Monday, July 26, 2010

Stuff I Don't Understand

Ezra Klein has a great short post today about what I consider perhaps the biggest mystery of the last couple years: the stimulus that didn't grow.  Had I been blogging back in spring 2009, I would have said that it didn't really matter if centrist Senators trimmed a few hundred billion dollars from the stimulus package, because it could only be spent over time anyway, and that an extra $200 billion or whatever would certainly be passed well before it would have been spent had it been part of the original bill.

In that, I would have been dead wrong. And if my job here is to explain things like this, I can't; I find it completely mysterious that Congress has not, at the very least, poured money to the states to prevent layoffs.  Because I don't understand it, I'm not even sure whether to place the blame with the White House, with Senate Democrats, with House Democrats...I don't know. 

Here's what I do know.  Regardless of what anyone says, the budget deficit is a voting issue for precisely no one.  No one.  It wasn't for people who voted for Ross Perot, it isn't for the Tea Party crowd today.  Moreover, even today, the Democrats remain the party of smaller deficits, and the Republicans remain the party of large deficits.  Nor do I see a logical interest group alignment against at the very least emergency aid to the states.  I do, of course, see the GOP decision to block whatever they can, but I'll note that Republicans have defected on Supreme Court nominations, on the original stimulus, on Frank-Dodd, on the small business bill that the Senate's been working on, on various controversial nominations...so while it's certainly correct to say that Republicans have filibustered everything and forced the Democrats to find 60 votes, it's not correct to say that Republicans have united to block everything they could.

Which leaves me, as I said, puzzled.  Could Barack Obama and his administration been more aggressive about explaining basic Keynesian ideas to Washington opinion leaders?  Sure.  Would that have changed anything?  I don't know.  Are Democrats on the Hill gunshy about deficits when they should be far more worried about economic growth?  Seems like it -- but why?  I don't know.  Is this just a question of numbers, in which the fact of 41 Republican Senators is really, when all is said and done, the whole story?  I think that's very much true on some issues -- but on this one?  Once again, I don't know. 

I'm certain that it's not because voters actually care about the deficit.  I'm certain that it's not because of genuine Republican concern about the deficit -- a quick look at GOP positions on extending the Bush tax cuts make it clear that they continue to be for larger, not smaller, deficits (and that goes too for any Democrats who want to make permanent lower tax revenues without an offset).  Beyond that: well, I don't understand it. 

13 comments:

  1. You're a political scientist, Jonathan. You're paid to understand the complex interplay of motives, incentives, and fears that motivates (or paralyzes) politicians. And yet you are, like the rest of us, at a loss for an explanation here.

    You know what that tells me? It tells me that this is simply irrational behavior. There is no secret agenda or hidden strategy here. It's simply bad politics, no matter how you slice it.

    I think we need to get accustomed to the fact that Washington Dems just aren't that good at reading the mood of the public. Or, they are being led astray by advisors and lack the conviction to push back. Either way, when you consider that, it makes it a lot less surprising that they are (most likely) going to suffer huge election losses in a few months to a fringe discredited party like the GOP. Frankly, who can blame the voters? If the Dems are too clueless to act in their own self-interest, how can we trust them to act in the nation's best interests?

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  2. I have a theory about this: People lack a vocabulary for talking about economics, and "deficit" is one of the negatively connoted words that they happen to know. So they harp about "the deficit" when they really mean that they want the economy to improve.

    We saw evidence of this in the '92 presidential debates. In the one where the ordinary citizens asked questions, someone asked the candidates how "the deficit" had affected them personally, or something like that. GHW Bush responded with bafflement, since the question wasn't really coherent, at which point the moderator (Carole Sipmson, if memory serves) broke in and said something like "I think she means the economy, the 'bad times'." At this point it was Clinton's turn and he gave a smooth answer about all the Arkansans he knew who were having a tough time of it.

