Some commentators have raised concerns that if the SCOTUS issues a broad decision recognizing the right to same-sex marriage, it will provoke a cultural backlash against same-sex marriage and gay rights generally. Theses commentators usually cite the backlash against Roe, which has lead to decades of fights over abortion.
The problem with this comparison is that even though same-sex marriage and abortion are both "cultural issues", they are very different. The fight over abortion is largely about conflicting rights and priorities: the rights of the fetus vs. the right of a women to have autonomy over her own body. Pro-lifers prioritize the rights of the fetus, whereas pro-choicers prioritize the right of the women.
Same-sex marriage isn't really like that. Opponents of same-sex marriage usually base their opposition in history and tradition. The common complaint is that same-sex marriage will change a centuries old institution. The problem with this argument, is that once same-sex marriage becomes legal, it becomes a lot less compelling. The traditional definition of marriage will start to fade away and society will begin to perceive marriage as just a union between any two people, regardless of sex.
When conservatives talk about "traditional marriage", they usually don't actually mean traditional marriage--which was for life. What they mean is "the marriage that I grew up with". In the future, a larger portion of citizens will have grown up with the definition of marriage including same-sex marriage and so, because there is no compelling moral argument against it, any backlash against legalized same-sex marriage will fade over time.
Now, progress isn't a forward march, and backlashes do happen. But same-sex marriage is very different from abortion in this regard, so we shouldn't expect one.
Friday, 29 March 2013
Wednesday, 27 March 2013
The Banker's New Clothes
I am a big fan of the new book The Bankers New Clothes by Anat Admati and Martin Hellwig. Their basic argument is that large financial institutions in the United States are able to borrow at artificially low interest rates because their creditors expect to be bailed out by the government if anything goes wrong. As a result, banks disproportionately fund themselves through debt rather than equity. This creates a banking system that is excessively leveraged and fragile. In order to resolve this problem, Congress should require financial institutions that are "too big to fail" to get 20-30% of their funding from equity (many banks are currently at 3%).
There is a lot of good discussion about this book on the blogosphere, but I wanted to respond to one argument made by Raghuram Rajan:
If anything, having to roll over debt on a regular basis skews bank managers towards investing in assets that have a liquid market and can be unloaded easily. This causes them to avoid acquiring illiquid assets, like long-term loans and investments, even if they would be more profitable for shareholders, safer and better for the bank in the long run.
Finally, at a certain level its just hard to really imagine that all of these bank managers would be opposing higher capital requirements, if the effect of these requirements was that they would be able to take far more risk. It seems more likely they would be forced to run safer, less profitable banks, because losses would accrue to shareholders, rather than the public.
There is a lot of good discussion about this book on the blogosphere, but I wanted to respond to one argument made by Raghuram Rajan:
The critics’ arguments about the benefits of equity are equally unsatisfying. Of course, given a set of bank assets, more equity would reduce the risk of failure. But failure is not always a bad thing; a banker operating an all-equity bank, with no need ever to repay investors, would be likelier to take unwarranted risk. The need to repay or roll over debt imposes discipline, giving the banker a stronger incentive to manage risk carefully.The problem with this argument is that it doesn't explain why banks are different in this regard than other large corporations. Apple doesn't have any debt, yet presumably the managers of Apple still have incentives (reputational, they could be fired, etc.) to appropriately manage risk and create profit for their shareholders. This is how it is for a lot of companies in America, most of whom don't need to roll over a large amount of short term debt on a regular basis.
If anything, having to roll over debt on a regular basis skews bank managers towards investing in assets that have a liquid market and can be unloaded easily. This causes them to avoid acquiring illiquid assets, like long-term loans and investments, even if they would be more profitable for shareholders, safer and better for the bank in the long run.
Finally, at a certain level its just hard to really imagine that all of these bank managers would be opposing higher capital requirements, if the effect of these requirements was that they would be able to take far more risk. It seems more likely they would be forced to run safer, less profitable banks, because losses would accrue to shareholders, rather than the public.
Monday, 25 March 2013
Hard Money for the sake of it
Conrad Black has a confusing article that is allegedly about the economics of bubbles. In the piece he unwittingly undermines his own hard money ideas:
An examination of the writing of a British 18th Century author such as Dr. Johnson, and a writer from 100 years later, such as Charles Dickens, reveals that there was no increase in that time in the cost of a loaf of bread or the rental of a simple but respectable residential room in London. There were soaring economic bubbles and bone-cracking depressions, and prices followed supply and demand, but the essential currency value was constant. Unfortunately, that would changeIts nice that if a young British chap was strolling down Fleet Street in the 18th century with a few pence in his pocket and looking for a bite to eat and he accidentally walked into a time machine sending him forward 100 years he would still be able to afford the same items. But its hard to imagine that level of price stability is really worth the "bone-cracking depressions". Certainly a more sane public policy would aim to utilize control over the money supply to alleviate those depressions. Also, here are a list the countries he believes to be "hard currency" ones:
The remaining hard-currency countries are limited to Canada, Australia, Singapore, the bloc of German and Baltic countries, the Dutch, Poles and Czechs.I don't even really know how to go about evaluating that statement.
National Review's Mark Steyn is a horrible liar
Syndicated columnist, warmonger, and racist Mark Steyn has a new column defending his Iraq war support. He tries to claim some sort of bizarre vindication by selectively evaluating a series of predictions he made in 2003:
In 2007, 85% of Basra residents believed that British troops had a negative on the province. Even though Basra is more stable now than during the 2004-07 period, terrorist bombings continue. But sure, "close enough".
