Category: Political Science

You can read their account of what is going on, as filtered through Brooks.  Excerpt:

…they argue…the Obama administration will not usher in an era of big
government. Federal spending over the last generation has been about 20
percent of G.D.P. This year, it has surged to about 27 percent. But
they aim to bring spending down to 22 percent of G.D.P. in a few years.
And most of the increase, they insist, is caused by the aging of the
population and the rise of mandatory entitlement spending. It’s not
caused by big increases in the welfare state.

The White House
has produced a chart showing nondefense discretionary spending as a
share of G.D.P. That’s spending for education, welfare and all the
stuff that Democrats love. Since 1985, this spending has hovered around
3.7 percent of G.D.P. This year, it’s about 4.6 percent. The White
House claims that it is going to reduce this spending to 3.1 percent by
2019, lower than at any time in any recent Republican administration. I
was invited to hang this chart on my wall and judge them by how well
they meet these targets. (I have.)

Via Natasha:

In fact, Moody’s Economy.com estimates that metro Washington’s economy will actually grow 2.5% from mid-2008 through mid-2010. New York’s economy is expected to shrink 4.2%.

Ross Douthat thinks through liberaltarianism and the new spatial equilibrium has him worried:

What could happen, instead, is a bigger-tent liberalism – somewhat
chastened, perhaps, by some big-government failures in the Obama era –
that makes libertarian intellectuals feel welcome, engages them in
conversations about smarter regulations and more efficient tax policy,
and generally woos them away from their culturally-dissonant alliance
with people who attend megachurches and Sarah Palin rallies. This would
make for a smarter left-of-center in the short run, but I think in the
long run it would be pernicious. It would further the Democratic
Party's transformation into a closed circle of brainy meritocrats, and
push the Republican Party in a yet more anti-intellectual direction.
And it would produce an elite consensus more impervious to structural
critiques, and a right-wing populism more incapable of providing them.
The Democratic Party would hold power more often, and become more
sclerotic as a result; the GOP would take office less often, and behave
more recklessly on those rare occasions when it did manage to seize the
reins of state.

Put aside your views on the R, D, and L people and think in terms of an abstract argument.  There is an optimal distribution of smart people across political parties and it need not be all in the same party.  For one thing, the marginal product of a smart person in a stupid party might be very high.  For another, being in power all the time may corrupt the thinking processes of smart people and we want to have some smart people insulated from this corruption.

So should a smart person attempt to move the world toward an optimal distribution of smart people across parties?  Or should a smart person join the party he or she most wishes to belong to?  Should a smart person advise others according to the same standard she uses to regulate herself?  In general does the world "cluster" smart people too much or too little?

You'll notice that many of these questions apply to fun parties and not just political parties. 

The excellent Arnold Kling adds insightful comment.

But that doesn’t begin to mean that we live up to our reputation for
the kind of liberty classical liberals tend to care about. My sense is
that some American libertarians have a vague sense that if Canada
really was more free, then they should want to move there. But they
emphatically don’t want to move to Canada. My diagnosis is that many
libertarians prefer to live in a place where it easy to find others who
share their individualistic and libertarian values over living in a
place where they would actually be more free, but would feel more culturally alienated.

Via Megan McArdle, here's talk of safe Canadian banks and yet Canadian is still seeing the same downturn as the United States.  One can preach the virtues of Canadian banking regulation as much as one wants, but the Fischer Black-like question remains: how much real net risk exposure did Canadian industry accept vis-a-vis all external sources of risk, U.S. financial institutions included?  Lots.  A decision not to economically decouple from a large, leveraged economy is a small bit like a decision to leverage oneself, though many people do not welcome this perspective.  The bottom line is that risk mistakes have been made by just about everybody, not just the obvious culprits.

Addendum: Arnold Kling is not Canadian but Megan McArdle defends him aptly; he wasn't guilty of anything in the first place, except perhaps having exaggerated the coercive nature of taxation,

Here is more, interesting throughout.  Shakespeare, in his Henriad, understood that citizens do not allow their leaders to be nice, reasonable, likable guys who admit when they are wrong.  I am still glad — for eggheady, "merit good," and self-aggrandizing of my own relative status reasons — that Obama is trying to be reasonable, but I am not naive as to what lies at the end of the process.

Read this post; here is Obama speaking:

Sweden, on the other hand, had a problem like this. They took over the
banks, nationalized them, got rid of the bad assets, resold the banks
and, a couple years later, they were going again. So you'd think
looking at it, Sweden looks like a good model. Here's the problem;
Sweden had like five banks. [LAUGHS] We've got thousands of banks. You
know, the scale of the U.S. economy and the capital markets are so vast
and the problems in terms of managing and overseeing anything of that
scale, I think, would — our assessment was that it wouldn't make
sense. And we also have different traditions in this country.

Here is a short movie by Ingmar Bergman.  Here is a Carl Milles sculpture.  Here is some cabbage with your pizza.

