Outside the Beltway

Jon Henke Twitters: “The California referendum proves that what voters want to spend is not well-connected with what voters are willing to pay.”

Quite right. Californian Kevin Drum takes as a given that his state is “broken” but sees no solution in sight. While he’s in favor of Governor Schwarzenegger’s idea of a constitutional convention to fix some of the institutional flaws that has the Golden State in this mess, he notes that the same institutions likely preclude said convention from working:

[I]n order to even hold a constitutional convention, it has to be put on the ballot and approved by a majority of the electorate. And how does the question get put on the ballot? It has to be approved by two-thirds of the legislature. But this is the problem we’re trying to solve in the first place: to pass a budget or raise taxes takes a two-thirds vote of the legislature, and Republicans have enough votes to stop that from happening. Votes that they use regularly. So why wouldn’t they also stand in the way of a constitutional convention whose main purpose would almost certainly be to remove the two-thirds requirements for passing a budget and raising taxes?

No reason, really.

George Will is one of the few elite outlyers on this one, calling the rejection of the various ballot measures designed to cope with the present economic crisis “sensible,” noting that each Proposition had rather serious flaws (Drum calls them “mostly gimmicks“). Still, even Will concedes that,

California’s voters are complicit in their state’s collapse. They elect and reelect the legislators off whom public employees unions batten. Also, voters have promiscuously used their state’s plebiscitary devices to control and fatten the budget. In November, as the dark fiscal clouds lowered, they authorized $9.95 billion more in debt as a down payment on a perhaps $75 billion high-speed-rail project linking San Francisco and Los Angeles — a delight California cannot afford.

Matthew Shugart notes that, while the needed measures managed to garner a mere one third of the vote, “the stupid one” passed “with nearly three fourths of the vote.” He suggests that furloughs — i.e., simply sending state employees home without pay — is a likely consequence. Megan McArdle, meanwhile, thinks California may be “too big to fail” and get a federal bailout.

Update (Steve Verdon): Just thought it is worth pointing out that if California had limited its budget increases to inflation plus rate of population growth the state would either have a much, much smaller deficit or even a surplus. When people complain about not being able to raise taxes they ignore the spending side of the equation. The implicit assumption is that the spending is just fine and not out of control, and it most certainly is out of control. For example, take former Los Angeles Police Chief Benard Parks.¹ He currently collects a salary of about $179,000 as a member of the City Council. However Parks also collects about $265,000 from his pension for being the police chief. That is a total annual income of around $444,000, and pension plans are generally considered “off the table” when it comes to looking at balancing the budget.

The California problem is the problem in with government that has tremendous discretionary powers: there is little in the way to ensure the state behaves in a responsible manner. Add to the mix special interest groups and rent seeking and you have the potential for big problems. Yes it is in part the fault of the voters for going down this road. But at the same time there are politicians and special interest groups that have been sucking up vast amounts of money too.
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¹Yes, as the former LA Police Chief and member of the LA City Council those are all Los Angeles issues, not state issues. However, Los Angeles is very much a microcosm of what is wrong with the State. Los Angeles is running a deficit, with few options in terms of raising revenues. There are powerful unions that have tremendous influence with the City Council and the Mayor. Los Angeles problems can be laid primarily at the feet of unrestrained spending. Sound familiar? It should, that is California writ large.

Policing, Uncategorized

bailout, California, deficit, George Will, Inflation, Jon Henke, Kevin Drum, Labor Unions, Matthew Shugart, Megan McArdle, Steve Verdon, Too Big to Fail, unions

14 responses to “Just Prisoners There, Of Their Own Device”

Steve Plunk

May 21, 2009 at 9:53 am

Decision making bodies, whether a local city council, state legislature, or Congress of the United States, all lack discipline. By virtue of shared responsibility for mistakes there is simply no responsibility to be handed out to individual members. That lack of real responsibility causes them all to slowly slide down the slippery slope of spending and taxing. It’s not tax and spend, it’s spend and tax. Raising taxes occurs after the spending is decided upon.

The 2/3 majority requirement is an effort to instill discipline and the California voters know it must be maintained if they want to keep their economy afloat. More taxes will drive more businesses out of state.

Voters are also tired of lawmakers laying off firemen, police, and teachers first. There are an awful lot of mid level state government managers that could go before public safety personnel.

Californians have been fooled many times by their liberal legislature and have learned from those previous mistakes. Arnold has moved to the dark side as he looks to make a name for himself with environmental concerns. So the voters are left with only themselves to hold off further ruin. They seem to know that now and are doing what needs to be done.
Dave Schuler

May 21, 2009 at 9:54 am

I posted on this subject this morning, too, James.

Of course Californians are complicit. However, I think it’s a bit of an overstatement that

The California referendum proves that what voters want to spend is not well-connected with what voters are willing to pay.

Even with its initiative process California isn’t a direct democracy. More accurate would be to say that California’s voters aren’t willing to pay for what California’s governor and legislators want to spend.

Since most of California’s budget is wages in one form or another that means that California voters aren’t willing to pay more to California’s government employees.

I interpret this a little differently than I think you do. I think that government needs to begin the process that American businesses started 25 years ago. Government has got to do more with less. It should have been started a long time ago but the pressure wasn’t on then. It is now.
Jeffrey W. Baker

May 21, 2009 at 10:00 am

George Will just hates trains, that’s all. He likes to say that California can’t afford its railroad, but the fact is that California can’t afford to NOT build the railroad. If we don’t build it, we’ll need highways and airports to satisfy future transportation demand, and those are estimated to cost three to five times more.