In a smart decision, he chooses to ignore some of his predictions that were so clearly wrong he couldn't salvage them through selective quoting and intellectual dishonesty:
What of the rest of the country? Iraq, I suggested, would wind up “at a bare minimum, the least badly governed state in the Arab world, and, at best, pleasant, civilized and thriving.” I’ll stand by my worst-case scenario there.Leaving aside his decision to stand by his worst-case scenario, its worth looking at how Steyn actually phrased this prediction when he originally made it in April 2003:
In a year's time, Iraq will be, at a bare minimum, the least badly governed state in the Arab world and, at best, pleasant, civilised and thriving. In short: not a bad three weeks' work. (emphasis mine)I'm going to suggest that he actually got this completely wrong. Lets see what else:
Overcompensating somewhat for all the doom-mongering, I wrote in Britain’s Daily Telegraph that “a year from now Basra will have a lower crime rate than most London boroughs.” Close enough. Major General Andy Salmon, the British commander in southern Iraq, eventually declared of Basra that “on a per capita basis, if you look at the violence statistics, it is less dangerous than Manchester.”"Eventually" is the crucial word here. General Salmon would make this statement in 2009, so Steyn was only 5 years off. In actuality, one year after Steyn's prediction a series of terrorist bombings took place in Basra killing over 65 people. This would kickstart a wave of violence in the region lasting until 2008. Here is how a report by the neo-conservative Institute for the Study of War described the situation from 2004-2006:
By late 2004, violence in Basra was steadily increasing. In the wake of the uprising by Sadr’s Jaysh al-Mahdi militia in Najaf and Karbala earlier that year, many of the fighters moved to Basra. The influx of Jaysh al-Mahdi militiamen fueled the increase in violence, as the fight between the Shi’a factions for control of the city’s lucrative resources intensified, particularly during the period surrounding the January 2005 elections. The Sadrist Trend, ISCI, and Fadhila all vied for control of the oil infrastructure and smuggling network; the security forces; and the provision of public services and state resources.Targeted assassinations, kidnapping, sectarian violence, gunfights, and widespread criminality accompanied this struggle, which persisted throughout 2005 and 2006.
In a smart decision, he chooses to ignore some of his predictions that were so clearly wrong he couldn't salvage them through selective quoting and intellectual dishonesty:
"Weapons of Mass Destruction. Remember them? Not a single one has yet been found" (Bill Neely, ITV, April 10). MBITRW: Actually, I almost wish this one were true. Anything that turns up now will be assumed to have been planted. If I were Washington, I'd consider burying anything I found. After all, an America that feels no need to bother faking justifications for invasion would be far more alarming to most Europeans. Instead, horrible things will turn up, but will never be "conclusive" enough for the French, who've got all the receipts anyway.Nope.
Thursday, 21 March 2013
Do We Need More High Skilled Workers?
When we discuss expanding H1-B visas for high-skilled workers, we are usually envisioning individuals employed in various high-tech industries. Probably because, as Suzy Khimm writes, lots of CEOs of tech companies complain about the lack of high-skilled workers. Also, a lot of centrist TED-talky types like to discuss this problem and will often use it as jumping off point for arguments about the necessity of promoting STEM studies and engaging in broader education reform.
This is all well and good. But if we are going to to take a targeted immigration approach, we should really take a look at industries with high unit-labor costs, the obvious example being the health care industry. Now we don't usually get a lot of complaints from healthcare industry representatives about the need to bring in more doctors, but as Yglesias notes in this piece, doctors get paid a lot more in the United States than they do in other Western countries despite not providing superior care. Most of our future fiscal problems relate to healthcare costs, so bringing in more doctors should be a no-brainer.
I am in favor of immigration reform that is more liberalized generally and brings in workers of all types. But if we are taking the targeted approach, we ought to look for professions where there is a large unit-labor cost differential between the U.S. and other Western countries and exploit that arbitrage opportunity through immigration reform.
This is all well and good. But if we are going to to take a targeted immigration approach, we should really take a look at industries with high unit-labor costs, the obvious example being the health care industry. Now we don't usually get a lot of complaints from healthcare industry representatives about the need to bring in more doctors, but as Yglesias notes in this piece, doctors get paid a lot more in the United States than they do in other Western countries despite not providing superior care. Most of our future fiscal problems relate to healthcare costs, so bringing in more doctors should be a no-brainer.
I am in favor of immigration reform that is more liberalized generally and brings in workers of all types. But if we are taking the targeted approach, we ought to look for professions where there is a large unit-labor cost differential between the U.S. and other Western countries and exploit that arbitrage opportunity through immigration reform.
A Simple Explanation of the Eurozone Crisis
One of the main purposes of government rules and regulations is to establish who in society takes a loss when things go wrong. Tort rules determine who pays for the damages, contract rules establish who pays after a contract is breached, and Bankruptcy rules establish who gets paid and who ends up holding the bag once a company goes south.
An acceptable rule will have a procedure in place enabling someone to determine who will take the loss. A good rule will make it clear ahead of time who will take the loss. An even better rule will assign the loss to a party who can sufficiently bear the risk of loss. A great rule will also assign the loss to the party who is in the better position to prevent the precipitating event that creates the loss. The best rule will do the above and also be perceived as generating an equitable and acceptable resolution by those governed by the rule.
With the exception of Lehman Brothers, the 2008 financial crisis made clear that in the United States the tax payers would bear the loss generated by a failure of one of the major financial institutions. The tax payers were able to sufficiently bear the risk of loss, but were not in a great position to prevent the precipitating event that created the loss. As a result, we were able to resolve the banking crisis, but our system was clearly tainted by moral hazard. Dodd-Frank was meant to deal with that moral hazard but it probably doesn't.
