It's possible to have too much democracy

WORLD VIEW: Californian referendums mean the kind of 'initiative' that can bring an economy to its knees

SO YOU think referendums are a good idea? Let the people decide?

A cautionary tale . . .

California, population 38 million and the eighth largest economy in the world, has an out-of-control deficit of $26 billion (€18.3 billion) to match its giant size, dwarfing those of the other US states. In the view of many citizens, the state has become ungovernable.

Its problem, bluntly, is too much democracy. Or, more precisely, too much of one form of democracy familiar to us in Ireland – the direct democracy of the referendum, or popular “initiative”. In California’s case it has helped to bring the state’s budget process to its knees. Governor Arnold Schwarzenegger recently joked that they have the state’s financial officer “on suicide watch”.

Not just the odd referendum, you understand. In effect, anyone or any group with money can circumvent the legislature by getting 700,000 signatures to put an issue to a state-wide plebiscite. It has happened 71 times in the last decade, according to Mark Baldassare, the head of the Public Policy Institute of California. The result – California’s constitution, adopted in 1879, now with 500-odd amendments, contains so many tax or spending requirements that the state legislature only has discretion over 7 per cent of the budget.

Far from being a democratically invigorating expression of popular sovereignty over remote politicians and their decisions, for 18 of the last 22 years the result has been that California’s state capital Sacramento has been convulsed by budget crises and a gridlocked legislature. Not least because of an initiative-imposed requirement for a two-thirds majority in the legislature for all budgets and tax increases. It culminated this year in the mother of all budget crises, a long hot summer during which Schwarzenegger had to resort to issuing IOUs to pay the bills.

Although a compromise was reached eventually on a package that includes cuts of more than $7 billion in education funding and more than $1 billion each in health and prisons budgets as well as in state workers’ pay, most expect it to unravel in the face of legal action that could cost the state billions. Among the key game-changing initiatives over the years, two stand out: Propositions 13 and 98.

A populist anti-tax revolt in 1978 saw Californians vote through the former. It reduced most property taxes to a painless 1 per cent a year, cutting by 57 per cent property tax revenue during its first year, and its effects continue. Another revenue drop came in 1982, when voters passed an initiative abolishing the state inheritance tax. Before that, California had taken in nearly $1 billion a year in estate taxes.

With property taxes so low – sound familiar? – 55 per cent of revenue now comes from personal income tax. When times are good, there’s plenty of money; when they’re sour, California goes bust. In just the first five months of this year, revenues from this tax fell 34 per cent.

Ten years after the anti-tax revolt in 1988, teacher unions and education groups got their revenge by pushing through Proposition 98, mandating huge rises in education spending. It wrote into the state constitution a complex formula requiring the state to spend 40 per cent of its budget on education. Both contradictory propositions now co-exist in the state constitution, ensuring budgetary gridlock.

The summer battle, however, proved the final straw for many of the state’s citizens. Public service unions are pushing for an initiative to repeal the legislature’s two-thirds vote requirement for tax increases and budget approval, while another group, California First, wants just a simple majority for budgets.

The Bay Area Council (BAC), a business-driven alliance, has launched a more radical, broadly based campaign through a coalition called Repair California for a citizens’ convention to redraft the constitution. The group wants to put two initiatives on next year’s ballot, one to change the constitution to allow citizens to call a convention, the other, to call it – its mandate would be to look at the structure of the legislature, the restrictive system of term limits, the gerrymandered electoral system, the budget process, and, crucially, the initiative system itself.

By avoiding divisive issues such as gay marriage or whether taxes should go up or down, the campaign has garnered significant support across the political spectrum, from business to unions and civic groups, and even the governor, who describes the proposal as “brilliant”.

Most controversially, to avoid the partisan domination by interest groups that has helped paralyse the legislature, Repair California is suggesting that delegates would be chosen like office holders in ancient Athens, randomly from the whole population by ballot.

The last true constitutional convention took place in 1878 and progressive-era reforms meant to overcome the stultifying power of railroad barons led to changes in 1911 that ushered in the initiative process. But the appeal of direct plebiscitary democracy, particularly in the complex tax and budget area, has waned. Often issues are not suited to a yes-no decision. There is no guarantee of coherence in policy making. The system has again come to be dominated by vested interests with deeper pockets.

The genius of representative government, James Madison wrote, is excluding the people in their collective capacity from the direct business of governing. Paradoxically perhaps, it is no less democracy.