Steve Teles on kludgeocracy

This is a very interesting essay, here is one bit:

While liberals are harmed by the opacity of kludgeocracy’s successes, conservatives are hurt by the lack of traceability of its failures. The fact that so much of our welfare state is jointly administered — either inter-governmentally or through contracting with private agents — makes it hard for Americans to attribute responsibility when things go wrong, thus leading blame to be spread over government in general, rather than affixed precisely, where such blame could do some good. The consequence of complexity, then, is diffuse cynicism, which is the opposite of the habit needed for good democratic citizenship.

And this:

The last thirty years of American history have witnessed, at least rhetorically, a battle over the size of government.1 Yet that is not what the history books will say the next thirty years of American politics were about. With the frontiers of the state roughly fixed, the issues that will dominate American politics going forward will concern the complexity of government, rather than its sheer size.

There are many interesting points in this piece (pdf), with some comments from Reihan.


1) Unless it collapses, crashes and burns?
2) The politicians who say its too big also vote to increase its size.
3) It doesn't seem fixed, it has continued to grow relative to GDP.

I have heard one form of "collapses, crashes and burns" or another from the right for over five decades.

I have seen in the past three decades the right doing everything they can to force "it collapses, crashes and burns" by "vote to increase its size" and the right has accomplished "continued to grow relative to GDP".

While the priorities are different between the right and left, the left checks the size of government by paying for it, something abandoned by the right with the advent of the great intellect of Grover Norquist who argues eliminating taxes will have no costs to "you": TANSTAAFL has been repealed. It has been said "Reagan proved deficits don't matter" but Reagan hiked taxes to pay for things he believed in. The Norquist intellect rejects the entire Constitutional process - he clearly believes the Continental Congress had all the power it needed in 1786, that Rhode Island was correct.

"kludgeocracy" was the solution arrived at in 1787 in order to tax to meet the threat that was certain to come, and that could not be denied in 1812. And taxing was needed to meet the demand for growth because in 1787 everyone looked to government to provide the growth by government redistribution of wealth. Those damn Indians were the obstacle to growth, for starters. Not to mention Britain, France, Spain,...

Obama learned from Clinton's experience that the right does not give a damn about the size of government, debt, or deficits - just power. At 18% of GDP, the right in 2001 was just itching to spend spend spend even as cutting taxes - Clinton had forced them to a balance between income taxes and government spending with Social Security separated and that was driving the right nuts. Obama has compromised with the right and agreed that deficits don't matter and given the right pretty much all the spending the right wants - Obama agrees with the right on the need to increase war spending faster than GDP growth, agreeing with the right that war spending staying constant is a drastic cut in war spending. The only place Obama breaks with the right is on insisting the spending the right wants be paid for with higher taxes.

Note that post WWI, Republicans drastically cut war spending, following the historic practice of cutting war spending at the end of wars. But since WWII, Republicans have been the party of ever increasing war spending.

>Note that post WWI, Republicans drastically cut war spending, following the historic practice of cutting war spending at the end of wars. But since WWII, Republicans have been the party of ever increasing war spending.

what planet are you on? defense spending has declined from 15% of GDP in 1950 to about 4% today, and the biggest drops were under Eisenhower, Nixon, and Bush the Elder.

...and large increases under Reagan and Bush the Second.

Batting .400 is good in baseball. Not so much here.

"Yet that is not what the history books will say the next thirty years of American politics were about. With the frontiers of the state roughly fixed, the issues that will dominate American politics going forward will concern the complexity of government, rather than its sheer size."

Huh? Obama wants to institutionalize Federal spending at 22.5% of GDP, compared with 18.5% under Clinton and around 19-20% under Bush. So we're looking to increase the size of government by an 1/8th in the most conservative case.

That's a lot, and the argument very much is about the size of government.

Huh. I guess I missed the White House press release where Obama put forth his plan to set a floor of 22.5% of GDP in government spending in perpetuity.

No, it's not about size. It's not about complexity either. Complexity and size are byproducts of policy decisions and moreso philosophical goals, not ends and in of themselves.

