Editorial: Cyprus Is Not an Exception

The recent crisis in Cyprus has highlighted the curious and dangerous phenomenon of banking systems that are much bigger than the economies in which they are based. One reason the government of Cyprus struggled to deal with its failing banks was that their assets were seven times as big as the country's economy.

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Cyprus is not the only such country in the euro zone. Luxembourg and Malta, which have established themselves as tax havens serving big global corporations and the superrich, have banking systems that are even larger. Luxembourg's bank assets are a staggering 22 times its gross domestic product, and Maltese bank assets clock in at eight times the size of its economy.

Leaders of both countries have insisted that they should not be compared with Cyprus and that they expected European leaders to stand behind their governments and banks come what may. Speaking of his banking system, the finance minister of Luxembourg, Luc Frieden, said: "We want to expand it further, not to downsize it."

Banks in Luxembourg and Malta, many owned by big European and American financial firms, are healthier than those in Cyprus, according to the International Monetary Fund. But the I.M.F. raised concerns about the ability of the countries to properly monitor their banks or support them in a crisis. In other words, the euro zone and the I.M.F. would have to step in to bail them out if they ran into trouble.

In any case, the euro zone needs urgently to finish work on a banking union that would allow the European Central Bank to supervise large banks instead of leaving that task to national policy makers who may be too protective of their banks. Europe should also have a common process to restructure troubled banks, which should reduce the risk of Cyprus-like debacles. A banking union would also give savers more confidence that their insured deposits are truly guaranteed, an assurance that was deeply shaken by what happened in Cyprus.

Thankfully, the crowds were not as big and chaotic as people had feared when banks in Cyprus reopened last week after for two weeks — but only after the country imposed tough capital controls to prevent depositors from fleeing. Europeans may not be as lucky next time.

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Op-Ed Columnist: Freedom Loses One

I don't think we've paused sufficiently to celebrate the wonderful recent defeat for the cause of personal freedom. After all, these sorts of defeats don't happen every day.

Over the past 40 years, personal freedom has been on a nearly uninterrupted winning streak. In the 1960s, we saw a great expansion of social and lifestyle freedom. In the 1980s, we saw a great expansion of economic freedom. Since then, we've had everything from jeans commercials to rock anthems to political conventions celebrating freedom as the highest ideal.

People are much more at liberty these days to follow their desires, unhampered by social convention, religious and ethnic traditions and legal restraints.

The big thinkers down through the ages warned us this was going to have downsides. Alexis de Tocqueville and Emile Durkheim thought that if people are left perfectly free to pursue their individual desires, they will discover their desires are unlimited and unquenchable. They'll turn inward and become self-absorbed. Society will become atomized. You'll end up with more loneliness and less community.

Other big thinkers believed that if people are left perfectly free to follow their desires, their baser ones will end up dominating their nobler ones. For these writers, the goal in life is not primarily to be free but to be good. Being virtuous often means thwarting your inclinations, obeying a power outside yourself. It means maintaining a balance between liberty and restraint, restricting freedom for the sake of an ordered existence. As Edmund Burke put it:

"Men are qualified for civil liberty in exact proportion to their disposition to put moral chains upon their own appetites. ... Society cannot exist unless a controlling power upon will and appetite be placed somewhere, and the less of it there is within, the more there must be without. It is ordained in the eternal constitution of things that men of intemperate minds cannot be free. Their passions forge their fetters."

Recently, the balance between freedom and restraint has been thrown out of whack. People no longer even have a language to explain why freedom should sometimes be limited. The results are as predicted. A decaying social fabric, especially among the less fortunate. Decline in marriage. More children raised in unsteady homes. Higher debt levels as people spend to satisfy their cravings.

But last week saw a setback for the forces of maximum freedom. A representative of millions of gays and lesbians went to the Supreme Court and asked the court to help put limits on their own freedom of choice. They asked for marriage.

Marriage is one of those institutions — along with religion and military service — that restricts freedom. Marriage is about making a commitment that binds you for decades to come. It narrows your options on how you will spend your time, money and attention.

Whether they understood it or not, the gays and lesbians represented at the court committed themselves to a certain agenda. They committed themselves to an institution that involves surrendering autonomy. They committed themselves to the idea that these self-restrictions should be reinforced by the state. They committed themselves to the idea that lifestyle choices are not just private affairs but work better when they are embedded in law.

