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Barack Obama China Criticism Economics Financial Crisis Foreign Policy Health care National Security Politics The Opinionsphere The War on Terrorism

Must-Reads of the Week: China’s distortionary exchange rate policy, Mario Savio, David Brooks, Ezra Klein, & Dana Priest’s The Mission

Apologies for the very, very light posting. There are quite a number of personal issues I’ve been dealing with – aside from the uprooted tree in my yard and miscellaneous damage.

But let me still give you some must-reads for the week.

1. China’s distortionary exchange rate policy. On Sunday, Keith Bradsher in the New York Times gave a good primer on how China is using currency manipulation and the global trade organizations to gain economic advantages as part of a global strategy to increase China’s power. China has also been using the global financial crisis to further their economic aims:

China is starting to describe its currency interventions as stimulus. But unlike extra government spending in the United States and other countries, currency intervention does not expand global demand, but shifts it from other countries to China.

Paul Krugman followed this up with a column urging action regarding China:

Today, China is adding more than $30 billion a month to its $2.4 trillion hoard of reserves. The International Monetary Fund expects China to have a 2010 current surplus of more than $450 billion — 10 times the 2003 figure. This is the most distortionary exchange rate policy any major nation has ever followed.

And it’s a policy that seriously damages the rest of the world. Most of the world’s large economies are stuck in a liquidity trap — deeply depressed, but unable to generate a recovery by cutting interest rates because the relevant rates are already near zero. China, by engineering an unwarranted trade surplus, is in effect imposing an anti-stimulus on these economies, which they can’t offset. [My emphases.]

My first attempt to make sense of this issue here.

2. Mario Savio. Scott Saul of The Nation follows up with an excellent profile of Mario Savio who at one point seemed poised to lead the 1960s radical New Left, but who then dropped out of public view:

Savio was a revolutionary and civil libertarian, logician and poet, scientific observer and self-aware partisan–and in his heyday a virtuosic extemporizer who seemed not so much to perform all these identities as to incarnate them. He was, in short, an icon of possibility for his generation of student activists; and so it’s a great historical riddle, tinged with pathos, why he was, in Berkeley in 1964, the lightning rod of his time and, almost immediately afterward, a man who couldn’t conduct the energy he’d summoned.

3. David Brooks on Obama. David Brooks wrote an excellent column last Friday arguing that both the right and left have Obama wrong, as they accuse excessive fealty to an extreme left wing ideology and of being a weak, passive, unprincipled traitor respectively. Brooks describes Obama as I have always understood and described him – and in fact, as he has described himself:

Obama is as he always has been, a center-left pragmatic reformer. Every time he tries to articulate a grand philosophy — from his book ”The Audacity of Hope” to his joint-session health care speech last September — he always describes a moderately activist government restrained by a sense of trade-offs.

4. Ezra Klein. Ezra Klein best summarized the CBO score released yesterday and how it gave the Democrats exactly what they needed:

According to the Congressional Budget Office, the bill cuts deficits by $130 billion in the first 10 years, and up to $1.2 trillion in the second 10 years. The excise tax is now indexed to inflation, rather than inflation plus one percentage point, and the subsidies grow more slowly over time. So one of the strongest cost controls just got stronger, and the automatic spending growth slowed. And then there are all the other cost controls in the bill: The Medicare Commission, which makes entitlement reform much more possible. The programs to begin paying doctors and hospitals for care rather than volume. The competitive insurance market.

This was a hard bill to write. Pairing the largest coverage increase since the Great Society with the most aggressive cost-control effort isn’t easy. And since the cost controls are complicated, while the coverage increase is straightforward, many people don’t believe that the Democrats have done it. But to a degree unmatched in recent legislative history, they have.

Klein then succinctly explained what was missing from the Republican approach to the deficit that this health care bill – to its great credit – attempted to address:

Our long-term deficit is not a function of our current spending, which is manageable. It is a function of our expected spending growth, particularly in health care. With the system growing at 8 percent a year and GDP growing at 2 percent or 3 percent a year, there’s a real long-term problem there. But you can’t cut, or even tax, your way out of it. If you cut 5 percent from the system in one year, that cut disappears by the next year.

