A California Bailout?

by John J. Pitney, Jr.

At his daily briefing earlier today, White House press secretary Robert Gibbs reminded California not to expect the administration to bail it out of its budget crisis. “We’ll continue to monitor the challenges that they have,” he said, “but this budgetary problem unfortunately is one that they’re going to have to solve.” One of those “challenges” is the stimulus package, which limits what the state can cut. “Trying to balance our budget in this fiscal environment is challenging enough,” said a spokesman for the Department of Finance a few weeks ago. “Doing it under Washington’s multiple requirements in order for us to receive federal funds multiplies that challenge.” A Washington Post story, however, suggests that a bailout may still be possible — at a price. “These policymakers continue to watch the situation closely and do not rule out helping the state if its condition significantly deteriorates, a senior administration official said. But in that case, federal help would carry conditions to protect taxpayers and make similar requests for aid unattractive to other states, the official said. The official did not detail those conditions.” Might California become another GM? Might the feds condition a bailout on passage of another state tax increase? It’s hard to say, but this situation is not looking good.

— John J. Pitney Jr. is the Roy P. Crocker professor of government at Claremont McKenna College. He is co-author of Epic Journey: The 2008 Elections and American Politics.