From the comments

by on February 18, 2010 at 6:58 am in Political Science | Permalink

It seems to me that the American political system is simply broken. Canada could reduce the size of government and keep health care spending in check because in a parliamentary system with strong party loyalty, individual politicans are given 'cover' by their parties and are not held personally responsible for the taxes and benefits of their constituents. If the party in power makes a decision to cut benefits which will harm an individual politician's district, that politician isn't necessarily on the hook for it. The voters know that he has to vote the party line even if he disagrees with the legislation. He gets re-elected so long as the public feels his party in general is better than the opposition.

In the U.S. system, where every vote is a free vote, each member of Congress has to answer for his/her votes, and this drives NIMBY-ism and ever-increasing benefits without the tax hikes to pay for them, and it also causes wheeling and dealing which ultimately makes large regulatory packages like health care reform incoherent and bloated with pork.

I think American government works well when it's strictly limited. When Americans try to implement Euro-style social democracy, they fail due to the nature of American government. It is uniquely unsuited to centralized technocratic governance.

That's from Dan H. and he has more to say at the link.

Doc Merlin February 18, 2010 at 7:21 am

“I think American government works well when it’s strictly limited. When Americans try to implement Euro-style social democracy, they fail due to the nature of American government. It is uniquely unsuited to centralized technocratic governance.”

So true. Modern parliaments are basically rubber stamps for most things for the coalition in power, and are just there as the face of the bureaucracy, because of the party nature. The non partisan nature of american elections were parties are a label more than an actual affiliation, means that each and every bill has to be compromised on, instead of the party leadership running the country as if it was their own fiefdom.

The US government because we vote for individuals not parties and they are directly accountable, means that problems in the incentive structures tend to be very obvious and much harder to hide than in a parliamentary system.

myself February 18, 2010 at 7:47 am

Entertaining comments at the link. I hope they convinced you, Tyler.

anon February 18, 2010 at 8:22 am

‘question period’ is a definite plus that one wishes the US would adopt

I disagree. It may be more entertaining than regular C-SPAN fare, but I’m not convinced it woud lead to better (i.e., less) governance.

This would push us even further to candidates who are way too much like used car sales people who are more articulate with slightly higher IQs. No thanks.

Bonus:
The Truth About Taxes 1939 (video)
http://www.youtube.com/watch?v=pK1SaPgpIf4

Al Brown February 18, 2010 at 9:01 am

I think what we need is electoral reform. We need to be able select who represents our interests in the legislature. And taxpayers need to have the final say on how their money is spent and on how much is borrowed.

Our winner-take-all elections give all the power to whichever candidate convinces the most people that he or she is the best candidate to represent their interests.

For most people, the candidate they select rarely shares most of their view, but is just the least worst of the two choices they typically have.

If people could vote for candidates from smaller parties that closely matched their views and these parties could get a proportion of the possible representation, it is far more likely that candidates will be well known to those that vote for them, will speak their minds and will not need or be able to misrepresent their plans once in office.

When a candidate must convince everyone in an area that he is the best candidate, he necessarily must lie a lot or at least misrepresent his views. We are simply going to get a better quality of person running if we change to proportional representation.

And its going to be a lot less expensive and with much less need for money from special interests to run such campaigns. People with a given perspective can tell who truly shares their views. Its just a much easier thing to do than to try to guess which liar will act the way you want the most if elected.

Finally, we must give taxpayers more voice than they currently have over what is spent and borrowed, in proportion to how much tax they have to pay.

It is is simply ridiculous that the village idiot has as much say on spending as Bill Gates. We need to balance the tendency of democracies to always soak the rich and ever expand the masses who don’t work for a living.

Marian Kechlibar February 18, 2010 at 9:46 am

Saintsimon: Canada has about the same population as California. California does not have significant military either (SWAT teams do not cost billions). It has objectively better natural conditions than Canada. Yet California is in much, much deeper fiscal mess than Canada. And I do not believe that a random sample of Canadian politicians is much better than a random sample of Californian politicians.

So yes, the difference must be – at least partially – in the system.

Lee A. Arnold February 18, 2010 at 10:58 am

It’s not the particular system. The problem is the world is getting too crowded and complicated for people to have enough knowledge to make good choices. Consequently both markets and governments are becoming ever less effective. What is needed is not just more information on the internet, but a more synthetic comprehension. We barely know how to do that.

Yancey Ward February 18, 2010 at 11:35 am

Yes, parliamentary systems in Europe have prevented high government debts and deficits, along with unsustainable benefit promises, unlike the United States with its primeval constitutional system of checks and balances. Pity we Americans are so damn stupid.

