Tuesday, September 25, 2012

Madison and Romney

At the risk of giving it more attention than it deserves, I want to go back to Mitt Romney's remarks about "47%" of the people being unwilling to vote for him. Part of the problem with these remarks is that, as Rich Lowry points out, they confuse three distinct groups.
Lowry goes on the characterize the remarks as a bad idea poorly stated. To the extent that Romney was suggesting that people who pay no income tax will not vote for him, he's wrong.

Nor would it be fair to say that everyone who does not pay income tax or receives governmental assistance does not take personal responsibility for themselves.
But given that Romney doesn't call for raising taxes on low income people or abolishing social welfare programs, I don't think he meant to say that. I think he was trying to stay - in a cobbed up way - that there are voters that he has no chance to win over and that a substantial reason for that is that they benefti from and do not pay for an ever increasing web of entitlements. Because of this, they have little interest in controlling the growth of the social welfare state. This, I think he meant to say, is a bad thing.
And that was a good point poorly stated.
Having large percentages of the public who don’t pay taxes and receive government aid is probably not healthy for democracy. As Madison wrote in Federalist No. 10, permitting a majority to exact money from a minority is a dangerous thing:

“The apportionment of taxes on the various descriptions of property is an act which seems to require the most exact impartiality; yet there is, perhaps, no legislative act in which greater opportunity and temptation are given to a predominant party to trample on the rules of justice. Every shilling with which they overburden the inferior number, is a shilling saved to their own pockets.”

This doesn’t mean that there ought not be a social safety net or provision of public services. No one who followed Romney’s record in Massachusetts or the positions that he has taken in the campaign can make the case that he disagrees (even if they want more government than he does.) Madison’s observation does suggest that there is a “tipping point” – a stage at which the disconnect between the receipt of benefits and the obligation to pay towards them becomes problematic.
Cross posted at Purple Wisconsin

Clueless in Seattle

I have been watching the NFL for a long time. The first game I can remember was between the Packers and the Los Angeles Rams in November of 1965. I've been hooked ever since.

I have never seen anything like last night.

It's not just that there was a spectacularly bad blown call at the end of the game. That happens. It was not even that there was a series of blown calls - all of which were necessary to put the Packers in a position to lose that game. I've seen that.

It's not even that these replacement officials are spectacularly incompetent. It is becoming quite clear that officiating an NFL game is a very difficult thing to do.

The thing about last night is the clinging stupidity on display. It is the utterly brain dead obstinence.

The refusal to reverse the call was extraordinary. I don't see how any sentient human being with a basic understanding of the rules of the game could watch the replay and fail to understand what had really happened.  It is as if the referee, not satisfied with being incompetent, doubled down and went for feckless.

For this, the replacements can be cut no slack. I can understand why they were unable to officiate the game properly. I cannot understand they lacked the courage to clean up their mess.

But the obstinence that is most stunning may be that of Roger Goodell and the NFL owners. This was not some one-off, incredibly bad performance by the officials. It is the culmination of three weeks of games being spoiled because they are being officiated by people who are not up to the task.

I get the thinking. The NFL believes, with reason, that it is so popular that its fans will tolerate an adulterated product for as long as it takes to resolve its dispute with the referees.

I wouldn't be so sure.

It is, as I said, not unheard of for a game to be decided by a bad call. It is rare that an officiating mistake is as gobsmackingly wrong as this one, but that is a matter of degree and not kind. What may catch up to the league is that this appears to be happening as a result of a deliberate decision by league management. It’s hard not to think that the NFL is being penny wise and pound foolish.

Cross posted at www.sharkandshepherd.blogspot.com

Friday, September 14, 2012

Politics and 9-11-12

I often read things that seem to beg for a response only to find that I just can't get to it - maybe for several days and maybe not at all.
James Causey's column in last Sunday's Journal Sentinel had a passage that I found to be stunning. In a column on why, in his view, we are better off than we were four years ago, he wrote:
He ended the war in Iraq. He brought thousands of troops home. He killed the No. 1 terrorist in the world. He restored America's standing with its long-term allies in Europe.

