Summary
Yes, California is in a state of paralysis. Neither its politicians nor its people have any idea what to do. But differences between California and federal government caution against concluding that the federal government is ungovernable.
Analysis
California is in a political and financial mess. Proposition 13 has given California's people and politics few options for fixing the state's budget crisis. The rule that requires a 2/3 vote to pass tax increases is another obstacle to fixing the problem.
Professor Krugman appears to be pinning the problem on Republicans. Such blame misses the point. While Republicans might be part of the problem, they are not solely responsible for irresponsible government in California or at the federal level. Pointing fingers won't help solve the problem. Other than raising taxes, Democrats have not offered any clear solutions to California's budget mess.
And California voters resoundingly rejected five of the six ballot initiatives that were designed to stabilize state spending (the measure tying the salaries of state legislators to passing a balanced budget passed). When education funding is further cut, the voters may wonder why they didn't pass Prop 1B. Parents, students, and teachers are already howling about the cuts in education funding. As a Californian, I am concerned and frustrated about the state of governance and the economy in California.
Given California's ungovernability and financial condition, is it any surprise that California has the lowest credit rating among the 50 states? S&P's lowered its rating of California's general obligation bonds to "A" in February 2009. With its deficit projected to reach $28 billion, California is having trouble borrowing.
Is the US ungovernable yet? I don't think Krugman made the case that it is. Republicans cannot blamed for whatever level of ungovernability exists at the federal level. Moreover, California and the federal government are different, as Krugman admits. And while the credit rating of the federal government may be at risk of being lowered, it won't be because of the factors Krugman cites.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