And far from being baffled by this attempt to use state power to restrict individual choice, most Americans seem to be applauding it. Once, gay culture was erroneously associated with bathhouses and nightclubs. Now, the gay and lesbian rights movement is associated with marriage and military service. Once the movement was associated with self-sacrifice, it was bound to become popular.

Americans may no longer have a vocabulary to explain why freedom should sometimes be constricted, but they like it when they see people trying to do it. Once Americans acknowledged gay people exist, then, of course, they wanted them enmeshed in webs of obligation.

I suspect that this shift in public acceptance will be permanent, unless it turns out that marriages are more unstable when two people of the same gender are involved.

And, who knows, maybe we'll see other spheres in life where restraints are placed on maximum personal choice. Maybe there will be sumptuary codes that will make lavish spending and C.E.O. salaries unseemly. Maybe there will be social codes so that people understand that the act of creating a child includes a lifetime commitment to give him or her an organized home. Maybe voters will restrain their appetite for their grandchildren's money. Maybe more straight people will marry.

The proponents of same-sex marriage used the language of equality and rights in promoting their cause, because that is the language we have floating around. But, if it wins, same-sex marriage will be a victory for the good life, which is about living in a society that induces you to narrow your choices and embrace your obligations.

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Op-Ed Columnist: When TV Takes Its Time

If you haven't caught "Top of the Lake," a cryptic mini-series on the Sundance Channel right now, you owe yourself a peek, if only to behold and savor Holly Hunter, whose character is a mash-up of Pocahontas, the oracle at Delphi and Cousin Itt from "The Addams Family." She's all hair, her silvery mane accounting for easily half of her body weight and seemingly destined to sweep the ground. Perhaps when the character isn't providing terse counsel to the damaged women around her at an odd spiritual retreat, she moonlights as a broom.

Most of the women at the retreat, built from a network of colorful cargo containers arranged like gigantic Legos on the lip of the aforementioned lake, are on the lam from destructive relationships with men. One is on the lam from a destructive relationship with a chimpanzee as well. Still they can't help themselves. Their eyes rove to the scruffy local lads in the gorgeous patch of New Zealand where the story is set, and in the third of what will be seven episodes, a woman leaves her container to spend the night in the less Spartan digs of a lakeside drug lord. Minor spoiler alert: as she slips into his bed, he announces that he's impotent, and the day after, as they frolic sexlessly in the woods, he stumbles across his mother's grave, kneels in front of it and begins flagellating himself. This is a pretty good definition of a really bad date.

I'm mesmerized by "Top of the Lake," which is now halfway through its run, and friends who are watching it constantly bring it up. And what we're mainly responding to isn't the meat of the yarn, which focuses on the effort to unravel what happened to a 12-year-old girl who is about five months pregnant. It's the ancillary riddles and vaguely explained curiosities, like the interludes in Lego land. It's the gentle pacing. It's the way in which the mini-series, one of whose principal writers and directors is Jane Campion, insists on a certain opaqueness and bucks the bulk of what's on television, even in this golden age of the medium.

"Top of the Lake" belongs to a budding genre that several critics, including Alessandra Stanley in The Times and Matt Zoller Seitz in Salon, have called Slow TV. Stanley sagely noted the parallel to Slow Food, which rebelled against the metastasis of McDonald's outposts. Slow TV pushes back at the instant gratification and empty calories of too many elimination contests, too many reality shows, too many efficient, literal-minded forensic dramas that perhaps keep certain plot threads dangling but tie up the episode's main mystery by the hour's end.

The term Slow TV has multiple meanings, and has been applied to full-length chronicles of actual, incrementally unfolding events, like a ship's voyage, and to the practice of spacing out viewings of a fictional serial's episodes rather than watching them in a marathon session. But I think it's best deployed in the way Stanley and then Seitz, writing about such shows as "Treme" and "Game of Thrones," used it: to describe unrushed, atmospheric narratives.

Slow TV mines the pleasures of ambiguity, which are affirmed, as it happens, by one of the best movies I've recently seen, "Room 237," a documentary in limited theatrical release and on cable TV. The title refers to a detail in Stanley Kubrick's film adaptation of "The Shining," and the documentary recounts the riot of messages and meanings that obsessive fans have read into Kubrick's lone foray into horror.

