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The NGA wants federal help for state budgets. The states raised spending during the boom of the 1990s (state spending per person grew by a third between 1992 and 2001, adjusting for inflation). But the recession has caused revenues to fall behind. For most governors, retrenchment is out of the question — let alone federal tax cuts that, because of state tax structures, have the effect of reducing state revenues. The NGA's other big lobbying kick this year has been to relax work requirements on welfare. In recent years, it has also devoted a lot of energy toward getting Congress to authorize the states to give them new powers to tax Internet sales. In both cases, the NGA uses federalist rhetoric; in both cases, the federalism is a far cry from that envisioned in the Constitution. In the case of welfare, what "federalism" means to the NGA is that states should be able to spend federal money however they please. In the case of Internet taxes, "federalism" means that states create a tax cartel rather than competing with one another. Supporters of actual federalism should understand that these aren't the states that Jefferson had in mind. To a large extent, they're the states the modern federal government has created. Dependent on the federal government, they act toward it like any other interest group, seeking the most cash they can get with the fewest strings attached. That, and not Democratic leanings, is what's really wrong with the NGA. And plenty of Republican governors — such as NGA chairman John Engler of Michigan — are part of that problem. ST.
ARTHUR Trust Jane Mayer of the New Yorker to present the issue as a morality play, in which Arthur Levitt — the former head of the SEC, who tried unsuccessfully to impose the rule in the late '90s — wears the white hat and businesses that resist regulation wear black ones. The thing is, none of the nefarious conduct she describes actually looks that bad. So congressmen were trying to get the SEC, an "independent agency," not to pass Levitt's rule? How terrible — legislators trying to influence public policy! Rep. Billy Tauzin, Louisiana Republican, points out to Levitt that the rule he's suggesting to guarantee independence is unrealistic: SEC members wouldn't be able to live with a similar rule applied to themselves. A "not very veiled threat," according to Mayer. Mayer suggests (and quotes someone saying) that Enron would not have happened if Levitt's rule had been in place. That's dubious — Arthur Andersen would still have had the powerful motive of its auditing fees to keep silent about Enron's malfeasance. Laughably, she also states that investors lost $93 billion because of the affair. Most estimates have come in well below that, and even those estimates have been exaggerated. (If you ride a stock up when it's growing based on fraud and then ride it down when the fraud is sniffed out, can you really claim losses based on the peak price?) The article will, if anything, reinforce fears that what Levitt and company want is an adversarial model of the relation between accountants and their clients, with all that implies in terms of reduced tolerance for risk. Nice to see Mayer live up to her usual standards, though. GORE
AND CLINTON
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epublicans
have long been dissatisfied with the National Governors Association, regarding
it as Democratic in orientation. For several months there have been rumors
that at least one Republican governor was going to leave the organization,
and that the White House was encouraging a defection. That hasn't happened
yet, but Florida governor Jeb Bush has now taken his unhappiness public.
He has criticized the NGA for opposing his brother President Bush on the
stimulus bill.