5. The Mission. I’m currently reading this 2003 book by Dana Priest who writes for the Washington Post on the military’s mission and how it evolved after the Cold War through the 1990s and into the War on Terror. Absolutely excellent. I highly recommend it.

[Image by me, this morning.]

Categories
Barack Obama Brazil China Criticism Economics Foreign Policy Health care National Security Politics The Bush Legacy The Opinionsphere

Must-Reads of the Week: A history lesson, Reconciling Chart, Theism, Starbucks, the New Global Middle Class, the Beijing Consensus, and the Traitorous Supreme Court

A history lesson in ramming through one piece of legislation. Ezra Klein gives a short history lesson describing the tactics used by Republicans to “ram through” the Medicare Prescription Drug Benefit.

Reconciling chart. The New York Times provides a chart of all the times reconciliation has been used.

Theism. Andrew Sullivan provides a beautiful quote from David Foster Wallace making what may be the best case for theism generally that I’ve seen.

Starbucks. Greg Beato for Reason has an interesting if annoying skewed take on Starbucks and its attempts to stay hip. His history and overall point is interesting, but the point of view he injects, his contempt for his less capitalist brethren, is irritating.

The New Global Middle Class. Rana Foroohar and Marc Margolis in Newsweek describe the new “global middle class” which “is more unstable and less liberal than we thought.” The examples they give are rather frustrating though. Brazil’s middle class is described as “more unstable and less liberal” because they applaud “more state control of the oil industry to keep out greedy foreign firms” and that “they don’t need outside advice on how to structure their societies, thank you.” The Russian middle class’s support for Putin and the Chinese support of the Beijing consensus are also cited and are much better examples proving their point. An interesting article, that touches on some gradually evolving issues in a way that most articles do not – but it seems to harness facts to reach their end rather than allow the facts to dictate the result.

The Beijing Consensus. Yang Yao in Foreign Affairs speculates that the Beijing Consensus – “a combination of mixed ownership, basic property rights, and heavy government intervention” – may be eroding. And as “the Chinese Communist Party (CCP) lacks legitimacy in the classic democratic sense,” and “has been forced to seek performance-based legitimacy instead, by continuously improving the living standards of Chinese citizens,” the end of this consensus would lead to “greater democratization.”

The Traitorous Supreme Court. Orin Kerr at the Volokh Conspiracy takes on the Andrew McCarthy/Liz Cheney line of attack calling those attorneys currently in the Justice Department who represented some of those branded terrorists by the Bush administration asking this question:

Does McCarthy think the Justices of the Supreme Court are guilty of aiding the enemy, and that (if we treat them like everybody else) they should be “indicted for coming to the enemy’s aid during wartime”?

[Image by me.]

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Barack Obama Criticism Economics Foreign Policy Health care National Security Politics The Bush Legacy The Opinionsphere The Web and Technology

Must-Reads During This Week: Perfect Storm for Health Reform, Making Controversy, Cyberwar, Limiting Government, Liz Cheney’s Al Qaeda Connection, George Will, and the Coffee Party

In lieu of a substantial post today (as I’m having trouble getting back into the blog-writing habit), here’s a few links to worthwhile articles.

1. Perfect Storm. Marc Ambinder of The Atlantic explains that a “Perfect Storm Nearly Killed Health Reform; Another Storm May Save It.” However, what Ambinder describes as the “perfect storm” that might save health reform seems to be more properly called Obama’s willingness to wait out bad news cycles.

2. Controversy. Ezra Klein opines usefully on “how to make something controversial“:

The media is giving blanket coverage to this “controversial” procedure being used by the Democrats. But using reconciliation for a few fixes and tweaks isn’t controversial historically, and it’s not controversial procedurally. It’s only controversial because Republicans are saying it is. Which is good enough, as it turns out. In our political system, if Democrats and Republicans are yelling at each other over something, then for the media, that is, by definition, controversy.