Europe's crisis has lasted a lot longer because they have no rule to establish who takes the loss. Beyond that, they don't even have a political process that can adequately assign the loss on an ad hoc basis. This is why the Eurozone, with a GDP of 9.5 trillion, is being held up by the fact that they can't find the extra 7 billion to bail out Cyprus' banks. None of the parties involved (the German tax payers, The Cypriot depositors, the Russian depositors) are willing to take the loss, and their is no clear way to determine who should take the loss.
Europe's economy isn't perfect. But it's current problems aren't economic, they reflect political institutions unable to effectively assign loss.
An acceptable rule will have a procedure in place enabling someone to determine who will take the loss. A good rule will make it clear ahead of time who will take the loss. An even better rule will assign the loss to a party who can sufficiently bear the risk of loss. A great rule will also assign the loss to the party who is in the better position to prevent the precipitating event that creates the loss. The best rule will do the above and also be perceived as generating an equitable and acceptable resolution by those governed by the rule.
With the exception of Lehman Brothers, the 2008 financial crisis made clear that in the United States the tax payers would bear the loss generated by a failure of one of the major financial institutions. The tax payers were able to sufficiently bear the risk of loss, but were not in a great position to prevent the precipitating event that created the loss. As a result, we were able to resolve the banking crisis, but our system was clearly tainted by moral hazard. Dodd-Frank was meant to deal with that moral hazard but it probably doesn't.
Europe's crisis has lasted a lot longer because they have no rule to establish who takes the loss. Beyond that, they don't even have a political process that can adequately assign the loss on an ad hoc basis. This is why the Eurozone, with a GDP of 9.5 trillion, is being held up by the fact that they can't find the extra 7 billion to bail out Cyprus' banks. None of the parties involved (the German tax payers, The Cypriot depositors, the Russian depositors) are willing to take the loss, and their is no clear way to determine who should take the loss.
Europe's economy isn't perfect. But it's current problems aren't economic, they reflect political institutions unable to effectively assign loss.
Tuesday, 19 March 2013
In Support of Commentary
Pew Research has a new study entitled the State of the News Media 2013. Everyone is excited about this:
But devoting air-time to reporters and to "straight reporting" isn't necessarily that desirable. First, it obviously depends on what you are reporting on, a frivolous story is not worth reporting on. But more importantly, broadcasting a reporter live from an event is a pretty big waste of time and money. When a reporter is on camera they are by definition not trying to find out new things to report. Similarly, the money spent flying out camera crews and equipment would be more usefully spent on additional reporters in the field. These reporters could spend the time figuring out what is going on, and then call the station with the news, which the host could then relay to the audience at home. Spending airtime putting the actual reporter on camera is usually not necessary to supply the news.
Now sometimes a picture is worth a thousand words and getting footage from an important event can help give viewers substance. But we live in an era where the best footage is almost always captured by cell phones and put directly on the internet. Networks frequently use this footage anyway, so spending money capturing live footage is not always the best choice.
At the same time, commentary can be really valuable. It was great seeing news footage of Tahrir Square during the protests, but the time spent interviewing experts on Egypt was probably better, as it helped viewers put the events in their proper context. Commentary is also a more engaging way to present the news. When commentators are providing their opinion on an event, the viewer is almost always given the details of the event itself. This is done so they can follow along. Good commentary gives a fullness to the event being covered, and does so in a way that viewers usually find more entertaining than just straight news.
Commentary can be bad too, it can distort the events. But that is a problem with a particular commentator, not commentary in general.
Its not clear what the correct ratio is, and I think we should be concerned about the economic dynamics that lead to their being less reporters in general. But commentary isn't a bad thing.
Opinion filled 85 percent of the content on MSNBC, according to the Pew Research Center’s 2013 State of the News Media report. On Fox News, commentary made up 55 percent of its coverage, while CNN was the only of the big three cable news channels to produce more straight reporting than opinion.Having fewer journalists out in the field reporting news is a bad thing. Without reporters, our sense of what is going on in the world would probably be a lot fuzzier. And since reporting is more expensive than commentary, we should concerned that a lot of news outlets will provide too little reporting.
...
Overall, the cable news landscape has undergone a major shift as “daytime programming now resembles primetime, with interviews and opinion replacing coverage of live events and breaking news,” the report stated. Interview segments are up 31 percent from 2007 to 2012, while live event coverage dropped 30 percent.
But devoting air-time to reporters and to "straight reporting" isn't necessarily that desirable. First, it obviously depends on what you are reporting on, a frivolous story is not worth reporting on. But more importantly, broadcasting a reporter live from an event is a pretty big waste of time and money. When a reporter is on camera they are by definition not trying to find out new things to report. Similarly, the money spent flying out camera crews and equipment would be more usefully spent on additional reporters in the field. These reporters could spend the time figuring out what is going on, and then call the station with the news, which the host could then relay to the audience at home. Spending airtime putting the actual reporter on camera is usually not necessary to supply the news.
Now sometimes a picture is worth a thousand words and getting footage from an important event can help give viewers substance. But we live in an era where the best footage is almost always captured by cell phones and put directly on the internet. Networks frequently use this footage anyway, so spending money capturing live footage is not always the best choice.