To channel Joe Biden, this literally made me stop reading. It struck me last Sunday as wildly implausible to suggest that the country is more secure and the world is a safer place than it was four years thanks to the leadership of President Obama.
The war in Iraq ended because it's military objectives were achieved. They were achieved largely because President Bush (belatedly) adopted a "surge" strategy that Senator Obama had opposed. You can't claim credit for what you did not do and would not have done.
The fact that the US military finally caugnht up with Osama bin Laden when Barack Obama was in office was undoubtedly an act of justice. But his richly deserved demise was hardy a significant victory in the war on terror. Bin Laden had long ago been driven to irrelevancy.
To say that we are "respected" is another way of saying that we have moved toward a very different view of America's role in the world - one that deemphasizes assertiveness and exceptionalism and emphasizes multilateralism and acceptance of a greater degree of limitation on American power.
Had I written on Sunday, I would have questioned whether this is a good thing and emphasized the simultaneous - and related - deterioration in our relationship with Israel and Iran's nascent emergence as an pre-modern fundamentalist state with nuclear weapons. The President has fomented the former and doesn't seem to have much of an answer for the latter.
I might have written about the dangers - as well as the hopes -  presented by the Arab Spring.
Today, the events of 9-11-12 would seem to further undermine the notion that the Obama Presidency has improved our lot in the Middle East or rolled back the threat posed by radical Islamicist movements - movements which, I hasten to add, should not be confused with Islam in general.
Indeed, the astonishing events in Libya, Egypt and elsewhere seem to be precisely the things that happen when our willingness to step back is seen as feckless by those who understand strength and not reason.
This is not to say that the President doesn't "care" about what happened or that he really "supports" Islamicist objectives. He does care and he doesn't support the goals of terrorist organizations. But it does fairly raise questions about how this threat is best resisted. It does prompt a debate about how American interests are best protected.
The argument about whether the statement condemning the obscure video that supposedly "set off" these protests was released before or after the Embassy in Cairo was actually besieged is beside the point. The larger question is whether the struggle against fundamentalist Islamicists can be won by failing to robustly acknowledge the values of western society. On that, the statement - which was clearly issued in anticipation of violence - struck the wrong note.
People have a right to do and say offensive things. Freedom of expression is one of the pillars on which our society is built and falling over ourselves to condemn an offensive movie that hardly anyone has seen is not the right message to send. (It is also fundamentally different from the Bush administration's response to the Danish cartoons.)
Beyond that, these attacks have nothing to do with this silly little movie. They were premeditated and coordinated acts of aggression that used the video as a pretext. Now is not the time to say that we "understand" the irrational or to suggest that we will work with the Libyan and Eygptian governments in the same way that a crime victim works with law enforcement.
What happened this week is intolerable and the unqualified message should be that it will not be tolerated.
What's happening in Iran is intolerable and it is fair to ask whether we should have a more robust plan to end it.
As Iran goes nuclear and our embassies are besieged, it is fair to ask whether the President might not find time to meet with our most important ally in the Middle East? It is fair tp wonder whether this was the time for another Las Vegas fundraiser.
The answer to those questions may depend on just what we want America's role in the world to be.The answer to that one may help us decide whether, in this area, we are better off than we were four years ago.

Cross posted at Purple Wisconsin.

Tuesday, September 11, 2012

The "recovery" should have been stronger

In his speech at the Democratic National Convention, Bill Clinton - in that hectoring, finger wagging way of his ("listen to me") - told us that no President could have "fixed" the economy in one term.

Why, not even he could have done it.

History suggests he's wrong. We have a relatively recent example of a strong recovery from a very deep recession in one Presidential term. There may well have been at least one President who could have "fixed" this in four years.

Ronald Reagan.

The economic downturn of 1981-1982 may not have been quite as bad as that of 2007-2009 (although by some measures it was worse), but it was very deep. Unemployment reached 11%. The recovery was far more - and I mean far more - robust than what we have seen during the past three years. The growth rate was over twice what it has been over the past three years and the percentage of persons participating in the labor force rose sharply. Since the downturn of 2008-09, it has remained flat. In other words, measured by the percentage of people working, there has been no recovery at all.

But there's more. It turns out that the central premise of the Clinton/Obama defense of the administration's poor economic record may he ahistorical and wrong.

The story is told graphically by Stanford economist John Taylor in a "chartcast" produced with George Mason economist Russ Roberts (who is also a research fellow at Stanford's Hoover Institute). The central point being made by the Democrats is that the recovery has been so weak because the recession was so deep. The worse things get, they say, the more slowly they get better.

Taylor and Roberts show that this is not necesssarily so. It is simply not true that deep economic downturns are followed by slower recoveries.

In fact, just the opposite seems to be the case. Taylor and Roberts point out that the deeper the recession, the stronger the recovery may be. They refer to Nobel laureate Milton Friedman's  "plucking" model for the business cycle. Friedman used a guitar string as a metaphor. The harder you pull on it, the harder it reverberates and "bounces back."

There is some practical wisdom behind this. A deeper downturn will result in lower inventories, more deferred consumption, heavier reductions in employment such that, when a recovery begins, there is far more upside.

Of course, we can think of reasons why a recovery may not proceed in this way. Indeed, it would be overly simplistic to suggest that a hard fall is always going to be followed by a rapid rise. The point is that Clinton's argment - while superficially logical - may not hold water. Taylor and Roberts show, American recoveries often proceed in a very different way and, in our more recent years, milder recessions have been followed by milder recoveries.

There are two implications for the President's re-election bid. First, this illustrates the weakness of the Presidents'  "well, I stopped the recession" argument. Recessions end quite apart from governmental intervention. In fact, they tend to create the conditions for their own end. Inventories get drawn done and need to be replaced. Work forces can be reduced no more. While I suppose things could get worse in perpetuity, that tends not to be what happens.

So the real questions are, not whether there has been a recovery, but what kind of recovery it has been and how have the administration's policies helped or hindered it. The answer to the first question is easy.  The recovery of the past several years has been the worst of the post war era.

