Feb 182010
 

Stephen Hill at CiF posits some kind of equivalency between Greece’s budget catastrophe, and the ensuing debate about whether the solvent EU countries should bail it out, and California’s budget catastrophe, and the debate about whether the solvent US states should bail it out.

Apparently Greece isn’t that large a proportion of the EU economy, so no big deal – but California represented a whopping 14% of the US economy before it went bust.

California’s situation in some ways is more worrisome than Greece’s. Having a state that is one-seventh of the national economy in dire straits is a threat to the nation’s economic recovery. It is analogous to having Germany struggling instead of Greece, striking at the heart of Europe. California has been shaken by widespread layoffs and furloughs – the city of Los Angeles just laid off 1,000 more workers – and core social programmes have been slashed. Millions of low income children have lost access to meal programmes, and community clinics have been closed. Almost 3 million low income adults have lost important benefits such as dental care, psychological services and mammograms.

In addition, while both California and Greece are in major belt tightening mode, at least in Greece all families and individuals still have access to healthcare and a long menu of other social supports that Europe is known for. In California, even before the crisis millions had no healthcare, and now more have lost their jobs and their health insurance. Unemployment compensation is miserly, as is the overall safety net, which impacts consumer spending and further weakens the economy.

In this case, then, it was terribly mean of the Obama administration to deny California a federal bail-out paid for by the taxes of the other 49 states. That’s, like, super unfair, because:

But ironically California’s current plight may serve as a warning to Germany and France. Over the last several decades, California’s once thriving economy served as a kind of backstop for other American states. California has subsidised low population (and often conservative) states by only receiving back about $.80 for every federal tax dollar it sends to Washington DC. Californians have sent tens of billions of dollars to conservative states such as Mississippi, Alaska and North Dakota, which receive about $1.75 for every dollar sent to Washington.

Yet when Governor Schwarzenegger asked the federal government for a return on that long-term support, the White House shut the door and the Republican states long subsidised by California were unsympathetic. Memories are short, as is gratitude.

Leaving aside the question of optimal single-currency zones – which Hill never addresses – let’s look at this central point about the unfairness of leaving California to its fate.

For years, Hill says, California was the wealthiest state in the country, and the federal taxes its wealthy citizens paid subsidised the poorer, less populous states of the union. Now California has farked itself, allowing and encouraging its legislature to spend the state into massive debt – and wealthy California wants the poorer states to subsidise it!

Surely this is exactly what Guardian writers (and readers) loathe, the idea of the poor subsidising the wealthy? They certainly profess to hate incidences of it in the UK and cry that the transfer of money from poor to rich is a massive injustice (that will, no doubt, be further perpetrated by the Tories if they win the next election). California’s budget crash has not made the poor states it used to subsidise any wealthier; in fact, it’s probably made them poorer. So why in the world should the poor states make themselves even poorer because the people of California were happy to elect legislatures that spend like drunken sailors?

Somebody please explain to me why, suddenly, the Guardian is in favour of the poor subsidising the rich.