California and Texas are not perfect representatives of the alternative deals, but they come close. Overall, the Census Bureau’s latest data show that state and local government expenditures for all purposes in 2005-06 were 46.8% higher in California than in Texas: $10,070 per person compared with $6,858. Only three states and the District of Columbia saw higher per capita government outlays than California, while those expenditures in Texas were lower than in all but seven states. California ranked 10th in overall taxes levied by state and local governments, on a per capita basis, while Texas, one of only seven states with no individual income tax, was 38th.
California is not exactly a high-tax, high-service state – it is more of a high borrowing, medium service state, at least when compared with the corner solutions (CT, NJ, HI) – but the contrast with Texas is apt. What is the root of the difference?
The high-benefit/high-tax model can work only if things are demonstrably not equal — if the public goods purchased by the high taxes far surpass the quality, quantity and impact of those available to people who live in states with low taxes…Today’s public benefits fail that test… “Twenty years ago, you could go to Texas, where they had very low taxes, and you would see the difference between there and California. Today, you go to Texas, the roads are no worse, the public schools are not great but are better than or equal to ours, and their universities are good. The bargain between California’s government and the middle class is constantly being renegotiated to the disadvantage of the middle class.”
That’s not exactly true. The roads are better in Texas. But perhaps the clue is in the definition of “middle class.”
Back in the day that Texas was run by bigots such as Allan Shivers and Price Daniel, California had Pat Brown, perhaps the best governor of any state. Water was pumped across the deserts, the freeway network was built, the public universities made into national champions. If there was ever a time of a grand bargain for the middle class, this was it, and the influx of migrants and skyrocketing land prices ensured that quite a few folks who started in the middle class ended up well north of it.
It was also the time not to be poor. The Federal government had not yet created Medicaid and told the states to pay for it. The schools were fully under local control, financed by the steady stream of local property taxes. The brown and the black were welcome to pick in the Central Valley or labor in the LA basin, but they were expected to stay off the coast.
In short, the California of old was a better-funded present-day Texas, minus the offensive accents.
The challenge for California was that it could not maintain its public services without being captured by its public servants.
California’s state and local government employees were the best compensated in America, according to the Census Bureau data for 2006…The “dues” paid by taxpayers in order to belong to Club California purchase benefits that, increasingly, are enjoyed by the staff instead of the members.
It is the key criticism for all of us who want a system of greater public goods. All of the cultural traits – the optimism, the energy, the dynamic desire to make money – that have made us a rich country work against effective management of our government offices. Our government representatives actually listen to the people, as opposed to Western Europe or China, where government is left to a small cohort of university classmates who act according to the consensus of their demographic (isn’t it odd that the Lisbon Treaty went into effect despite losing referenda – the leaders just kept reintroducing it wherever it lost without feeling the same need to reintroduce it where it won). When the people are public employees, the responsive representatives cannot control them as typical employers controlling employees; instead the inmates run the asylum.
This is especially true in California, where the optimism that draws people from around the world prevents people from understanding the concept of scarcity, that it is not indefinitely possible to spend more than you make. The teachers want something? Why not; they are good people. The firefighters want something? Why not; they are brave people. The poor want something? Why not; the meek shall inherit the earth.
The value that has kept Texas’ budgetary house in order is the simplest: not caring. The state has tolerated incredible poverty along the Rio for a century and a half; it sees no reason to stop now. It quite publicly does anything and everything it can to slow-play the processing of Medicaid applications – if you get tired of waiting, head west to someone who cares. It has far fewer land use restrictions and no personal income tax, which benefit people who already have capital and income. It is not precisely a state for the middle class, but it is a state for the middle class’ aspirations. If you work just a little bit harder, you’ll be happy we left you alone.
There’s a terrific series over at Daily Kos about some of the disasters that prompted government regulations. It’s important to bear in mind, when listening to the FOX news crowd bleat about taxes, that most government intervention did not arise for the hell of it. We have food inspections – and food inspectors – because companies relentlessly sold tainted food that got people sick. We have building codes – and building inspectors – because people burned to death in buildings that were death traps. We have old age transfer payments – Social Security and Medicare – because the elderly used to live their years after retirement in poverty.
The challenge is not cutting inherently wasteful programs, it’s cutting the waste from inherently valuable programs. This isn’t going to happen with some silver bullet idea like electronic medical records, however valuable such a system might be; it means paying people less and demanding more and better performance. It means pissing people off.
The experience in California is concerning because it shows how easy it is for a well-intentioned state to go off the rails, and how difficult it is to put it back together. Immediately after Pat Brown came Ronald Reagan, and he and his followers managed to end the property tax that paid for Brown’s programs and build a ballot initiative system that allowed voters to govern directly. What Reagan did not do was get rid of Brown’s programs, so the rot in the system was not immediately visible but rather dug its way through over the decades. Today there are middle-class people who pay the highest income and sales taxes in the nation and think that keeping Prop 13 is a good deal for them, despite the fact that it is the lack of property tax revenue that requires such high income and sales taxes. And the scarier thing is that their gut instinct might be right; would a new source of cash flow go to put the state on firmer footing, or would it simply be captured by the public employee unions?
If the state is going to care for its people, it needs to stop caring for its employees. Does it have the courage?