Post II of III: When pol. dysfunction threatens economy -- Dems get elected by delivering services & Republicans get elected by delivering tax cuts.
David Ignatius writes in The Washington Post:
What worries me, looking ahead, is what might be called the "Californiazation" of America -- the growing tendency of our political system to make promises in social spending programs that it isn't prepared to pay for with tax increases.
What's worrisome this year isn't economic decline but political dysfunction. And nowhere is that clearer than in California, where politicians -- despite some serious bipartisan efforts -- haven't been able to make the decisions that would put the state on a sound financial footing.
The political forces that generate deficits are just too strong: a Democratic Party in hock to public-employee unions and a Republican Party in love with tax cuts.
[Gov. Arnold] Schwarzenegger is talking about a new round of budget cuts, but what he really wants is a federal rescue. I can't help thinking of California as the new AIG -- spending money extravagantly on the way up and then extending the tin cup to Washington when the bubble bursts.
California is hardly alone in its fiscal difficulties. Most states are still recovering from the effects of the recession. But even more, they suffer from a chronic inability to resist the impulse to spend big and tax small.
What many state governments want is a federal bailout, which would free them of the consequences of overspending. It's a classic case of what economists call "moral hazard" -- in that the bailouts would allow the irresponsible behavior to continue, rather than force a halt. One prominent economist argues that if the states were countries, the International Monetary Fund would grant relief only if it came with conditions that imposed fiscal discipline.
So will Washington become like California? Some would argue that has already happened, with the fiscal disaster masked by the federal government's ability to sell its massive debt cheaply and print money to pay its bills. And you see in Washington the same dysfunctional political process that's at work at the state level -- Democrats who get elected by delivering services and Republicans who get elected by delivering tax cuts.
The test case this year for Californiazation will be the health-care bill. Democrats' desire to provide universal access to care is right, but the country has to pay for it. Indeed, we have to lower the cost of delivering health care so that paying this bill won't be a crushing economic burden.
We should judge President Obama and Congress this year on whether they're paying for the promises they make -- and providing real reform that cuts costs, rather than another political goody bag.
What worries me, looking ahead, is what might be called the "Californiazation" of America -- the growing tendency of our political system to make promises in social spending programs that it isn't prepared to pay for with tax increases.
What's worrisome this year isn't economic decline but political dysfunction. And nowhere is that clearer than in California, where politicians -- despite some serious bipartisan efforts -- haven't been able to make the decisions that would put the state on a sound financial footing.
The political forces that generate deficits are just too strong: a Democratic Party in hock to public-employee unions and a Republican Party in love with tax cuts.
[Gov. Arnold] Schwarzenegger is talking about a new round of budget cuts, but what he really wants is a federal rescue. I can't help thinking of California as the new AIG -- spending money extravagantly on the way up and then extending the tin cup to Washington when the bubble bursts.
California is hardly alone in its fiscal difficulties. Most states are still recovering from the effects of the recession. But even more, they suffer from a chronic inability to resist the impulse to spend big and tax small.
What many state governments want is a federal bailout, which would free them of the consequences of overspending. It's a classic case of what economists call "moral hazard" -- in that the bailouts would allow the irresponsible behavior to continue, rather than force a halt. One prominent economist argues that if the states were countries, the International Monetary Fund would grant relief only if it came with conditions that imposed fiscal discipline.
So will Washington become like California? Some would argue that has already happened, with the fiscal disaster masked by the federal government's ability to sell its massive debt cheaply and print money to pay its bills. And you see in Washington the same dysfunctional political process that's at work at the state level -- Democrats who get elected by delivering services and Republicans who get elected by delivering tax cuts.
The test case this year for Californiazation will be the health-care bill. Democrats' desire to provide universal access to care is right, but the country has to pay for it. Indeed, we have to lower the cost of delivering health care so that paying this bill won't be a crushing economic burden.
We should judge President Obama and Congress this year on whether they're paying for the promises they make -- and providing real reform that cuts costs, rather than another political goody bag.
posted by Sid Cottingham | 9:06 AM
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