The House Republican Victory

A lot of liberal bloggers are posting this graph as a retort to claims that Obama is a big spender:

http://research.stlouisfed.org/fredgraph.png?g=eSY

Fair enough. But I think one thing that is under appreciated is how successful House republicans were at getting the government to cut spending.

They came in on the platform of reducing spending. They threatened to not raise the debt ceiling unless an agreement was made to cut spending. Spending was cut. Success!

The problem is they can't really celebrate their victory without admitting that spending is no longer out of control. So everyone just kind of pretends gridlock prevented anything from happening last congress, but something did happen! Spending was drastically curtailed!

House agrees to extend debt ceiling

Last Friday, the House leadership convinced their caucus to raise to the debt ceiling for three months. In order to do this, the house will require a budget resolution from the Democrat-controlled Senate.

Obviously a three month fix is less than ideal, but I think this is a HUGE step in the right direction. Previously, Boehner was claiming that all raises to the debt ceiling would have to be matched by 1:1 spending cuts. This was a toxic rule that lead to the U.S. narrowly avoiding defaulting on its debt, and put in motion a series of high-stakes budgetary showdowns.

The new plan returns the debt ceiling to its rightful use--attempting to embarrass the other party and score political points. Hopefully in a few cycles Congress will fully return to its 2010 equilibrium--doing nothing to help the economy. This would be a huge improvement over the 2011-12 dynamic of setting up fake crises that actively harm the economy and delay the recovery. 

Foreign Policy Accountability

Conor Friedersdorf has a good post about mission creep and Mali. But one section struck me as off:

I don't know what's going to happen in Mali. But I know that the Libya intervention can't be fully evaluated until we find out (and until we see what else happens in Libya itself in coming years). I also know that America's role in Mali is more likely to reflect the will of the people if Congress determines it. Sadly, the legislature isn't yet willing to assert its Constitutional prerogatives, and the political press doesn't see fit to cover the news as if they have an important role. (emphasis mine)

If Congress had to sign off on military action/assistance, its likely that the U.S. would involve itself in fewer wars. I suspect that Conor would prefer this (as would I). However, I don't think this would make America's foreign policy more closely reflect the will  of the people. I also don't think that it would make government officials more accountable.

Congressional approval almost always requires some form of antidemocratic supermajority support. This is good if your goal is to slow legislative action and require greater consensus. Its bad if you want government action to reflect the will of the people. 

Similarly, vesting war-making powers in a single executive produces greater accountability. Despite the general unpopularity of the Iraq War, Congressional supporters of the war--Kerry, Hilary Clinton, Hagel--are still given the chance to serve in important positions of authority in the foreign policy arena. Its hard to imagine George W. Bush being given a similar opportunity. Presidents are the ones who receive the majority of the national security briefings, who oversee the execution of the war, and who ultimately will end up taking the blame when the war goes badly. 

Likewise, Presidents can actually be expected to carry out their foreign policy pronouncements. Candidates can talk all they want about repealing Obamacare or reforming the tax code, but the Madisonian system means that their rhetoric won't end up matching policy outcomes. This is not the same for foreign policy--to the extent that Obama strayed in his first term from his foreign policy declarations, he can, and should, be held accountable. Its much harder to blame him for not providing more stimulus or failing to introduce a carbon tax/cap-and-tade, as he had far less control over these outcomes.

The GOP's Immigration Problem

The New York Times published a piece this morning on immigration reform. Essentially, Obama and the Democrats are pushing for a broad immigration reform bill, while GOP senators--including Marco Rubio--are working to break up the bill into a series of smaller measures:

Mr. Obama and Senate Democrats will propose the changes in one comprehensive bill, the officials said, resisting efforts by some Republicans to break the overhaul into smaller pieces — separately addressing young illegal immigrants, migrant farmworkers or highly skilled foreigners — which might be easier for reluctant members of their party to accept. 

I'm skeptical of the argument that all the GOP needs to do is moderate its stance on immigration to win over the hispanic vote. I think the economic policies of the Democrats are clearly more attractive to Hispanic voters. In addition, even though Hispanics are more pro-life than the average American, I don't think the GOP's version of cultural conservatism squares well with most Hispanics.

But what makes the plan to use immigration reform to woo the Hispanic vote so dumb, is that the Democrats are going to endorse polices that are more liberal on immigration than the GOP.  In any negotiation the Democrats will be pushing for comprehensive reform that grants more visas and a more clear and easy path to citizenship. The GOP will try to moderate its tone but will be working to undermine the complete overhaul of the system by replacing it with smaller measures and making things contingent on "border security". It will also face vocal and ugly opposition from more conservative house members and constituents--further alienating Hispanic voters. A clear political loser.

