This past Friday, California Governor Arnold Schwarzenegger called for the federal government to bail out the taxpayers of his state to the tune of some $6.9 billion. The request comes amid efforts to close a $19.9 billion gap in his proposed $82.9 billion 2010-2011 fiscal budget. We hear daily news stories of governors all over the United States struggling to close similar gaping holes in their states’ budgets. By what rationale is California more deserving than others? Schwarzenegger argues his case on two fronts. First, he points out that Californians pay far more in federal taxes than they ever receive in federal disbursements. Second, he suggests that the burden of complying with unfunded federal mandates is one of the chief culprits bankrupting his state. Let’s take each of these arguments in turn.
Schwarzenegger suggests that there should be some measure of parity between the amount that Californians pay to support the federal government and the quantity of services or federal funding they receive in return. He might have a legitimate complaint on this score, if only we were still governed by the same constitutional provisions written in 1787 and ratified in 1791. The Founders understood, and concurred with Schwarzenegger, that the several independent, sovereign states should not be disproportionately burdened with the responsibility of funding the operation of the federal government. To protect against this, the apportionment clause (Article I, Section 2) was written to ensure that each state share the responsibility of providing for those federal activities enumerated in the Constitution, in direct proportion to the number of citizens residing in each state.
It is gratifying to see Schwarzenegger arrive at the Founders’ view of budgetary fairness some 219 years after the fact, but his argument comes 108 years too late. The Sixteenth Amendment effectively overrides the apportionment clause, and authorizes the U.S. Congress to levy direct taxes against individual incomes, “without apportionment among the several States, and without regard to any census or enumeration.” Not only does this amendment authorize Congress to tax some states more than others (with respect to their proportional populations), but as of this writing, no intrepid litigator has yet mounted a successful general welfare argument to prevent the feds from spending the proceeds just as disproportionately. You can hardly swing a dead cat these days without hitting someone who will argue that passage of the Sixteenth Amendment dealt a potentially fatal blow to both state sovereignty and individual liberty, and much progress could be made in restoring responsible governance and economic prosperity with the repeal of the Sixteenth Amendment. Nonetheless, since 1913, it has been the law of the land. Sorry, Arnold, but on this count, you lose — especially since California was among the earliest states to ratify the Sixteenth Amendment in January of 1911.
In response to Schwarzenegger’s claim that unfunded federal mandates are bankrupting his state, the most obvious question is, “So who’s fault is that?” To which specific federal mandates is the Governator referring? In his remarks on Friday, Schwarzenegger referred to mandates in the areas of health, education and welfare. Fascinating that he should choose these examples, since all are areas in which the politicians in Washington have no constitutional authority to govern, much less issue binding mandates (funded or otherwise). What Schwarzenegger is really saying is that he, as governor, the California legislature and thousands of their predecessors have voluntarily chosen to comply with one illegitimate federal mandate after another. Rather than take seriously their sworn obligation to preserve the integrity of their offices, and to defend the sovereignty of their state and the liberty of its citizens, Schwarzenegger, his counterparts and their predecessors have repeatedly taken the path of least resistance, and evaded the difficult work of doing the right thing. Now we are told that California must be saved, because it is “too big to fail”. This is like the couple in the house down the street losing their life savings to a con artist, and then self-righteously demanding that all of their neighbors pool their resources to compensate them for the loss. Thanks, but no thanks.
None of us living outside of California should imagine that our own state officials have shown greater responsibility than Schwarzenegger and his colleagues. Officeholders in every state have consistently refused to face down unconstitutional federal intrusion. The solution, however, cannot possibly come from the very same practices that created the mess in the first place. If states across the nation are unable to meet the costs of their own ill-advised obligations, where does Schwarzenegger expect them to find the surplus to help Californians meet theirs? He seems infected with the currently popular misconception that the federal government has its own supply of money to spend. To give Californians $6.9 billion, the federal government can either tax it away from the rest of us (leaving us less prepared to stave off our own collapse); borrow it from foreign lenders (leaving us and our descendants indebted to those with no inherent concern for our well-being); or simply print more money (destroying the economic value of everything we currently have). Unless folks in the Golden State know of some economic alchemy that Adam Smith, Milton Friedman, and John Maynard Keynes never imagined, there are no other options.
Despite the logic of the very argument he made on Friday, don’t expect Arnold Schwarzenegger or any other state governor to lobby for repeal of the Sixteenth Amendment anytime soon. However sensible this proposal may seem in principle, those wishing to be considered “mainstream” will inevitably yield to pressure to denounce the idea of repeal as a product of lunatic fringe thinking. With the resulting opportunities for disproportionate federal taxation, don’t expect state officials to exercise restraint in trying to curry federal favor, in the hope of landing a disproportionate share of the resulting proceeds. This pathetic effort to regain a few crumbs of the loaf already taken from their citizens at gunpoint keeps state officials jumping through whatever federal hoops Washington contrives, however constitutionally indefensible they may be.
We have little hope of untying this Gordian knot, but it may soon be cut by economic realities no politician can ignore forever. Over the past year, not a week has gone by without someone blogging or “tweeting”:
The problem with socialism is that eventually you run out of other people’s money.
Usually attributed to Margaret Thatcher (perhaps apocryphally), this quote invariably expresses the frustration of those who think themselves unfairly burdened with the consequences of someone else’s irresponsibility. Faced with the unvarnished prospect of seeing their own state services slashed, while being taxed to maintain the existing basket of benefits Californians enjoy, citizens of other states may finally be ready to revolt against the federal spoils system that got us into this mess. Whether enough of us see the issues clearly or not, the economic reality is that we cannot all bail each other out. We’ve already run out of each others’ money.
