In 1897, when the Territory of Arizona was seeking to demonstrate its fitness for statehood, the legislature solicited bids to design a new capitol building and grounds in Phoenix. The winning entry was that of James Riely Gordon, the architect behind a number of well-regarded public buildings in Texas and Maryland. He drew up ambitious plans: an expansive dome, a grand rotunda, stately wings for each house. But funding fell short, and so the legislative wings were scrapped, and a diminutive lead-alloy top was chosen in lieu of Gordon’s more elaborate dome. Worse, in the building’s interior, a mosaic of the state seal was bungled by the contractor, who forgot to include the images of cattle and citrus, two of Arizona’s “five C’s” (the others being climate, copper, and cotton).

Despite much talk over the years of an upgrade—including a proposal from none other than Frank Lloyd Wright, who envisioned the addition of fountains, gardens, and reflecting pools—all plans were rejected as too expensive. In the 1960s, two new buildings were finally erected on either side of the capitol, one for the house and one for the senate; but these structures, which resemble Soviet apartment blocks, only made matters worse. Nowadays, the capitol’s dingy, unshaded plaza is bare save for a few small rosebushes and some patches of dry grass. The buildings themselves have been plagued by plumbing problems and leaks, making the complex “wholly inadequate” to Arizona’s future needs, according to a task force charged with studying the matter.

The general unsightliness of the capitol makes it a fitting home for today’s Arizona legislature, which is composed almost entirely of dimwits, racists, and cranks.Collectively they have bankrupted the state through a combination of ideological fanaticism on the Republican right and acquiescence and timidity on the part of G.O.P. moderates and Democrats. Although dozens of states are facing budget crises, the situation in Arizona is arguably the nation’s worst, graver even than in California. A horrific budget deficit has been papered over with massive borrowing and accounting gimmickry, and the state may yet have to issue IOUs to employees and vendors. All-day kindergarten has been eliminated statewide, and some districts have adopted a four-day school week. Arizona’s state parks, despite bringing in 2 million visitors and $266 million annually, have lost 80 percent of their budget, with up to two thirds of the parks now in danger of closure. The legislature slashed the budget for the Department of Revenue, which required the agency to fire hundreds of state auditors and tax collectors; lawmakers boasted that these measures saved $25 million, but a top official in the department estimated that the state would miss out on $174 million in tax collections as a result.

Any way out of Arizona’s crisis will require raising taxes, a move that is tantamount to heresy for most lawmakers. For nearly a year, the legislature refused to approve the emergency sales-tax increase (of just one cent per dollar) proposed by Governor Jan Brewer, a Republican who had been elected as secretary of state but assumed the top job in 2009 when Janet Napolitano joined the Obama Administration. Eventually, lawmakers passed the buck to voters by authorizing a May 18 statewide ballot on the sales tax—which passed, after a $2.2 million marketing effort by education and business groups—but before doing so they enacted tax cuts that over four years will deprive the state of more money than the sales-tax increase is estimated to bring in.

Instead, to raise cash, the legislature has pursued a series of wild sell-offs and budget cuts. It privatized the capitol building and leased it back from its new owner, an arrangement that brought in substantial revenue but over time will cost Arizona far more. The legislature has sold off numerous other state properties at bargain prices, and has put up future lottery revenues as collateral on a $450 million loan. Meanwhile, Arizona removed more than 300,000 adults from state health coverage and terminated one health-care program for 47,000 poor children. Funding was slashed at the agency that deals with reports of child abuse and neglect, and also at Children’s Rehabilitative Services, so that parents of children with cystic fibrosis, cerebral palsy, and a number of other conditions are now required to pay 100 percent of treatment costs.

All totaled, the cuts amounted to roughly $1 billion, which came on top of a similar amount that had been slashed the previous year. These cuts, in combination with the sale of state assets (which raised more than $700 million) and the securitization of the lottery, plugged a massive hole in next year’s budget. But the deficit for 2011 is already projected to be at least $1 billion and possibly double that, on a total budget of only $9 billion. The situation will only worsen from there, as federal stimulus money dries up and the state runs out of short-term sources of cash. “Could we cut our way out of it mathematically?” Dennis Hoffman, an economist who has forecast revenue for Arizona governors since 1983, mused when I asked him about the crisis. “Anything is possible on paper, but for practical purposes it can’t be done, unless you want to start releasing prisoners, shutting down universities, and eliminating extracurricular activities in the schools. We’ve already had a $2 billion haircut over the past two years. Try another $2 billion and see what the state looks like.”

