Seated at his desk, California governor Arnold Schwarzenegger looks ready to commit hari-kari, a big knife sitting upward in his enormous hand. The photo opp is meant to symbolise his determination to relentlessly cut government services in order to pass the state’s gridlocked budget, but he could be forgiven for plunging the thing into his washboard abs.
Months in, the largest state economy in the US, and the 15th largest economy in the world in its own right, remains locked in a crisis more typical of a place like Zaire (I can’t get used to this Congo-DR, Congo-Brazzaville stuff — when nations start getting surnames, it’s time to think more creatively). State workers are on part-time, state contractors are being paid with IOUs, teachers are being made redundant, prisoners are being released early, and basic law and order is being allowed to slide — the most notable event being the crowds around the Michael Jackson memorial service, which the government thought might spiral out of control.
How did the great bear state get to this impasse? By decades of bad government and false populism. Everything you could throw in a polity to make it ungovernable, California has.
The first is a balanced budget provision — which most US states have — which makes it impossible for the state to respond to changing economic circumstances with flexibility. What every business or family can do — go into deficit to maintain stability — is out of bounds, and thus the state was badly hit when the beginning of the recession hit its revenue base hard last year. The 2004 law making this mandatory foresaw that its “rainy day fund” would cover dips in revenue. That fund is around $5 billion, the state’s deficit is $US11.2 billion.
But of course you can always grit your teeth and raise taxes, right? Wrong. Because of the “citizens initiative” process — whereby mini-referendum “propositions” can be voted on at elections — the government has been bound up by anti-tax initiatives. 75% of the taxes administered are limited in their scope by these initiatives. Even better, people can also vote up propositions that mandate spending levels — such as Prop 98, fixing school spending. You’d normally fund local school spending with property tax variations, but proposition 13 puts a ceiling on property tax increases. Hilarious. There are 250 of these propositions in operation.
Could a united legislature rally against this dysfunctional populism? Yes, if it weren’t dysfunctional itself. The legislature sets the boundaries of its own members’ districts, making the shape of Elbridge Gerry’s famous “gerrymander” look reasonable by comparison. The electoral map of California is closer to Pollock than Bagehot.
The result is lifetime fiefdoms, the Republican ones held by hard right fiscal conservatives, the Democratic ones held by California big government liberals. And the budget needs a two thirds majority (most legislatures make a budget the one thing that requires a simple majority). Politics never stops and government never begins. And the governor won’t provide the leadership to force at least short-term tax increases to maintain basic governance.
The result is a disaster for an economy that depends on a perception of stability for its media and high-tech industries. If you want people to keep their highly mobile businesses there, you’ve got to guarantee basic order, decent schools etc.
You’ve also got guarantee the state’s credit rating, otherwise you’re in a death spiral — with the credit rating downgraded, and thus interest rates rising, that’s already begun.
The whole thing shows that if you have a basic contempt for the idea of government — that you wanted it to be small enough to “get it in the bathtub and drown it” — then it will come back at with you with failure that threatens the very basis of orderly life itself. California’s getting a lesson in that. Maybe soon they’ll all be reaching for the knife.