California gets no bailout love from White House

California hoped that their dire economic predicament might get enough sympathy from the Obama administration to get a GM-style bailout.  Sympathy, the White House has in abundance, but not cash — at least not for self-indulgent states who don’t want to exercise some fiscal discipline.  The White House finally drew the line on throwing cash at the insolvent:

The Obama administration has turned back pleas for emergency aid from one of the biggest remaining threats to the economy — the state of California.

Top state officials have gone hat in hand to the administration, armed with dire warnings of a fast-approaching “fiscal meltdown” caused by a budget shortfall. Concern has grown inside the White House in recent weeks as California’s fiscal condition has worsened, leading to high-level administration meetings. But federal officials are worried that a bailout of California would set off a cascade of demands from other states. …

After a series of meetings, Treasury Secretary Timothy F. Geithner, top White House economists Lawrence Summers and Christina Romer, and other senior officials have decided that California could hold on a little longer and should get its budget in order rather than rely on a federal bailout.

Gee, you think?  States have sovereign rights in the Constitution, including the right to tax and govern themselves.  California citizens should be embarrassed to run to the federal Treasury to solve their budget crisis.  The Congressional delegation should demand fiscal discipline and responsibility and resist federal encroachment on California’s sovereignty.

That is what a bailout will mean, as the administration strongly hinted:

These policymakers continue to watch the situation closely and do not rule out helping the state if its condition significantly deteriorates, a senior administration official said. But in that case, federal help would carry conditions to protect taxpayers and make similar requests for aid unattractive to other states, the official said. The official did not detail those conditions.

Perhaps Congress should set the rules so that any state applying for a federal bailout will get treated like the District of Columbia.  Since they seem keen on surrendering their sovereign status, they can have non-voting delegations to the House and Senate until they repay whatever federal dollars they take to cover their shortfall.  Considering the vast majority of California’s elected representatives on Capitol Hiill, that would be in practical terms a net plus for Congress, although an egregious violation of the Constitution.  (Yes, I’m being glib.)

California needs to “bail” itself out by cutting spending and eliminating unnecessary services.  The state has spent the last several decades expanding government far beyond the necessities of actual governance and extending into social engineering.  It has one of the highest tax burdens in the nation, which belies the notion that the legislature just hasn’t taxed Californians enough. Now that this last avenue of responsibility-shirking has been closed, Sacramento needs to start making the tough decisions that they’ve avoided for most of the last 40 years.

It’s at least somewhat heartening to see the White House express a limit to federal bailouts. Too bad they didn’t stop before getting to automakers.

Will they do it?  So far … not so good:

Tobacco and oil severance taxes are key elements of a revenue-raising package that will be unveiled today by Assembly Democrats. …

“The problem is that this economic crisis was caused by an enormous and rapid drop in revenues, so to ignore the need for new revenues is irresponsible,” said Evans, D-Santa Rosa.

Besides the tax on cigarettes and oil extraction, the Assembly possibilities include closing corporate or business loopholes that were approved as compromises in past budget negotiations.

Jon Fleischman says Arnold won’t play along this time:

The attempt by Democrats to hike taxes are not surprising in the slightest.  After all, we are talking about Democrat caucuses that are split between complete union hacks, whose fealty to the public employee union bosses leave them unable to vote for cuts that would negatively impact the core mission of the unions (to increase the wages and benefits for union members, as well as increase the size of the union) — and liberal ideologues to whom making any cuts in social welfare programs, let alone cuts of this magnitude, are heresy to even consider.

Fortunately for California taxpayers, Governor Schwarzenegger is not tone deaf, and has made it crystal clear over and over that he will not support tax increases as a part of resolving the state’s fiscal crisis (at least going forward).  So I would expect a pretty quick veto from the Governor if these or other taxes are passed on a majority vote and placed on his desk.

We’ll see.

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