Obama wants a smaller, less expensive military, an end to corporate welfare, and an expansion of redistributive programs to benefit the poor. Republicans want the opposite, and by limiting federal redistribution programs want to put the financial onus of caring for the poor on states' coffers.

Neither party wants a smaller government in toto. Neither party wants a less complex government in toto.

See Table S-1, p. 205

Obama just reinterated his commitment to this budget.

Outlays averaged 22.1% of GDP during Reagan and Bush I's terms.

(BTW receipts under Obama have been in the 15-16% level, lowest since pre-WWII.)

The long-term increase in federal government spending is largely due to the population getting older. Not sure that more old people is equivalent to "bigger government." The US has been committed to Social Security and Medicare for decades now.

Then we can go back to the Clinton rates, and we're all done? Then bring on the fiscal cliff.

Receipts are now up. Its not 2009 anymore. We are in recovery. Stop trying to use bottom of the recession tax numbers in order to convince people taxes must go up.

Whoops, they are still low, but supposed to go back to normal levels "soon"

"Stop trying to use bottom of the recession tax numbers in order to convince people taxes must go up."

That sounds like dumb politics!

If you gave Obama carte blanche, you think he'd settle for going back to the historical norm?

Go ahead, end corporate welfare. I'm waiting. I also doubt he wants to reduce the military except that (1) he can use it as a wedge issue politically and (2) money is scarce so his gifts have to come from somewhere. Otherwise, we'd be exactly right the ----- where we are, only arguing about the government going bankrupt WHEN it's going bankrupt.

The argument has never been more about size because with the mind numbing complexity that is all people can argue about.

Umm Spending is still controlled by Democrats. Reagan did remove some regulatory burden, and brought military spending back commensurate with the Cold war but he did so with Democrats controlling the purse strings. Same for Bush 1.

Clinton had a GOP Congress from 1995 -2001 and averaged 18.5% of GDP. The economy did well even with higher marginal rates. As Milton Friedman used to say: "its all about the amount of spending".

Last GOP Budget under Bush was FY07 : 170 billion in deficit spending.

First Budget under Obama with Pelosi/Reid: 1.7 TRILLION dollar deficit.

And since Reid won't pass a budget, we get baseline + 5 percent spending until one is passed.

Growth of Medicare, SS, and Medicaid accounts for almost all of the increase. Non-defense discretionary spending is actually smaller under the Obama budget you linked to than it was in 1999 under Clinton. If we could go back to 1999 demographics and 1999-level medical costs, 18-20% spending would be realistic. But, of course, we cannot and SS and Medicare recipients lean Republican these days so don't expect to see many serious proposals from the Republicans on how to reduce spending as a percentage of GDP. 20+% spending is not an "Obama" commitment -- it's a U.S. electorate commitment.

Well now, Romney promised to get Federal spending down to 20% of GDP; Obama promises to maintain it at 22.5% of GDP. There was a difference. The US opted for high spending. With it come high taxes.

Obama is now talking about taxing the Top 2%. On 118 m households in total, that's 2.4 million households with an average income of about $350,000. If I assume wel hit these guys with $30k per household for additional taxes (about 8% of gross income), then that's $75 billion, on a total deficit of $1 trillion. So it's maybe 1/12th of the deficit in total, after a massive tax increase. By the way, to get there, going back to the Clinton rates may not be enough. Clinton rates are 4% marginal, not 8% average, higher than the current rates. But there are other taxes coming for this group as well, so maybe it works some other way. In any event, this group is going to be flattened by coming increases, and for all that, the effect on the deficit will be all but unnoticeable.

So maybe we go to the next layer: the Top 20%. The lower bound here is about $100,000 HH income; the higher bound about $300,000 HH income (2% income threshold). Figure the average income in this group will be around $170,000. Now we're talking 18% (20%-Top 2%) of households, so 21 million households, and let's hit them up each for 6% of gross income. That's good for $216 bn. Someone making $100k would get a bill for $6,000. An earner with $250,000 would be tagged with a $15,000 bill.

But we're making progress. We're about $300 bn into a $1,000 bn deficit.

