The Fiscal State and Our State
Peter Drucker:

“The two world wars of this (previous) century transformed the nation-state into a 'fiscal state'...They (nation-states) have all come to believe that there are no economic limits to what government can tax and borrow, and, therefore, no economic limits to what government can spend. Under the new dispensation, which assumes that there are no economic limits to the revenues it can obtain, government becomes the master of civil society. The sole result of the fiscal state has been the opposite of what it aims at...In every single developed country, governments have reached the limits of their ability to tax and their ability to borrow. The fiscal state has spent itself into impotence.

Worst of all, the fiscal state has become a 'pork-barrel' state...government spending becomes the means for politicians to buy votes...In the fiscal state, the looting [of the public treasury] is done by politicians to ensure their own election...Democratic government rests on the belief that the first job of elected representatives is to defend their constituents against rapacious government. The pork-barrel state thus increasingly undermines the foundations of a free society.

Joseph Schumpeter warned in 1918 that the fiscal state would in the end undermine government's ability to govern. Fifteen years later, Keynes hailed the fiscal state as the great liberator; no longer limited by restraints on spending, government in the fiscal state could govern effectively, Keynes maintained. We now know that Schumpeter was right.”

Peter Drucker, Post-Capitalist Society, quotes from pages 125-135

You can see this in the small - if the phrase "the fiscal state has spent itself into impotence" doesn't apply to California, I don't know what does - and in the large, as the federal deficit zooms out of control. Just look at the new Medicaid bill, which manages to spew pork in all directions while providing little to no actual benefits to ordinary citizens.

What got me on this track was reading about our Governor's new budget. As some wag pointed out, it's probably almost identical to the budget Gray Davis would have produced. The most salient points to me were the reliance on a $14 billion bond issue and the transfer of an extra $1.3 billion in property tax revenues from cities and counties to the state. There's very little that sounds like trimming the fat off the pork, unless you consider education and health services wasteful and unnecessary. I find it impossible to believe that there aren't billions of dollars in truly wasteful corporate and special interest welfare that can't be cut.

What would real reform look like? Well, it might start by dealing effectively with the problems described here. And it might end with a significant transfer of both funds and responsibilities out of Sacramento and back into local governments. It would be the end of the fiscal state.

And that end will come. It's just a question of whether it will be a difficult transition (the best case) or a painful, revolutionary upheaval.

I don't believe that our new Governor will lead us into that transition. For all the talk of a revolution in California politics, I think that Arnold's election is an end, not a beginning. It's an end because the only way one group of entrenched power interests in this state (the Pete Wilson Republicans) could get elected was to use a popular cultural icon as their frontman. But what happens if the frontman's administration is as ineffective and unpopular as the previous administrations?

“Meet the new boss, same as the old boss”
The Who, Won't Get Fooled Again