CT Blue

California is on the verge of bankruptcy, but Washington is in no hurry to help:

California needs to solve its financial crisis by itself and should not expect an emergency bailout from the White House, an array of Obama administration officials said Thursday, making clear they had no appetite to step in and provide financial assistance or loan guarantees.

“Look, we’re going to examine what we can do. What we need to do, however, is to treat states fairly and that means uniformly,” David Axelrod, senior advisor to the president, said in an interview. “Whatever we do for one state, there will be other states who also will want to do that. And there’s a limit to what the government can do.”

Axelrod indicated that federal intervention on California’s behalf would set a dangerous precedent.

California has a huge debt. California has a debt that is a fraction of a fraction of the amount we have handed out to rogue banks with no strings attached. Both of those statements are true.

Washington could do California a favor by doing what it should have done to the banks. Provide help with lots of strings attached, or in the case of California, preconditions. If California were a corporation it would be unmanageable and absent a government bailout, already bankrupt. The budget process is held hostage to a minority in the legislature every year. The state is afflicted by scores of constitutional amendments put there by the initiative process that starve the state of revenues while often, at the same time, forcing the state to spend money on things it doesn’t need.

Washington should offer help. The preconditions should be that the voters amend their constitution to get rid of the right of taxpayer initiative, which they have abused, and that the legislature be returned to majority control in the budget process. If they want our money they should only get it if they have a sound business plan. I know that’s a departure from the way we handed money to the banks, but you have to start somewhere.

Update: Paul Krugman on the same subject.