Arizona lawmakers have shown little enthusiasm for dealing seriously with the state’s insolvency. They have instead preferred to focus on matters that have little to do with the crisis. Lawmakers have turned racial profiling into official policy, through a new law that requires police to stop suspected illegal immigrants and demand to see their papers; anyone not carrying acceptable proof of citizenship can be arrested for trespassing and thrown in jail for up to six months. But this is just one bill in what has been a season of provocative legislating. Another new law bans the funding of any ethnic-studies programs in the public schools, while a third prohibits “intentionally or knowingly creating a human-animal hybrid.” Lawmakers declared February 8 the “Boy Scout Holiday,” took time out to discount fishing-license fees for Eagle Scouts, and approved a constitutional right to hunt.

In January, Senator Jack Harper, an immaculately combed zealot who speaks in the patter of an infomercial voiceover, submitted a bill that would allow faculty members to carry guns on university campuses, saying it was “one very small step in trying to eliminate gun-free zones, where there’s absolutely no one who could defend themselves if a terrorist incident happened.” The house passed a measure that would force President Barack Obama to show his birth certificate to state officials if he runs for re-election, as well as a bill that bars Arizona from entering into any program to regulate greenhouse gases without approval from the legislature. “There are only two ways to vote on this,” said Representative Ray Barnes of the latter initiative. “Yes, or face the east in the morning and worship the EPA because they own you.”

As the national midterm elections approach in November, the Tea Party movement is supplying the Republican Party with most of its momentum. But this movement, and the strain of aggrieved libertarianism it espouses, cannot claim much representation in elected office. This disparity has led many on the left to dismiss Tea Partiers as a media phenomenon, and to speculate that their ideas could not possibly “stand up to the test” of real governance. But there is, in fact, one place where the results of Tea Party governance has already been tested: Arizona, where the Tea Party is arguably the ruling party. Less driven by issues of national security, on the one hand, or moral values on the other, Arizonan conservatives are largely obsessed with taxes and immigration—also the twin fixations of Tea Partiers, who, like Arizonans, are disproportionately white and older. So it comes as little surprise that top Republican elected officials in Arizona eagerly seek the Tea Party’s support and make time to speak at the group’s rallies. Should the Republicans succeed in retaking power nationwide over the next four years, the country might start to resemble the right-wing desert that Arizona has become.

Arizonans are generally moderate. In-migration has brought a flood of independents and Democrats, who in 2008 won five of the state’s eight U.S. House seats. Although registered Republicans outnumber Democrats by 36 percent to 33 percent, independents now stand at 30 percent and are rapidly gaining ground at the expense of both parties.And yet Arizona politics are disproportionately controlled by ultraconservatives. Only a handful of the state’s house districts are genuinely competitive between Democrats and Republicans, with the latter holding thirty-five of the sixty seats. Being a member of the legislature is not considered a prestige job—the office pays only $24,000 annually—and many lawmakers are small businessmen. The Republican primaries are dominated by hard-core conservatives who spurn moderates and back ideologues.

Anti-government sentiment here is longstanding, and can be traced in part to the influence of the Church of Jesus Christ of Latter-day Saints. Mormons make up only around 6 percent of the state population, but they are enormously influential in Republican politics—and they don’t approve of borrowing money, whether it’s an individual or a state that’s doing the borrowing. Mormons tend to believe that the role of government is to let people fend for themselves. After the church created a nationwide Welfare Services Department, back in 1936, its Arizona branch displaced the government among church members as the provider of many social services, offering everything from job training to family counseling to educational programs.

Since the days of Barry Goldwater, an axiom of Arizona politics, particularly among Republicans, has been that tax cuts generate economic growth in all circumstances. Hence total state taxation has declined during fifteen of the past seventeen years; the individual income tax has taken the biggest hit, but sales, property, and corporate-income taxes have also come down substantially. The legislature has created tax exemptions for everything from country-club memberships to pedicures to food purchases by airlines (the latter at the behest of local airline lobbyists). None of this has produced the hoped-for effect. Although tax cuts “have lowered government revenues,” they “have not had any perceptible effect on the state’s economic growth,” concluded an Arizona State University business-school study, published last November, that examined the past three decades of fiscal policy.