It's a testament, hilarious at times, to the human genius for overanalysis. One "Shining" fan points to a German-made typewriter in the movie to support his theory that it's a Holocaust parable; another cites the feathered-headdress logo on baking-powder cans in a few scenes for his belief that "The Shining" is about the massacre of American Indians. A desktop paper tray is determined to be a metaphoric erection, and so on. The abstruseness of some of "The Shining" is arguably a flaw, but "Room 237" reminds you that only an artistic work that resists tidy explanation can accommodate such enjoyable flights of interpretive fancy.

Ambiguity has never been what TV values most, "Twin Peaks" excepted. But it was central to "The Killing," which highlighted an additional characteristic of Slow or Slowish TV, the willingness to wander off the main road and down an intriguing cul-de-sac, as "Girls" did in a discrete episode with Patrick Wilson as a guest star. Another HBO series, "Enlightened," partly redeemed its irritations with its habits of straying, and of lingering: on a sigh, on a glare, on a soulless office building. It cared as much for mood as for plot.

The same is true of "Top of the Lake," which preserves some enigmas, hirsute and otherwise, and surrenders others on its own timetable, making you wait and making you work. Just like life.

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Opinionator: Marrying Out of the Faith

Back in 1963, my brother Ron was going out with (that was the phrase then) an Irish Catholic girl named Ann who was attending the University of Rhode Island. One day, she was sitting in class and suddenly through the window she saw my father, who, it turned out, had tracked her down by finding out from the university administration what classes she was taking and at what times. He took her to dinner and then proceeded to tell her that it would ruin his son's life is he were to marry a non-Jewish girl. He then asked if she would be willing to have no contact with Ron for a year; in return, he offered to pay all her expenses during that time. She refused.

Meanwhile I had been asked if I could get Ron into the University of California at Berkeley, where I was then teaching. (My father, as I recall, was for this plan, and may even have initiated it.) I went to the head of the admissions office and said, "My brother has to get out of Rhode Island. Can you admit him here?"

"Sure," he said, and it was done. (Those were the days; if I tried that in 2013, I would be run out of town.)

If the idea was to separate the two young people, it didn't work. Shortly after Ron got to California, he sent Ann a plane ticket. When she arrived, they got married and have remained married to this day. She got a job at the university, took a class in Judaism and, much to my brother's surprise, converted, although it took her a while to find a rabbi willing to give her the required course of instruction. Just the other day she remarked, "It was a hard club to get into."

In 1963 I didn't know any interfaith couples, but things have changed, as Naomi Schaefer Riley reports in her new book, "'Til Faith Do Us Part: How Interfaith Marriage Is Transforming America."

According to Riley's research — in 2010 she commissioned a large interfaith marriage survey — the interfaith marriage rate in the United States is 42 percent. The book is chock-full of fascinating statistics ("Jews are the most likely and Mormons are the least likely to marry members of other faiths"), but at its heart is a cautionary thesis: the growing number of interfaith couples don't know what they're getting into. "Interfaith couples tend to marry without thinking through the practical implications of their religious differences. They assume that because they are decent and tolerant people … they will not encounter difficulties being married to someone of another faith."

They do, however, worry about marrying someone whose political views differ from theirs. Riley's data show that "inter political party marriages are far less common than interfaith marriages." Why, she asks, "do Americans seem so much more reluctant to marry outside of their political affiliation than their faith?", and she answers that they may be "unaware or unwilling to acknowledge that religion can be a serious dividing in a marriage." Because debating political differences is part of the culture in a way that debating religious differences is not, two people entering into a relationship are likely to be more concerned with the former than the latter.

That, Riley suggests, is a mistake. Early on, a difference in faith may seem unimportant and an occasion for practicing tolerance, while a difference over same-sex marriage or global warming or gun control may seem intractable and full of future hazard. (I can't marry someone who believes that!) "But faith," Riley insists, "is a tricky thing and it sneaks up on people," especially at significant moments when the pull of old loyalties supposedly outgrown reasserts itself. "The death of a loved one, the birth of a child, the loss of a job, a move to a new city — all of these things can give people a sense of religious longing, a desire to return to the faith of their childhood."

This can be true even of those whose childhood faith was weak and perfunctory. A Christian may think of herself or himself as not being religious at all, yet "find it hard to imagine family life without a Christmas tree." A wife or a husband, also not particularly religious, may feel that having a Christmas tree goes too far. In an interfaith marriage, Riley observes, holidays can "become like bargaining chips." (I'll do this if you'll do that, and if the children get to choose.) Even when one of the partners has converted and religious tensions have supposedly been eliminated, the fact of conversion can be the source of its own tension, as when one spouse, in the course of an argument, "plays the conversion card" and says "but I left my faith for you," or, in other words, "You owe me big-time and for a long time."