3. Cyberwar? Ryan Singel of Wired‘s Threat Level reported some of the back-and-forth among the U.S. intelligence community, explaining why Republicans want to undermine and destroy the internet for national security as well as for commercial reasons. The Obama administration’s web security chief maintains in an interview with Threat Level that, “There is no cyberwar.”

4. Limiting government. Jacob Weisberg of Slate always seems to be looking for the zeitgeist. His piece this week is on how Obama can embrace the vision of limited government.  While all the pieces are there, he doesn’t quite make the connection I want to make: that government is absolutely needed even as it must be limited and its power checked. A post on this line has been percolating in my mind for some time, and now that Weisberg has written his piece, I feel its just about time for me to write mine.

5. Liz Cheney, Al Qaeda Sympathizer? Dahlia Lithwick slams Liz Cheney for her recent ad calling the Justice Department the “Department of Jihad” and labeling some attorneys there the “Al-Qaeda 7”:

Given that the Bill of Rights pretty much evaporates once you’ve been deemed a jihadi lover of Bin Laden, you might think Liz Cheney would be super-careful tossing around such words They have very serious legal implications…Having worked for years to ensure that the word jihadist is legally synonymous with guilty, Cheney cannot be allowed to use it casually to describe anyone she simply doesn’t like.

6. George Will: More Partisan Than Independent? Ezra Klein catches George Will out in a rather telling fit of procedural outrage over the Democrats’ use of reconciliation in the Senate. Plus, Klein uses this nifty chart to illustrate that dramatic change that George Will doesn’t happen to comment upon:

7. Coffee Party. I’m intrigued by this idea, though I don’t know how workable it is.

[Image taken by me over the weekend.]

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Barack Obama Domestic issues Economics Health care National Security Politics The Bush Legacy The Opinionsphere The War on Terrorism

Must-Reads of the Week: Ezra Klein, Sleeper Issue of 2010, Success, Virtual Insanity, Abdulmutallab, Obstruction, and Madden

1. Ezra Klein on Rep. Paul Ryan, Health Care, and the Deficit. If you want a serious, policy-oriented daily take on health care and fiscal issues, turn to Ezra Klein. This week, he began the opinionosphere’s discussion of Rep. Paul Ryan’s serious attempt to balance the budget (which has no chance of being embraced even by the Republicans or Democrats.) Later, he interviewed Rep. Ryan – though it read more like a discussion between two serious people about fiscal policy and health care reform. Klein later attempted to see where along the political spectrum the Senate health care reform bill fell:

Take Rep. Paul Ryan’s health-care plan…as the conservative pole on this issue. Then take single-payer and place it on the other side of the spectrum. Where does the Senate bill fall?

It’s closer to Ryan’s plan than to single-payer. A lot closer, in fact.

Yet this basic fact – that Obama has taken a rather conservative approach to health care substantively similar to the 1994 plan Republicans counter-proposed to Bill Clinton – has been obscured by a Republican Party intent on obstructing Obama’s agenda to gain partisan advantage. As Klein explains, the problem is that the incentives for each party don’t line up:

[T]hat’s the underlying reality of health-care reform. Substantive compromise is easy. In fact, the bill is a substantive compromise. It’s a deficit-neutral, universal-coverage scheme that relies on the private insurance market and looks like one of the Republican alternatives from 1994. What’s hard is political compromise. Because there, the two positions are that Democrats are helped if a bill passes and Republicans make gains if a bill fails. There’s no way to split the difference between those positions.