Yet even as the state has teetered toward bankruptcy, political leaders have remained unwilling to acknowledge that taxes in Arizona are too low. Indeed, thirty-eight of Arizona’s ninety lawmakers, together with Governor Brewer, have signed the “Taxpayer Protection Pledge” of Grover Norquist’s group Americans for Tax Reform, a pledge that they will never vote for a tax increase. Democrats have played the game as well: in 2007, then-Governor Napolitano approved a 10 percent reduction in the income tax, which cost the state about $500 million. The combination of historic tax cuts with the recession has reduced government revenues from $9.5 billion in 2007 to $6.4 billion this year. That latter figure is roughly equal to the amount of money the state took in six years ago, even as the population—and the need for government spending on health care, education, and prisons, for example—has continued its rapid growth.

The anti-government attitude in Arizona is now reflexive, especially because of its entanglement with the issue of immigration. As one local resident, who didn’t want to be identified because she has a government job, told me: “People who have swimming pools don’t need state parks. If you buy your books at Borders you don’t need libraries. If your kids are in private school, you don’t need K-12. The people here, or at least those who vote, don’t see the need for government. Since a lot of the population are not citizens, the message is that government exists to help the undeserving, so we shouldn’t have it at all. People think it’s OK to cut spending, because ESL is about people who refuse to assimilate and health care pays for illegals.”

This confluence of nativism and anti-government sentiment makes Arizona fertile ground for an especially showy brand of symbolic politics. One day in February I sat in the audience during a session of the Senate Appropriations Committee, which meets in a wood-paneled room with a stained carpet, on the ground floor of the senate building. During the meeting, committee chairman Senator Russell Pearce—sponsor of the anti-immigrant bill and one of the most powerful politicians in the state—called on the federal government to put the National Guard on the border and “have rifles with bullets in ’em.” Apropos of nothing, the balding, red-faced Senator Al Melvin brought up his pet topic of inmate labor, which he views as a solution to the state’s budget crisis. Jailbirds, burbled Melvin, should fill potholes, keep golf courses open, and refurbish public buildings.

Soon the committee began to debate whether to post the Ten Commandments at the entrance to the old state capitol. A six-foot granite version located a few hundred feet away did not, it seemed, sufficiently convey the state’s piety. “George Washington, our first recognized president of this republic, said you cannot properly govern without the Bible and God, and I couldn’t agree more. And John Adams once made the statement that this republic is designed wholly for a moral and religious people and will survive under none other,” Pearce, the measure’s sponsor, told his colleagues. After a few minutes’ more debate, the measure passed, and the committee, having done the people’s business, adjourned for the day.

Besides its aging mining industry and its few remaining aerospace plants, Arizona doesn’t manufacture or even sell much of anything. Phoenix is a branch-office town, not a headquarters town, and much of the population works low-paying jobs at call centers and assembly plants. Yet over the past half-century, the population of Arizona has grown faster than that of any other state besides Nevada. Between 1950 and 2009, Phoenix swelled from 105,000 people to 1.5 million, making it the fifth largest city in the United States. The climate—one of those “five C’s”—has been a major attraction, especially for senior citizens. So have low taxes, weak business regulation, and (for a long time) cheap housing, especially when compared with neighboring California. The engine of economic growth in Arizona was growth itself—real estate in particular, but also a host of related industries: construction, hauling, landscaping, roofing, painting, remodeling, swimming-pool maintenance, architecture, plumbing, and on and on.

Real estate prices rose wildly in Arizona during the past decade, pushed, as elsewhere in the country, by low interest rates, ARMs, and the reckless practices of such companies as Countrywide Financial and Goldman Sachs. When the market went bust, Arizona—along with Florida, Nevada, and California—crashed particularly hard. Last spring, Phoenix became the first major American city where home prices had fallen by half from their mid-decade market peak. Recent figures show that 61.5 percent of Phoenix mortgages are “underwater,” with commercial real estate in even worse shape. It is unlikely that a major office building will be erected in Phoenix in the next five years. Since its peak in 2006, the state’s construction industry has lost roughly 113,000 jobs, a drop of almost 50 percent. The official unemployment rate is above 9 percent, but that figure nearly doubles when people who can’t find full-time work and people who have given up are factored in. The Arizona Department of Health Services estimates that as many as 260,000 Hispanics have left the state since late 2007, partly because of anti-immigrant laws and sentiment and partly because jobs dried up.

