Paul Krugman has a fascinating op-ed in yesterday’s NY Times. In it, he recounts some of the litany of conservative alarms about liberalism sinking California’s economy. Krugman argues convincingly that the truth is quite the opposite: California’s worst problems over the decades have often been connected to conservative greed and obstructionism (my terms).
A dozen years ago, the state was supposedly doomed by all its environmentalists. You see, the eco-freaks were blocking power plants, and the result was crippling blackouts and soaring power prices. “The country’s showcase state,” gloated The Wall Street Journal, “has come to look like a hapless banana republic.”
But a funny thing happened on the road to collapse: it turned out that the main culprit in the electricity crisis was deregulation, which opened the door for ruthless market manipulation. When the market manipulation went away, so did the blackouts.
Krugman sees in the confluence of the state’s leftward political shift and the GOP’s rightwing meltdown (and consequent loss of influence) the glimmering of hope that California can have effective (non-gridlocked) government once again:
Reports of the state’s demise proved premature. Unemployment in California remains high, but it’s coming down — and there’s a projected budget surplus, in part because the implosion of the state’s Republican Party finally gave Democrats a big enough political advantage to push through some desperately needed tax increases. Far from presiding over a Greek-style crisis, Gov. Jerry Brown is proclaiming a comeback.
Needless to say, the usual suspects are still predicting doom — this time from the very tax hikes that are closing the budget gap, which they say will cause millionaires and businesses to flee the state. Well, maybe — but serious studies have found very little evidence either that tax hikes cause lots of wealthy people to move or that state taxes have any significant impact on growth.
Read Krugman’s complete op-ed here –> “Lessons From a Comeback“