At the same time, however, Klein castigates Democrats as well as Republicans for failing to put the national good over their own political situations:

The distinguishing feature of the budget conversation, however, is that it happens at a very abstract level. This red line needs to come down to meet this black line, and this huge number needs to eventually become this slightly-smaller number. That’s all fine for a floor speech, but when you start trying to muscle the red line into position or subtract from the very big number, things get real specific, real quick. Suddenly, you’re telling seniors that there are treatments they just can’t get and you’re telling workers that the insurance system is going to have to change. And just as Conrad doesn’t have much appetite for doing that to his constituents on the small things that most of them don’t notice, very few legislators have demonstrated much appetite for doing this to the country on the big things that pretty much everyone notices.

2. I do not accept second place for the United States of America. Edward Alden and E. J. Dionne comment on what is brewing to become the big issue of the 2010 elections, not coincidentally countering the main narrative put forth by the right wing.

3. A successful first year. Norm Ornstein and John P. Judis explain some of the significant accomplishments of Obama’s first year in office.

4. Virtual insanity. Andrew Sullivan’s main theme this week has been the virtual insanity of the Republican Party. He writes: “On every single major issue of the day, they are incoherent.” He quotes Daniel Larison:

Republicans have been treating temporary, tactical political victories as if they were far more significant, strategic victories, when, in fact, they have no political strategy worth mentioning.

Then of course are the highlights from that Daily Kos poll in which – for example – 59% of Republicans believe Obama should be impeached for something-or-other.

5. Reid v. Abdulmutallab. Steve Benen at the Washington Monthly gets some hard hits in on the ridiculousness of the Republican response to Obama’s handling of the panty-bomber. And Benen doesn’t even get into the fact that Abdulmutallab is now cooperating.

6. Obstruction. I examined some of the theories of why the Republicans are so uniformly obstructionist.

7. Madden vs. Real Life. As a football-related article for this Super Bowl weekend, Chris Suellentrop for Wired explored how the video game Madden is affecting the real game of football.

[Image by Doug Kim, used with permission of the creator, and in anticipation of the snowstorm that might rock Manhattan today as I’m commuting home.]

Categories
Domestic issues Financial Crisis Politics The Opinionsphere

How To Oppose Doing What the People Want: Pretend It’s Something Else

Jonathan Chait:

Luntz’s latest memo advising Republicans on how to fight financial reform, obtained by Sam Stein, is a classic of the genre. The unstated argument of the memo is that, being determined to oppose legislation that most Americans support, Republicans should simply pretend they are arguing against something completely different.

This is depressingly and utterly predictable given what happened with the health care debate (government takeover! government-mandated abortion! death panels!) and with the national security debate and on net neutrality and on a range of issues.

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Domestic issues Economics Politics The Opinionsphere

Explaining Republican Obstructionism: Party First

[digg-reddit-me]Republicans are pushing back against the notion that they are simply obstructionists, that they are the “Party of ‘No’!” But as they do so, their obstructionism has reached new heights.

Specifically, you could look to these examples: Senator Mitch McConnell; Senator Judd Gregg; and Senator John McCain (who thought he was in favor of net neutrality before he started to raise money opposing it and calling it a “government takeover of the internet;” and on cap and trade legislation, which he was one of the major supporters of until Obama proposed it; or then changing his position on Don’t Ask Don’t Tell.)

What you think about Republican obstruction determines what you think of Obama. The almost unanimous view of the right wing opinionosphere is that Obama is the most left-wing world leader since Mao Zedong. Obama’s supposed radicalism justifies and explains the unified Republican opposition. Yet no reasonable observer can judge Obama’s policies and actions as very far from the center. He has been ambitious, but cautious. So, with that explanation found to be implausible, what other explanations are there?

Andrew Sullivan posits one which seems the typical and politicized answer – and the one I would have given before the health care debate:

The core narrative of Obama’s promise and candidacy remains what it always was, in my view. He’s struggling against ideology to enact pragmatic reform.