Jon Sealy February 18, 2010 at 11:50 am

Steven Landsburg has an interesting argument in MORE SEX IS SAFER SEX. He recommends giving everyone two votes on election day: one for your district and one for any district of your choice. That constituents outside one’s district could potentially vote you out of office would create an incentive for the representative to temper pork projects that are harmful to the nation as a whole.

Dan H. February 18, 2010 at 12:48 pm

Saintsimon said:

“Reduce the size of government? Are you kidding?”

In the early 1990′s, Canada’s government was spending more than 50% of GDP. Today, it’s around 36%. That’s a rather steep decline in the size of government. In fact, current trends will have the U.S. surpassing us in government size within the next year or two.

We have gone from massive deficits to running surpluses up until 2008. We have also reduced the public debt from 70% of GDP to 30% of GDP. In 13 years, Canada went from having the second-highest public debt/GDP ratio in the G7 to having the lowest.

I think those are pretty remarkable numbers. And we’ve done it while cutting business taxes and keeping capital gains and dividend taxes low, and without an inheritance tax. We also cut our VAT from 7% to 5%, and held our top marginal rate to 29%.

This would indicate that it’s possible to pull yourself out of a bad fiscal situation without tax hikes, and without making the tax system more progressive.

Yancey Ward February 18, 2010 at 1:37 pm

Dan,

I wasn’t really picking on your original comment. However, I tend to disagree with you about how much more effective parlimentary government designed bills are versus what you see in the US. I don’t think Canada is the proper test case. I think the ratio in Canada has greatly benefitted from the now decade-long run up in commodities.

I think both systems would work much, much better if power were decentralized and lessened.

Karl February 18, 2010 at 3:02 pm

The US is experiencing a tragedy of the commons wrt solid fiscal policy (and broader policy). Politicians that want to come out in favour of sound policy (which will require a VAT and some spending restraint) are putting their political life in jeopardy. The private costs of good policy exceed the public benefits by too great a margin.

There was a movement in the senate (put forward by one republican and one democrast)to create the equiv. of a fast track authority on the debt that would of generated a bill subject to no amendments or filibuster rules – just a straight up or down vote. This motion was killed by the filibuster and garnered just over 50 votes.

So everyone is acting rationally and (for the most part) with in the rules and yet we continue to get policy that generates crisis after crisis without meaningful change.

Conclusion: the rules need to change. But this is asking the foxes who have positioned themselves as guards to the hen house to meaningfully increase the security. So the rules won’t change.

It also highlights the importance during the Canadian crisis of the media and REFORM in the role of education and providing cover for the Liberals to do what they needed to do to navigate us out of our fiscal crisis. On the fiscal issue Canada in effect was not polarized.

The difference is in the US the polarization between the two parties and the inability of individual members to either resist lobbying or take middle positions so they can survive their primary processes. Rome will most certainly burn as a result.

Even Ronald Regan and Tip O’Neil, political opponents who liked each other personally and worked with each other for compromise could not control the Federal books.

Now Republicans, like McCain, can’t even bring themselves to vote for a health care bill that is essentially the one they promoted during their election campaign. Country First! Good one….

Karl February 18, 2010 at 3:14 pm

For the record the Canadian government’s fiscal crisis hit in 1993 and was resloved well before the commodity boom. Right now the high CDN dollar is killing the manufacturing base in central Canada where the bulk of the popualtion live. So the commodity boom and its concommitant rise in our currency is hardly an unconditonal blessing to the Canadian economy. The gov’t balanced the books by hard cuts in transfer payments to the provinces, and the provinces had to do the same. Interest rates for a five yr mortgage in the mid 90s were 7% (Despite low inflation). Canadians went through hard times.

Brent Buckner February 18, 2010 at 3:56 pm

Another thing the Reform Party accomplished was to split the Canadian political right. I think this did leave the mid-1990s Liberal party elite feeling relatively secure as “the natural governing party”, and made it easier for them to behave as (loosely) a stationary bandit.

TangoMan February 18, 2010 at 5:11 pm

Karl,

What compromise? Where is it on the budget? On health care? On financial reform? Compromise on redistriciting has resulted in most congressman sitiing in polarized (safe) districts. You don’t even have meaningful financial reform (ex:derivatives) after the global economy was nearly nuked by a market design philosophy that believed the market will self-regulate.