Now, a 3% deficit—the level traditionally considered sustainable—is about $450 bn, so the necessary debt reduction is $550 bn ($1 trn - $450 bn), of which we've achieved $300 bn cruising through the Top 20% of households. Only $250 bn to go, and, let's see... Only 53% of households pay income tax. Should we stop at the Top 53% or cruise right down to, say, the Top 75%? Well, let's stay with the Top 53%. So now, we have 33% (53%-Top 20%) of households with incomes from about $45,000 to $100,000. Figure $60k is the average here. That's 40 million households which we can hit up for, say, 5% of gross income. That's about $120 bn.

So we're now through the Top 53% and we've raised $420 bn--still $130 bn short of a stable deficit. But OK, let's spot everyone a bit of GDP growth, and we can live with a $570 bn deficit for now.

Oh, there's one more thing, actually two more things. First, I believe high oil prices are holding back the economy and will continue to do so. So take 1% off potential GDP for that.

Second, running a 3% deficit on debt exceeding 100% of GDP may not prove feasible in the long run. Longer term stability might require a deficit not greater than 1-2% of GDP. So that's a problem as well.

And I'd add that government forecasts on spending seem invariably too optimistic.

In short: Taxing the Top 2% or Top 4%, even with horrendous tax hikes, won't be even close to enough. Republicans, Democrats and the President all acknowledge this. And horrendous tax hikes on the Top 20% won't be nearly enough either. Now, horrendous tax hikes on the Top 53% might bring us close.

So, if you hear the President talking about raising marginal tax rates by 2% on the Top 2%, you should cringe, because that means more for you to pay. And further, if that happens, then there's a good chance we're on our way to financial crisis. Why? Because the President won't be able to go back to that well for at least 2-3 years. He can’t say, “Hey, Mr. 200k, I know I hit you up for $12,000 last year, but could you do another $8k this year?” Will he then push taxes on everyone else? Or will he be content to run the tab? If he does that, when does he stop? 2014? That's an election year--he won't have the Democratic votes. Ditto for 2016. So that leaves 2015 or beyond. Miss 2015 and we'll be stuck with deficits until the bond market vigilantes get us. And then things will get much, much worse.

If you think about it that way, the fiscal cliff looks better and better all the time.

Romney promised

Who cares what Romney promised? Romney also promised to cut tax rates while eliminating unspecified deductions to keep revenues neutral. Romney also criticized Obama for cutting $716B off Medicare.spending.

So you read into those tables that Obama targeted a specific percentage of GDP as a baseline for spending?

That's, well, an interesting premise. I've never seen budgeting done that way, but okay.

Then you must believe, Popeye, that there was no difference between Romney and Obama on spending. So Romney would also have been a tax and spend guy. He would have said to the Republicans, "Give me a tax raise on the Top 2%, and then we can talk entitlement reform sometime in the unspecified future."

I strongly believe that entitlement reform would be front and center now had Romney been elected.

Dead -

A budget is prepared by economists and financial analysts over an extended period of time. It will normally be cross-checked against other metrics, share of GDP being one of them.

I did not mean to imply the budget was prepared starting with share of GDP as a target (although that's possible), but rather that share of GDP was one measure against which the budget was tested during and at the end of preparation. Given that the share of GDP is right there on the first page of the appendix, clearly the preparer of the budget was cogniscent of the broader economic implications.

"an end to corporate welfare"

If only...

"Obama wants... an end to corporate welfare"

This is the most laughable statement on this blog today.
Obama wants corporate welfare, just for his guys not the other group's guys.

Seems this book is a modern remake of this classic: Kaufman, Herbert. Red Tape, Its Origins, Uses, and Abuses. Washington: Brookings Institution, 1977 (Kaufman concluded red tape is of our own making, due to conflicting interest groups all rent seeking). And this blurb is wrong IMO: "Conservatives over the last few years have increasingly claimed that America is, in Hayek’s terms, on the road to serfdom. This is ridiculous, for it ascribes vastly greater coherence to American government than we have ever achieved." - mistakes effect and cause. Hitl er's Na zi party was not coherent but their program was definitely on the road to serfdom. intent != Cause != effect. On this last point, on the road to h ell paved with good intentions, if you read the history of Communism in Russia you'll find that Lenin et al were well intentioned in thinking they could abolish the laws of supply and demand and 'free' the proletariat.

