Morning Must Reads

Only one measure – the cap on the salaries of elected officials – won in California’s big referendum on Tuesday. Everything else – extensions of tax increases, shifting resources from the state lottery to pay bills, a bigger rainy day fund and more – got utterly smashed. Nothing but the salary caps even made it to 40 percent.

Gov. Arnold Schwarzenegger must have known it would be bad because he went to Washington to cheer on President Obama’s car emission crackdown rather than stay and face the music.

Without the extended taxes and shifted funds, the state will be $22 billion short of making budget. Tens of thousands will be released from prison, state properties will be sold, and more layoffs will be discussed. But the state still won’t be able to cover the gap. Labor contracts – protected by the president’s stimulus package – and earners fleeing the state’s high taxes mean that taxes will have to go up again. The only mitigating circumstance could be the other reason Schwarzenegger was in Washington – another federal bailout, which he discussed with the state’s delegation Tuesday.

It may be a foretaste of the tax outrage and disgust with spending that could go national if the federal government continues to follow California’s example.

The anti-tax attitude is strong enough in California that all of those threats plus a concerted effort to pass the measures were total busts.

“Schwarzenegger helped behind the scenes to garner big contributions for the measure’s proponents, who raised about $30 million and outspent foes by nearly 10 to 1. Among the big contributors were businesses hoping to avoid tax increases if state finances slumped further: oil companies, tobacco and alcoholic beverage firms, sports teams and Hollywood studios.

Despite a big advantage in cash and manpower, the campaign failed to gain traction from the start. Polls throughout the race showed all the ballot measures — except Proposition 1F — losing badly, as voters expressed equal parts confusion over the package and disdain for the Sacramento politicians who crafted it.”

Wall Street Journal — Obama Begins Interviewing Potential Supreme Court Picks

Writers Jonathan Weisman and Naftali Bendavid got David Axelrod on the record that President Obama started conducting the last round of interviews with potential Supreme Court nominees on Tuesday.

Michigan Gov. Jennifer Granholm was already there for the carbon emissions crackdown event, but there’s no confirmation of any names and no telling who got slipped in behind tinted windows.

The story, which includes a handy primer on Obama’s sometimes bombastic, sometimes conciliatory rhetoric about court nominees as a Senator, also turns to Obama’s political guru for thoughts on empathy versus constitutionality.

“White House adviser David Axelrod said the U.S. Constitution, like any document of its vintage, must be subject to interpretation in a modern context.

‘Fidelity to the Constitution is paramount, but as with any document that was written no matter how brilliantly centuries ago, it couldn’t possibly have anticipated all the questions that would be asked in the 21st century,’ Mr. Axelrod said.”

BBC — Iran ‘test launches’ medium-range missile

After a grip and grin session with Bibi Netanyahu with President Obama the White House was rewarded with a missile launch that Iran says has the range to deliver payload into Israel, Baghdad and other points of U.S. interest.

Scientists believe it will take another five years or more for the country to have a nuclear bomb like the ones in the arsenals of developed nations, unless they get a hook up from North Korea or elsewhere.

“The announcement of the launch came shortly after Mahmoud Ahmadinejad was confirmed as one of the four candidates cleared to stand in Iran 12 June presidential elections.

He will run against two leading reformists – former Prime Minister Mir-Hossein Mousavi and ex-parliament speaker Mehdi Karoubi – and Mohsen Rezai, former chief of the Revolutionary Guards.

Washington Post — A Blue-Ribbon Adviser With a Gray-Area Role

Paul Volker – the former Federal Reserve chairman who worked closely with successor Ronald Reagan to get runaway inflation under control — was supposed to bring some balance to the Obama economic team dominated by former treasury secretary Larry Summers and his acolytes.

A Democrat who endorsed Obama early, Volker was given the chairmanship of the new President’s Economic Recovery Advisory Board, but it seems that the inflation foe is having little impact on the borrowing, printing and spending policies of the administration.

Writers David Cho and Lori Montgomery lay on pretty thickly about the first four months being lost to confusion bt that everything is on track now.

“So far, however, Volcker has not been able to gain broad influence over the issues he cares about most, the overhaul of the financial system and the financial rescue initiative, sources close to him said. Those issues are dominated by Treasury Secretary Timothy F. Geithner, whose office is next door to the White House, and Lawrence H. Summers, director of the National Economic Council, who works down the hall from the Oval Office.

Unlike other prominent members of Obama’s team, Volcker does not have a long relationship with the president.”

Gordon – Why Government Can’t Run a Business

Proving again that he is among the very few indispensable thinkers writing today, John Steele Gordon explains the American government’s abysmal track record when it comes to trying to operate a business. Misadventures in armor plate for battleships, the nationalization of the phone system, and more reveal the varied ways in which government inevitably fails when going beyond its constitutionally proscribed role.

“It is government’s job to make and enforce the rules that allow a civilized society to flourish. But it has a dismal record of regulating itself. Imagine, for instance, if a corporation, seeking to make its bottom line look better, transferred employee contributions from the company pension fund to its own accounts, replaced the money with general obligation corporate bonds, and called the money it expropriated income. We all know what would happen: The company accountants would refuse to certify the books and management would likely — and rightly — end up in jail.

But that is exactly what the federal government (which, unlike corporations, decides how to keep its own books) does with Social Security. In the late 1990s, the government was running what it — and a largely unquestioning Washington press corps — called budget ‘surpluses.’ But the national debt still increased in every single one of those years because the government was borrowing money to create the ‘surpluses.’”