Subprime mortgages rejected by Calfornia voters.

The day after their defeat in a California special election, it’s clear that most voters viewed Props 1A-E like a subprime mortgages. I’ve used this analogy in a previous post about Bush’s unsustainable tax cuts, and it fits equally well here. In trying to solve an unprecedented financial challenge, these propositions offered voters a quick fix based on completely unrealistic revenue projections.

If Props 1A-E passed, voters were smart enough to realize that in a few short years they would be just like homeowners with subprime mortgages: unable to pay the bills and wondering how they got bamboozled into creating debts they couldn’t repay.

Subprime “victims” were told they could refinance their homes when their debt payments ballooned or bought into a fantasy that the ballooning economy would trickle down higher salaries to them that would cover their debt. Voters in yesterday's election were told that when the state’s income needs would further balloon in a couple of years – in large part because of the elaborate borrowing against future revenues orchestrated by these propositions – that either a huge economic recovery or the “rainy day fund” created by Prop 1-A would cover the gap. (Never mind that it might take decades, if ever, for the fund to grow large enough to keep voters from getting soaked.)

Another sad truth has been reinforced by the election: if the private sector figures out a way to fleece unsophisticated consumers, after politicians denounce the hucksters for their immoral greed those same politicians sometimes have the gall to try to fleece voters in a similar way. The focus on today at the expense of planning for tomorrow that has famously plagued American industry since the 1980's also has deeply infected politics and public policy. In California, with term limits forcing every newly elected public official to immediately set his or her sights on the race for the next office, it’s a miracle the ship of state didn’t sink years before yesterday.

I’ve mentioned in previous posts some long standing issues that must be fixed as part of raising the wreck, such the requirement that any bill with fiscal impact pass by a two-thirds vote. Hopefully this will all play out like a disaster movie formula, and we’ll be rescued in time. My additional hope is that the Governator will make good on his promise to leave politics forever, and that future entertainers who assume that public office is just another venue that would draw on their existing skill set will study the careers of Arnold and Jesse and try stand up comedy instead.