{"id":9298,"date":"2009-07-06T20:30:00","date_gmt":"2009-07-06T20:30:00","guid":{"rendered":""},"modified":"2009-07-06T20:31:49","modified_gmt":"2009-07-06T20:31:49","slug":"the-california-problem","status":"publish","type":"post","link":"https:\/\/calitics.com\/index.php\/2009\/07\/06\/the-california-problem\/","title":{"rendered":"The California Problem"},"content":{"rendered":"

Once upon a time, way back in the spring of 2009, there was a lot of talk of “green shoots” and the promise of economic recovery. Well, that theory seems pretty much shot to hell now, as there is growing recognition that, in Nouriel Roubini’s words, “the green shoots are mostly yellow weeds.”<\/a> Unemployment continues to rise, and the economic indicators that implied a possible turnaround seem to have been little more than side effects of another Goldman Sachs bubble<\/a>.<\/p>\n

And as a result there’s more and more talk of a “third stimulus” across the left blogs, including Paul Krugman<\/a>, especially as people come to realize just how stupid it was to gut the February stimulus by taking out the all-important state stabilization funds. As realization dawns that 50 Herbert Hoovers<\/a> are wiping out the effect of the stimulus by state budget cuts, the necessity of federal aid to the states is becoming obvious.<\/p>\n

Unfortunately, some commentators are still stuck in “blame” mode, and haven’t yet grasped the need to move beyond blame and toward action that can prevent a full-blown Depression. Take Ryan Avent, for example, who opines today that California is the obstacle<\/a> to a new stimulus aimed at rescuing the states:<\/p>\n

The huge obstacle to getting this done, however, is California. California is the state in the worst shape, and it’s also the state no one wants to help, because its problems stem from terrible institutions and a horribly dysfunctional government. They’re not just cyclically screwed; they worked very hard to get themselves into this mess, and the rest of America, quite reasonably, doesn’t want to bail them out. But this is a problem for the rest of America, because rare is the state that couldn’t use some additional help right about now.<\/p><\/blockquote>\n

This sort of argument is becoming depressingly familiar. As we pointed out yesterday<\/a> most Californians weren’t able to vote in the June 1978 election that approved Prop 13, and many who voted yes didn’t know what they were doing<\/a>. More significantly, Californians have never been given the chance to vote again on Prop 13<\/strong> as our political leadership convinced itself that it could cut a series of deals<\/a> in the name of asset bubble centrism and avoid both financial collapse and being overrun by the Jarvisite hordes.<\/p>\n

Californians routinely vote for tax increases, especially at the local level, and would do so much more often if the right-wing hadn’t blocked the majority from governing the state by the 2\/3rds rule. Folks like Ryan Avent offer a superficial understanding of California’s problems, unfamiliar with the fact that we have a center-left electorate governed by a center-right system and a Democratic Party whose leadership has been frankly afraid to challenge that status quo.<\/p>\n

But as wrong as Avent is about the details, his “blame all Californians and let them rot” attitude is quite familiar, even widespread, among national elites, including ostensible liberals. I say “ostensible” because a core tenet of liberalism is the notion that government should provide second chances.<\/p>\n

Avent does offer a somewhat sensible basis for a solution:<\/p>\n

This is the part where I’d recommend a negotiated, conditional aid package to California, combined with a broader state budget resolution authority designed to facilitate countercyclical aid in situations like these. But at this point, I kind of think that California is screwed, and that by extension America is screwed, and will suffer a longer and more painful recession than is necessary thanks to the intractable politics of the issue.<\/p><\/blockquote>\n

And such a package is precisely what many of us in California want. We recognize that we need the federal government to use its leverage to break the impasse in Sacramento. But we’re worried about the conditions. With Larry Summers in charge of economic policy, the conditions are likely to resemble a 1990s IMF bailout, demanding massive cuts to the public sector – cuts that will merely worsen the recession, as the Sacramento region is discovering<\/a>.<\/p>\n

The fact that many other states are facing budget meltdown may be enough to overcome the previous hesitance of the feds to offer California anything that smacks of a “bailout”. And if that assistance came with appropriate and progressive conditions – that California place a repeal of the 2\/3rds rule on the ballot, that corporate tax loopholes be closed, that education and health care no longer face cuts – then it would be a significant step forward.<\/p>\n

Unfortunately we may not be at the point yet where this is possible. Avent blames “intractable politics” but I would argue the problem is instead intractable assumptions. Too many people are still out to play the blame game, or like the Obama Administration, are more afraid of right-wing criticism than of the political repercussions of a slide into Depression.<\/p>\n

It would help if national observers would look past the superficial assumption that all Californians were party to the reckless economic, fiscal and political choices of the last 30 years, and instead realize that avoiding a national Depression and fixing California’s problems are not mutually exclusive, but instead are mutually reinforcing.<\/p>\n","protected":false},"excerpt":{"rendered":"

