Category: Political Science

If you've been paying attention, the Fed likes to release bad news
after the markets close on Friday afternoon. The past couple weeks,
they've announced the failures of small regional banks.

Well today [referring to a Friday], they announced something just a little bit bigger – the government bailout/takeover of Fannie Mae and Freddie Mac,
the two large mortgage finance guarantors. The markets have been
expecting this for a while, but obviously not everyone was expecting it
as their stock prices were $5.50 and $4 respectively when the market
closed today. If everyone was expecting this, then those prices would
have been a lot closer to zero.

Here is more.

Eric Posner and Paul Krugman defend the use of tariff threats against polluting countries, such as China.  I'll outsource my response to an earlier post by Matt Yglesias:

The bottom line about the international aspects of climate change is that the very idea of an effective response assumes
the existence of a generally cooperative international environment. It
doesn’t assume the non-existence of the odd “rogue” state here or
there, but it assumes the absence of any kind of serious great power
rivalries. Not just China, but also India and probably Russia, Brazil,
and Indonesia as well are going to need to cooperate in a serious way
with the OECD nations on this. And I just don’t see how you’re going to
get where you need to get through coercion. If anything, I think
attempted economic coercion of China is more likely to wind up breaking
down solidarity between the US, EU, and Japan than anything else.
First, we impose our carbon tariff. Then suddenly Airbus and European
car companies are getting all kinds of sales because the EU hasn’t
followed suit. Now not only are the Chinese mad at us, we’re mad at the
Europeans. Optimistically, at this point everyone decides coercion is unworkable and we start to back away.

I'll say it again: the current version of Waxman-Markey will make things worse.  Keep in mind by the time we are slapping those 2020 tariffs on China, we won't have made much progress on emissions ourselves.  How would we feel, and how would it influence our domestic politics, if the Chinese demanded we pass Waxman-Markey, while polluting at a high level themselves, or otherwise they will stop buying our Treasury securities?

Median voter theorem.

It's my first-cut account of a lot of what is going on in the newspaper headlines.  Yet somehow I rarely see it mentioned, even when I read very prominent social scientists commenting on current policy.

I thank Garett Jones for a useful conversation behind this blog post.

Ryan Avent has a good post and I agree with much of it (and read him as expressing a good deal of agreement with me).  I do, however, disagree with one part:

…if Waxman-Markey is a bad bill, then it is a bad bill largely because
the minority party has an energy plan that scarcely recognises the
threat of climate change as a problem. This guarantees that the vote
will be close, which guarantees that Democrats will have to wheel and
deal and wheel and deal to get the votes they need–the last Democrat to
be converted can name his price. It's a little silly to complain about
the imperfect bill Democrats have crafted, when the Republican minority
has basically forced them to build a law that every last Democrat can
accept.

I don't mean to pick on Ryan but I am seeing this idea growing in influence and I wish to push on it a bit.  (By the way, here is his follow-up post.)  A few points:

1. Negative claims about Republican politicians are, in fact, usually true.  I don't wish to defend them or make you dislike them less.

2. If a policy idea cannot survive the opposition being partisan and also lying about it, I submit the policy idea is not such a good one.  You can blame the opposition with all the justice in the world on your side, but still the idea has major, major problems.

3. The notion of a "minimum winning coalition" is commonplace in political science.  Maybe the idea isn't as universal as its early proponents claimed, but still it is an important force in shaping political equilibria.  If a policy idea cannot survive being turned into a "minimum winning coalition" version of itself…well…see #2.

4. Both the Republicans and the Democrats share some common problems and they are known as voters.  And special interest groups.  If your plan cannot survive the influence of voters, and special interest groups…well…see #2.

5. Many government programs can in fact survive all of these negative influences and still emerge as good ideas.

6. The Democrats do in fact rule by more than one seat in both houses of Congress.  So maybe the marginal Democratic legislators don't have so much bargaining power after all.  You can cite 60+ in the Senate but of course this is endogenous to what the Democrats themselves think public opinion will bear.  There is a reason why the Democratic establishment does not, as Matt Yglesias so often recommends, abolish the 60+ requirement.  Often they prefer inaction, combined with the ability to blame the Republicans for such.  See #4.  The often-sad truth is that the Democrats as a whole prefer to tailor policy to pander to their "worst" members.