    Of course, congressmen and other opinion leaders should be economically better informed than their constituents, and they do have staffs who can explain things to them. But they too have no doubt internalized a general sense of "deficit" not as a specific fiscal category -- let alone something you should be raising in some circumstances -- but as a trope for economic awfulness. No doubt it helps that this misapprehension serves a number of right-wing agendas.

    As to what Obama could have done differently, I firmly believe that he was extremely well-positioned, as a popular and brainy new president in early '09 to whom people were looking for solutions, to go on TV in fireside-chat / Perot-informercial style, and explain some things not just to the political class but to the people. The "output gap" is the real problem, and it's not really a hard concept to explain, especially with a couple of nicely drawn graphs. Obama, I think, could have made "the output gap" the problem on everyone's lips instead of "the deficit," and then if the astroturfers started ginning up tea parties around "the deficit," the natural question facing them (from the media, uncommitted citizens, etc.) would have been, "But how do you propose to fill the output gap"? Whatever Obama's Neustadian-limited powers to move Congress and the bureaucracy directly, he was exceptionally well positioned to help educate people at a critical moment in a way that I believe would have changed the political discussion, and if he had done that we'd be in a different policymaking environment today.

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  3. And a quick P.S.: Why didn't Obama do that? I think he trusted that the old rules still held, and that his fellow political elites would agree on sound (or at least, non-insane) policy directions and then help him convey a positive sense of these to the people at large. This was my problem with Obama from the beginning, and why I didn't support him at first for the Dem nomination: He seems to think he's still dealing with Bob Michel and Everett Dirksen (or maybe that he IS Everett Dirksen) and wasn't prepared for opponents who would do everything possible, including reversing their own positions, in a ruthless effort to discredit his.

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  4. Is this really confusing?

    Sure there have been some defections along the way. And during the first stimulus, everyone was still finding their way.

    But since then it has become painfully clear that the Republicans' strategy is to make Obama fail at all costs. And the worse the economy, the better the chances for failure.

    Things like SCOTUS nominations aren't the key points on which Obama will succeed or fail -- the economy is. And the Republicans have concluded (probably correctly) that no matter how brazen they are in keeping the economy down, Obama and the Dems will take the blame.

    Hell, you prove their point: "I'm not even sure whether to place the blame with the White House, with Senate Democrats, with House Democrats..." Um, how about the Republicans?!? Sure, Obama and the congressional Dems could have done a better job of positioning and framing things, but the substantive blame goes entirely to the Republicans!

    It's painfully obvious that the Reps' opposition has precisely nothing to do with the deficit, the deficit is only their rhetorical tool, so that they can present their relentless obstruction as *not* being about trying to kill the economy and destroy Obama. But there has been nothing about their actions (as opposed to words) that even hints that they are primarily concerned about the deficit.

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  5. Snowe and Collins have been making hawkish noises about the deficit and were the main reason the stimulus was as small as it was.

    Brown insisted that unemployment extension pay for itself. Blue dogs in the House maintain their phony centrist stance through deficit peacockery. And the deficit is an issue even for centrist Democratic senators.

    No second stimulus is a result of the 41 Republican votes combined with centrist Democrats' fear of another spending initiative with a big headline number.

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  6. If Obama could get more stimulus without a knock-down/drag-out fight, I imagine he'd do it. He seems to think he can't, and he, along with Pelosi and Reid, are in a good position to know.

    If that's true, then should Obama be more willing to fight? That's a tough call. So far, Obama has only fought when he had a reasonable chance of success. (Note that with respect to HCR, "reasonable chance of success" means "extraordinarily slim" and "fight" means Herculean effort, even after some of your allies are calling for surrender.) For all the problems Obama's having now - in spite of passing historic legislation - how much worse would they be if Repubs had beat him on the stimulus or HCR or FinReg? The Repubs certainly think he'd be a lot worse off, and I tend to agree. Past presidents didn't help their standing when they tried and failed to pass legislation - instead they created a narrative of failure.