There is truth to this claim – but it is insufficient given Obama’s pragmatism and moderation. On a range of issues, Republicans supported Bush and opposed Obama (for example, compare the treatment of failed shoe-bomber Richard Reid with that of failed underwear bomber Umar Farouk Abdul Mutallab or even deficit spending in general.) This suggests the ideological motivation is not sufficient. Ezra Klein describing Senator Mitch McConnell’s vote against the Conrad-Gregg Deficit Commission posits an explanation that seems most compelling in understanding our current political gridlock, in predicting who will do what:

McConnell’s actions cannot be explained by beliefs, which is something that makes people very uncomfortable. But they can be explained by party incentives, which is something  that makes people even more uncomfortable. We’re very familiar with a model of Congress in which legislators disagree over policy and that causes them to vote against one another. We’re much more concerned by the idea that they don’t disagree at all, but are simply trying to win the next election.

Simply put, for the most part, voters are not electing individuals with ideologies, but parties incentivized and empowered to obstruct to get into power. This creates the dynamic described in an email sent to James Fallows by a source who claims to have witnessed this conversation regarding the stimulus bill:

GOP member: ‘I’d like this in the bill.’

Dem member response: ‘If we put it in, will you vote for the bill?’

GOP member:  ‘You know I can’t vote for the bill.’

Dem member:  ‘Then why should we put it in the bill?’

Ezra Klein, citing John Hibbing and Elizabeth Theiss-Morse, explains why this is an effective political strategy, even if it means giving up on governing:

“People believe that Americans all have the same basic goals,” write Hibbing and Theiss-Morse, “and they are consequently turned off by political debate and deal making that presuppose an absence of consensus. People believe these activities would be unnecessary if if decision makers were in tune with the (consensual) public interest rather than cacophonous special interests.”

Disagreement and deal-making, in other words, signal something going wrong in the political process. They signal that legislators aren’t acting in service of the common-sense consensus of the American people, and are instead serving special interests. Moreover, that’s often true.

In other words, most people, not having the time to figure out what is really going on as misinformation and ideology muddy the news, apply heuristic reasoning – shortcuts for guessing answers to complex problems. People don’t judge policies on the merits as there are conflicting claims, but instead on stories about the process as legislation is being debated and stories about effects after a policy is in force. Given this, its clear that Republicans are taking advantage of the dynamic described well by Nate Silver of FiveThirtyEight.com:

Republicans can brand any policy as “partisan” simply by opposing it, however moderate it might in fact be.

With the typical focus on ideology, this seems backwards. But a focus on ideology doesn’t explain the underlying facts – either the public opinion about what is happening in Washington or the uniform opposition of Republicans. At some point, this dynamic will change – because the media will need a new story and the public will grow bored and the facts will eventually seep into the public consciousness. Remember how effective the fear-mongering was after September 11? Eventually, it began to be seen as a stale political tactic – and though it may work again, for the moment, it seems to have lost its magical power. So, too, will this strategy – even if the Democrats never figure out that the effective way to counter this is to just pass the damn bills with good policy and defend them vigorously in public.

[Image not subject to copyright.]

Categories
Economics Health care Politics The Opinionsphere

Ezra Klein: Our government’s partial role is pricier than the whole of government-run systems.

Ezra Klein:

We don’t have a government-run system. But our system is so expensive that our government’s partial role is pricier than the whole of government-run systems.

I’d love to see conservaties grapple with this issue – rather than try to deflect it with unsourced claims that our health care system is simply the best in the world.

It’s also worth pointing out that Republicans, conservatives, or others defending America’s health care system as the “best in the world” generally use facts that suggest our system is best for those with the money to buy the best. So, for example, if a foreign despot needs treatment for cancer, he’ll come to America. If you have similar financial resources, you too can buy this world-class treatment.

Most other attempts to defend our status quo are simply about deflecting claims. For example, someone might claim that poor people do get treated – with or without insurance – and that they don’t get a lesser quality of care. (Studies have demonstrated that they do – but that’s a different topic.)

The point that Ezra Klein makes here is scarcely understood by most Americans – as they insist that the government stop wasting money, and decry cuts to Medicare.