Once you begin to think about it, it's obvious how many potential pitfalls await interfaith couples, but it is often not obvious to them, Riley says, for at least four reasons.

First, the liberal rhetoric of individualism and personal choice is casually affirmed without sufficient attention to the ways in which one's choices and much else are influenced by tradition and community. Many interfaith couples have "chosen the romanticism and the individualistic ethos of America over the demands of the communities that they have come from" only to find, later on, that those demands still exert a force.

Second, young people today "consider religion to be a pursuit of the individual" and therefore downplay differences in ritual and doctrine; they minimize the requirements of faith by conceiving of faith as something without a specific content that might become the source of friction.

Third, the assertion, found everywhere in American cultural life, that differences are to be celebrated and embraced — our "obsession with tolerance at all costs" — obscures the extent to which those differences touch on something deep and immovable. "Ironically, interfaith marriage may awaken people to the fact that … that the particulars of practice and belief do matter, and that not all interfaith conflicts can be solved with the placement of a menorah next to a manger."

And fourth, faith has become "racialized"; that is, we have come to think that "like skin color [it] is a trait that need not divide us." But, Riley demurs, believing that faith "is a superficial characteristic the way race [and] ethnicity are" doesn't make it so. In fact, "religious identity … can and should be considered" as more substantive than racial identity; and like any other substance it remains in place even when the commonplaces of multicultural doctrine tell us that it shouldn't really matter.

My rehearsal of Riley's points may suggest that her book is a brief against interfaith marriage. Far from it. She is herself a partner in an interfaith marriage (and in an inter-racial one, too), and she and her spouse have made it work. She just wants prospective interfaith couples to know that it is work, that love doesn't conquer all, that "a rocky road may lie ahead of them" and that they "need to think in practical terms about their faith differences — how it will affect the way they spend their time, their money, and the way they want to raise their kids." Her message is that if you don't make the mistake of thinking it will be a bed of roses, you'll have a better chance of its not being a bed of thorns.

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Op-Ed Columnist: Investor Activism Gone Wild

William Ackman, the investor-activist who runs the $12 billion hedge fund, Pershing Square Capital, is like one of those guys you used to see in a certain kind of old-fashioned comedy. On one shoulder sits an angel, encouraging his better nature. On the other sits a devil, whispering temptation.

When he listens to the angel, Ackman does amazing things. He made a $25 million contribution to the Newark school system, an early and important match against the $100 million that Facebook's founder, Mark Zuckerberg, put up in September 2010. Yet unlike virtually every other actor involved in the Zuckerberg grant, who have been squabbling ever since, Ackman attached virtually no strings to his donation. He wants his money to be used to help Newark's schoolchildren — not to push someone's reform agenda.

Then there's his current Herbalife crusade. After making a $1 billion bet that the stock would fall, Ackman released a lengthy report alleging that the company was running an illegal pyramid scheme. I have been sadly constrained from writing columns about the Ackman-Herbalife battle because the company had the wit to hire my fiancée's employer, David Boies, after Ackman unveiled his attack. I was, as they say, "conflicted out."

But I will say this: Pyramid schemes are a hidden scourge, hurting millions of people seduced by their get-rich-quick promises. Until Ackman began agitating, the federal government had largely capitulated to the "multilevel marketing" industry (as it likes to be called), even exempting it from a law passed a few years ago specifically aimed at curbing pyramid schemes. Ackman has been heroic in taking on this litigious, well-financed industry. Not since Jim Chanos went after Enron has a hedge fund manager been willing to question whether a company was actually a criminal enterprise. That takes guts.

Also, his track record as an activist has been good; you don't get $12 billion in assets if you don't win more than you lose.

But there is always that devil on the other shoulder. A few years ago, Ackman took a position in Target's stock. Because of the recession, retailers such as Target were struggling. To get the stock up, Ackman began throwing out ideas that amounted to financial engineering. He then mounted an expensive proxy fight to get on the board, which thankfully, he lost. The stock has since rebounded. Target didn't need financial engineering; it just needed a better economy.

Which brings me to his latest retail foray, J.C. Penney. Is there a single word that can sum up what has befallen J.C. Penney since Ackman took a stake in the company? Yes: disaster.