At the same time, commentary can be really valuable. It was great seeing news footage of Tahrir Square during the protests, but the time spent interviewing experts on Egypt was probably better, as it helped viewers put the events in their proper context. Commentary is also a more engaging way to present the news. When commentators are providing their opinion on an event, the viewer is almost always given the details of the event itself. This is done so they can follow along. Good commentary gives a fullness to the event being covered, and does so in a way that viewers usually find more entertaining than just straight news.
Commentary can be bad too, it can distort the events. But that is a problem with a particular commentator, not commentary in general.
Its not clear what the correct ratio is, and I think we should be concerned about the economic dynamics that lead to their being less reporters in general. But commentary isn't a bad thing.
Monday, 18 March 2013
Max Boot's Bizarre Rewrite
This is from Max Boot's Commentary piece on the 10th anniversary of the Iraq war:
Also this, from 2003:I should make clear that, unlike some supporters of the war effort, I would not have backed the invasion if I had known what we now know—that Saddam Hussein did not have weapons of mass destruction. There were, to be sure, secondary reasons to act, in particular the desire to implant a democracy in the middle of the Middle East. But, while I am a firm believer in democracy promotion, I don’t believe that its spread justifies exposing our soldiers to danger unless there is an overriding threat to our own security.Here is Max Boot in December 2002:
Many conservatives think, however, that "realism" presents far too crabbed a view of American power and responsibility. They suggest that we need to promote our values, for the simple reason that liberal democracies rarely fight one another, sponsor terrorism, or use weapons of mass destruction. If we are to avoid another 9/11, they argue, we need to liberalize the Middle East— a massive undertaking, to be sure, but better than the unspeakable alternative. And if this requires occupying Iraq for an extended period, so be it; we did it with Germany, Japan and Italy, and we can do it again.
The most prominent champions of this view inside the administration are Vice President Dick Cheney and Deputy Defense Secretary Paul Wolfowitz. Their agenda is known as "neoconservatism," though a more accurate term might be "hard Wilsonianism." Advocates of this view embrace Woodrow Wilson's championing of American ideals but reject his reliance on international organizations and treaties to accomplish our objectives. ("Soft Wilsonians," a k a liberals, place their reliance, in Charles Krauthammer's trenchant phrase, on paper, not power.) Like Theodore Roosevelt, Franklin Roosevelt and Ronald Reagan, "hard Wilsonians" want to use American might to promote American ideals.
This is, in case you haven't guessed, my own view too.Here is more from 2002:
Iraq is next on the democratization list. Once U.S. troops invade and occupy Iraq, they will have no choice but to create a liberal national government. It's simply impossible to imagine U.S. forces handing power to some general — a mini-Saddam — and washing our hands of the place, as a few people in Washington still advocate. That's not the American way. We come as liberators spreading freedom. Which is not to say that Iraq can easily be made into a perfect democracy, or even a Turkish-style democracy, but that's what we will have to shoot for.
It does not matter whether there is a direct connection between Hussein and al-Qaida (although Powell laid out much circumstantial evidence to suggest that there is). What matters is that a failure to depose Hussein now will be perceived by the al-Qaidas of the world as a green light for further terrorism. Ousting him will, at the very least, make the enemies of civilization think twice before striking again.
The Republicans and Gay Marriage
This is a problem for the Republican Party:
So basically, Republicans hold a policy preference that differs pretty wildly from the majority of Americans. In a pure democracy they would just lose elections, gay marriage would become legal, and we would all move on to other issues. Luckily for conservatives, the United States has enough anti-democratic institutional checks that, despite losing elections, they can still prevent the federal government from moving on this issue. This is good for conservatives but bad for the Republican party because they are stuck advocating unpopular beliefs and attempting to slow the inevitable.
The poll shows that 58 percent of Americans now believe it should be legal for gay and lesbian couples to get married; 36 percent say it should be illegal. Public attitudes toward gay marriage are a mirror image of what they were a decade ago: in 2003, 37 percent favored gay nuptials, and 55 percent opposed them.And also:
Among young adults age 18 to 29, support for gay marriage is overwhelming, hitting a record high of 81 percent in the new poll. Support has also been increasing among older adults, but those aged 65 years old and up remain opposed, on balance: 44 percent say same-sex marriage should be legal; 50 percent say illegal.At the same time the poll notes that 59% of Republicans think gay marriage should be illegal, while 34% think it should be legal.
So basically, Republicans hold a policy preference that differs pretty wildly from the majority of Americans. In a pure democracy they would just lose elections, gay marriage would become legal, and we would all move on to other issues. Luckily for conservatives, the United States has enough anti-democratic institutional checks that, despite losing elections, they can still prevent the federal government from moving on this issue. This is good for conservatives but bad for the Republican party because they are stuck advocating unpopular beliefs and attempting to slow the inevitable.
Sunday, 17 March 2013
Priorities and the Ryan Budget
Matt Yglesias has a post detailing some findings from the Tax Policy Center on Paul Ryan's budget. In short, the Ryan budget proposes revenue-neutral tax reform and provides the tax rate goals but doesn't explain what loopholes will be closed to get there. The Tax Policy Center took the tax rate goals of the Ryan Budget and demonstrated that the distributional consequences are pretty skewed. Here's Yglesias:
It would be fun to be able to graph a final distributional outcome to his plan, because in all likelihood it would perversely favor really wealthy individuals. But to the extent that a budget is about laying out the political priorities of a party, the Ryan budget gives us exactly that. As a political document, the budget isn't confusing at all. If Republicans return to power they will cut taxes, might try to close some loopholes, and won't really care who shoulders the burden/gets the benefit. The loophole tease is new, but the rest is old hat.
