The reshaping of the stimulus: public choice thoughts

by on February 9, 2009 at 2:45 pm in Political Science | Permalink

The topic is why some of the aid to state governments was cut and Matt Yglesias, after citing conservative supporters of such aid, reports:

I genuinely don’t understand why it’s [politics] failing to function in this particular way. It seems to me that there ought to be strong interest-group politics behind state and local financial aid coming from public employees, and senators of all parties should be facing strong pressure from governors back home to do this.

Ross Douthat comments as well.  I believe that if state-level governments fail to do a good job, the blame is put on governors and state-level legislators, not U.S. Senators.  Voters have theories of responsibility, rather than theories of causality, and that subtle difference occasionally becomes very important.  (And the governors then have to make up the funds by squeezing some of their constituencies.)  In the meantime, for better or worse, three Senators are on the evening news, for days on end, and they are described as "bipartisan."  One of Obama's problems is that other peoples' attempts to copy his memes and strategies make it harder for those same strategies to succeed.  There is a common pool of "good publicity for being bipartisan" and now many players are rushing to exhaust it, even if that means pushing policy changes of low quality.

I believe also that many of the Republicans in the House wanted to vote for the stimulus bill but they had no cover and also their donors are dead set against.  Precisely because so many Republicans voted for TARP, there is a feeling that a line in the sand must be drawn.  If fewer Republicans had voted yes on TARP, and thus more Republicans could have voted yes on the stimulus, a bipartisan restructuring could have reallocated the spending more wisely than it did.  The attempted Republican re-establishment of long-spent ideological credibility is precisely what opens up room for some "moderate" political entrepreneurship. 

Alternatively, maybe you can predict what will come out of the House-Senate committee and then solve backwards for the equilibrium strategies.

Highgamma February 9, 2009 at 2:53 pm

Of course, your analysis is for a single play of the game. (Except your discussion of the TARP.) If Republicans who oppose spending didn’t stand up today, they would find themselves faces down a whole host of newly-created and re-energized interest groups in the future.

E. Barandiaran February 9, 2009 at 3:03 pm

Just repeat a hundred times CALIFORNIA. Do you think that BHO does not want to bail out California and all other state and local governments? Do you think that he cannot do it because it is not included in the stimulus plan?

babar February 9, 2009 at 3:56 pm

the national republican party exited the last election so far out of the money that they have no incentive to do anything but stonewall.

that being said, i think that it would have been much better to make the stimulus bill simpler (existing state spending plus unemployment benefits plus suspending payroll deductions) and then save the smart work for later. the way the legislative process has failed and quite visibly so will do nobody any good.

Taeyoung February 9, 2009 at 4:26 pm

One of Obama’s problems is that other peoples’ attempts to copy his memes and strategies make it harder for those same strategies to succeed. There is a common pool of “good publicity for being bipartisan” and now many players are rushing to exhaust it, even if that means pushing policy changes of low quality.

Wait, where was he bipartisan? All he has is a meme, not a strategy. At least the people bleating on the news have a colourable claim to a bipartisan strategy beyond mere, empty words.

DanC February 9, 2009 at 4:43 pm

Actually there were press reports with some Republicans claiming that some Democrats on the other side think the stimulus plan is the wrong approach but they could not allow President Obama to suffer a major political setback so early in his administration. Pelosi wrote a bad bill, Obama backed it, political case closed.

If you view the real objective of this spending bill as a desire to change spending priorities, then the Democrats should be willing to compromise on money to states. Why? Because if the economy is weak in two years Democrats can easily push for more aid to states. They will talk about fireman and policemen be laid off etc. These are easy themes in a reelection battle.

However, I think Democrats would have a much harder time reshaping healthcare etc later if the country is not in a panic. Remember, Pelosi, Franks, and Obama are Social Democrats. They have a vision of a more equitable society. That requires some radical changes that are buried in one of the largest spending bills in history.

Republicans did almost nothing to change the spending bill. The minor cuts in state spending that were given to recruit three idiot Republican Senators, can easily be turned around politically against Republicans if things get worse. I would think that the Democrats control everything and think they can easily go back and pickup that spending again.

Look at Democrats today. What did Bush do wrong, according to Democrats? He doubled federal spending on education. He created a huge new entitlement in health care. He encouraged banks to lend to marginal lenders. He threw money at bad banks.

What is different in the Democratic plan, besides putting 12 zeros behind the number?

Andrew February 9, 2009 at 5:05 pm

Of course government humans think and behave different from non-government humans, but when we bail-out non-government humans we at least want to make them squirm a bit.

Besides, I like bipartisanship, it presents we the peoples with a common enemy.

DanC February 9, 2009 at 6:29 pm

Invaded a country for fictitious reasons – How many Democrats voted for the war? Iraq Generals thought they had WMD.

economic catastrophe that was arguably caused by a laissez-faire belief – the banking sector is just about the most regulated sector. And tell me again about how Dodd, Maxine, Pelosi and Franks were fighting for prudent lending.

Still, Bush was a rather big government Republican. He spent like crazy. The Democratic solution? Be a bigger spender.