J.C. Penney had long catered to lower-middle-class families searching for sales. Its chief executive, Mike Ullman, who had been at the helm since 2004, was widely viewed as solid, if a tad unimaginative. He had led J.C. Penney to some of the most profitable years in its history. But, by the fall of 2010, hurt by the same recession that hurt Target, Penney's stock was way down. That's when Ackman showed up.

Being a big-time activist-investor, Ackman could hardly allow Ullman to remain at the helm. Activists have to be, you know, active. Within a year, he landed the executive everyone in retail wanted: Ron Johnson, who had built Apple's retail business. Imagine: a Steve Jobs disciple was going to run downmarket J.C. Penney. What could possibly go wrong?

Pretty much everything. Johnson decided to eliminate the sales that had always been J.C. Penney's trademark and move to everyday low prices. He thus alienated the core J.C. Penney customer. He kept talking about how he was going to apply the lessons he had learned at Apple to J.C. Penney, even though the companies sold completely different products to completely different customers. As the core customers departed, Johnson and J.C. Penney didn't have the merchandise or cachet to attract a more upscale, Target-type customer. People abandoned J.C. Penney.

At the end of 2012, J.C. Penney announced that its revenues had fallen by a staggering $4.3 billion. It has laid off some 20,000 people. Walter Loeb, the former longtime retail analyst at Morgan Stanley who now blogs for Forbes.com, is predicting that its revenues will decline another 22 percent in the first quarter of 2013.

Lately, Johnson has brought back sales and devised a new strategy, revolving around "stores within stores" — selling merchandise much the way Bloomingdale's does. One of its ministores will be devoted to Martha Stewart-designed home goods. You may have read about that. Macy's, which says it has a contract that prevents Martha Stewart from selling housewares to other retailers, has sued. On the stand during the trial, I'm told, Johnson kept referring to his experience at Apple. Some people never learn.

The question is no longer whether Johnson will learn in time. If the quarter is as bad as Loeb is predicting, he'll be gone soon. The question is whether Ackman has learned anything. The next time the devil whispers in his ear, let's hope he doesn't listen.

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Op-Ed Contributor: On the Economy, Think Long-Term

THE 2009 economic stimulus package has come and gone. So, too, have the temporary payroll tax cuts of 2011-12. Most of the Bush-era tax cuts, in addition, have been made permanent. Yet the lasting effects of these policies have been meager.

The economy is still sluggish. Unemployment remains high, especially for lower-skilled workers. Inequality of incomes is higher still. What's more, the fundamental structural challenges to our economy remain. Deeply disruptive forces — rapidly evolving information technology, globalization and environmental stresses — are radically reshaping the jobs market. Decent jobs for low-skilled workers have virtually disappeared. Some have been relegated to China and emerging economies, while others have been lost to robotics and computerization.

The results of these changes can be seen in two starkly different employment figures: since 2008, 3.1 million new jobs have been created for college graduates as 4.3 million jobs have disappeared for high-school graduates and those without a high school diploma.

These trends will only continue, and even become more sharply defined. But in the face of such immense challenges, Republicans continue to hawk their age-old remedy, demanding cuts in government spending, tax rates and regulation so that market forces can respond in due course. Democrats, meanwhile, push just as stridently for their familiar fixes — short-term spending programs like the 2009 stimulus package enacted during President Obama's first term.

It's time to move beyond such transitory and piecemeal policies. Our underlying economic problems are chronic, not temporary; structural, not cyclical. To solve them, we need a systematic long-term approach.

Consider three priorities for this new, long-range perspective: infrastructure, energy and job skills. With a smart, ambitious strategy in these sectors we can encourage the creation of good jobs and begin to resolve huge problems of competitiveness and the environment.

Start with the country's crumbling infrastructure. Mr. Obama has spoken eloquently about fast intercity rail, renovated highways, safe water systems and refurbished waterways and coastlines. And on Friday, in a speech at the Port of Miami in Florida, the president called once more for a new public-private funding strategy for infrastructure — $21 billion, on top of some $40 billion previously announced.

That's good and important. Yet the private money will move off the sidelines only when there are solid, long-term plans to deploy it. After all, the 2009 stimulus program put some short-term money toward infrastructure repair, but there has been precious little sustained investment to show for it. Calls for "public-private" financing aren't enough. We need strategies — linking federal, state, regional and local efforts — that have a 10- to 20-year perspective.

The same goes for our energy system. We are in the midst of a short-term boom of shale oil and natural gas. Yet this expansion in energy production, driven in large part by two new techniques — horizontal drilling and hydraulic fracturing — won't begin to address our long-term energy needs.