    Obama could make a big push for stimulus knowing that he was likely to lose, in order to shine a light on deficit nincompoopery by Repubs and Blue Dogs, but I think that would be more likely to make non-informed voters (i.e., most of them) think Obama was incompetent than to make them think that the Repubs and Blue Dogs are hurting the country.

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  7. I'm perplexed by your perplexity. I’m no political tactician, but I think I can spot a hard political sell when I hear one.

    Suppose it’s your job to come up with a political pitch to persuade the crucial constituency of non-unionized private sector employees that another round of stimulus consisting mostly in subsidies to state governments is a good idea. It’s your job, in other words, to justify putting publicly borrowed dollars in the pockets of public sector employees who already make more money and enjoy more job security than their counterparts in the private sector and can look forward to a retirement lavishly funded by defined-benefit pensions when private sector employees are lucky to have self-financed 401Ks. Your pitch will be that private sector employees' best hope for finding or keeping a job is for the government to enable comparably skilled people working fewer hours than they do to buy stuff that they can’t afford.

    I don’t doubt that a story to this effect is economically coherent, or even that it may well point to the best way out of our current economic predicament. But is it really mysterious why it’s a hard sell?

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  8. I find it completely mysterious that Congress has not, at the very least, poured money to the states to prevent layoffs.

    You mean all of those red states that claimed they would refuse the money (then took it anyway)? All of those GOP Congress Critters who claimed the stimulus didn't work and then showed up at ribbon cuttings and took credit for big projects that were paid for by the stimulus?

    Look, I knew we had one shot at that stimulus, that the rhetoric in this country has reached fever-pitch toxicity and once something gets passed we'll be lucky if the Republicans don't repeal it, forget trying to pass a "fix" later. But I live in a red state.

    This is why a lot of us far-left DFH's have been wailing and gnashing our teeth over half-assed measures like a stimulus that bent too far to the right and incorporated failed Republican ideas like tax rebates and tax cuts, and didn't include enough things like funds for job-creating projects. This is why we bemoaned the health "reform" that's really just a glorious giveaway to the private, for-profit insurance companies.

    If the Democrats can't pass anything that will actually WORK then there won't be any results and forget a second term. The mood of the country will not allow for second chances.

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  9. I gotta agree with Jonathan here. I always thought the Dems would be able to go back to the well for a little more stimulus if it came to that. I think the White House shared Jonathan & I's opinion on the matter. So why were we wrong? I am thinking it's the Affordable Care Act. The earliest Congress was gonna look at more stimulus was last fall and by that point we were in the midst of epic health care fight which jammed up Congress for nearly a year.

    What I disagree with a lot of my fellow liberals with is the idea that the White House could have gotten more with the original Stimulus. There is no way the were gonna get that number over a trillion. I think they got the most they could and thought (hoped) they could come back if they needed to.

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  10. Perhaps our politicians are simply more stupid than they were before.

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  11. "I find it completely mysterious that Congress has not, at the very least, poured money to the states to prevent layoffs."

    When the public hears about public employees retiring below age 60 with 100k a year pensions I don't find it mysterious. Layoffs could be prevented if salaries and pensions were reduced like it is for many private sector workers.

    If the Dems want more stimulus spending they should push for more infrastructure repair and projects like roads, water mains, bridges etc. This would probably get more support then giving money to preserve high public employee compensation.

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  12. If Perot voters didn't put the fear of deficits into the politicians, what would be an alternate explanation for why the federal budget was more-or-less balanced in the Clinton years?

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  13. Really enjoying this comments thread and wanted to jump in earlier but I was too busy...anyway, I have a quick answer for David: The Fed (and his economists) convinced him that under 1993 conditions, balancing budgets would yield lower interest rates and therefore higher growth. Those conditions don't always (or even usually) hold, and at least IMO don't hold now, but that's why Clinton did it, not the Perot voters. Who, by the way, didn't care about deficits -- although perhaps they cared more about deficits than Perot himself did.

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