Of course since rich people start out with higher after-tax incomes than the middle class, that larger percentage increase in after-tax incomes expands to an enormous gap in actual dollars. The poorest 20 percent of American households would receive, on average, a $60 tax cut. The middle 20 percent would get $1,961. The top 1 percent would get $227,420. The results are so skewed that I couldn't come up with a legible way of presenting them visually, but if you go up to the top 0.1 percent they get $1.2 million on average.If the tax reform is revenue neutral than the distribution will be somewhat different depending on which loopholes get closed. More Yglesias:
It's difficult to say, however, without the details. And that's what's pernicious about this half-specific approach to tax policy. It's fine that Ryan doesn't want to usurp the role of the Ways & Means Committee, but by naming specific tax rates without naming specific tax deductions he's created a very confusing situation in which it's difficult to say what the consequences of this approach would really be.The fact that we can't graph the final distribution of the changes is annoying, but by giving a "half-specific"outline of his tax policy Ryan has made his priorities crystal clear. The specificity given to the tax rate reductions signals that reducing rates (especially for wealthier individuals) is the number one priority of tax reform for Republicans. By not laying out which loopholes he would like to close, Ryan has made it clear that deficit neutrality is of secondary importance. The fact that he doesn't mention a distributional goal suggests that he really doesn't care about this at all.
It would be fun to be able to graph a final distributional outcome to his plan, because in all likelihood it would perversely favor really wealthy individuals. But to the extent that a budget is about laying out the political priorities of a party, the Ryan budget gives us exactly that. As a political document, the budget isn't confusing at all. If Republicans return to power they will cut taxes, might try to close some loopholes, and won't really care who shoulders the burden/gets the benefit. The loophole tease is new, but the rest is old hat.
Friday, 15 March 2013
Federalism and the Modern Republican Party
Last night, I was listening to Matt K. Lewis and Bill Scher on bloggingheads discuss CPAC. One point that was brought up was the increasing number of prominent Republicans who have taken the position that gay marriage is a "state issue" and the federal government should leave it alone. This is Marco Rubio's position.
In certain respects, this is clearly a dodge. Gay marriage is a generational issue and young people across the political spectrum overwhelmingly support it. If the Republican party is to have a future it will need to eventually support gay marriage or at least become indifferent about it.
What is more interesting, however, is thinking about the role of federalism in modern politics. Federalism can mean two different things: 1) the federal government has less power and the states do more; or 2) the states are given the power to craft solutions that address local needs, because they are more adept at dealing with local issues. As political parties and interest groups become more centralized and nationally based, Federalism--as advocated by the Republican party--is increasingly become more like the first version. Large interest groups now have the capacity to enforce party discipline at the state level. If you are a Republican legislator in Minnesota and you vote in favor of gay marriage, the National Organization for Marriage (NOM) will spend money to defeat you in the next election. Likewise, Bob McDonnell didn't get invited to CPAC this year, presumably because his transportation bill included a tax hike. Same for Chris Christie, whose support for gun control in New Jersey meant he wasn't coming.
The best example of this phenomenon is Mitt Romney. Romney was the governor of Massachusetts,one of the bluest states. The people of Massachusetts were in favor of universal healthcare in their state. As governor, Romney basically crafted a solution that met the goal of universal coverage but did so in a way that preserved the private market for insurance. One could see this as a triumph of federalism, where a Republican governor met the needs of his state, without eliminating the market-based system favored by conservatives. But when he ran for President in 2008 and 2012, party leaders and conservatives didn't really see it this way, and he had to distance himself from this policy. (Note: it obviously didn't help that Obamacare was based on his Massachusetts plan)
In certain respects, this makes sense. Political parties should be ideologically coherent, and interest groups want to promote their positions at both the state and federal level. But this presents a real challenge for true supporters of federalism. Well funded, centralized interest groups and party leaders can stifle the ability of state legislators to find workable solutions that are favored by their constituents. If federalism means anything, it's that the voters of Virginia, and their elected representatives, are the people best suited to make decisions about how to fund Virginia's highways, and that a few leaders of the ACU (who put on CPAC) shouldn't really have much influence on that process.
In an era when highly centralized interest groups are able to exert pressure on state representatives, is there any room for real federalism?
In certain respects, this is clearly a dodge. Gay marriage is a generational issue and young people across the political spectrum overwhelmingly support it. If the Republican party is to have a future it will need to eventually support gay marriage or at least become indifferent about it.
What is more interesting, however, is thinking about the role of federalism in modern politics. Federalism can mean two different things: 1) the federal government has less power and the states do more; or 2) the states are given the power to craft solutions that address local needs, because they are more adept at dealing with local issues. As political parties and interest groups become more centralized and nationally based, Federalism--as advocated by the Republican party--is increasingly become more like the first version. Large interest groups now have the capacity to enforce party discipline at the state level. If you are a Republican legislator in Minnesota and you vote in favor of gay marriage, the National Organization for Marriage (NOM) will spend money to defeat you in the next election. Likewise, Bob McDonnell didn't get invited to CPAC this year, presumably because his transportation bill included a tax hike. Same for Chris Christie, whose support for gun control in New Jersey meant he wasn't coming.
