Washington misreads California — again

June 21, 2012

By John Seiler

If you’ve ever lived in Washington, D.C., as I did in 1977 and from 1982 to 1987, you know the place lives under a bubble. They have no idea what’s going on in the rest of the country. But they tell us what to do.

That’s sure the case with E.J. Dionne, the Washington Post’s top political writer. From a San Francisco dateline, he asks:

“If the United States were still governed under the Articles of Confederation, might California be in the position of Greece, Spain or Italy?

“After all, California has a major budget crisis and all sorts of difficulties governing itself. Its initiative system allows voters to mandate specific forms of spending and to limit tax increases and also make them harder to enact. Absent a strong federal government with the power to offset the impact of the recession and the banking crisis, how would California fare in a global financial system?”

He doesn’t seem to know that, unlike in those countries, California law mandates that bond payments are the first priority of payment in any budget. So the state’s current $73 billion in general obligation bonds (meaning they must be paid for from the general fund) are quite secure.

It’s true that California vies with Illinois for the state with the worst credit rating. But that’s because, should the national economy begin to implode, it is these state economies that would be hit the hardest, demolishing their state budgets. But so long as the national economy doesn’t implode, that won’t happen.

Bond rating

So the real problem then shifts to Dionne’s beloved federal government, which has taken out $16 trillion in debt in the name of all Americans. If the Articles of Confederation still were in effect, the federal government never could have run up that debt.

Under the Articles, Congress had no power of taxation. The federal government ran only on money given it by the several states. So the federal government never could have grown into the monstrosity it has become, wasting $3.8 trillion a year while running up trillion-dollar annual deficits.

On its own, California’s far-left politics would not be tempered by the more moderate politics of the rest of the United States. So it might resemble Cuba.

Then again, Canada is run by left-wingers — but lefties who figured out about 15 years ago that they could only manipulate society if reasonable tax and regulatory policies keep the economy growing. Same thing for Australia.

California’s large Latino population also pushes its politics to the left. But as an independent country, California might resemble Mexico; which, as I noted in an earlier article, has less than half America’s national debt (as a percentage of its economy) and has pursued progressively more free-market policies since 1995.

So, by itself, California might develop a hybrid Canadian-Mexican system with lower taxes and less regulation, but maybe a government-run medical system that’s inefficient (as in Canada, where there are long lines and people go to the United States for many operations), but costs half as much.

Dionne’s ‘solution’

Dionne’s “solution” the the ongoing economic problems of California and the United States is … the suspense is unbearable … massive new federal government spending! So the deficits and debt now weighing us down would be increased. Dionne:

“First, we are lucky to have a robust federal government, which the European Union lacks. Early in the recession, the feds were able to offset problems in the country’s most troubled regions with a stimulus program (and also with that auto bailout that so many, including Mitt Romney, opposed). The stimulus should have been bigger, and it should have extended over a longer period. But it helped.”

First, the opposite is true. There never was any recovery. Certainly not in California, where unemployment remains at 10.8 percent.

The bailouts didn’t work. GM would have been better off if its assets had been auctioned off. By now it would be a strong, independent company. Instead, taxpayers lost about $14 billion in the bailouts of GM and Chrysler.

Worse, the GM bondholders were ripped off so that the UAW could get a piece of the action. This set a dangerous precedent and undermined every business bond in the country, disrupting capital formation — and so business and jobs formation. Now, no one’s bonds are secure.

How D.C. looks at California

On California, Dionne naturally likes Gov. Jerry Brown’s proposed $8.5 billion tax hike:

“Moreover, Gov. Jerry Brown deserves credit for trying to get a handle on the California budget crisis. He’s going to the voters this fall with a referendum to raise about $8 billion in taxes to stave off further cuts. Without the money, Brown says, education spending would have to be slashed beyond the cutbacks that have already taken effect.”

Actually, Brown deserves no credit. The tax increase would chase even more businesses and jobs from the state. He also offered only a paltry reform of the state’s underfunded pension systems. And the problem with California’s education system is not a lack of spending, which is generous, but severe structural and pedagogical defects, with the powerful California Teachers Association and the California Federation of Teachers impeding reforms.

