Krugman: Yes, California Is A Crisis Of Democracy

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Paul Krugman has assessed the crisis in California and has come to the same conclusion as us: The state is not so much an economic failure as it is a failure of politics, or more specifically, democracy.

Last week Bill Gross of Pimco, the giant bond fund, warned that the U.S. government may lose its AAA debt rating in a few years, thanks to the trillions it’s spending to rescue the economy and the banks. Is that a real possibility?

Well, in a rational world Mr. Gross’s warning would make no sense. America’s projected deficits may sound large, yet it would take only a modest tax increase to cover the expected rise in interest payments — and right now American taxes are well below those in most other wealthy countries. The fiscal consequences of the current crisis, in other words, should be manageable.

But that presumes that we’ll be able, as a political matter, to act responsibly. The example of California shows that this is by no means guaranteed. And the political problems that have plagued California for years are now increasingly apparent at a national level.

We disagree (somewhat) with Krugman’s rather simplistic economic assessment — which is to eliminate the infamous prop 13, which keeps property taxes low. Sure, that would help the state raise revenue, but it’s already one of the most taxed states in the country. And beyond that, the state has already suffered an exodus of the wealthy, who went to states like Utah, Nevada and Colorado, so to say that low taxes is the problem is kind of silly.

But Krugman is right to worry that California’s disastrous experiment with direct democracy (so many ballot measures, a constitution with a ridiculous number of ammendments) foretells trouble on the national level, particularly as Washington prepares to confront big problems.

And so far, Obama’s attempts at the big problems like health care and greenhouse gas emissions (assuming you agree with him on the severity of the problem) appear to be straightjacketed by a lack of political will on the part of the entire Washington establishment.

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