Like any overhyped gold rush, today's boom will soon be tomorrow's bust; fractured gas fields have a remarkably rapid decline rate. They also threaten the local environment. More important, given the genuine and increasing impact of climate change, there is no longer any doubt that the world will have to fulfill its energy needs with low-carbon sources — whether solar, wind, nuclear or carbon-capture and sequestration.

A clearly laid out federal program to support large-scale solar and wind energy, electric vehicles and other smart technologies — and backed partly by public money — would unlock hundreds of billions of dollars of private investments. It would secure America's energy future and protect the environment, too.

The third area is job skills. Let's take a lesson from Germany, which boasts a low youth unemployment rate because of skills training. There, many young people gain a job foothold through an apprenticeship with a private company partly financed by the government.

If Mr. Obama were to stop angling for more temporary stimulus and instead put forward sound programs for job training, low-carbon energy and modernized infrastructure, he would most likely carry the public and eventually win the political battle.

For encouragement, he can look to history. Indeed, the United States government has a strong track record of success in such long-term public-private investment programs. Federal agencies helped support and guide the birth of the computer age, the Internet, the Human Genome Project, the federal highway system, the GPS revolution, the global fight against AIDS and, of course, the space program. Each was built on the painstaking political work of a president, backed by scientific experts and private businesses, and fashioned over many years.

All of the challenges above were daunting. We set out for the moon, John F. Kennedy said, not because it was easy but because it was hard. Likewise, those who think returning the nation to prosperity, economic fairness and a safe environment will be easy are only fooling themselves.

Jeffrey D. Sachs, a professor of sustainable development and director of the Earth Institute at Columbia University, is the author of the forthcoming book "To Move the World: JFK's Quest for Peace."

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Op-Ed Columnist: Lessons From a Comeback

Modern movement conservatism, which transformed the G.O.P. from the moderate party of Dwight Eisenhower into the radical right-wing organization we see today, was largely born in California. The Golden State, even more than the South, created today's religious conservatism; it elected Ronald Reagan governor; it's where the tax revolt of the 1970s began. But that was then. In the decades since, the state has grown ever more liberal, thanks in large part to an ever-growing nonwhite share of the electorate.

As a result, the reign of the Governator aside, California has been solidly Democratic since the late 1990s. And ever since the political balance shifted, conservatives have declared the state doomed. Their specifics keep changing, but the moral is always the same: liberal do-gooders are bringing California to its knees.

A dozen years ago, the state was supposedly doomed by all its environmentalists. You see, the eco-freaks were blocking power plants, and the result was crippling blackouts and soaring power prices. "The country's showcase state," gloated The Wall Street Journal, "has come to look like a hapless banana republic."

But a funny thing happened on the road to collapse: it turned out that the main culprit in the electricity crisis was deregulation, which opened the door for ruthless market manipulation. When the market manipulation went away, so did the blackouts.

Undeterred, a few years later conservatives found another line of attack. This time they said that liberal big spending and overpaid public employees were bringing on collapse.

And the state has indeed spent the past few years facing a severe fiscal crunch. When the national housing bubble burst, California was hit especially hard, and the combined effects of the plunge in home prices and the economic downturn led to sharply reduced revenue. Once more there were gleeful pronouncements of imminent doom: California, declared one pundit after another, is America's Greece.

Again, however, reports of the state's demise proved premature. Unemployment in California remains high, but it's coming down — and there's a projected budget surplus, in part because the implosion of the state's Republican Party finally gave Democrats a big enough political advantage to push through some desperately needed tax increases. Far from presiding over a Greek-style crisis, Gov. Jerry Brown is proclaiming a comeback.

Needless to say, the usual suspects are still predicting doom — this time from the very tax hikes that are closing the budget gap, which they say will cause millionaires and businesses to flee the state. Well, maybe — but serious studies have found very little evidence either that tax hikes cause lots of wealthy people to move or that state taxes have any significant impact on growth.

So what do we learn from this history of doom deferred?

I'm not suggesting everything in California is just fine. Unemployment — especially long-term unemployment — remains very high. California's longer-term economic growth has slowed, too, mainly because the state's limited supply of buildable land means high housing prices, bringing an era of rapid population growth to an end. (Did you know that metropolitan Los Angeles has a higher population density than metropolitan New York?) Last but not least, decades of political paralysis have degraded the state's once-superb public education system. So there are plenty of problems.