7. If indeed "the revolution is over" it is a question of critical importance, for progressives, what lessons to take away from the experience.  I'm not yet sure what are the correct lessons, from a progressive point of view (Robin Hanson and I have been chatting about this and I hope to blog it more soon).  Deep in my bones, however, I feel that if the main takeaway were "the Republicans were at fault," that a significant learning opportunity will have been missed.

Megan McArdle writes:

There's a lot of sadness on liberal blogs these days.  What happened to
Hope and Change?  Climate change is coming sometime next year, maybe. 
Financial regulation also isn't coming anytime soon, and what's
proposed is the minimum set of politically feasible propositions rather
than a sweeping overhaul.  And health care? 

There is more at the link and I suspect it is mostly or fully correct.  Here is Ezra on health care reform and the very big chance that it might fail.  I'd just like to repeat a simple question I asked at the beginning of the Obama administration: which would you rather have, the fiscal stimulus or $775 billion in public health programs?

Even better, how about $300 billion in stimulus — the immediate stuff like aid to state governments — and $475 billion in public health programs?

At the time no one except a few progressives thought such a question was particularly relevant.

Note that the economy has seemed to stabilize, more or less, and well under ten percent of the stimulus money has been spent to date.  Moving forward, if no further major programs will be put into place, how would you like to spend the rest of that cash?

Seriously.

And I don't mean this post as a poke at Democrats in particular.  Conservatives, libertarians, etc. all commit their own versions of this error, at least if they find their way to power.  The basic mechanism is simply that policy advocates underestimate the opportunity costs of the measures they propose, as they tend to see those measures as more "win-win" than others are willing to believe.

From The Economist, there is an entire symposium.  Here is my bit and it closes as follows:

I thought these sentences from Mrs Romer’s piece were excellent: "As
someone who has written somewhat critically of the short-sightedness of
policymakers in the late 1930s, I feel new humility. I can see that the
pressure they were under was probably enormous."

That's the
bottom line. With Mrs Romer's piece we have one of the world’s great
macroeconomists, yet not quite being allowed to play that role.

In part I was referring to this:

I am least happy with the sentence: "By coupling the expansion of
coverage with reforms that significantly slow the growth of health-care
costs, we can dramatically improve the long-run fiscal situation
without tightening prematurely." So far we have every reason to believe
that Congress–and indirectly the American voter–will not allow the
growth of health-care costs to be slowed. Mrs Romer's sentence could
have been rewritten: "Congress is unlikely to significantly slow the
growth of health-care costs, so we cannot dramatically improve the
long-run fiscal situation without tightening prematurely."

If you're wondering, all that talk of "Mrs Romer" is a Britishism added by The Economist (should I have offered her a "lovely biscuit" as well?).  I get a kick out of seeing myself having "written" that, but being from New Jersey what I sent in was simply "Romer"; next in line would have been "Professor Romer," "Ms. Romer," or even "Mrs. Romer."

Of the total loans, Bt500 billion will be earmarked for mega projects under the jurisdiction of the Bhum Jai Thai Party. The remaining Bt300 billion will be shared by the Democrat and the Chart Thai Pattana parties.

How's that for a way to break through parliamentary logjams?  Just give the money to the parties themselves, they'll find ways of spending it.  The full story is here and for the pointer I thank Air Genius Gary Leff.

Democrats on three House panels continue to meet privately to seek consensus on a single plan. Democrats on the House Ways and Means Committee said they were trying to decide whether to finance coverage of the uninsured with one broad-based tax, like the value-added tax, or a combination of smaller taxes.

The article is here.  I wasn't expecting that for years to come.  From my distant perch out here in Fairfax (and Arlington), I believe this means health care reform is falling apart.  It means the unions won't let them tax health insurance benefits and the CBO won't let them punt on the issue of finance.

But they do understand that price may signal quality; the price was raised from $500,000 to $1.5 million:

A former Khmer Rouge official photographer has put on sale for 1.5
million dollars what he claims to be Pol Pot's clothes, sandals and
toilet, along with thousands of photographs and other artifacts he
collected during the genocidal regime's 1975-79 rule. "I will sell Pol
Pot's sandals, toilet, his uniform and cap, thousands of photographs
and the two cameras I used during the Khmer Rouge period," said Nhem
En, who was recruited to take photographs of detainees when they
arrived at Tuol Sleng torture prison in Phnom Penh.

Forgive me if I am skeptical that the government is going to show GM
how to streamline its bureaucracy.  Nor do governments historically
have a good record as cutting-edge auto designers.

All the government can give GM is money.  Our money.  Perhaps we should change the name to American Leyland.

Here is more, from Megan McArdle.