People say to me, "Mr. President, you helped revive the banking industry, you saved GM and Chrysler. What about the news business?" I have to explain, hey, I'm just the president. I'm not a miracle worker, here," Obama joked.
Here's the problem. State governments are most important to the public in recessions, since they provide much of the money for important health, human services and education programs that are heavily subscribed in bad economic times. But, because states can't print money and must balance their budgets, states -- and this is especially true in California -- have to make big cuts in these sorts of programs precisely when they're most needed.
All this begs the question: should more of these programs be funded by other levels of government -- particularly the federal government? That's a politically difficult question to ask, particularly when you think about all the controversy over the stimulus legislation and the federal bailouts of banks and the auto industry. But it's a crucial one.
Linda J. Blimes, a senior lecturer in public policy at Harvard, asks this question in a very thoughtful paper on the current fiscal crisis in the government of California and several other states.(Full disclosure: the paper was distributed by the New America Foundation, a think tank where I'm a fellow, though I don't know Blimes). She offers a few ideas for mitigating the current problem, involving carefully targeted federal support for certain programs.
But she doesn't offer much on the question of whether a more fundamental restructuring of state and federal responsibilities is needed to protect the safety net for future recessions. "Longer term," she concludes, "we need to consider whether it is logical for the states to finance such large portions of such vital programs as Medicaid and K-12 education, leaving them vulnerable to cyclical swings in the economy."