Monday, May 25, 2009

Reading: Paul Krugman on the (in)ability to deal with the economy responsibly

Sometimes it only takes a word or two to let you know that, if you hadn't already realized that things are going badly, you should realize it now: When you hear a thoracic surgeon say "uh-oh," for example, or when you hear a newly-licensed teen driver tell his buddies, "Watch this."

Or when you hear Paul Krugman describe himself as "rattled."

On Friday I shared my worry that Oregon, influenced by political trends that began in California some years ago and gradually crept northward, could find responding to the current economic troubles a more difficult task than it might otherwise.

Citing an observation by Charlie Pierce, I wrote:

[T]he ongoing mess that our neighbors to the south have been facing for years isn't just a side effect of knee-jerk opposition to taxes and abuse of the initiative system on the structure of government--it's that knee-jerk opposition to taxes and abuse of the initiative system have become the structure of government.

Now comes Paul Krugman to tell me that, if I've erred, it could be that I'm not worried enough:

Despite the economic slump, despite irresponsible policies that have doubled the state’s debt burden since Arnold Schwarzenegger became governor, California has immense human and financial resources. It should not be in fiscal crisis; it should not be on the verge of cutting essential public services and denying health coverage to almost a million children. But it is — and you have to wonder if California’s political paralysis foreshadows the future of the nation as a whole.

The seeds of California’s current crisis were planted more than 30 years ago, when voters overwhelmingly passed Proposition 13, a ballot measure that placed the state’s budget in a straitjacket. Property tax rates were capped, and homeowners were shielded from increases in their tax assessments even as the value of their homes rose.

The result was a tax system that is both inequitable and unstable. […]

Even more important, however, Proposition 13 made it extremely hard to raise taxes, even in emergencies: no state tax rate may be increased without a two-thirds majority in both houses of the State Legislature. And this provision has interacted disastrously with state political trends.

For California, where the Republicans began their transformation from the party of Eisenhower to the party of Reagan, is also the place where they began their next transformation, into the party of Rush Limbaugh.

The result is a state--whose economy ranks below only a handful of nations in the world--that may simply be unable to take any responsible action to head off fiscal meltdown.

But surely political dysfunction on the scale Krugman sees in California can't spread to the nation as a whole, right? At least you'd think so. But that's where Krugman confesses to getting a little rattled:

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.

To be blunt: recent events suggest that the Republican Party has been driven mad by lack of power. […]

And that party still has 40 senators.

Fortunately for Oregon--at the moment--Democrats have a supermajority in both chambers. Not that Democrats are perfect. But if nothing else they're an effective brake on a minority party who, if they haven't yet begun barking at the moon like their colleagues at the national level, don't seem to be re-thinking any of their dysfunctional assumptions, either.

Krugman's article is going in the Readings list on the sidebar.

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