“Texas has oil and gas, and Nevada has gambling, so they generate money even during a recession—but Arizona needs growth to grow,” Grady Gammage Jr., a lawyer and real estate developer, told me at his office in Tempe, thirteen miles from downtown Phoenix. “We’re also not a low-problem state like Vermont. We’re a big border state with only a few private institutions to take care of social problems. We need government.”

Gammage walked me out to a balcony that faces Arizona State University’s Sun Devil Stadium. He pointed off to the left, toward two unfinished towers, barely visible in the distance. They had been started with financing from a company headed by Scott Coles, a leading local businessman; as the project was unraveling last year, Coles’s wife left him and he committed suicide. “Investors put $130 million into it,” Gammage said. “The penthouses had private pools and they were talking about selling them for between $5 million and $10 million apiece. Now they’ll be lucky to get $30 million for both buildings, and it would cost another $20 million to finish them. But the market’s gone and no one knows what to do. There’s talk of turning it into a hotel or student dormitories.”

Drive around Greater Phoenix, and one sees a procession of commercial real estate projects in bankruptcy and for-rent signs plastered across strip mall windows. But to take in the full scale of the damage—and to understand why the state government is bankrupt—requires heading out to communities at the edge of recent development, communities that were growing at a breakneck pace up until the crash.

Few spots are worse off than Maricopa, forty-five minutes southwest of Phoenix by car, a town that sprang from desert scrub in 2003 and within five years had a population of 45,000. On a sunny Sunday morning, John Guthrie, a thirty-five-year-old real estate agent, met me at the Carl’s Jr. in the town’s main shopping mall, off the John Wayne Parkway. He moved here from Orange County, California, in 2004, just as the real estate boom was gathering force, before there was a mall or nearly anything else in Maricopa. But by the end of that year, the real estate market in Maricopa was in a frenzy. Lotteries became normal in the most popular new developments; would-be buyers had to put up a deposit of $20,000 or more just for the right to bid. “Developers said we’d be getting a Home Depot and movie theaters and restaurants,” the soft-spoken Guthrie recalled. “Over twenty-five years they were saying there would be amusement parks and resorts.”

Guthrie crumpled up his sandwich wrapper, grabbed his soda, and ushered me to his car in the parking lot. In 2007, the market stalled out, and by early the following year it collapsed, he explained as we pulled out onto the road. “You could see it hit street by street,” he said. “One house would go into foreclosure and then it would just move down the street, and then hit the next block and then the next. There were a bunch of families who came out here who didn’t have assets, and when they started going upside-down by $150,000 there wasn’t much to do but walk away.”

Guthrie handed me several documents as he drove. One showed that in Maricopa the “Distress Index”—the percentage of sales in which the property is bank-owned or in pre-foreclosure—was 76.8 percent. Guthrie looked increasingly shell-shocked as he laid all this out, and soon I found out why: he was upside-down on a home of his own by about $100,000.

In a neighborhood called Maricopa Meadows, we drove past numerous empty lots—builders as well as homeowners had gone under during the crash—and many “short sale” signs in front of houses. Soon we rolled past a block of McMansions, all but a handful of which had gone into foreclosure. “These houses have about 4,000 square feet and swimming pools,” he said. “They topped out at $600,000. Now you can get one for about $250,000. You’ve got people doubling up in houses so they can split utilities. During the summer the air conditioning bill can be $500 a month. The story is the same from here to Queen Creek to Buckeye, in all these places that people scattered out to before the crash.”

Politically, there was almost no fallout from the economic crisis. In the G.O.P. primary of 2008, when the impending disaster was already apparent, a number of Republican state legislators who opposed further tax cuts lost to fire-breathers on their right, all but eliminating the party’s “moderate” wing. In the state senate, Russell Pearce—who as a house member had already sponsored a number of anti-immigrant bills, including an employer-sanctions law—trounced his Republican opponent, an attorney who had handled immigration cases and who was backed by the Chamber of Commerce (which is highly conservative on most issues but splits on immigration because its members like cheap immigrant labor). Steve Pierce, a right-wing rancher, ousted Senator Tom O’Halleran, a pro-environment moderate who had helped broker a budget deal with Governor Napolitano. Al Melvin, who had never before held public office, won his primary race against Pete Hershberger, whom he tarred as not sufficiently “loyal” to the G.O.P. on issues of taxes, gun rights, and gay marriage.

