Photo: Flickr Greg Balzer
I do not mean for this to serve as a full-throated rebuttal of Walter Russell Mead’s “California is a Failed State” article which appeared both in the pages of The American Interest and as a link on this very website.I believe he raises some very interesting questions for policymakers and citizens to ponder. I pen this rather to enter into the debate, and counter a few claims Mr. Mead makes to demonstrate the precariousness of California’s position.
Louis Brandeis envisioned state legislatures as “laboratories of democracy” in meeting the needs of society. Texas has been California’s most common foil amongst authors and scholars. However, Mr. Mead makes the odd – and unfair – comparison between the Golden State and the Peace Garden State (North Dakota for those unfamiliar with state mottos) to make his case. He references, correctly, that North Dakota continuously balances its budget while California is awash in debt. Unfortunately, Mr. Mead omits the fact that North Dakota easily balances its budget because of its vast reserve of natural resources.
North Dakota’s Tax Department recently released a statement that state coffers enjoy over $100 million in revenue per month thanks to oil tax collections. If this level of exploration continues, each of North Dakota’s 672591 residents will save nearly $3000 in taxes over the next two years. California, in contrast, has no severance tax. North Dakota also benefits tremendously from federal subsidies. For every $1 North Dakotans pay into the federal government, they get back $1.62 in services. California receives only 78 cents for every $1. Mr. Mead then notes the difference between the two states’ business climates.
His claim is that companies are fleeing Silicon Valley for the open prairies of business-friendly states like North Dakota. Yet he provides no evidence of this assertion. Joseph Vranich, who writes the “Business Relocation Coach” blog, has been compiling a comprehensive list of all the companies that picked up and moved from California over the last two years. According to his research, not a single one moved to North Dakota.
After spending several paragraphs painting a vivid picture of California’s doom, Mr. Mead then proposes a solution: splitting it up into five smaller states. These newer entities will have smaller populations which can be more easily and effectively served. This solution falls into a common fallacy floated by federalists: only by returning power to local governments will our immense national challenges be solved.
There’s only one problem with that theory, which is that history has proven it doesn’t work. Leaving the Articles of Confederation debacle aside, it’s important to note how the United States got into its current fiscal predicaments as in almost every way, California is a microcosm of the country (immigration, failing education system, overcrowded prisons, high levels of debt).
The United States is in trouble not because the states have too little power but because they have too much. Balanced budget amendments to state constitutions are hampering economic growth because dollars are being redirected from stimulative investments towards plugging holes in state budgets like teacher salaries. But with the threat of severe cutbacks looming over their heads, teachers will save the money, thus completely negating the stimulative effects of the cash in the first place. Conservatives who point to Obama’s stimulus as an example of a failed Keynesian initiative omit the fact that it was structurally handicapped from the start.
Mr. Mead also believes the newly created state governments will right-size themselves in order to best respond to constituent services. First, when has one ever heard of a government at any level eliminating positions or services wilfully? Second, services currently consolidated in Sacramento will now have to be duplicated. Instead of one Secretary of State (current California salary: $130490) there will be five. Instead of one Senate Second Ranking Minority Leader (salary: $102437) there will be five. And no doubt instead of one state with massive budget problems you’ll have five. Instead of right-sizing, there will be tremendous redundancy. With significantly less populations to spread those costs around, exactly how will that help taxpayers?
Former Senator Trent Lott once said (and I’m paraphrasing here) the best thing we can do for economic development in this country is eliminate state borders. Let’s not create more.
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