The failure of liberalism in the states

NY Times Editorial:

Is California next in line for a bailout? Facing a $21 billion budget gap, California has asked for federal aid, probably in the range of $5 billion to $10 billion. Whatever form it might take, say loans or loan guarantees, taxpayers nationwide would be kicking in to help clean up California’s mess.

So far, the administration has correctly declined to help, but there is no doubt that a fiscal meltdown in California — one of the world’s largest economies — would be a fiasco. If Washington is forced to intervene, it must do so in a way that does not simply create a long line of states demanding relief as well.

Nearly all of the states face budget shortfalls. Though California’s is the worst in sheer dollar terms, cumulative state deficits over the next two years are estimated at $350 billion to $370 billion. Federal stimulus spending will offset about 40 percent of that. To close the gap, most states have cut spending and many have raised taxes, or are seriously considering tax increases.

California enacted big spending cuts and tax increases in February, but they were not enough. Last week, voters rejected budget measures that would have eased the state’s dire condition. If federal aid were to allow California to go on delaying necessary reforms, other states would want the same slack.

Like other states, California is suffering from a collapse in tax revenues brought on by the recession. Unlike other states, it suffers from severely dysfunctional politics, including gridlock-inducing budget procedures and a deeply anti-tax strain that plays itself out in endless voter referenda, dating back to the Proposition 13 property tax cap from the 1970s. As a result, Gov. Arnold Schwarzenegger declared recently that more tax increases are politically impossible. Yet, his proposed spending cuts are also unappealing, if not impossible, including slashing education and health care funds and releasing prison inmates early.

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It is hard to say that California has an anti tax strain when it has both the highest income tax and sales tax in the nation. In fact it is those two things that have done the most to reduce its revenue and drive business to low tax states like Texas which has no income tax.

In contrast with California, Texas also has been creating jobs--70 percent of all jobs created in the US in the last two years were in Texas. It now is the corporate headquarters for more Fortune 500 companies than any other state. Texas is the number one state in terms of exports. It is also balancing its budget through spending cuts which are not draconian.

Texas is the state that proves the superiority of conservatism.