So, on economic policy, please answer the following:

According to Democrats Bush was wrong to do the following. He doubled federal spending on education. He created a huge new entitlement in health care. He encouraged banks to lend to marginal lenders. He threw money at bad banks. He offered tax cuts that were really just throwing money at people.

What is different in the Democratic plan, besides putting 12 zeros behind the number?

DanC February 9, 2009 at 6:50 pm

BTW
Michelle Obama was grossly overpaid when she worked at the University of Chicago Hospitals. She helped create an outreach program to expand into communities around the University. Today the University’s hospital announced huge layoffs, in part, because her plan was a huge drain on resources. Just a quick look into the future of the country

Alan Wynnewood February 9, 2009 at 7:01 pm

The largest problem we face is that voters and politicians speak and think of parties and their faults. And yet the crisis was caused by particular people over two administrations, allied with both parties. It was caused by the amalgamated banking crowd, local and Wall Street, and their supporters in Congress. I am personally shocked that the Ruben crowd is back. And cry, don’t laugh, about the Nazis coming back, for we may end up needing a Schachtian Rentenmark before we’re through.

Mark Turner February 9, 2009 at 8:09 pm

…and the GOP has to stop allowing itself to be blamed for everything that is wrong with the country today. One thing that amazed me about McCain (and the GOP as a whole) is that they let Obama/the Dems walk all over them in the media and didn’t mount any effective response when there was plenty of ammunition to do so. If the GOP can get its message together and individual candidates can convey it coherently, they should be able to make strong gains in congress in 2010 if Obama continues on his current path. He’s making similar mistakes to what Clinton did in his first 2 years, and he should be made to pay for them at the polls.

Anonymous February 9, 2009 at 10:18 pm

The rush to pass a stimulus bill is very reminiscent of the rush to pass the Patriot Act in the immediate aftermath of 9/11. No time for debate, we must act immediately, clear and present danger, delay or dissent is intolerable.

In the fullness of time, people had second thoughts. However, this time around, the price for hasty measures will not be merely a few civil liberties temporarily infringed, but a final shove off the cliff into the economic abyss.

John Thacker February 10, 2009 at 12:12 am

I believe also that many of the Republicans in the House wanted to vote for the stimulus bill but they had no cover and also their donors are dead set against.

And also their voters are dead set against.

1) Opposing the stimulus bill polls pretty well for Republicans; it’s raised their standing on the generic ballot considerably.

2) Most Republicans who represent swing or left-leaning districts in the House lost in the last two cycles.

3) The Republicans weren’t “needed” to pass it, like TARP. It’s of course possible that, like TARP, people would have voted for it/wanted to vote for it if their votes were necessary, believing that it was good for the country, but wanted to vote against it if possible. That’s a lot of what happened with TARP and the initial bill failure. This time around, Republican votes weren’t needed– and the House leadership saw little need in negotiating with the Republicans in the House anyway. The stimulus bill doesn’t offend any Democratic support bases like TARP did.

4) It’s silly to pretend that there would be a bipartisan majority for some of those “sensible” things. There is no free-trade majority in the Senate– almost all the Democrat pickups in the Senate in the last four years have been by committed protectionists who largely won (or think that they won) on the basis of their protectionism.

5) As far as aid to states– clearly not everyone is going to support something that’s based on bailing out the worst off states and giving nothing to states that were more frugal (like SC) and aren’t asking for the money. What you’re really asking is why couldn’t Congress hammer out some kind of rational formula for sharing the spoils state-by-state. I think that Professor Kling’s comment about the money for the states (and cities) being divvying up the spoils of the election comes to mind. One side won the election; to the victor go the spoils. They have a majority to divvy up the spoils, and a House leadership that comes from the states that will be best off in getting the spoils. Why exactly would they compromise out of a sense of good government? In what sense is that sort of idealism about politics a “public choice thought?”

mulp February 10, 2009 at 4:02 am

I think Obama, like me, doesn’t understand how things work in the Alice in Wunderland political circles. I just noticed that Carter, the failed, worst, president ever, created more jobs in each of his four years than Bush and his stimulutive job creating tax cuts created in his entire eight years.

And the FDR that kept the economy from recovering as fast as it could, created more than three times the number of jobs in his first term than Bush did in all eight years.

But then again, FDR only increased the number employed by less than 30%, from 24 million in 1933 to 31 million in 1937. Employment during Carter’s four years increased from 81 million to 91 million, a larger magnitude, but a smaller percentage: only ~12%. For conservatives, these seem to be the two presidents that evoke the greatest condemnation from conservatives.

Reagan in his first term increased employment from 91 million to 96 million, half the increase of Carter’s “failed” presidency. And even in Reagan’s second term, Reagan’s increase was only ~11%.

So, when the view of economic history is seen so differently by “left” vs “right”, “liberal” vs “conservative”, how can bipartisanship be possible.

Obama just doesn’t yet appreciate why Moynihan’s favorite response was “you are entitled to your own opinion, but not your own facts.”

shutthehellup February 10, 2009 at 6:39 pm

for eight years gw did nothing but lie and throw money at his pals. now that ojama is committed to making a plan that works the neofreaks can do nothing but cry….get this, and get it good, when it is all said and done, jama did more his first week than gw did in eight years. Try to live with it losers.

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