Washington declines to help California, at least for now - Los Angeles Times: "California needs to solve its financial crisis by itself and should not expect an emergency bailout from the White House, an array of Obama administration officials said Thursday, making clear they had no appetite to step in and provide financial assistance or loan guarantees.
'Look, we're going to examine what we can do. What we need to do, however, is to treat states fairly and that means uniformly,' David Axelrod, senior advisor to the president, said in an interview. 'Whatever we do for one state, there will be other states who also will want to do that. And there's a limit to what the government can do.'"
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I agree with Axelrod. If they bail out California, how can they say "no" to Illinois, New Jersey, New York, and a number of other states? What would be the principle underlying a decision to help one state but not the others? And if the national government goes down that road, what about federalism? States are supposed to have, and pay for, their own policy agenda, and a state government elected by the residents of that state. They make their own decisions and they have to pay for them. If the national government is going to underwrite all the states' economic risks, federalism is gone and we are a unitary nation like France or Japan.
What is going on with the auto industry is bad enough. Let's not compound it.
3 comments:
Kudos re your observation that federalism is threatened if states cannot remain fiscally viable given that states must operate in the black and not carry budget deficits. This critical aspect of state budget problems has been overlooked in the reporting I've read.
I wonder if we'll see some functions revert fully to the federal government such as providing health care coverage to the poor. State Medicaid funds are getting an $87 billion bailout in the economic stimulus package. But even so, California now contends it can no longer afford to administer Medicaid without further relief in the form of eligibility rule waivers.
The insidious aspect of this situation is that previous federal intrusions on state policy making have contributed to the current insolvency crisis. If the feds paid for their own mandates, and for the problems they create that states have to pay to fix, states would have more money for their own priorities. But now the case for a federal bailout is strengthened by unfunded mandates that put states in this situation. And the end result of a bailout is...more federal intrusion.
I like Fred's proposal, and I would add to it. Let the feds pay for all their mandates. Standardized K-12 testing; medical emergency care for the uninsured; Medicaid; food stamps and TANF; homeland security; Americans with Disabilities Act compliance; environmental mandates; and on and on. Take all these costs that the federal government imposes on state and local governments and make the feds pay for them. Then see how much of a budget crisis is left, and let the state taxpayers and state legislators deal with it. Right now, many of these costs are beyond the control of states anyway because they emanate from Washington. California has created enough of its own problems with public employee union contracts, etc., without having to do the bidding of the US Congress.
Don't be surprised if the governator declares a statewide economic disaster and frames the request for a federal bailout as disaster aid.
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