The point, however, is that these problems bear no resemblance to the death-by-liberalism story line the California-bashers keep peddling. California isn't a state in which liberals have run wild; it's a state where a liberal majority has been effectively hamstrung by a fanatical conservative minority that, thanks to supermajority rules, has been able to block effective policy-making.

And that's where things get really interesting — because the era of hamstrung government seems to be coming to an end. Over the years, California's Republicans moved right as the state moved left, yet retained political relevance thanks to their blocking power. But at this point the state's G.O.P. has fallen below critical mass, losing even its power to obstruct — and this has left Mr. Brown free to push an agenda of tax hikes and infrastructure spending that sounds remarkably like the kind of thing California used to do before the rise of the radical right.

And if this agenda is successful, it will have national implications. After all, California's political story — in which a radicalized G.O.P. fell increasingly out of touch with an increasingly diverse and socially liberal electorate, and eventually found itself marginalized — is arguably playing out with a lag on the national scene too.

So is California still the place where the future happens first? Stay tuned.

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Editorial: Mexico’s Ambitious Economic Agenda

Mexico's new president, Enrique Peña Nieto, has proposed reforms that could make monopolistic industries like telecommunications more competitive, bolster oil production and improve the government's finances. The proposals are commendable and could transform Mexico's economy. But success is far from guaranteed.

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Mexico has long failed to take full advantage of its many assets, including big energy reserves, a growing middle class and access to the American market. One obstacle has been crony capitalist policies that have concentrated economic power in the hands of a few oligarchs. As a result, Mexicans pay much more for goods and services like phone calls, medicines and airfares than the citizens of most other advanced countries, according to the Organization for Economic Cooperation and Development.

Mr. Peña Nieto is the young face of Mexico's grand old political party, the Institutional Revolutionary Party, or PRI, which governed the country for more than 70 years and is responsible for many of its problems. He argues that it has changed and that he and the PRI are ready to take on vested interests like the broadcasting giant Televisa and the telecom colossus América Móvil, which is controlled by Carlos Slim Helú, who also owns about 8 percent of the Class A shares of The New York Times Company.

In recent weeks, Mr. Peña Nieto and leaders of the country's two other large parties agreed to introduce more competition in broadcasting and telecommunications by giving a new regulator the power to break up dominant companies and award licenses to new firms. Mr. Peña Nieto also plans to reform the country's tax code to cut down on evasion by corporations and the rich. And he wants to allow the country's state-owned oil monopoly to form joint ventures with foreign energy companies to improve its ability to produce oil from deepwater wells.

The big questions are whether and how these proposals will be implemented. The new regulator overseeing the telecommunications and broadcasting industries will need real authority and political backing to confront powerful companies that have undermined previous efforts to allow more competition. In the energy sector, policy makers will have to guarantee that concessions involving foreign oil companies are awarded fairly and transparently and are not handed out to a favored few.

One house of the Mexican Congress has already approved a new telecommunications law and changes to the constitution that could usher in education reforms that will pay off in the long run. Other proposals like tax reform have been delayed because other political parties oppose plans to expand the country's value-added tax to food and medicine, which are not currently taxed.

Mr. Peña Nieto, who took office in December, is not the first Mexican president to attempt big economic reforms, though he has moved further and faster than his predecessors, who were often stymied by the PRI. Now that the PRI is back in power after a 12-year absence, it must demonstrate that it can turn Mr. Peña Nieto's ambitious agenda into national policy.

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Editorial: Using Medicaid Dollars for Private Insurance

The Obama administration and Republican officials in several states are exploring ways to redirect federal money intended to expand Medicaid, the main public insurance program for the poor, and use it instead to buy private health insurance for Medicaid recipients. The approach could have important benefits for beneficiaries and for the future of health care reform. But the idea also carries big risks. Federal officials will need to enforce strict conditions before agreeing to any redirection of Medicaid dollars that were originally intended to enlarge the Medicaid rolls.

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The Supreme Court ruled last year that the states could decide whether they want to expand their Medicaid programs to cover more of the uninsured; they can't be required to do so, as the health reform law intended.

The law provides hugely attractive financial incentives for states to add more people. The federal government will pay 100 percent of the cost of caring for newly eligible enrollees for the first three years, tapering to 90 percent in later years. Even so, some state officials, mostly Republicans, are proposing that the very generous federal financing for expansion be used instead to pay the premiums of poor people on new electronic health care exchanges, created by the reform law, where people can shop for subsidized private insurance.

