The Smart Politics of Refusing State Bailouts

The old saying goes that good policy makes for good politics. In the case of Washington bailing out spendthrift states, the best policy is for the incoming Republican U.S. House to refuse to give the likes of California or New York a penny. A steadfast "No Bailouts" policy makes for better -- and, perhaps, profoundly transformational -- politics.

Unless voter behavior changes, the policies and practices that are leading overleveraged states to default -- or worse -- won't change. Reform in voter thinking and, consequently, in how voters touch screens in state elections is critical to ending the era of irresponsible big government on the state level (and eventually ending it in Washington, too). Critical to this formula is compelling voters to strictly hold state elected officials accountable for their actions, or lack thereof.           

No bailouts means that state politicians -- mostly Democrats, but also a fair share of Republicans -- are going to have to explain the folly of featherbedding public employee and teacher pensions, runaway spending, and big government, all which are leading more than a few states to the bleak land of default. And make no mistake -- state defaults are in the offing, with the tarnished Golden State and diminished Empire State of New York on the inside track.

California and New York, conspicuous by their size, prominence, and the magnitude of their looming failures, are the best examples of how a conservative-dominated U.S. House can force a significant and positive change in the political dynamics of profligate states. Without changes in the politics and policies of California and New York, the stage is set for an open-ended cycle of default and Washington bailouts (or federal bailouts until the national government confronts its own ruin).

Let's face it. California and New York are hard cases, as jail wardens might say. The electorates in both states are lopsidedly Democratic. Californians and New Yorkers have a taste for the liberal. 

Case in point, on Election Day, Californians and New Yorkers, in nostalgic moods, deposited the once-outcast Jerry Brown in the governor's office in Sacramento and elected Andrew Cuomo (Mario's reincarnation) to the helm in Albany. The plain truth is that voters weren't hoodwinked by either Brown or Cuomo. By both men's elections, Californians and New Yorkers were giving clear mandates for business as usual -- meaning spend, spend, spend. Borrow, borrow, borrow. Tax, tax, tax.    

Of course, Brown and Cuomo on the stump made feints at fiscal responsibility -- you know, snip state spending here, trim a little there. But both men are career liberal Democratic politicians; at their cores, they believe deeply in big government. Brown and Cuomo have reputations, careers, and incomes riding on liberalism. Genuine apostasy -- meaning real departures from spend, borrow, and tax -- aren't in either Brown's or Cuomo's playbook.

Instead, what will happen in California and New York is that Governors Brown and Cuomo, along with Democratic leaders and some Republican enablers, will make cosmetic cuts to their states' budgets. Both governors will announce that despite good faith efforts, their states face budget crises. Both Brown and Cuomo will blame the budget crises not on bad policies and reckless spending and borrowing, but on an ailing national economy. Forces beyond their control will not permit California's and New York's political leaders to get a handle on their state budgets. Hence the need for Brown and Cuomo to go hats-in-hand to Washington.

If Washington caves in and gives bailouts to California and New York, the result will be to let Brown, Cuomo, and their ilk off the hook. Certainly, Washington will insist on some austerity measures as conditions of receiving federal largess, but that plays right into Brown's and Cuomo's hands. Both men can return to their states claiming victory in carting off bagfuls of federal taxpayer money. On the other hand, Brown and Cuomo can blame Washington for imposing budget belt-tightening that each man had no choice but to accept.

Lately, what's been floated is for Congress to create legislation that permits a federal bankruptcy procedure for states. This is a superior idea, and an essential tool in changing bad state politics. What a state bankruptcy procedure allows is for states to invalidate contracts, reorganize, and start over. What a state bankruptcy procedure doesn't do is make Washington a sugar-daddy and budget bad guy. A state bankruptcy procedure forces state politicians to make the tough choices; it forces these politicians to govern and explain their governance to voters. 

Does that mean that voters, once confronted by the reality that liberal promises and big-government panaceas have led not to good times, but bad, to fundamental and often painful changes in lifestyles, will forsake liberalism totally in favor of something approximating a conservative worldview and behaviors?

Any psychologist can tell you that we human beings have a curious capacity for persisting in our beliefs in the face of those beliefs being debunked. But it's a safe bet that many Californians and New Yorkers aren't hardened in liberal beliefs; they aren't, in other words, liberal ideologues ready to bite down on cyanide capsules once their worlds have collapsed. Many "lifestyle liberals" are capable of reform and will learn to adapt. Perhaps enough of these liberal voters -- mugged by reality -- will contribute to changing their state's political dynamics -- with the sort of change that is so imperative for the betterment of California and New York.

In any event, what needs to be ushered in on local, state, and national governmental levels is the Era of the Grown-up -- or, if you prefer, the Era of Responsibility. The days of faux compassion leading to economy-wrecking government policies and the days of crony-liberalism that have led to public employee and teacher unions and special interests of all stripes plundering local and state treasuries -- and soon, the federal treasury -- must end. 

Ah, but the old axiom holds true: In order for the world to change, hearts and minds must change first. That's no different in the world of politics. 
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