At Last, the Obama Model for Economic Policy

(By Edward Morrissey, American Issues Project) - There may be states with poorer economic conditions than California, but perhaps none with more self-inflicted fiscal wounds. The state legislature, controlled by one party for decades, keeps spending record amounts of money, in boom times and bust. Its electorate uses a free-wheeling referendum system to continually approve bond issues for pet projects while maintaining flinty opposition to the taxes required to repay them. They kicked out one governor for bad management of the state's finances – and Gray Davis may be the happiest man in California these days for it. Unemployment has passed 11% on its way to 13% or more by the end of the year, according to analysts.

This week, though, the Golden State has reached its nadir. The legislature, facing an unprecedented $24 billion shortfall and a cash crisis, boldly did … nothing at all. A bid to cut the budget by less than 15% of the shortfall died in partisan bickering, forcing the state into a de facto default. Governor Arnold Schwarzenegger will start preparing to pay the state's bills with IOUs, and the bond rating agencies will likely reduce the state's bonds to junk status shortly afterwards.

All of this has been widely known, thoroughly reported, and understood by most of the nation – indeed, most of the world. Everyone comprehends the lesson of California's free-spending, interventionist governance – except, apparently, the White House. In hailing the cap-and-trade bill passed by the House late last week, President Barack Obama demanded quick action from the Senate, and told them to look at the economic powerhouse of California to see how the nation can lower its energy demand while succeeding at providing jobs and an expanding economy.

“In the late 1970s, the state of California enacted tougher energy-efficiency policies. Over the next three decades, those policies helped create almost 1.5 million jobs. And today, Californians consume 40 percent less energy per person than the national average -- which, over time, has prevented the need to build at least 24 new power plants. Think about that. California -- producing jobs, their economy keeping pace with the rest of the country, and yet they have been able to maintain their energy usage at a much lower level than the rest of the country.”