; in that case, Nevada was the bulward against a McCain victory that seriously could have wrecked the country for good.

We'll see on Tuesday whether Prop 8 survives anyway.  If it doesn't, I put the blame on bad political strategy.  We knew that there would be a high turnout in minority communities; that was not a prime focus of the campaign.

My willingness to bust my ass for the CDP depends on its leaders making good use of that effort.  Right now, they are folding.  Steinberg, inventor of the budgetary "Steinberg maneuver," has forgotten about it.  They have to earn our support too.


[ Parent ]
Et Tu, Arne? | 31 comments
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