The answer to the second question will be a matter of dispute but we can say this. The President has spent an awful lot of money and left the country in materially worsened fiscal shape. We have little to show for it. To say "well, it could have been worse" and "no one could have done better' is unfalsifiable. It is also implausible.

Second, Taylor and Roberts blow apart the "it's not my fault" theme on which the President is running for relectioon. When Bill Clinton says that even he could not have done better and that "no President" could have, he's - at best - half right.  The so-called "Clinton recovery" actually began when George H.W. Bush was still in office. As I blogged last week, much of what Clinton did right - spending restraint and the absence of grandiose policies - was forced on him by a GOP Congress. He didn't have the votes to do otherwise. As a result, the policies that were actually implemented were nothing like what President Obama wants to do. It may well be that "even he" could not have done better.

But someone else might have. The deep recession of 1981-1982 was followed by an extremely robust recovery.

The President, as I said before, was Ronald Reagan.

Cross posted at Purple Wisconsin

Wednesday, September 05, 2012

Barack Obama is no Bill Clinton

Tonight at the Democratic Convention is, as I understand it, Bill Clinton Night. Despite persistent reports that the two men are not much enamored of each other, former President Clinton has decided to go Full Bubba in support of President Obama's re-election. That's not surprising. I rather doubt that Mitt Romney is a personal favorite of Newt Gingrich or Rick Santorum either. Parties pull together.

The Clintonian move is to claim that Obama is doing - or will do - the same things that Clinton did. These things supposedly led to a strong economy in the mid to late 90s – at least until the tech bubble burst. We've seen the commercials in which Clinton argues that we need to adhere to some unspecified Obama policies that are supposedly just like his own.

Details are not provided.So I guess we'll have to figure it out.  Let's pull up some Nirvana from Paul Ryan's playlist and review federal economic policies in the 90s.

Tax rates were a little higher and, to be sure, President Obama says he wants to return to Clinton era rates for high earners.  But actually, as Michael Tanner of the Cato Institute points out, Obama wants these rates to be significantly higher - about a point higher on ordinary income and a staggering 40% higher on investment income. 

Is that the answer? We know that these rates won't put a ding in the federal deficit.They may, in an economy as weak as ours, be counterproductive. That's about the range of possibility - meaningless to harmful.

In fact, after Clinton raised taxes in 1993, he cut them in 1997. Not only did he cut them - he cut them on rich people. He reduced the capital gains rate by almost 50%. Revenues rose sharply.
So - no - that's not the Clinton magic that Obama has or will or might bring back.
We did have balanced budgets back in the 90s. These were largely a product of the "peace dividend" following the end of the Cold War, the tech boom and, note this carefully, divided government. But maybe it is the Clinton record of fiscal restraint that our current President has sought to emulate - or might seek to emulate - or is thinking about.

No, that's not it either. If there is anything that we can be sure that President Obama is about - it's a larger federal government that does more things. Clinton said that the era of Big Government is over. For our current President, it's just getting started.

As Tanner points out, during the Clinton years, the federal govenment spent an average of 19.8% of GDP. During Obama's Presidency, it's been 24.4%. While government spending as a percentage of GDP will tend to be higher during a poor economy, the President's proposed budgets - his "plan" - never brings it below 22%. On this issue, Paul Ryan may be closer to Clinton than Obama.

Maybe it's the relative position of the middle class. Maybe Clinton's Presidency brought about greater income equality. Although it's a complicated picture, the "decline of the middle class" story has been oversold. The average American family is much better off today than it was 30 years ago. But we have seen a long term increase in the share of income going to the very wealthy. I question how much government policy has to do with it, but, whatever the cause, rising inequality was a fact of life during the Clinton years In fact, by one commonly used measure, inequality - as measured by income - went up during the Clinton years and not during the George W. Bush presidency

Of course, you can slice the numbers any which way to get the result you want. And, as I have written before, I don't think one can assume that the state of the economy is caused by Presidential policies. The point is that we can't point to anything in the Clinton administration and say “this is what we need to do now.” And, to the extent, that we could - say fiscal restraint - the current President is not on board.

There is one huge similarity between Bill Clinton and Barack Obama. After putting both in office, voters came down with a violent case of buyer's remorse and swept Democrats out of Congress in the off year election.

Ironically, it is that similarity that shows how different they are. Clinton's response was to make the best of it and move to the right. He declared the Era of Big Government to be over and signed welfare reform into law. Growth in federal spending was, at least, tempered. He even flirted with entitlement reform and the partial privatization of social security - an effort that fell apart when he was caught perjuring himself in the Lewinsky affair. Again, Bill Clinton even cut taxes on rich people.

It may well be that Clinton did not want to do any of this. I suspect he didn't. But it's what happened.

Obama's response is almost the polar opposite. After his own massive losses, he has doubled down on his commitment to traditional liberalism. In a number of areas - emission regulation, immigration policy, labor policy - he has attempted to do administratively what he cannot do legislatively. Indeed, he has attempted to substantially modify - I'd say abandon - the core of Clinton's signal legislative accomplishment, the work requirements embedded in welfare reform.

For President Obama, the era of big government it not over. It's on hold.

Cross posted at Purple Wisconsin