Via J. Wallace, here is a tableaux of how U.S. banking/bailout proposals have evolved.  And of course the Geithner plan has hardly proven itself overwhelming.  I offer up the following hypotheses, none of which settles the issue for me:

1. U.S. banks have been known to be insolvent for some time and everyone is simply afraid to come out and admit it.

2. The economists offer up coherent plans, but they are then bogged down by the input of competing advisers and Karl Rove-like politicos.

3. The goal of the various plans has been to confuse Congress.

4. The Republicans were just stupid and irresponsible and now the Democrats are smart but they lack experience at the rudder and they need another try to get it right.

5. The Republicans were just stupid and irresponsible and now the Democrats are just stupid and irresponsible.

6. The Obama team is brilliant and we are the silly ones who insist on imposing simple narratives on all policy actions.  Good policy should be difficult to understand.

7. The Democrats made the mistake of setting an artificial deadline and by the time it came around they realized they had nothing so they put up what they had, which wasn't much.

8. We need to re-benchmark our expectations because the world doesn't work as well as we used to think.  What we used to consider "bad policy" is, in reality, compared to the relevant alternatives, "reasonably good policy."

9. U.S. banks are insolvent but we can muddle through if we ignore that fact and let them evolve back into solvency.  What we need is a plan which lacks transparency and Geithner delivered.

10. All of the above.

I do.

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.

Robert C. sent me this one:

Here is more.

Matt Yglesias writes:

I would make a few points.  First, some progressives wish to argue that government is fairly efficient (low Medicare overhead costs is a common observation here); in those sectors this argument won't apply.  Second, if a given activity could go to either the private or public sector, we might be reluctant to stick it in the less-productivity-enhancing public sector.  Third, many government activities should benefit greatly from private sector technological advancement (electricity, cars, internet, etc.), yet we don't usually observe those sectors shrinking rapidly, as a percentage of gdp, as a consequence.  This should worry us.  Still, there is truth in Matt's basic observation.

Remember the debates on whether/why conservatives are happier than liberals?  Here is a new contribution, from Jamie Napier and John Jost::

In this research, we drew on system-justification theory and the notion that conservative ideology serves a palliative function to explain why conservatives are happier than liberals. Specifically, in three studies using nationally representative data from the United States and nine additional countries, we found that right-wing (vs. left-wing) orientation is indeed associated with greater subjective well-being and that the relation between political orientation and subjective well-being is mediated by the rationalization of inequality. In our third study, we found that increasing economic inequality (as measured by the Gini index) from 1974 to 2004 has exacerbated the happiness gap between liberals and conservatives, apparently because conservatives (more than liberals) possess an ideological buffer against the negative hedonic effects of economic inequality. 

I am not at all committed to the view that conservatives are truly happier than liberals, whether adjusting for relevant demographics or not.  But to think that if liberals are less happy, it is because of they suffer under a greater awareness of economic inequality…that to me is dubious.  We’re simply being told that conservatives are more happy because they enjoy living with evil.  You’ll notice that the paper does not provide a single piece of causal evidence for this claim.  (And do you recall the results that conservatives give more to charity?)  A simple alternative model (but not the only one) is that people have a certain amount of unhappiness in them and they channel their political discontents to fill that unhappiness. 

This paper is drawn from a long list of new papers devoted to attacking markets, linked to a Harvard Law conference, and I thank Daniel Klein for the pointer.

In a recent paper, Cass Sunstein (with Dick Zeckhauser) writes:

Put that man in charge of economic policy, I say.  Hat tip goes to Peter Klein.  Here is Peter's post on the economics of Stonehenge.

If you want to worry less about the stimulus, try this argument.  Government will spend a certain amount of money in any case, but that spending can be of higher or lower quality.  Maybe you don't like the stimulus spending but is it possible that the spending alternatives would be even worse?  Lock Jason Furman and Larry Summers in a room for an hour, with no web connection and equipped only with a single crayon between them.  They still would come up with a better spending plan than would Congress and perhaps we are getting some version of what except they have more than a crayon.

Alternatively, perhaps progressives should be a little worried.  As Matt Yglesias admits, evidence on massive fiscal stimulus is iffy (through nobody's fault, it's simply hard to know).  But if you're a progressive, the opportunity cost of spending that money is a very non-iffy, highly-likely-to-succeed government program of some kind.  Call it public health infrastructure.  Maybe the content of the stimulus bill isn't as progressive as the alternatives.

If you're a libertarian, the government will just waste that money anyway.  Can it be that progressives should be more worried about the stimulus, in net terms, than libertarians?

The underlying fiscal model here is that Obama has more good ideas (good from a progressive point of view, at least) than he is allowed to spend money on but he will spend as much as he can.  These conclusions can be overturned to the extent that the prospect of a stimulus increases the total of what will be spent.

Addendum: Is Jeff Sachs agreeing with me?