The best example of this phenomenon is Mitt Romney. Romney was the governor of Massachusetts,one of the bluest states. The people of Massachusetts were in favor of universal healthcare in their state. As governor, Romney basically crafted a solution that met the goal of universal coverage but did so in a way that preserved the private market for insurance. One could see this as a triumph of federalism, where a Republican governor met the needs of his state, without eliminating the market-based system favored by conservatives. But when he ran for President in 2008 and 2012, party leaders and conservatives didn't really see it this way, and he had to distance himself from this policy. (Note: it obviously didn't help that Obamacare was based on his Massachusetts plan)
In certain respects, this makes sense. Political parties should be ideologically coherent, and interest groups want to promote their positions at both the state and federal level. But this presents a real challenge for true supporters of federalism. Well funded, centralized interest groups and party leaders can stifle the ability of state legislators to find workable solutions that are favored by their constituents. If federalism means anything, it's that the voters of Virginia, and their elected representatives, are the people best suited to make decisions about how to fund Virginia's highways, and that a few leaders of the ACU (who put on CPAC) shouldn't really have much influence on that process.
In an era when highly centralized interest groups are able to exert pressure on state representatives, is there any room for real federalism?
Thursday, 14 March 2013
Lawrence Kotlikoff's Strange Ideas
Lawrence Kotlikoff is out with an angry column at Yahoo. The premise is that Paul Krugman and others are spreading "dangerous fiscal fables" and that the American debt situation is absolutely dire. At one point he claims that our policies amount to "fiscal child abuse plain and simple".
Kotlikoff's main argument is that the way we measure the debt is wrong, and that instead of just looking at what we owe on our government bonds, we should consider the entire "fiscal gap"--all of our future fiscal commitments based on current law--as the relevant measure. According to Kotlikoff, the U.S. fiscal gap is $222 trillion.
This strikes me as a silly way to think about policy. Kotlikoff says there is no difference between the short run and the long run in terms of budget policy, but this is clearly wrong. Budget projections are based on underlying assumptions about what the future will look like. When the CBO creates their fiscal projections they make a bunch of assumptions about things like economic growth, health care costs, etc. They also assume no relevant policy changes. These assumptions are less likely to be accurate the further into the future you project, for obvious reasons. A hypothetical 75 year CBO budget projection from 1800 would have missed the Louisiana Purchase, the War of 1812, The Civil War, the end of slavery, and the industrial revolution in America. The CBO projection from 1900 would have missed the Great Depression,two world wars, and the cold war. The CBO projection from 1960 would have missed the entrance of women into the workplace, the end of the cold war, globalization, and the great recession. As time passes, a bunch of important stuff happens that isn't foreseeable 50 years in advance.
Kotlikoff feels like we should aim to balance the budget on the infinite horizon. But the preceding paragraph should reveal the ridiculousness of this exercise. Things change. Maybe the coming cyber war with China will require us to divert most of resources to computer hacking. Maybe the singularity will arrive. Maybe economic growth will stop entirely. Maybe we will have cures for diseases and less people will be sick. Maybe we will reform our immigration policy to allow more young people to move here. Who knows? The point being that what really matters isn't how much money we say our government is going to transfer from working people to retired people in 2080, but whether the above things--or a bunch of things that we haven't even thought of--will happen.
The crazy thing is that from a certain perspective Krugman and Kotlikoff basically agree. Kotlikoff is essentially arguing that the current budget deficit is pretty trivial and what really matters is paying for health care for seniors in 2030. When you argue that the relevant fiscal number is $222 trillion, you are basically saying that the $845 billion deficit for fiscal year 2013 isn't really that important in the grand scheme of things. This is what Krugman thinks! Which is why he endorses a temporary fiscal stimulus to boost output and get us back to full employment.
The question of future health care costs is important, and is something we will need to address, but thinking of it purely in terms of budgets totally misses the issue. Raising the medicare age just moves the costs from the government to private citizens, and effectively raises them, because as Steve Brill's epic health-care piece in Time magazine demonstrated, health care is a lot cheaper when the government uses monopsony power to bargain it down. The health care challenge is to figure out how to reduce these costs even further. According to the CBO, health care inflation is slowing. What else can we do to reduce costs? Give visas to doctors from other countries who are willing to treat the elderly on the cheap? Increase the scope of practice authority for nurse practitioners? Death Panels?
The point is that health care policy, and budget policy generally, aren't about making CBO lines match up, but about economic growth, reducing costs, and moral questions about how we distribute resources within a society.
Kotlikoff also claims that hyperinflation is on the way. This is something he has been saying for a the last few years despite inflation continuing to come in at below the Fed's 2% target. But if he is really concerned about "fiscal child abuse" than he should favor inflation because it redistributes money from creditors/savers (mostly the elderly) to debtors (mostly young people). He doesn't seem to see it this way, though.
Kotlikoff's main argument is that the way we measure the debt is wrong, and that instead of just looking at what we owe on our government bonds, we should consider the entire "fiscal gap"--all of our future fiscal commitments based on current law--as the relevant measure. According to Kotlikoff, the U.S. fiscal gap is $222 trillion.
This strikes me as a silly way to think about policy. Kotlikoff says there is no difference between the short run and the long run in terms of budget policy, but this is clearly wrong. Budget projections are based on underlying assumptions about what the future will look like. When the CBO creates their fiscal projections they make a bunch of assumptions about things like economic growth, health care costs, etc. They also assume no relevant policy changes. These assumptions are less likely to be accurate the further into the future you project, for obvious reasons. A hypothetical 75 year CBO budget projection from 1800 would have missed the Louisiana Purchase, the War of 1812, The Civil War, the end of slavery, and the industrial revolution in America. The CBO projection from 1900 would have missed the Great Depression,two world wars, and the cold war. The CBO projection from 1960 would have missed the entrance of women into the workplace, the end of the cold war, globalization, and the great recession. As time passes, a bunch of important stuff happens that isn't foreseeable 50 years in advance.