Anti-Semitism and the Israel Lobby

Ali Gahrib and James Kirchick discussed the Chuck Hagel nomination on bloggingheads last night. It was generally a good conversation and I recommend it. However, as tends to happen with these types of conversations, the "Anti-Semitism and the Israel Lobby" argument arose. This argument involves one side attributing foreign policy or domestic political outcomes to the actions of a pro-Israel Lobby, while the other side responds with vague non-accusations along the lines of "i'm not calling you an anti-semite but . . ." and then proceeds to argue that the pro-Israel lobby is treated differently from other lobbying groups and is discussed in terms that are arguably anti-semitic. Eli Lake and Robert Wright had the same argument a few months ago.

Anti-semitism has historically involved the charge that a small group of elite Jews use money to disproportionately influence global events in the service of a narrow interest. The accusation is almost always one that is vague and conspiratorial--involving references to an unspecified pressure and influence.

It strikes me that it is more or less impossible to discuss how lobbying works in American politics, without accidentally tripping over an anti-Semitic dog-whistle. This is because lobbying is a partially veiled activity that involves a small group of individuals coordinating and using pressure to influence policy outcomes.

I don't have a good solution for this problem. Racial and anti-semetic dog-whistles aren't acceptable and should be called for what they are. But in this particular area it is hard to imagine someone discussing the influence on the U.S. government--of those who explicitly try to influence the U.S. government--without inadvertently leaving themselves exposed to the charge of anti-semitism. This is why you get the type of discussions I posted above, where both sides know that neither is anti-semite, yet the conversation returns to anti-semitism.

The Trillion Dollar Coin Option

The idea of using a legal loophole to mint a trillion dollar platinum coin and avoid the debt ceiling, is gaining some steam in the form of a petition to the president. The basic concept is that the treasury orders the minting of a trillion dollar platinum coin, which they are arguably allowed to do under a reading of 31 USC sec. 5112 (k):

The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time

This is kind of crazy legally and politically. But if the U.S. government minted the coin, deposited it with the federal reserve, was credited by the Fed with a trillion dollars, and said they would ensure that they would buy the coin back in 10 years and then destroy the coin (or put it on display), it would really be no different economically from borrowing in their own fiat currency.

The loophole here is a legal one, not an economic one.

How Centrists Lose

It's still unclear who the winner of the recent Fiscal Cliff deal is, but Pete Peterson, David Brooks, Alan Simpson, Erskine Bowles, and the whole austerity crowd are the clear losers.

After years of spending money, writing op-eds, and coming up with debt-reduction frameworks, this crowd came away with literally nothing. The tax deal amounts to a permanent extension of the Bush tax cuts for almost everyone, and spending wasn't even addressed.

What is incredible about this is if Congress hadn't acted at all, taxes would have automatically gone up and spending would have been cut. For the austerity crowd the entire scenario seemed like a slam dunk. What went wrong?

First, The austerity crowd has a fetish for bipartisanship. Their mantra is that each side needs to come together for a bipartisan deal, and they steadfastly blame both sides equally for the failure to do so. This creates really poor incentives for political actors to make deals. A political actor who comes out in favor of the sort of "tough" measure that these groups support will be hurt politically for proposing an unpopular measure, while still sharing half the blame when the deal inevitably falls through. A good example of this sequence: Obama puts chained-CPI on the table, Marco Rubio disavows it, chained-CPI gets dropped from final deal, David Brooks lays blame equally on both parties for lack of entitlement reform. This leaves lawmakers with no real incentive to make a good faith push for deficit reduction and instead you just get each side blaming the other for not endorsing Bowles-Simpson.

Second, each of the two political parties has certain goals. Deficit reduction is secondary to those goals. The Democrats want a secure welfare state for poorer and older Americans. In order to secure those programs in the long term they are willing to raise taxes. Likewise, Republicans want low taxes, and in order to get low taxes they are willing to cut spending. The idea of a deal where major programs are cut in exchange for higher taxes is perverse to both parties.

So what should they do? The austerity crowd needs to pick a side and lobby that side to their position. I would recommend the Democrats because Republicans are too ideologically rigid a party. Pete Peterson needs to commit to supporting Democrats in primaries and in general elections who are genuinely in favor of deficit reduction--some sort of Grover Norquist style pledge could be used.

Because of their foolish commitment to bipartisanship, the austerians have no one to champion their cause.