Problem with people like Will is they are unable to distinguish government waste — gold-plated public employee retirement plans at age 40 — from government spending that yields future returns, like the high speed railroad. California is in trouble because spending on prisons and pensions has skyrocketed, not because of our universities and public infrastructure.
Eric Florack

May 21, 2009 at 11:14 am

I’m with Schuler on this one; Henke overtstaes his case. I see the vote there as an earthquake, and an indicative one at that. Consider it; Even a far-left-whack job place like California, and a crushing majority… with prop 1A going down 66/24… votes not only against tax increases but votes to retaliate against legislators on a legal basis, if they don’t keep their spending in line. If it plays that way in the liberal paradise of California, how’s it gonna play in Peoria, come 2010 and 2012?

Also, I tend to agree with Megan, and like Dave, I’ve already posted to the topic; I don’t think there’s any doubt at all we’re going to bail California out.

Why? Well first off, you can forget getting any cuts out of the legislature, which is basically tied in a Mexican standoff, with prop 13 laws demanding a super-majority for tax increases, and yet Democrats holding just under that super majority, we’re going to see nothing until the next election cycle, when presumably, we’ll see some degree of turnover in the state. They won’t survive like this, absent some federal money. And Obama will do it. Simply put, California’s a far left state, mostly, and one the Democrats in Washington need to survive 2010 and 2012.

And given the vote there yesterday, they may not survive even then, such is the mood of the electorate.

The question, once that bailout is completed, is how many other states will be standing in line with their hands out? And the Federal government gets even larger.
FranklinTest

May 21, 2009 at 11:53 am

Props on the title, James.
Steven Taylor

May 21, 2009 at 11:57 am

The 2/3 majority requirement is an effort to instill discipline and the California voters know it must be maintained if they want to keep their economy afloat.

The problem is, a supermajority requirement to pass budgets isn’t a means of instilling discipline. What is does it make it necessary to cobble together large coalitions to pass spending, meaning the need to make a lot of people happy (i.e., even more spending) while making revenue increases very difficult.

Indeed, it is the 2/3rds requirement that has gutted the state’s ability to respond to the financial crisis.

I concur that spending in the main problem in CA, but the 2/3rds requirement exacerbates that problem, it doesn’t help it.

And Henke is quite right: the voters in CA want their cake, but they don’t want to pay for it.

The initiative process makes it worse, because the voters can cherry-pick even more spending that they like (as noted in the post) but are rather unlikely to vote taxes on themselves. Indeed, the voters this week voted both to do nothing about spending and not to raise revenues.

The property tax provisions in Prop 13 of 1978 don’t help, either. I wrote about some of this here yesterday.
WJ

May 21, 2009 at 12:37 pm

What party controls the both houses of the legislature in Calif?
Steve Verdon

May 21, 2009 at 12:45 pm

The problem is, a supermajority requirement to pass budgets isn’t a means of instilling discipline. What is does it make it necessary to cobble together large coalitions to pass spending, meaning the need to make a lot of people happy (i.e., even more spending) while making revenue increases very difficult.

Indeed, it is the 2/3rds requirement that has gutted the state’s ability to respond to the financial crisis.

I don’t think there is a super-majority requirement to pass a budget. There is a super-majority requirement on increasing taxes. Rather different.

The problem is that California spends all the money it gets in tax revenue and then some each year without apparently realizing that tax rates are not going to be easily changed thus making revenues follow the business cycle.

For an individual this would mean saving in the fat years, and drawing down those saving sin the lean years. The State of CA just can’t seem to do this. I’d argue it is inherently a fault of democracy. During fat years politicians can use the excess revenues to placate supporters and/or voters ensuring re-election. When the lean years hit, oh well too bad.

Steven Taylor is right in that the 2/3rds requirement is a problem, but only that it doesn’t go far enough, IMO. Make it a 2/3rds requirement to increase the budget over and above inflation + population growth and we wouldn’t be in the situation we are now in. You need to instil discipline directly on spending, not indirectly by limiting the ability to raise taxes.
Jeffrey W. Baker

May 21, 2009 at 1:23 pm

Let’s dust off and nuke the California Constitution from orbit. It’s the only way to be sure.

http://www.repaircalifornia.org/
Pug

May 21, 2009 at 1:36 pm

Californians have been fooled many times by their liberal legislature and have learned from those previous mistakes.

First of all, the voeters of California put that liberal legislature in place. They then tied everyone’s hands by passing initiatives related to everything from prison sentences to education spending to budgeting to agricultural land use policy and taxes.

Now they want to turn around and blame the politicians. More than any state, California is a direct democracy where citizens repeatedly vote on issues that they know nothing about. They now face the consequences of their votes. California’s voters created this mess.
Francis

May 21, 2009 at 1:42 pm

“I don’t think there is a super-majority requirement to pass a budget”.

You’re wrong; there is.

“What party controls the both houses of the legislature in Calif?”

Given the super-majority requirements, the Republicans.
Brett

May 21, 2009 at 3:41 pm

You’d probably need to do a backdoor threat using the proposition system in order to get a Constitutional Convention proposal through the California State Legislature. Something like, “If California doesn’t hold a Constitutional Convention by Date XX/XX/XXXX, all state legislature salaries are cut off indefinitely.”
Brett

May 21, 2009 at 3:47 pm

Overall, I think the fundamental root of California’s problems are the interest group politics – and it’s not just the public sector unions, although they are among the biggest factors.*

*I wonder if this is actually an argument against public sector unions. At least with private sector unions, there’s some pushback from the company, since if the union pushes too hard the company goes out of business, and everybody loses. But with private sector unions, they can always politically lobby the government to pass the costs on to the taxpayers.