These are all complicated issues. Budget compromise – the Democrats didn’t need to compromise, much like Canada’s Liberals didn’t need to compromise when they had solid majority governments. Canada’s tackling of their financial problems were spurred on by outside shocks to their system of governance, after all their budget deficits continued to grow for a long period prior to Martin’s ’95 budget. The US, thus far, has been able to continue doing business as usual without incurring shocks to our system. So, to compare the Canadian political class response to a shock against an American political class response to no shock is an invalid comparison. Let’s wait and see how the American political class governs when they can’t sell out a bond offering, or when the dollar crashes, or some such other shock befalls the nation. Crisis seems to have a motivating effect on leaders.

If you’re looking for root causes to the financial crisis, the level of regulation regarding derivatives is too far up the chain to be very useful for explanation. Look further down at government imposing social goals on financial decisions and thus corrupting the financial decision making process by subjecting it to a type of matrix decision making; the goal of bankers shouldn’t be to insure that people with bad credit, who predominantly happen to be minorities, be treated the same as people with better credit and thus qualify for more mortgages, etc. That’s really not the government’s business. Changing the loan rules starts a cascading effect that erodes solid financial decisionmaking all down the line and that’s what leads to bundled mortgages, derivatives, etc.

You are the only industrialized country that does not have some form of universal health care. And yet you spend more and are sicker than most.

First, one has almost nothing to do with the other. Secondly, the US, IIRC spends more per capita on public health care than does Canada.

Compromise in the US political ssytem is allowing derviative markets to go unregulated and loosening leverage restrictions

The European banking system in more heavily regulated than the American system and yet it has higher leverage ratios, as measured by assets against shareholder equity.

Karl February 18, 2010 at 7:48 pm

“If you’re looking for root causes to the financial crisis, the level of regulation regarding derivatives is too far up the chain to be very useful for explanation.”

Wrong. LTCM was the first short over the bow. Brooksley Born a Clinton appointee to the CFTC (1996-99) (Those interested watch Frontline “the Warning”) tried to regulate the market. The lobbyists and Rubin, Greenspan Summers and Levitt went and petitioned congress to neuter her. They succeeded – she resigned. AIG and the unregulated CDS market are at the core of the bailout. In that Frontline program you see Greenspan recanting his position on the market’s ability to self regulate saying – he got it wrong.

Rubin went to Citigroup -we see how well that worked out. Levitt says what they did to Born was wrong.

Karl February 18, 2010 at 7:50 pm

There is an ideological battle that gets fought daily on these pages which often is the reason I don’t bother posting on blogs. (I got referred here by a friend after he noticed some of my thoughts were germane to this discussion).

Those in favour of the market and those against. Like the market were some kind of off the shelf product your order on Amazon.com and presto you install it.

My first point is that congress designs the market in the US. And when they design it they often don’t do it in the best interests of the tax payer or the consumer. The positions they take are either ideological (if one views them most kindly) or purely tactical (if viewed more cynically) regarding campaign finance and primary votes. They are rarely taken from a dispassionate bipartisan “what is good for the country† perspective. I lived in the US for 6 years as an adult and have two degrees from you country. So, I have observed you political process fisrthand for awhile.

Karl February 18, 2010 at 7:52 pm

However, I will end by saying that many countries including Canada chose to design government and markets that tend to socialize goods and services more and that yield a more equal distribution of the economic pie. It appears to me that the people in these countries are happier in Aggregate than those in the US. They have less stuff but more life.

So in sum, my position is the US govt is a partisan arm of large corporate interests. It sets policy not on the basis of values but for partisan or financial gain. The modern system has become increasingly polarized since the Clinton era to the point where it is no longer arrives at middle of the road pragmatic solutions to public policy issues. This pertains across the board wrt issues ranging from banking, health care, energy policy, budget issues and entitlements. Rome is burning and Fox news and MSNBC keep singing their same old tired fights songs from the Reagan and Carter eras. Meanwhile meaningful reform just gets delayed. Good luck with your system market based and rational. You will need it. But from the sidelines it looks to me like passing a car wreck.

TangoMan February 18, 2010 at 8:34 pm

Karl,

We can stand back and make comparisons b/n the US banking market design and the Canadian one. I submit that the long run choices of Canadian policy makers have been vindicated.

I agree with your last sentence. Keep in mind though that policies develop in response to “facts on the ground” and the Canadian milieu is very much different from the American milieu. Canadian banks held onto the mortgages they wrote, American banks, in general, didn’t. This fact, by itself, influences the loan decision process. Canadian policy makers didn’t have to contend with sizable ethnic minority groups clamoring for the government to “do something” about their low levels of home ownership or the terms of loans already granted or being granted. To my understanding your CMHC is like our FHA and you don’t have a Fannie or Freddie facilitating securitization. In other words, your wise policy makers let your bankers be bankers, and refrained from imposing social engineering mandates on financial decisions. In the end that was a very wise policy decision but it was also likely a very easy decision absent vocal constituencies agitating for a corruption of banking practices in order to direct benefits to said constituencies. In other words, Canada’s demographics are different from American demographics and this results in quite tangible financial and political influence on policy decisions.

