Steffen Schmidt, IAFC Blogger
Steffen W. Schmidt, University Professor of Political Science and Public Policy at Iowa State University, WNYC blogger, and chief Political correspondent of Insider Iowa.
Let me be perfectly clear at the outset that I DO NOT SUPPORT SEPARATISM or the breakup of the United States. The comments below are intended to stimulate a discussion about federalism, U.S. monetary policy, and the role of states vs. the central government.
As Europe sinks into greater crisis with Ireland, Portugal, Greece, and Spain suffering unemployment, a huge debt crisis, and a centralized monetary policy - the Euro - we need to pay attention in the United States. Here is what Robert Samuelson wrote this earlier summer New York Times:
"The euro helped create the crisis and has made its resolution harder, as a new report from the International Monetary Fund shows. For starters, the euro fostered a credit bubble that led to booms in housing, borrowing and consumer spending. When each country had its own currency, the country’s central bank (its Federal Reserve) regulated local interest rates and credit conditions. With the euro, the European Central Bank (ECB) assumed that job. But one policy didn’t fit all: Interest rates suited to Germany and France were too low for “periphery” countries (Greece, Ireland, Portugal and Spain).
“Financial markets” — private investors — compounded the problem by assuming that the euro’s creation reduced risk. Weak countries would be protected by the strong. Money poured into the periphery countries. There was a huge compression of interest rates. In 1997, rates on 10-year Greek government bonds averaged 9.8 percent, compared with 5.7 percent for similar German bonds. By 2003, Greek bonds fetched 4.3 percent, just above the 4.1 percent of German bonds."
The question now becomes is the same dynamic playing out in the U.S? The central bank (The Fed) and the federal government manage one-size-fits-all policies. Yet, the United States is fully as diverse as Europe in terms of regional economies and problems. "Weak states are protected by the strong" in the United States as well through "transfers," federal programs that move vast sums of money around the United States. "Money poured into the periphery states" so to speak.
Also, huge entities such as Freddy Mac and Fanny Mae nationalized a housing frenzy that was fueled by cheap interest rates, which were set by the U.S. "Central Bank."
Like the hapless declining European nations U.S. states cannot devalue their currency to make themselves more attractive to business and as a result of federal mandates for Medicare, Medicaid and other programs states cannot adjust their spending to respond effectively to economic cycles.
Only Gov. Rick Perry of Texas briefly flirted with the notion of Texas becoming an independent country that could legislate in its own interest. Other than that the words "secession," "self determination," or "independence" is practically treason in the U.S. It immediately raises the issue of slavery, the Confederacy, etc.
So we are stuck with being a huge country that is really fifty very different regions, economies and cultures. Look at the states by per capita income. Not that there is any real comparison but the Soviet Union broke apart into a much smaller Russia because its component parts were unhappy under Moscow’s thumb. Of course we already had that experience with the unsuccessful and bloody effort by the States of the Confederacy to separate from the Union.
Here are some comparisons of per capita income.
Lowest ranked states
47. Louisiana – $16,912
48. Arkansas – $16,904
49. West Virginia – $16,477
50. Mississippi – $15,853
Highest ranked states
1. Delaware – $28,766
2. District of Columbia* – $28,659
3. Massachusetts – $25,952
4. Connecticut – $25,614
5. Colorado – $24,049
*Not a state
Of course there are other dramatic differences in education, health, economic development, etc. Issues such as gay marriage, abortion, the death penalty, prayer in schools, gun ownership, universal healthcare, and many more play out very differently in say Vermont vs. Arizona or Massachusetts vs. Mississippi. As different as Portugal vs. Belgium!
Yet we are run by a central government that has vastly increased its authority over the past one hundred years and we are dependent a "single currency" that seems to be failing in Europe but that we take for granted; the U.S. dollar.
Maybe there is a lesson to learn from the plight of Europe and other Mega-states that attempt to encompass huge variety with cookie cutter solutions. We are seeing restlessness at the state level these days in regard to immigration policy as well as Medicare and Medicaid. Perhaps a "looser union" with more state autonomy would work better.
These are some of the deep and underlying political issues of the 2012 elections. These anxieties are reflected in the painful and explosive debate ion Congress over the debt ceiling and thus the size and power of the federal government. Remember that in the latest vote rejecting an increase in the national debt ceiling nearly half of the House Democrats sided with the Republicans. That’s a real fire alarm.
Steffen Schmidt is professor of political science at Iowa State University, blogs for the Des Moines Register and WNYC “It’s a Free Country,” and is chief political correspondent for Insideriowa.com.