Last week California voters resoundingly defeated five of six propositions on the ballot aimed at reducing the state's budget deficits. Once again, the effects of the historic Proposition 13 are being felt. In 1978, when this taxpayer revolt was voted into law by the voters, the main effect was expected to be to decelerate the rise in property taxes. But as last week's voting proves, the longer-lasting effect was Prop 13's requirement that any state tax rate increases would have to be approved by a two-thirds majority of the state assembly. This has made it difficult, if not impossible, for state officials to budget effectively for inevitable increases in the costs of providing services. Proposition 13 is just another manifestation of a problem I've raised before: People want a lot from their government, but they don't want to pay for it.
While Governor Schwarzenegger is now focused on budget cuts to keep the state fiscally afloat, some California legislators apparently still hoped to stave off having to deal with their own budget problems, and suggested that the federal government should do so instead, by guaranteeing California debt. How could supposedly serious state politicians, not to mention both the state's Senators, even consider making this proposal? Maybe they supposed that a heavily Democratic state, even one with a nominally Republican governor, could depend on the sympathies of a Democratic administration dependent on California votes. Was this what they meant when they said California is too big to fail? Maybe they were just smoking something, or addled by the Sacramento heat.
Anyway, that flyer has now appropriately been slapped down. It was surprising that anyone in Washington gave it even a moment's consideration, though the tenor of the reports suggested that some did take it seriously. Discussion about why it could not, or should not, be done centered on the idea that the Federal government couldn't offer such help to one state without expecting others to put their bids in too.
That's true, but it's far from the main point. This just isn't a national problem. The voters of California produced the crisis, and it's up to them and their representatives to solve it. If the electorate turned down the budget propositions, they must be prepared to weather cutbacks in services. Economic retrenchment in California won't help the country's economic recovery, but the real story may be that while the Golden State continues to dither over fixing its finances, growth opportunities could go elsewhere, and other states could pick up the slack.
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