Private insurance obtained on the exchanges could help poor beneficiaries in several ways. They would be less vulnerable to disruptions every time their incomes fluctuated above or below the boundary line that determines whether they are poor enough to qualify for Medicaid, where they would see one array of doctors, or slightly better off and eligible for subsidized insurance on the exchanges, where they might see a completely different group of doctors. Providers would be paid the same amount whether treating a Medicaid recipient or a privately insured patient, potentially creating a wider network of doctors for Medicaid patients. And some poor residents of states resistant to expansion, who would otherwise be frozen out by a glitch in the reform law, could gain coverage through the exchanges.

But the main benefit would be political in that it could engage Republicans in the whole health reform effort, make it easier to carry out the law and reduce the appetite among Congressional Republicans to gut the law.

There are at least two big caveats. The switch would be likely to increase costs for the federal government, and ultimately state governments, because private insurance is almost always more costly than Medicaid. That could force a cutback in the number of people covered because the money won't go as far. There is also a risk that poor people will end up with fewer benefits and higher cost-sharing on the exchanges despite regulations that should prohibit that.

Federal officials must be vigilant in ensuring that recipients on the exchanges receive the same services and same cost-sharing limits that they would under an expanded Medicaid program. State officials who don't want to play by those rules would be better off using the generous federal dollars as originally intended — to expand their Medicaid programs to cover many more of their uninsured residents.

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Editorial: The Immigration Spring

It has been amazing this year to watch immigration reform, that perennial train wreck of an issue, keep rolling forward without losing steam or blowing up. A bipartisan band of senators called the Gang of Eight has been working steadily for months on a bill; a similar group in the House is doing the same; diverse outside forces are lining up to urge all of them on, and every week seems to bring new reason for optimism.

The news over the weekend may be the best yet: an agreement in principle between two old adversaries, business and labor, on a new visa program for lower-skilled workers in industries like hotels, restaurants and construction. Previous immigration overhauls have died because of the seemingly unbridgeable divide between business groups, which want an abundant flow of cheap workers, and labor unions, which want to protect the jobs and wages of workers already here. The impasse had been threatening to derail current efforts to draft legislation, just as it did the last time Congress came close to passing a bill, in 2007.

The breakthrough seems to have come through the vanishing art of compromise. According to negotiators, business won't get the annual flood of 400,000 guest workers it wanted, but it will get four years of rising visa totals — going from 20,000 to 75,000. After that, visa levels would rise and fall with the unemployment rate and other factors, with a maximum of 200,000 a year.

Labor, meanwhile, gets significant worker protections, including the right for immigrants to change jobs and to seek green cards and citizenship if they wish. Labor's objection to previous guest-worker programs was that they import workers who are shackled to employers and thus acutely vulnerable to exploitation — a recipe for abysmal wages and working conditions for everybody.

The deal as it has been outlined is highly encouraging, but an actual bill hasn't been seen yet, much less debated. And there is so much else to negotiate beyond the future flow of guest workers. Here are some of the devilish details that remain:

Any bill should give the 11 million unauthorized immigrants a shot at citizenship within a reasonable time — a decade or less. We want the system to create new Americans, not a permanent subclass of the marginalized and poor. A bill should swiftly clear long backlogs in legal immigration, and not burden the unauthorized with onerous penalties that would only keep them in the shadows.

A bill that cracks down on illegal hiring by expanding the E-Verify database should also include robust anti-discrimination provisions and protect privacy and whistle-blowers. But it must not demand border-sealing benchmarks, or "triggers," as a condition for legalization.

As the immigration debate has moved forward, it has also gone topsy-turvy; left and right are jumbled and players are in unfamiliar positions. President Obama says the right words about giving hope to the unauthorized, but is still playing the role of hard-core enforcer: his administration is deporting people at record rates and keeping detention cells full. More Republicans are trying to appear welcoming to immigrants, though how well these penitents reflect their party as a whole is unclear.

The loudest voices on the anti-immigrant fringe, at least so far, have been drowned out by the calls for comprehensive reform, which is supported by a solid majority of Americans in polls.

Die-hards like Senator Jeff Sessions of Alabama are imploring Democratic leaders to slow the process down, which is another way of letting it fester. He should remember that those who have griped the loudest about the immigration problem have always been short on solutions. We are encouraged by the doggedness of Senator Lindsey Graham, who said of reform: "If I can sell it in South Carolina, don't come to me and say it's hard. This is a conservative state, and the way we're selling it is to fix it."

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