Ric Locke February 18, 2010 at 10:06 pm

I propose a relatively simple change: Require the Treasury to report revenue broken down by Congressional district, and make those numbers public. Most especially, make those numbers available to the Representatives.

Then require OMB to report the cost of bills and the money flows by district as well.

The idea is to give each Congresscritter a sense of ownership of his or her District’s output, and a sense of how much of that is being spent for any given program.

Ultimately, I would like to credit the revenues to the Congresscritter in fee simple, to be his or hers absolutely, and require that they be assessed proportionately to pay for the work of Government — but only after we have term limits in place! (Yes, if there was any surplus the Congresscritter could keep it.) I reckon it would focus their minds on cost/benefit ratios.

Regards,
Ric

anonymous February 18, 2010 at 10:59 pm

Karl,

– Quebec is 1/4, not 1/3, of the total population of Canada.
– The “sucession” [sic] referendum was in 1995, not 1997.
– Nobody who actually lives in Canada uses the term “French Canadian” anymore (they are “francophones” or, for most contexts, “Quebecois” or “Quebecers”).

Karl February 19, 2010 at 1:51 am

And let’s be clear the global financial system did not almost collapse b/c US social policy favored home ownership by poor minorities.

Again it did not collapse b/c too many poor African Americans or Latinos or Californians took out mortgages.

Let’s agree on the facts on the ground. It collapsed b/c Citgroup went from having 3 B in MBS on its book to 43B. It collapsed because AIG wrote a bunch of credit default swaps that it wasn’t going to be able to pay and threatened to take down Goldman and other banks. It collapsed b/c the banks were overleveraged. The market has known for years that the US would have to back up Freddie and Fannie. I have been teaching that in my University Money and Banking class for over a decade.

Let’s get the facts on the ground straight here people. The US financial market collapsed b/c of over leverage (which the industry campaigned to loosen leverage restrictions) and a lack of regulation of derivatives specifically MBS and CDS. Attempts by the head of the Commodity and Futures Trading Commission to create transparency, set up derivates exchanges and kill the OTC market by Brooksley Born were killed by Summers, Levitt, Rubin and Greenspan. Why-b/c of lobbying from the FIs that warned legislators this will kill innovation and that there is no need since markets are self regulating. Fancy that – no need for market design. Just have contract law. No need for restrictions on the size of positions of banks for that matter. Don’t worry about “too big to fail” markets will self regulate. So simple, so comforting, I feel like I just had a class of warm milk.

Too many African American or latinos getting homes in California were not going to sink the system else it was too fragile to begin with.

We are coming dangerously close to blaming the rape victim here folks.

The banks failed b/c they successfully campaigned for regulation that let them become overleveraged, too big to fail (which Canadian banks unsuccessfully lobbied for) and left them with derivative exposures that were unregulated and oblique.

None of these regulations have as yet changed. Instead we are talking bank taxes and limits on executive compensation. REALLY America? REALLY Economists? REALLY is that all you’ve got? Oh, but Summers, Rubin and Geitner are still pulling the strings – the same crew that let the banking system off the hook after LTCM and forced Brooksley Born out. Well done.

I think this augers well for how you will handle your coming health care/entitlements/budget/energy crisis. I can’t wait to see the nimble way that you will redesign your markets so as to optimize innovation and yet limit market power to protect the consumers.
If not come to Canada, policy makers don’t have to make tough tradeoffs here. We are able to easily design benign markets without social upheaval. Just ask any Canadian.

Karl February 19, 2010 at 3:09 am

I note the establisment of a bipartisan commisson by the president to look at the long term deficit yesterday, as vindication of my assertion that the current political dynamics are such than they can no longer address America’s pressing public policy issues. Market design is now being left to a “neutral” group that can only make nonbinding recommendations. Good luck with that.

Jeremy R. Shown February 21, 2010 at 10:16 am

Scoop,

I understand that we don’t actually have a parliamentary system, I was trying to point out that right now each party’s caucus is largely unified. This gives the political landscape the feel of a parliamentary system.

EJ Dionne made the same point on Meet The Press this morning.

I’m not sure if that helps or hurts my argument.

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