I think the real problem with Lenin, Stalin, et al. was that they thought they could abolish the laws of supply and demand and free the proletariat by killing people. That's what set them apart from your run-of-the-mill leftist labor parties. You can always vote for the other party when you decide that you want to privatize the factories, unless you have been shot to death by the secret police.

Killing people for the sake of killing was not Lenin's first priority--you are confusing him with his paranoid successor Stalin. Your broader point about a dictatorship never occurring in a democracy is belied by history: Germany was a democracy before the Nazis seized power, and in the USA when it was founded, who would have predicted 'three strikes and you're out' laws, as well as 'preemptive wars'? Government is the root of all these evils. More government, more evil.

Lenin didn't kill people? He killed some people. Stalin may have been pushing Lenin to do it, and Stalin certainly took murder to a new level, but Lenin's hands were stained with the blood of many, many people.

My broader point was not that dictatorship never evolves out of a democracy. It was that what sets people like Lenin, Stalin, Hitler, etc. is not "good intentions" paving the road to hell, it is that they believed that murder was an acceptable political tool. I think you are completely daft to think that government is the root of all evil. But I would not support your liquidation, no matter how many silly ideas you hold.

MD you missed my points. Your projection noted.

MD - " I think you are completely daft to think that government is the 'root of all evil'."

He didn't say that.

Well, I didn't say what he said I said, so I thought I would return the favor.

I mean, serious Ray, you have to work real hard to miss the point I was making by as much as you did. "You say democracy never leads to dictatorship but you are so wrong!" Strong reading comp skills there.

No, of course for Lenin killing people was necessary to reduce the number of people that would be killed. Marx said when the Revolution came entire classes would be destroyed violently. They would resist this, naturally. The only way to reduce the bloodshed was a ruthless policy of Revolutionary terror which would strike hard and fast and so reduce the killing over all. In a way, a Lenin who merely wanted to kill for the sake of killing would have been an improvement.

Stalin wasn't paranoid. He had people at every level of virtually every level of every Western government. He has nothing to offer them but empty promises and they still betrayed their countries. The rational assumption was that the West could do even better.

It would be simple to predict a Three Strikes and You're Out law. After all, just before the USA was founded, the Puritans had a Three Felonies and We'll Execute You policy. There is a continuity there. Nor is there any shortage of preemptive wars against various peoples especially Indians.

"Stalin wasn’t paranoid."

Stalin's paranoia reached absurd and tragic proportions. As Timothy Snyder points out, Stalin was obsessed with the idea that he was surrounded by Polish conspiracies against the USSR (which have never been substantiated) at a time when Nazi Germany was obviously the greater threat. This delusion started with the murder by the NKVD of thousands of ethnic Poles in the USSR and climaxed with the Molotov-von Ribbentrop pact which resulted in the dismemberment of Poland and the mass murder of Polish leaders and intellectuals on both sides of the Molotov-von Ribbentrop line. Yet less than two years later, Stalin found his army -- weakened by purges he had ordered himself -- facing down the Nazis.

I worry that arguments like this are a bit to dismissive of the idea that these outcomes sometimes look like they do because there isn't really all that great of an alternative out there. Yes there are interests and yes there are costs of complexity, but there seems to be a presumption that if you just simplify you get better outcomes. I'm not sure that's justified. What would the super simple super fair tax code look like? Consumption? Flat income? I'll give you 20 seconds before people start carving out exceptions.

Here's an alternative: improve the tax code by 2%. Or 3%. etc. Why must everything be either-or?

I'm going to use that with my wife: "honey, I'm willing to change some of the habits you (often rightly) deplore. But let's be reasonable, shall we? I'm willing to improve myself by 2, maybe 3%." heh, I'll let you know how that works out.

"With the frontiers of the state roughly fixed, the issues that will dominate American politics going forward will concern the complexity of government, rather than its sheer size."