Dionne’s view is important because it gives us Californians a glimpse into what our masters in D.C. are thinking about us — and are preparing to do to us.

Maybe the good old Articles of Confederation weren’t such a bad idea after all.

 

 

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  1. Eric in SR
    Eric in SR 21 June, 2012, 10:57

    Always love reading your posts, John–and this one’s no different. Not only on economic matters, but I wonder if the Articles of Confederation would have prevented Roe v. Wade as well (and many other awful Supreme Court decisions), meaning millions more Americans would be alive today.

    Reply this comment
    • CalWatchdog
      CalWatchdog Author 21 June, 2012, 11:07

      Eric: Yes, there would have been no Roe vs. Wade because the Articles set up no Supreme Court. The founders didn’t realize how dictatorial the Supreme Court would become under the Constitution.

      Although they were warned by Brutus in the Anti-Federalist Papers: “The judicial power will operate to effect, in the most certain, but yet silent and imperceptible manner, what is evidently the tendency of the constitution: — I mean, an entire subversion of the legislative, executive and judicial powers of the individual states. Every adjudication of the supreme court, on any question that may arise upon the nature and extent of the general government, will affect the limits of the state jurisdiction. In proportion as the former enlarge the exercise of their powers, will that of the latter be restricted.”

      Link: http://constitution.org/afp/brutus11.htm

      — John Seiler

      Reply this comment
  2. Donkey
    Donkey 21 June, 2012, 13:05

    John, the RAGWUS will eat itself, then we can start anew! 🙂

    Reply this comment
  3. SkippingDog
    SkippingDog 21 June, 2012, 19:07

    Nor did the Articles have a Bill of Rights, so we would have long since been able to deal with the proliferation of guns and gun nuts in this country.

    Oh, and there wouldn’t have been a Civil War. I suppose that’s certainly a positive, but it would have left slavery in place throughout the Confederation.

    Hmmmm, what else wouldn’t we have? No judiciary, so interstate contracts would have no means of enforcement. No military, except at the state level. Again, perhaps a good thing, but I suspect France and Great Britain, followed by Mexico and Canada would have taken a far greater role in our various affairs over the years.

    Ah, it’s always interesting to ponder what might have been. Personally, I think our founders erred by not implementing a parliamentary system of government with proportional representation, but that’s another discussion.

    Reply this comment
  4. Donkey
    Donkey 21 June, 2012, 20:10

    SKdog, when you speak of “guns and gun nuts” you must be alluding to the LE RAGWUS feeders no doubt.

    Slavery would have fallen no matter the government at hand.

    The judiciary would have devolved into the elitist slims we have today and the LE RAGWUS would be even more corrout than it is now.

    The Repulican form of government, as envisioned by the Founders, is best suited for our people, though the RAGWUS has cleverly managed to wreck havoc on our taxpayer funded services. 🙂

    Reply this comment
  5. SkippingDog
    SkippingDog 22 June, 2012, 11:55

    “The Repulican form of government, as envisioned by the Founders, is best suited for our people….”

    But you constantly cry and moan about our republican form of government, Donkey. Your frequent complaints about the decisions of our elected representatives, and your unfounded claims about corrupt bargains between them and various groups, clearly show that you do not believe in our form of representative government and would much prefer some type of direct democracy.

    At least try to think these thing through a little before contradicting yourself.

    Reply this comment
  6. LGMike
    LGMike 22 June, 2012, 12:44

    Nice off topic responses by most commentators. Point being, the Federal govenment wants to do the same to the rest of the US, like California is doing to its own people. Tax then tax some more, don’t ever try to upset the applecart (unions), just live with it.
    California is doomed to its own failure to actually legislate to the benefit of people, not special interests. Time to return, at least in California , to a part time legislature, which would then only have time to do the “peoples work” not see how much money they can get from special interests or worry about their next job.

    Reply this comment

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