Categories
Barack Obama Criticism Economics Health care The Opinionsphere

Defending Obama’s First Year in Office

[digg-reddit-me]When the press mentions the online hordes who gathered on the tubes of the internets to push Obama to victory, they are talking about people like me. I started a blog because (along with my unhealthy compulsion to write) I decided to support Obama in 2007; I raised several thousand dollars from dozens of my friends and online contacts; I sent out emails making the case for Obama to my family; I bought a sign to place in my front yard and attended rallies in Brooklyn and Manhattan; I fought against smears in emails and in the social media (on reddit, on digg, on Stumbleupon, on Facebook, and on discussion boards); and on November 4, 2008, for the first time in my life, I walked out of the polling center proud of who I had cast my vote for.

A year on, there has been much commentary about what people like me think now – the young, the wired, the inspired. Were we were just naive and now feel fooled by Obama’s promise of “Hope, change, blah, blah, blah,” as speechwriter Jon Favreau referred to the Obama’s magic formula? Do we think that Obama sold-out to the banks and health insurance industry? Has he disappointed us with his escalation in Afghanistan? Certainly, a good portion of the left has turned against Obama with the passion of scorned lovers – as demonstrated by the histrionic pronouncements of Howard Dean (who denounced the health care bill as a “bigger bailout for the insurance industry than AIG“) and the Village Voice (which labeled the president, “George W. Obama.”)

I cannot speak for all of my fellow liberal bloggers, my fellow redditors, my fellow Obama supporters – but I, for one, am not disappointed. During the campaign, I saw Obama as – and exhorted others to support him because – he was an idealistic tinkerer. He inspired with his grand rhetoric but his policy proposals and instincts were epistemologically modest. He understood that the status quo was difficult to change, and that change brought with it its own perils. His proposals sought to pragmatically improve our society a bit at a time – creating processes that would allow for organic change rather than imposing radical top-down measures. For anyone who took the time to investigate his policy proposals, this was clear – that Obama had learned deeply the lessons of Ronald Reagan and the conservative movement – that centralized government action always had unanticipated consequences; yet at the same time, Obama had not rejected the lessons of Franklin Roosevelt and Bill Clinton – that government could also do much good, that collective action was needed to shape our society, and that times of crisis called for, “bold, persistent experimentation.”

Obama has met my high expectations; he has governed seriously and with bipartisan substance. His Congressionalist approach has led to a string of legislative accomplishments rarely seen in Washington and a stronger record of spending cuts than George W. Bush. (Though his predecessor admittedly did not set the highest standard.) He passed a massive stimulus bill supported by policy wonks on the left and right, composed of more than a third tax cuts, but including much needed funding for education, infrastructure, and technological innovation. He pulled the nation back from the brink of a financial crisis and recession without nationalizing the banks or bailing them out yet again. He moved America back from the panicked emergency measures adopted by George W. Bush in the aftermath of September 11. He salvaged some deal from Copenhagen despite the Chinese attempts to undercut America’s position. He appointed a moderate, liberal pragmatist to the Supreme Court. He has made many long-term bets in domestic and foreign policy which we have yet to see play out. And of course, there is his attempt at health care reform – combining the most significant attempt at cost control in a generation with the most significant expansion of access to medical insurance. (The two goals being surprisingly compatible as Milton Friedman acknowledged.) Though this last bill still has not had its fate decided, these are serious and substantial accomplishments that form the basis of a solid legacy. Yet Obama hasn’t been able to achieve his core promise: to overcome the Freak Show that has dominated our political discourse for a generation.