Kotlikoff feels like we should aim to balance the budget on the infinite horizon. But the preceding paragraph should reveal the ridiculousness of this exercise. Things change. Maybe the coming cyber war with China will require us to divert most of resources to computer hacking. Maybe the singularity will arrive. Maybe economic growth will stop entirely. Maybe we will have cures for diseases and less people will be sick. Maybe we will reform our immigration policy to allow more young people to move here. Who knows? The point being that what really matters isn't how much money we say our government is going to transfer from working people to retired people in 2080, but whether the above things--or a bunch of things that we haven't even thought of--will happen.
The crazy thing is that from a certain perspective Krugman and Kotlikoff basically agree. Kotlikoff is essentially arguing that the current budget deficit is pretty trivial and what really matters is paying for health care for seniors in 2030. When you argue that the relevant fiscal number is $222 trillion, you are basically saying that the $845 billion deficit for fiscal year 2013 isn't really that important in the grand scheme of things. This is what Krugman thinks! Which is why he endorses a temporary fiscal stimulus to boost output and get us back to full employment.
The question of future health care costs is important, and is something we will need to address, but thinking of it purely in terms of budgets totally misses the issue. Raising the medicare age just moves the costs from the government to private citizens, and effectively raises them, because as Steve Brill's epic health-care piece in Time magazine demonstrated, health care is a lot cheaper when the government uses monopsony power to bargain it down. The health care challenge is to figure out how to reduce these costs even further. According to the CBO, health care inflation is slowing. What else can we do to reduce costs? Give visas to doctors from other countries who are willing to treat the elderly on the cheap? Increase the scope of practice authority for nurse practitioners? Death Panels?
The point is that health care policy, and budget policy generally, aren't about making CBO lines match up, but about economic growth, reducing costs, and moral questions about how we distribute resources within a society.
Kotlikoff also claims that hyperinflation is on the way. This is something he has been saying for a the last few years despite inflation continuing to come in at below the Fed's 2% target. But if he is really concerned about "fiscal child abuse" than he should favor inflation because it redistributes money from creditors/savers (mostly the elderly) to debtors (mostly young people). He doesn't seem to see it this way, though.
Tuesday, 12 March 2013
The Ryan Manifesto
Derek Thompson has one of the best takes on Paul Ryan's new budget. The whole thing is must-read but one part in particular caught my attention:
That is why it's kind of crazy that Ryan doesn't include it (or any other social security reform) in his plan. I think this is pretty revealing. Besides wanting the (non-elderly) poor and middle class to shoulder the burden of deficit reduction, Ryan doesn't actually care about putting forward a plan that has any realistic chance of passing.
For what its worth, Paul Ryan's budget is a pretty honest statement of Republican political priorities. It should be read as a manifesto on government, not a real budget proposal.
But this budget is as notable for what it cuts as for what it doesn't cut. Social Security, defense, and Medicare -- together making up about half of the federal budget -- would scarcely be cut at all. After all, it's hard to win a Republican election if you abandon old voters and the defense industry.Anyone who has been following the budget debates of the last two years would recognize that there is only one place where a long-run deficitreducing "Grand Bargain" can be found: Social Security. Obama has supported the idea of using chained-CPI to reduce benefits and shore up the program's long term fiscal position. Whatever the merits of this proposal (I don't really like it), this is where the Grand Bargain is. Obama's in favor of it, he seems to think he can get some congressional Democrats on board, and conservatives have been yelling about reforming entitlements for years. Additionally, unlike Medicare-voucherization, this isn't a qualitative change to the program, it is basically a reduction in benefits that can be sold to the public as a wonky fix. As a result, we don't need to argue about whether or not it will save us money or how it will affect medical costs--our actuarial predictions will likely be pretty spot-on. If what you care about is reducing the government's long term fiscal obligations, chained-CPI is what you want to be talking about in this political environment.
That is why it's kind of crazy that Ryan doesn't include it (or any other social security reform) in his plan. I think this is pretty revealing. Besides wanting the (non-elderly) poor and middle class to shoulder the burden of deficit reduction, Ryan doesn't actually care about putting forward a plan that has any realistic chance of passing.
For what its worth, Paul Ryan's budget is a pretty honest statement of Republican political priorities. It should be read as a manifesto on government, not a real budget proposal.
Monday, 11 March 2013
Professors, Blogs, and the Iraq War
I enjoyed this back and forth between Dan Drezner and Justin Logan over the differences in prevailing opinion between IR academics and the Washington foreign policy community during the lead up to the Iraq War. Justin's contention is that the foreign policy community was (and still is) way more hawkish than their IR counterparts, and this was due to the perceived negative career implications of being a foreign policy dove at that time in Washington.
I was thinking about this when I read Ezra Klein's recent piece on the "Revenge of the sources". Ezra is responding the Nate Thayer-Atlantic incident and his contention is that the people turning out copy on the internet and not getting paid are primarily the same who used to be unpaid sources for journalists:
If Logan is right and IR academics are more "realist" in orientation and less hawkish in general, than its interesting to think about how the debate over the Iraq war would have played out in the media environment of today. It is easy to imagine more IR academics playing a larger role in our public discussions. Looking back at some of the commentary in the run up to the Iraq war, it is hard to ignore how "political" its orientation is, and how nonacademic the arguments being made are. There was very little realistic assesment of how the war would turn out, or what the costs and benefits would be. I'd like to think that the widespread existence and mainstream recognition of blogs would have lead to a more healthy, intelligent, and balanced policy discussion. Matthew Yglesias said that one of the reasons he initially supported the war was the feeling that you had to be a supporter in order to be taken seriously in the media environment of the time. If someone like Stephen Walt had been regularly blogging at the time, maybe things would have been different.