Then there was Sylvia Allen, a real estate broker from the town of Snowflake, who, in 2008, was appointed by the local Republican Party to finish the term of a respected conservative who had died in office. Allen, who retained her seat in an election that fall, has since gained minor notoriety after calling for more uranium mining, saying in a speech that “this earth has been here 6,000 years, long before anybody had environmental laws, and somehow it hasn’t been done away with.” She also has complained that trees are “stealing Arizona’s water supply” and sponsored a new law that allows carriers of concealed weapons to forego safety training and the indignity of background checks.

A similar crew was elected to the house, including Frank Antenori. “I despise expansion of government into people’s lives,” he said on the campaign trail. “K–12 is meant to prepare kids to enter the world. . . . We need to spend less time teaching how to put condoms on cucumbers and more time on balancing a checkbook.”

In 2010, the same paradoxical process seems to be at work: despite the disastrous policies of the right in Arizona, the state’s Republicans are threatening to move rightward still. This slide was clearly visible at the February campaign kickoff for J. D. Hayworth, who is hoping to beat Senator John McCain in the August G.O.P. primary. A former sports anchor and radio talk- show host, Hayworth served in Congress from 1995 to 2007, where he was best known for his cornball jokes—from the House floor he cracked that Democrats should “hire Freddy Krueger as the new liberal Democratic spokesman” and “set up a new political-action committee, the ‘Whine Producers.’ ” He also was embroiled in the scandal around the lobbyist Jack Abramoff: in 1997, Hayworth helped stop a proposal to tax Indian casinos and five years later helped prevent a change in the law that would have capped campaign contributions by Indian tribes. Between 1998 and 2005, Hayworth received $150,000 from Indian tribes and other groups connected to Abramoff.

Conservatives have always been suspicious of McCain’s support for campaign-finance reform and his opposition (before he flip-flopped on the presidential campaign trail) to torture and to George W. Bush’s tax cuts. But what truly sank McCain’s standing in Arizona was his long-standing support for comprehensive immigration reform, a position he has now desperately abandoned as well—he came out in support of the state immigration bill during an interview with Bill O’Reilly, saying that “illegals . . . are intentionally causing accidents on the freeway”—though this switch has been of no avail in placating the Arizona right.

At Hayworth’s campaign kickoff, held in front of his new campaign headquarters in a Phoenix strip mall, a series of local conservatives stood beneath a banner proclaiming Hayworth the “Consistent Conservative,” thrilling the crowd with stories of Hayworth’s devotion to conservative causes and McCain’s betrayal of same. One of the most warmly received speakers was right-wing Senator Ron Gould. A big guy with a flattop haircut and a shit-kicker’s mustache, Gould prefaced his endorsement of Hayworth by calling himself “probably the most conservative legislator in the state,” and he closed with the words, “God bless America and may America bless God.” The crowd, mostly white retirees, picked up doughnut holes and coffee from a table draped with a yellow banner that featured a coiled rattlesnake and the words DON’T TREAD ON ME. (That design dates to the Continental Congress in 1775 and has been widely adapted by Tea Party activists.) Vendors sold green buttons supporting the Tea Party; red buttons bearing the slogan PROUD MEMBER OF THE ANGRY MOB; and pink buttons that said, simply, SARAHCUDA. From speakers blared a soundtrack that included “Hound Dog,” “Wake Up Little Susie,” and the theme from Hawaii Five-O.

“Sheriff Joe is here!” a woman next to me exclaimed. She was referring to longtime Maricopa County Sheriff Joe Arpaio, known for housing prisoners in tents and making them wear pink underwear, and for having his officers raid Latino neighborhoods to round up suspected illegal immigrants. Wearing a dark jacket, maroon shirt, and a tie pin shaped like a gold pistol, Arpaio took the stage to declare that McCain had been in Washington too long. “We have to give McCain a map to help him find his way back to Arizona,” he said to a big cheer.

