As speculation builds about his campaign for governor, Rudy Giuliani tells The Daily Beast’s John Avlon—who served as his chief speechwriter on his presidential campaign—how he’d tame the nation’s most dysfunctional legislature. Can America’s Mayor become New York’s governor? Avlon is the author of Wingnuts: How the Lunatic Fringe Is Hijacking America.

In Albany, the inmates are running the asylum. The state senate is entering its fourth week of partisan lockdown, cementing its reputation as the most dysfunctional legislature in the nation. Mayor Bloomberg’s successful school-reform program could expire midweek if no action is taken. A recent poll showed that 20% of New Yorkers want to leave the state amid rising taxes, poverty and unemployment rates, and parallels to the bad old days of the 1970s. At least one guy’s not buying it: “Once you say something’s ungovernable,” Rudy Giuliani told me, “You remove accountability.”

“Once you say something’s ungovernable,” Giuliani told me, “You remove accountability.”

Rudy’s back, doing what he does best: proposing how to clean up the mess. He’s hitting the airways and pumping out op-eds in The New York Times. With regard to New York State, Giuliani is calling for a state constitutional convention centered on systemic fixes such as gubernatorial budget authority, term limits, campaign-finance reform and redistricting reform. “The state needs to be fundamentally modernized,” Rudy says. “Many of these suggestions have enjoyed bipartisan support in the past. What’s been missing is action.” He wants to begin a larger debate: “If you have a better way of reforming state government, then come up with it. Just don't sit back and say ‘I can't do anything about it.’” His efforts are being met with speculation that he’ll run for governor in 2010.

New Yorkers know Rudy Giuliani does best in a crisis. I’ve seen that up close, working with him in City Hall. And the Empire State is wrestling with two huge problems with long-term ramifications.

First, the mess in Albany, where corruption and scandal have left only one out of four statewide elected Albany officials where the voters put them less than three years ago. The serial dysfunction has hit tragicomic proportions in recent weeks, with party defections and parliamentary games like one party turning out the lights while the other locks the legislative door and hides the key. Literally.

Second, the state economy is a mess: New York has lost 1.5 million people this decade and 195,000 private-sector jobs in the past year. The number of upstate manufacturing jobs has declined by 24% and the only sector growing north of the Hudson River Valley is the government. In the face of the worst economic crisis in a generation, the Democratic-controlled legislature raised taxes by $8 billion and spending by an unprecedented 9 percent.

Some people see parallels to the shape of New York state today and the shape of New York City when Rudy ran for mayor. Back in 1993, crime rates were near historic highs, one out of every seven New Yorkers was on Welfare and the city had lost 330,000 jobs in the previous four years. Fifty-nine percent of New Yorkers said they’d leave the city if they could and legendary Democratic Senator Patrick Moynihan declared that we were “defining deviancy down.” Rudy rejected the idea of inevitable decline, and crime, welfare rolls and unemployment rates all dropped by half. He was not perfect and did not pretend to be. His actions were too aggressive for some. But nobody asks if New York City is ungovernable anymore.

When I asked Rudy whether he’s decided to run for governor, he said he hasn’t decided. I know him: Believe it. But polls in New York show an interesting opportunity. The Marist poll’s hypothetical head-to-head matchups show Rudy defeating Governor Paterson by 56% to 32%, while trailing Attorney General (and son of Mario) Andrew Cuomo. What’s most revealing is a look at the cross-tabs showing Rudy winning the support of 38% of Democrats, 54% of moderates, and 56% of independents, as well as 58% of voters who make less than $50,000 a year. Republicans realize that he might be their last shot in a state that is down to two GOP congressmen from 13 a decade ago. “Rudy Giuliani has proven time and again that he commands the leadership skills to bring order and prosperity out of chaos and dysfunction,” says Michael McCormack, GOP chairman in FDR country, Dutchess County.

Whether he leads a state constitutional convention or runs to lead the Albany statehouse itself, a Rudy resurgence has the potential to be bigger than just turning the tide in New York. A cleanup there could show the national Republican Party a path out of the wilderness, with a focus on fiscal responsibility, effective governance, political reform, and economic growth—a big-tent prescription based on the principles that Republicans used to stand for.

John P. Avlon is the author of Independent Nation: How Centrists Can Change American Politics. He writes a weekly column for The Daily Beast and is a senior fellow at the Manhattan Institute. Previously, he served as Chief Speechwriter for New York City Mayor Rudy Giuliani and was a columnist and associate editor for The New York Sun.