Once upon a time, way back in the spring of 2009, there was a lot of talk of “green shoots” and the promise of economic recovery. Well, that theory seems pretty much shot to hell now, as there is growing recognition that, in Nouriel Roubini’s words, “the green shoots are mostly yellow weeds.”<\/a> Unemployment continues to rise, and the economic indicators that implied a possible turnaround seem to have been little more than side effects of another Goldman Sachs bubble<\/a>.<\/p>\n

And as a result there’s more and more talk of a “third stimulus” across the left blogs, including Paul Krugman<\/a>, especially as people come to realize just how stupid it was to gut the February stimulus by taking out the all-important state stabilization funds. As realization dawns that 50 Herbert Hoovers<\/a> are wiping out the effect of the stimulus by state budget cuts, the necessity of federal aid to the states is becoming obvious.<\/p>\n

Unfortunately, some commentators are still stuck in “blame” mode, and haven’t yet grasped the need to move beyond blame and toward action that can prevent a full-blown Depression. Take Ryan Avent, for example, who opines today that California is the obstacle<\/a> to a new stimulus aimed at rescuing the states:<\/p>\n

The huge obstacle to getting this done, however, is California. California is the state in the worst shape, and it’s also the state no one wants to help, because its problems stem from terrible institutions and a horribly dysfunctional government. They’re not just cyclically screwed; they worked very hard to get themselves into this mess, and the rest of America, quite reasonably, doesn’t want to bail them out. But this is a problem for the rest of America, because rare is the state that couldn’t use some additional help right about now.<\/p><\/blockquote>\n

This sort of argument is becoming depressingly familiar. As we pointed out yesterday<\/a> most Californians weren’t able to vote in the June 1978 election that approved Prop 13, and many who voted yes didn’t know what they were doing<\/a>. More significantly, Californians have never been given the chance to vote again on Prop 13<\/strong> as our political leadership convinced itself that it could cut a series of deals<\/a> in the name of asset bubble centrism and avoid both financial collapse and being overrun by the Jarvisite hordes.<\/p>\n

Californians routinely vote for tax increases, especially at the local level, and would do so much more often if the right-wing hadn’t blocked the majority from governing the state by the 2\/3rds rule. Folks like Ryan Avent offer a superficial understanding of California’s problems, unfamiliar with the fact that we have a center-left electorate governed by a center-right system and a Democratic Party whose leadership has been frankly afraid to challenge that status quo.<\/p>\n

But as wrong as Avent is about the details, his “blame all Californians and let them rot” attitude is quite familiar, even widespread, among national elites, including ostensible liberals. I say “ostensible” because a core tenet of liberalism is the notion that government should provide second chances.<\/p>\n

Avent does offer a somewhat sensible basis for a solution:<\/p>\n

This is the part where I’d recommend a negotiated, conditional aid package to California, combined with a broader state budget resolution authority designed to facilitate countercyclical aid in situations like these. But at this point, I kind of think that California is screwed, and that by extension America is screwed, and will suffer a longer and more painful recession than is necessary thanks to the intractable politics of the issue.<\/p><\/blockquote>\n

And such a package is precisely what many of us in California want. We recognize that we need the federal government to use its leverage to break the impasse in Sacramento. But we’re worried about the conditions. With Larry Summers in charge of economic policy, the conditions are likely to resemble a 1990s IMF bailout, demanding massive cuts to the public sector – cuts that will merely worsen the recession, as the Sacramento region is discovering<\/a>.<\/p>\n

The fact that many other states are facing budget meltdown may be enough to overcome the previous hesitance of the feds to offer California anything that smacks of a “bailout”. And if that assistance came with appropriate and progressive conditions – that California place a repeal of the 2\/3rds rule on the ballot, that corporate tax loopholes be closed, that education and health care no longer face cuts – then it would be a significant step forward.<\/p>\n

Unfortunately we may not be at the point yet where this is possible. Avent blames “intractable politics” but I would argue the problem is instead intractable assumptions. Too many people are still out to play the blame game, or like the Obama Administration, are more afraid of right-wing criticism than of the political repercussions of a slide into Depression.<\/p>\n

It would help if national observers would look past the superficial assumption that all Californians were party to the reckless economic, fiscal and political choices of the last 30 years, and instead realize that avoiding a national Depression and fixing California’s problems are not mutually exclusive, but instead are mutually reinforcing.<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[117],"tags":[],"class_list":["post-9298","post","type-post","status-publish","format-standard","hentry","category-117"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack-related-posts":[],"jetpack_shortlink":"https:\/\/wp.me\/p6Pvhz-2pY","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/calitics.com\/index.php\/wp-json\/wp\/v2\/posts\/9298","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/calitics.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/calitics.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/calitics.com\/index.php\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/calitics.com\/index.php\/wp-json\/wp\/v2\/comments?post=9298"}],"version-history":[{"count":0,"href":"https:\/\/calitics.com\/index.php\/wp-json\/wp\/v2\/posts\/9298\/revisions"}],"wp:attachment":[{"href":"https:\/\/calitics.com\/index.php\/wp-json\/wp\/v2\/media?parent=9298"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/calitics.com\/index.php\/wp-json\/wp\/v2\/categories?post=9298"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/calitics.com\/index.php\/wp-json\/wp\/v2\/tags?post=9298"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}