The reshaping of the stimulus: public choice thoughts

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.


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