California often is a trend setter for the nation, for good and ill. In 1978 the passage of Proposition 13 in California which capped property taxes presaged a national movement against high taxes which helped sweep Reagan and the GOP into power in 1980. On Tuesday California voters rejected by better than 60% five ballot propositions which would have resulted in higher taxes, the raiding of special funds for general budget purposes and the selling of future lottery proceeds. Here is a good analysis, albeit from a Libertarian perspective, of the ballot propositions that went down in flames. The only ballot proposition to pass, politicians everywhere take note!, by a 73% vote, would prevent salary increases for legislators and statewide officials during deficit years.
According to the Field poll, 72% of voters viewed this as an opportunity to send a message to the state government that they are tired of ever more government spending and ever increasing taxes.
California is an economic basket case. As columnist George Will details here, it has a 42 billion dollar budget deficit caused by exploding government spending since 1990. The unemployment rate is 11% and in the past eight years the California private sector has lost 600,000 jobs. There is a silver lining–for Nevada which has been running ads to convince California businesses to relocate.
Well, what does all of this mean, if anything, for those of us who do not live in California?
First, it probably means that tax increases will be much harder to get through Congress. If one of the most liberal states in the Union rejects tax increases and budgetary flim-flam by the margins that the voters of California just did, that means that every Democrat member of Congress in an even marginally competitive district or state will be increasingly nervous as the 2010 elections approach about voting to pass any tax increases to pay towards the massive budget deficit or to pay for a national health care plan.
Second, in many ways California has been a laboratory for what Obama wishes to do on a national scale. In the June 17, 2001 issue of the liberal American Prospect magazine, in an article entitled California’s Progressive Mosaic, and which can be read here, author Harold Myerson celebrated the leftward shift in California politics : “Like New York before the New Deal–like the New York that inspired the New Deal–California has responded to the economic travails and political opportunities that have come with its immigrant workers by getting out in front of much of the nation, by creating a model of social equity, of worker and public power, at a time of capital supremacy. A full continent off-Broadway, the next New Deal is in tryouts.” Under the R.I.N.O. Gubernator, and a legislature firmly under Democrat control, California has attempted a New New Deal and it is ending with serious predictions that California will be the first state to go bankrupt. This should be a cautionary tale for what is likely to happen to the US under the Obama Deal.
Third, the proposed solution to California’s woes? Why to have the federal government bail out the state! The federal government, engaging in creation of a debt supernova of its own, is to subsidize with borrowed or printed money the fiscal irresponsibility of Sacramento. I imagine this proposal will be deeply unpopular in 49 states unless the Obama administration is willing to bail out all states in financial difficulty. Of course this would merely bring closer the day when the national economy hits a wall created by a Matterhorn of public debt and tanks completely and the day when the US is simply unable to service the debt or borrow the funds.
California’s present could well be the future of the US with the difference that there will be no one we can turn to for a bailout.