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Letter from Europe: California Not Only Place Without a Plan B

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Plan B? What Plan B?

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I spent the week in various European Union institutions in Brussels, Belgium this week, reporting, giving a speech and attending a conference.

Everywhere, I kept hearing a talking point from European officials that was chillingly familiar for a Californian: we have no Plan B.

The context here was Europe’s sovereign debt crisis. Greece, and perhaps other countries, may default on their debt without assistance from their European neighbors.

As the price of such assistance, Europe is demanding austerity measures, which the Greek public understandably doesn’t want.

European officials I encountered kept delivering to Greece the same message Jerry Brown kept delivering to the legislature the first five and a half months of this year: we’re going forward with our fiscal plan, and that means pain for you.

And we’re not entertaining a Plan B.

Of course, Brown surrendered and agreed to a budget this week, but that document didn't amount to a Plan B.

It instead was largely fictional, relying on rosy assumptions about new revenues and other gimmicks. The Europeans, for all their tough talk, are about to stage a similar surrender, providing a bailout to Greece that's based on rosy assumptions about that country's ability to dig itself out of budget hole.

Brown and the Europeans punted for the same two reasons -- a weak stomach for deeper cuts in public services, and the structural limitations of the governing system under which they operate.

In Brown's case, his original plan didn't work because California's system of two-thirds supermajorities and extensive fiscal rules gives the legislative minorities and other interest groups veto power over new revenues and big budget changes.

Unable to raise revenues and unwilling to make even deeper cuts, Brown went for gimmicks.

In Europe's case, the convoluted and weak structure of European governance -- and the widespread feeling that the EU is not sufficiently democratic -- make it difficult to get all the various parties, from governments to banks, to agree on an effective rescue plan for Greece.

And so the EU will bailout the Greeks, because the alternative could be a debt default that would put the European and global economies at risk.

Both California and Europe are stuck in a crisis from which there are no easy ways out.

And both California and Europe need a real Plan B – systemic reform so that each can escape from the constant crisis.

The context and political institutions are different in each place, but the solutions are similar.

Each place needs systems that don’t make it quite so easy to delay reckoning with problems, and that voters and the public to pay more if they want more government services. And each place needs to redesign its democracy so that voters can hold its policymakers accountable.

In an odd way, it was a relief for a Californian to spend a week in the heart of the crisis -- in much the same way it's to visit someone else's nightmare, even if it only is a temporary escape from your own bad dream.

Related Topics Greece, Budget, California, EU, Crisis
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