He wants the debate to be about complexity but the size of government is very much in play. We are still stuck in a debate where the Republicans are completely mired in hypocrisy and magical thinking about the size of government where they can campaign against Obama for wanting to cut spending on medicare while demanding that Obama propose much deeper cuts to medicare.

This isn't really complicated:
The Medicare Advantage cut gets the most attention, but it only accounts for about a third of the Affordable Care Act’s spending reduction. Another big chunk comes from the hospitals. The health law changed how Medicare calculates what they get reimbursed for various services, slightly lowering their rates over time. Hospitals agreed to these cuts because they knew, at the same time, they would likely see an influx of paying patients with the Affordable Care Act’s insurance expansion.

Obama cut what the oldsters feel is "their" entitlement to give to the 'influx'. The pundits try to hide this by claiming it's not cutting benefits but only the reimbursements to hospitals. It doesn't take an economist to tell you...

"they can campaign against Obama for wanting to cut spending on medicare"

That's a misstatement of the position. Republican's campaigned against Obama for cutting $600 billion from Medicare and using the funds for another purpose.

He's really close, makes a lot of important points. But why would relying on the unelected bureaucracy magically cure the problem? I take issue with these arguments:
1. "[Congress] does too much of what the executive is best equipped to do, and too little of what only it can command the authority. Giving the people who will actually have to administer policies greater power over their design would likely increase their simplicity."
-------He's right that Congress does too little in the way of writing properly general, abstract law, but wouldn't delegation just change the lobbying pressure point to the unelected, opaque bureaucracy? Congress would still need to find a way to transparently, simply limit the scope of agency activity.

2. "Increasing the salaries of high-level federal workers throughout the federal government and reducing caps on their numbers could also go hand in hand with cutting the budgets that agencies have to spend on management consultants."
----Really, so public employee unions are a less voracious interest group than private corporate contractors? Pots n' kettles, no?

3.----And then there's this gem: "The myth of the superiority of private business has been supported by funneling government money through contractors in the military and consultants throughout government, and government supported enterprises like Fannie Mae and Sallie Mae."
Private firms and governments have different core competencies. In the long run governments can't efficiently build cars (or much of any consumer goods or services), and businesses can't tax consumption and provide Earned Income Tax Credits. I didn't appreciate his major gloss over this distinction.

He’s right that Congress does too little in the way of writing properly general, abstract law, but wouldn’t delegation just change the lobbying pressure point to the unelected, opaque bureaucracy?

I think it's pretty inevitable that general, abstract laws will leave have at least as much room for interpretation as micro-managing laws; thus leaving regulators will quasi-legislative discretion. The point is to make those regulators accountable various way including: (1) courts checking that they are staying within reasonable interpretations of the overarching statute (2) a clear chain of command to a high-visibility elected official (Presidents, Governors).

Many of these private agents are "non-profits" which are not audited nearly to the extent they should be. People at the top skim the cream, exploit the front line workers, and inefficiently attend to the public interest that purportedly motivates their operations. Many of these non-profits are political activists with a thin veneer of non-partisanship.

If it were up to me, I'd double the number of US attorneys, IRS auditors, judges, and support staff at least on a temporary basis. Cracking down on corruption would pay for itself many times over.

Edit: I was a bit hasty on point 2; he seems to be talking about cutting the agencies on net. The implication that the consultants are the bad guys doesn't seem to be a mechanism for keeping overall cuts in check--but then again, if we assign complete responsibility to short-run expansions of public agencies instead of contractors, at least the public will know who to blame.

Overall, it's great to have another voice pushing for generally substantive transparency, differentiating between government scope and government scale, and encouraging reflection on the problematic Congressional committee system.

Government is too complex??? Has anyone actually worked in a major corporation? Government looks quite simple in comparison

But that corporation can collapse, even GM (look at the shareholders). The government can always just resort to violence.

Federal Register? What's that?

"looks" is the right word.

Get yourself a government job and report back in 6 months.

The complexity cost of a corporation is internalized, the complexity cost of government is externalized.

(Almost every business model I dream up dies because it is too complex. Do you think the average lawyer/legislator/lobbyist worries the same things I do?)