I was thinking about this when I read Ezra Klein's recent piece on the "Revenge of the sources". Ezra is responding the Nate Thayer-Atlantic incident and his contention is that the people turning out copy on the internet and not getting paid are primarily the same who used to be unpaid sources for journalists:
That, at least, was the situation until the Internet made the supply of “newsprint” virtually infinite. Now, the people who were once sources can write their own blogs, or they send op-ed submissions or even feature articles to editors looking for vastly more content. Think about Brad DeLong’s blog, Marginal Revolution, or the Monkey Cage. This work often doesn’t pay — at least not at first — but it offers a much more reliable, predictable and controllable form of exposure. It’s a direct relationship with an audience rather than one mediated by a professional journalist.I think this is right. But I think the implications go beyond the structure of labor in journalism. Academics are now able to play a larger public role in policy discussion. Ten years ago a guy like Scott Sumner could have maybe gotten an op-ed published in a minor newspaper. Now it's probably fair to say he has had some influence on Federal Reserve policy-making. Similarly, everybody and their grandma knows who Nate Silver is, and I think he has changed the way a lot of people think about pundits and election forecasting.
If Logan is right and IR academics are more "realist" in orientation and less hawkish in general, than its interesting to think about how the debate over the Iraq war would have played out in the media environment of today. It is easy to imagine more IR academics playing a larger role in our public discussions. Looking back at some of the commentary in the run up to the Iraq war, it is hard to ignore how "political" its orientation is, and how nonacademic the arguments being made are. There was very little realistic assesment of how the war would turn out, or what the costs and benefits would be. I'd like to think that the widespread existence and mainstream recognition of blogs would have lead to a more healthy, intelligent, and balanced policy discussion. Matthew Yglesias said that one of the reasons he initially supported the war was the feeling that you had to be a supporter in order to be taken seriously in the media environment of the time. If someone like Stephen Walt had been regularly blogging at the time, maybe things would have been different.
Congressional Budgeting
This week the Senate Democrats and the House Republicans are each going to pass their irreconcilable budgets. The Senate is, presumably, going to include higher taxes on wealthier individuals. Paul Ryan's House budget will apparently include the repeal of Obamacare, except for the medicare savings that he supported in his last two budgets but ran against as vice president.
This is all being done to try to give the Republicans a political victory. The House has already passed two unpopular versions of the "Ryan plan" and they feel that the Senate Democrats have been getting an unfair pass by not passing a budget. That is why they used the debt ceiling to force the Senate to pass a budget. I think their assumption is that they will be able to attack the budget from two angles: 1) look how much it raises taxes! 2) look it does nothing about the deficit!
This is all silly, but my hope is that this will be a turning point in Washington. Now that the two respective budgets are on the table, maybe we can turn to something like immigration or climate change. The Republicans and Democrats fundamentally disagree as to the course of government fiscal policy, nothing is really going to change this.
Let's reveal our budgets, move on to something else, and see if anything changes after the midterms.
This is all being done to try to give the Republicans a political victory. The House has already passed two unpopular versions of the "Ryan plan" and they feel that the Senate Democrats have been getting an unfair pass by not passing a budget. That is why they used the debt ceiling to force the Senate to pass a budget. I think their assumption is that they will be able to attack the budget from two angles: 1) look how much it raises taxes! 2) look it does nothing about the deficit!
This is all silly, but my hope is that this will be a turning point in Washington. Now that the two respective budgets are on the table, maybe we can turn to something like immigration or climate change. The Republicans and Democrats fundamentally disagree as to the course of government fiscal policy, nothing is really going to change this.
Let's reveal our budgets, move on to something else, and see if anything changes after the midterms.
Sunday, 3 March 2013
The House Republicans Won the Last Two Years
I found this Up with Chris Hayes segment both interesting and incredibly frustrating. As Chris points out at the beginning, the GOP's "no revenue" stance is deeply unpopular and hurts the GOP's image. Most Americans will blame them for the sequester, regardless of the "Obamaquester" spin.
Chris quickly notes that the GOP is succeeding in setting the terms of the debate in Washington and in achieving their substantive goals. But then the conversation kind of switches over to Chris and the three liberal guests lamenting the fact that the GOP and centrist beltway media won't acknowledge how much spending has actually been cut.
This is fine, but I really wish they had spent more time dwelling on the fact that the House GOP's strategy of not compromising and taking the economy hostage over the debt ceiling has been a massive success. Discretionary spending has completely plateaued! And as Chris' conservative guest acknowledged, conservatives don't really care about the deficit--its all about the size of government. The GOP is nominally unpopular and Mitt Romney lost the election, but does that really matter if you are able to pursue your agenda through political obstructionism?
There has been a lot of discussion lately on the need for the GOP to change, in order to be competitive in future presidential elections. But if I were a conservative I would be totally satisfied with the last two years--Obama has been unable to undertake any additional progressive initiatives, while spending has been drastically cut. Would Mitt Romney really have stood a better chance if the GOP had cooperated with Obama? Would a Republican in the White House really have lowered the trajectory of federal government spending?
The GOP should avoid rape gaffes and maybe ease off gay marriage as an issue. But as long as they can hold the gerrymandered House, i'm not sure if being more reasonable and compromising is the correct strategy. Their intransigence has worked wonders in achieving many of their aims. The truth is that in the current American political system it is better to be the party that won't blink first than being the party with the more popular platform.
I wish Chris had spend more time discussing the Republican's substantive victory and what that means for our political system.
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