This is the one profound disappointment I have with Obama’s presidency to date. His core promise (which helped him defeat Senator Clinton) was that he would be better able to move past the rabid partisanship and petty squabbles of the Baby Boomers – that he could surmount the influence of the “idiocrats” on our political conversations, as they jumped from petty scandal to scandal, from one moment of faux outrage to another. This Freak Show that dominated our political conversation forced politicians to treat their constituents as children incapable of understanding either why their leaders might be less than perfect or that they could not both lower taxes and increase spending forever. As Obama addressed the issue of Reverend Wright in his campaign, he proved he was capable – at least for a moment – of surmounting this Freak Show mentality, treating the American people as if they were adults capable to wrestling with the difficult issues of race and religion. But since this moment, Obama has seemed unable to fully rise above this Freak Show. With the Tea Party demonstrations in August 2009 rallying against “death panels,” handouts to illegal immigrants, “government mandated abortion” and other myths that were useful in rallying the Republican base (if not in describing the bill), he seemed finally to have lost the conversation. Those with legitimate and conservative concerns, as well as those with progressive ones, were overshadowed by the inchoate anger of the hysterical.

Now that Scott Brown has replaced Ted Kennedy – and with the pundits and media figures and Republicans circling – the Freak Show has declared health care reform dead. Again. For Obama to resurrect this bill, to restore the momentum in his presidency, and prove he is capable of governing and dealing with long-term issues (rather than the political posturing which have marked the past 15 years), he will need to break the hold that the idiocrats have over our political discourse and reconnect with his grassroots supporters instead of playing the inside Washington game. While Obama spent his first year focused on governing and policy, with his State of the Union last night, Obama began to focus on the political task of getting the American people behind him as he attempts to tackle the difficult, long-term issues that have been festering for so long unaddressed by our dysfunctional politics.

We should remember one thing as Tea Party supporters jubilantly support their momentum and energy with Scott Brown’s election: 14 months is a very long time in this political age. Interpreting political movements in light of the Feiler Faster thesis, it’s not surprising that it was just 14 months ago that the Obama grass roots which seemed ascendant now seem dormant; and 14 months from the August birth of the Tea Party movement happens to be November 2010.

[Image not subject to copyright.]

Categories
Criticism Economics The Opinionsphere

Victor Davis Hanson’s “Productive Classes”

It’s always interesting to watch a pundit venture from his field of “expertise.” Scratch a bit beneath the surface, and anywhere outside of their expertise they tend to be rabid ideologues. Every virtue they bring to their perspective on what they are an expert in vanishes. Generalists on the other hand seem to bring the same worldview to everything – whatever it may be. (My goal with this blog is to be a rather amiable generalist.)

For example, Victor Davis Hanson is an expert on ancient warfare. However, he wrote last week a column in the National Review about the “war” on the “wannabe rich.” His evidence of such a war is based on the idea that someone who is extremely wealthy has far more money than he or she needs – and so, increased taxes don’t hurt them much. Which is, of course, the entire basis for the progressive taxation that Hanson is trying to reject – that money beyond a certain base of income serves little use. The utility of more income for someone making $500,000 a year is undoubtedly less then for someone making $50,000.

Hanson also attempts to play the populist card in the class struggle between the “haves” and the “have mores” – or the “haves” and the “have yachts.” According to Hanson, those making between $200,000 and $500,000 are the “productive classes who want to be rich” (the 95% of Americans making less are not mentioned) and those making more are the corrupt elites. It’s a rather interesting view – quite Randian in its conclusion: “continue to punish and demonize [the productive classes], and the country will grind to a halt – as we are seeing now.”

More mature libertarians and conservatives often look at Rand through the somewhat rosy lens of adolescence when they first discovered her – but they find her theories to be fundamentally lacking. Hanson though seems to still view the world through this adolescent lens – and doesn’t realize how it sounds to claim that those who are still making $500,000 in the midst of this recession are deliberately grinding the economy to a halt because they feel demonized and burdened by paying a slightly higher percentage of their taxes than they did a few years ago (but still less than they did under Clinton, Bush I, or Reagan.)

Categories
Economics Financial Crisis Politics The Opinionsphere

Rooting for a Fiscal Catastrophe

[digg-reddit-me]The Wall Street Journal editorial board is following the exact playbook I predicted/described Republicans would take in dealing with the coming fiscal crisis.