“Give him a map to Mexico,” someone shouted from the audience.

Now Hayworth took the microphone, and scanned the crowd. He was taller and tanner than anyone else on stage. “Like Ronald Reagan, I believe that government is not the solution to our problems, but too often it is part of the problem,” he said.

“If they do anything more for the poor I’m gonna be one of them,” yelled a well-dressed man from the audience.

Backed into an ideological corner on taxes, Arizona continues to cut indiscriminately. The three state universities have scrapped whole degree programs and may soon have to shutter entire campuses. Funding for GED programs and adult-education courses has been reduced to zero. Arizona has furloughed more than 15,000 state employees and has closed thirteen of eighteen highway rest stops. (This latter move provoked an outcry, especially among truckers; state authorities responded by asking roadside businesses to allow motorists to use bathrooms free of charge.) The budget for the Department of Water Resources—an important agency in the desert—has been cut from $23 million to $7 million during the past two years. “Demand for water exceeds supply, and we share what there is with six states,” Herb Guenther, the agency’s director, told me. “We have to protect what we have collectively while looking for new supplies, but everyone is fighting for resources. There’s a cliff coming, and we haven’t figured out how to fly. ‘No government’ is not the answer when it comes to water.”

Lawmakers have siphoned off state funds allocated for specific purposes, pouring the money into the state’s general fund. The legislature seized $160,000 in voluntary contributions and mandatory fees from the agriculture industry that were supposed to be used for research and marketing. It swiped another $7 million from the Arizona Early Childhood Development and Health Board, whose revenue comes from a voter-approved tobacco tax. (Arizona’s supreme court ruled that the legislature had acted illegally and forced the return of the tobacco money; the state may eventually be ordered to give back tens of millions of dollars more from other “sweeps.”)

In addition to selling the state capitol, the legislature has examined auctioning off dozens of other properties—among them the house and senate buildings, the offices of the secretary of state and the treasurer, and most of the state’s prisons, including maximum-security units and death row. One of the major proponents of privatization is Representative John Kavanagh, an amiable oddball originally from Queens and a former Port Authority Police Department detective. “We haven’t cut taxes that much,” he told me during an interview at his legislative office, which is decorated with a variety of G.O.P.-related knickknacks, including a large pink plush elephant on a bookshelf. “Here’s the problem: we grew government during good times far beyond responsible levels, and instead of cutting, we’ve been relying on tricks and massive borrowing to sustain it. Now we’ve reached the end of the line. It’s going to require major cuts; you’re talking about government super-light.”

Kavanagh blithely opined that the benefits of all-day kindergarten “dissipate by third grade for all but poverty level” and that the state should offer Medicaid only to people at one-third of poverty-level income—which works out to less than $7,500 for a family of four—as opposed to the current practice of offering it to everyone at poverty level and below. “We can’t afford to be that generous anymore,” he said.

Despite passage of the sales tax in May, no one believes that Arizona’s financial crisis is over. But the state’s electoral system, which rewards extreme right-wing rhetoric, has allowed the political class to be as irresponsible and reckless as it likes. State residents seem content to cheer on the legislature for lowering their taxes—even as massive budget cuts pack their children into classrooms with more and more students, or force them to stand in line for a day to renew driver’s licenses at the gutted Department of Motor Vehicles. Arizonans will complain about their legislature—one recent poll showed that just 15 percent thought state lawmakers’ performance was “good”—but keep sending ever more radical Republicans to office. It is much like the Tea Party nationwide, which will, quite sensibly, demand political reform and protest the bank bailout, even as it backs hacks like Hayworth who represent the most corrupt wing of the G.O.P.

Russell Pearce, basking in the triumph of his immigration-law victory, is hoping to become senate leader, and he likely will win that post. Representative Antenori—who distinguished himself in the house by opposing federal light-bulb efficiency standards (which he dismissed as “touchy-feely legislation”) and by proposing that welfare recipients be required to sign an affidavit swearing they do not smoke, drink, use drugs, or have more than basic cable—was recently appointed to a vacant senate seat. And as for Senator Sylvia Allen, the senator who once complained that trees were “stealing Arizona’s water supply,” she stands for reelection this year and, by all accounts, is almost certain to prevail.