America's largest state is broken and looking for fixes in the wrong places.

America's largest state is broken and looking for fixes in the wrong places.

In my last column I tackled the not-so-secret implosion of state governments across the land. A question, however, still lingers: What ought to be done? On this score there are two, and only two, general approaches. The first is structural and concerns the division of political authority within the states. The second deals with the conception of individual rights and duties of state citizens. As Americans, we should stress the second and ditch the first. But true to form, California seems to be moving in the opposite direction.

Right now many groups are getting ready to put new measures in November's referendum process, which lets voters have the word on reform. These exercises in direct democracy consciously bypass the state legislature, in which public confidence has fallen to 14%--which is quite generous in light of its dismal performance.

Naturally, many of these proposals take aim at the legislature itself. Some try to slash legislative salaries in half, which won't do much good since most people who crave their seats spend far more than they earn to obtain them. What drives them to office is the prospect of power--influence that will ultimately pay them far more than the gobs of cash they need to get elected in the first place.

Other proposals address how legislative gerrymandering of local districts has been a source of public malaise and discontent. True enough, but given the current mind-set the only thing that redistricting will accomplish is a shift in power of the various interest groups that now vie for influence. It will do little or nothing to raise the overall level of legislative performance.

Still other programs aim to alter the balance between state and local governments in ways that shift more education and public safety responsibilities to the local levels. This is a form of mini-federalism; while it will likely do some good in education, when it comes to issues like land-use regulation and labor reform some local communities are as bad as the state.

Worse still are efforts to organize a new constitutional convention to start matters over from scratch. Put that august assembly together and every interest group in town will find ways to entrench their own pet projects. A constitutional mishmash is no better than a legislative one.

The theoretical mistake in these reforms needs emphasis. Structural remedies have one vital function: The diffusion of power in different branches of government is a key bulwark against tyranny, even at the cost of gridlock and paralysis. On balance that trade-off is worth making.

Yet tinkering with this balance will do little to cure today's entitlement malaise. Whatever the importance of some division of power among political actors, no theory tells which division of power is likely to work better than the others. Look around the world and ask whether presidential systems of government, like that in the United States, work better than parliamentary systems of government, like that in Great Britain. We can't be sure. Nations under stress often oscillate between the two, without any clear direction.

On the other hand, getting the basic set of substantive entitlements right does make a huge difference in the success or failure of government. It is only by taking on that unfashionable issue that real progress can be made in places like California. The first order of business should be to rationalize the tax structure. Low, flat taxes on income will draw in capital, not drive it away.

More to the point, none of these proposals take dead aim at entitlements. The impulse is to find out ways to add back dental benefits to Medicaid, often by asking the federal government (i.e., citizens in other states) to foot the bill. It's a mug's game that forces sensible states to subsidize the follies of profligate ones. We need to find a way to shrink the program nationwide.
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Closer to home, I have not seen one proposal that works to relax the restrictions on land use now exercised at both the state and the local level. No proposal wants to take on the bloated pensions of public unions or the state protection of private unions. The truth is California is failing because its aspirations have grown so rapidly that they have choked off the productive base needed to fund them. The current set of reform proposals won't stop the state from putting an ever greater set of entitlements onto a shrinking tax base.

What we need is a sharp change in direction--a deep commitment to a smaller government along classic liberal lines. While some of these ballot initiatives will be approved, the underlying situation will get only worse. All the money and effort might be better spent rearranging deck chairs on the Titanic.

Richard A. Epstein is the James Parker Hall Distinguished Service Professor of Law, The University of Chicago; the Peter and Kirsten Bedford Senior Fellow, the Hoover Institution; and a visiting professor at New York University Law School. He writes a weekly column for Forbes.com.