I don't understand your comment. How are any costs in a corporation internalized? All costs are passed on to consumers.

Consumers have a choice. Taxpayers don't.

I'll be sure to tell that to my utility suppliers.

"I’ll be sure to tell that to my utility suppliers."
Thats due to government mandated monopoly. Move to a state that allows choice in utility supplier.

I'm pretty sure that Verizon, for example, isn't a government mandated monopoly. Its complexity costs are passed onto consumers, and then some.

Try again.

As are all of its (Verizon's) competitors, I might add.

So no, I don't have a choice in not paying for complexity costs if I want to purchase pretty much any product or service available for sale in this country, or any other country on the planet in case that's not clear.

dead serious:

I am sorry to hear the iron law of scarcity is forcing you as a Verizon customer to bear 100% of the unit costs of your consumption, as otherwise production of that good would not occur. It looks like you will just have to lobby the government to get some of the costs of your consumption shifted on to others since the market won't do it for you.

Dear A-G,

I don't expect otherwise and you missed the point. The original contention was that government is unique in passing along its complexity costs to consumers (taxpayers).

I call BS. This is standard practice in every business model. Eating costs doesn't bode well for longevity.

yes I have looked at lots, lots, and lots of major corporations, I connect with at least one every day and I find them the nonfinancial ones to be remarkably easy to understand. The financial ones can be harder to understand than the nonfinancial ones are, but I find the government regulations governing financial institutions are far more complex actually.

My single question would be who owned the obamaphone website, and how were they compensated.

Yes, the site named obamaphone explicitly said such a phone did not exist, and yet spent money to register, set up, and administer a site by that name.

(Not to mention actual people on the street using the term, but that's a digression.)

I don't really care about the program, perhaps its even a good idea. I just want to know who owns the site and how they are compensated. I assume they get paid by referal. It also seems like a great political tool to implant in the minds of people who skip the FAQ and go to the form to get the phone on who is giving you the phone.

I wonder how many other groups make their money this way.

This argument reminds me of Jaron Lanier's lament of the loss of influence of the intellectual elite and more indirectly of the philosophy of Asimov's Foundation series. It strikes me as a form of new conservatism in that it is a plea for the return of lost cultural privilege. He seems to want a return to a simpler time when the masses trusted the elites to tell them what to want. I don't think that idea measures up too well by any historical standard. It's like he thinks you can streamline the marketplace of ideas by sweeping all but elite approved ideas from the shelves.

The author seems to have no awareness of his own biases, of which the gross mischaracterization of Hayek's "Road to Serfdom" concept provides one stark example. It reads like he's trying to adapt to a new realization that good government intentions can make things worse without giving up the "government as panacea" banner. It makes me curious how his writing will differ in a year.

Sorry for all the ad hominem, but as a work of rhetoric there's not much else to address.

To anyone who lives in South Carolina and had their social security numbers stolen a few months back, be careful. I had my identity stolen and had to change my name and everything. It is a nightmare. So protect yourselves.

That is all

Thank goodness the government protects us though, right? Right?

Oh please. You wouldn't even have an identity to steal without the government.


(Shorter: That's not your identity! You didn't create that!)

"Conservatives over the last few years have increasingly claimed that America is, in Hayek’s terms, on the road to serfdom. This is ridiculous, for it ascribes vastly greater coherence to American government than we have ever achieved. If anything, we have arrived at a form of government with no ideological justification whatsoever."

That statement is ridiculous. Even if government had no ideological agenda, the sheer scope and scale of the administrative bureacracy is burdensome and intrusive.

This is just what I said yesterday under the post "Questions that are rarely asked (development economics and anarchism)" in response to a question from "axa" to the effect of "What’s the purpose of regulation it is not enforceable?"

December 11, 2012 at 10:42 am
Pretty obviously, it’s so that the politicians who propounded the regulation can please both the constituencies who want regulation and those who don’t. The key is to sound tough passing a law with big general standards in it, then leave the actual enforcement to faceless bureaucrats, who can then be blamed for the law’s ineffectiveness. It is the essence of government in the last quarter century.

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