During those times it had power since 1980, the Republican Party has blown out the deficit while in office by increasing spending for their constituencies (the elderly, big corporations, and the military) while cutting taxes for the wealthy a lot and a bit for everyone else. When out of office, the Republican Party has agitated for “fiscal responsibility” by which it apparently means protecting the status quo of spending while cutting taxes even more (and until the aughts, it also included reducing spending on groups that weren’t part of the Republican base.) This strategy was christened “starve the beast” – and it theoretically will culminate in the moment when government spending is so far above government revenue that no increase in taxes could make up for the difference. Thus a generation in the future (probably mine) will need to suffer through increased taxes with minimal government assistance, discrediting the idea of effective government itself.

Bill Clinton responded when he was handed this mess by fixing the fiscal situation he was handed: shelving his proposed spending, reforming welfare, cutting the budget, and keeping taxes as they were. (In fairness, George H. W. Bush also helped fix Reagan’s fiscal irresponsibility.) Obama proposes something different – to keep the economy growing, to “bend the curve” of health care spending, and with some of the fiscal pressure relieved, then to come to some “grand bargain” which will shore up our fiscal situation.

Looking at the politics of the moment, I predicted that the Republican Party (of which the WSJ editorial board is a primary voice) would want no part of any solutions. They would respond to this challenge from Obama by passing off all the responsibility for the increases in taxes or cuts in spending onto the Democrats (despite the facts shown in the graph below) – and would strive to protect the status quo by defending the privileged position their constituencies have – all the while asserting that fiscal disaster is looming.

This is how the Wall Street Journal framed the issue:

Democrats are candid, at least in private, about the kind of the deal they have mind this time around. Democrats would agree to means-test entitlements, which means that middle and upper-middle class (i.e., GOP) voters would get less than they were promised…

In return, Republicans would agree to an increase in the top income tax rate to as high as 49% and in addition to a new energy tax, a stock transaction tax, or value-added tax. The Indians got a better deal for selling Manhattan.

New taxes will only reduce the pressure to cut future spending…

The Democrats will use a tax-and-spend commission to confront Republicans with the false choice between huge tax increases or fiscal disaster. Republicans should respond with their own choice: They’ll agree to a deficit commission only if it takes tax increases off the table and forces all of Washington to confront the hard spending trade-offs between guns and butter, old and young, the poor and middle class, and social welfare and corporate welfare. Otherwise, Democrats should be forced to defend and finance their own destructive fiscal choices. [my emphasis]

To rephrase what the Journal is saying, “We oppose any changes to the status quo that would hurt anyone who benefits now. Therefore, we want no part of any solutions to the coming fiscal crisis. But it’s the Democrats fault!” For the Journal, fiscal responsibility is cutting spending. Yet they oppose cutting spending on “middle and upper-middle class (i.e., GOP) voters.” And they also have previously opposed cutting spending on the elderly and the military.

For the Republicans, responsible governance – where spending and revenue are matched – is irresponsible.

Given this ideological position, it’s not surprising that what the WSJ is signaling that they wouldn’t mind spending cuts as long as the Democrats take responsibility for them and those who benefit from the status quo don’t have to give up their privileged position. The Republicans are determined to keep the status quo intact until it becomes unsustainable – and in the aftermath of that fiscal catastrophe, remake the nation by cutting back the role of government. In contrast, the Democrats are committed to making the status quo into a sustainable system, while aiding those who are least privileged.

That’s not even getting to the inaccuracies in the framing of the piece (i.e., the lies at the heart of it.) Ezra Klein posted an excellent graph in response to this op-ed pointing out that the “destructive fiscal choices” the WSJ is attributing to the Democrats can be entirely placed on the Republicans.

Beyond the ten year time window in the graph, the entitlement spending budget explodes because of rapidly growing medical costs and an aging population – but that is exactly the rationale for health care reform that “bends the curve” that Democrats have been pushing and the Journal and Republican Party have opposed.

[Image by kevindooley licensed under Creative Commons.]