Can we live up to Christina’s expectations?

Ross Douthat looks to the liberal blogosphere today and examines two perspectives on the source of overheated rhetoric.  He compares Paul Krugman’s opinion (“the truth is that we are a deeply divided nation and are likely to remain one for a long time”) to the more pragmatic view of Matt Yglesias (“that we have a kind of furious partisan debate despite the fact that we don’t see large disagreements about the basic principles of welfare state capitalism.”)  Douthat comes down on the side of Yglesias:

“All the sound and fury of partisan warfare is just a way to deceive ourselves into thinking there’s something more important at stake in each election than special interests jockeying for control of the fiscal commons. Our debates are so furious, in this reading, because our disagreements aren’t that significant: We rely on apocalyptic rhetoric about socialism and fascism, tyranny and freedom, to persuade ourselves that we’re actors in a world-historical drama, rather than just interest groups feuding over the spoils of governing a prosperous but somewhat decadent republic… most Americans don’t actually disagree strongly about whether we should have a stronger safety net or a more limited government. They think, in a vague and none-too-consistent fashion, that we should have both at once — low taxes and expensive entitlements, subsidies for me but not for thee, a go-go free market when G.D.P. is rising but a protective government ready to save us from our foolishness when the economy goes bad, and so on.”

Douthat goes on to say that the overheated rhetoric is merely an effort by the minorities of each party on the left and the right to convince moderates that much as at stake.  By Douthat’s logic, the Republican Party opposes the Affordable Care Act and the Dodd-Frank Wal Street Reform Act mainly because they don’t trust Democrats, but otherwise their policy of choice would be similar.  Douthat is right that many Americans want expensive entitlements yet don’t want to pay for them with taxes, but the Republican Party is losing its few remaining moderates minute-by minute.  The problem with his analysis is that the policy proposals of the Republican Party consistently call (since the time of Reagan) for the removal the Federal government’s power, in the words of Grover Norquist, “reduc[ing] it to the size where I can drag it into the bathroom and drown it in the bathtub.”  The Tea Party has taken over the Republican Party, and put in power people like Ron Paul who wants to End the Fed, and who now is in charge of oversight of the Fed.  Health care did not come down to distinctions about abortion and euthanasia: opponents made it clear from day one that they viewed the act as socialist tyranny.  The Republicans simply do not wish to govern from the center.

Which takes us back to the original point.  Douthat claims that the overheated rhetoric is simply political football, practiced equally by each side. George Packer makes clear today that in fact one side makes violent rhetoric an art form, a calling card:

“In fact, there is no balance—none whatsoever. Only one side has made the rhetoric of armed revolt against an oppressive tyranny the guiding spirit of its grassroots movement and its midterm campaign. Only one side routinely invokes the Second Amendment as a form of swagger and intimidation, not-so-coyly conflating rights with threats. Only one side’s activists bring guns to democratic political gatherings. Only one side has a popular national TV host who uses his platform to indoctrinate viewers in the conviction that the President is an alien, totalitarian menace to the country. Only one side fills the AM waves with rage and incendiary falsehoods. Only one side has an iconic leader, with a devoted grassroots following, who can’t stop using violent imagery and dividing her countrymen into us and them, real and fake. Any sentient American knows which side that is; to argue otherwise is disingenuous.”

There are distinct differences between the right and the left; the big problems we will face, including Climate Change, long-term entitlement reform, and resource scarcity, will require elected officials on all sides who are willing to work together.  Unfortunately, the political dynamite that George Packer describes will prevent much from being accomplished in the next two years.  The Republican Party and its Tea Party majority are happy to wait for 2012 and continue their cries of socialist tyranny all the way to Election Day.


Network vs. cluster politicians

President Barack Obama and Senator Ted Kennedy...

Image via Wikipedia

David Brooks writes today about the criticism that President Obama has received this week, from Paul Krugman and countless others, over the tax compromise that he made with the GOP.  Brooks defines the President as a ‘Network’ liberal, and his liberal critics as ‘Cluster’ liberals:

“Cluster liberals (like cluster conservatives) view politics as a battle between implacable opponents. As a result, they believe victory is achieved through maximum unity. Psychologically, they tend to value loyalty and solidarity. They tend to angle toward situations in which philosophical lines are clearly drawn and partisan might can be bluntly applied. Network liberals share the same goals and emerge from the same movement. But they tend to believe — the nation being as diverse as it is and the Constitution saying what it does — that politics is a complex jockeying of ideas and interests. They believe progress is achieved by leaders savvy enough to build coalitions. Psychologically, network liberals are comfortable with weak ties; they are comfortable building relationships with people they disagree with. This contrast is not between lefties and moderates. It’s a contrast between different theories of how politics is done. Ted Kennedy was a network liberal, willing to stray from his preferences in negotiation with George W. Bush or John McCain. Most House Democrats, by contrast, are cluster liberals. They come from safe seats, have a poor feel for the wider electorate and work in an institution where politics is a war of all against all.”

Brooks is trapped in the fuzzy center, with the vanishing moderates.  His analysis of the political climate today is crystal clear, and he is exactly right, the President did achieve a victory with this tax compromise.  The problem with politicians that give no quarter is that the major problems we face demand compromise and cooperation.  The President wants to tackle comprehensive tax reform in the Spring; progress on that difficult issue will be hindered by cluster politicians.  The main reasons I originally became a supporter of the President, after his 2004 Convention speech, were that I saw a Great Communicator in the mold of Reagan, and a network politician willing to work across the aisle.  This is the perfect opportunity for the President to play to his strengths.

With the 2012 election approaching, Paul Krugman is right about one thing: many Republicans will be working to sabotage the President because they think that will deliver the White House to the GOP.  The problem with the GOP game plan is that the American people will not stand for two years of stalemate.  GOP opposition to the Health Bill for 9/11 workers is the perfect case in point.


Reid to climate: drop dead. Can we afford inaction?

Ross Douthat admits Global Warming is a problem, but argues for inaction.

Today, in the New York Times, Paul Krugman and Conservative wunderkind Ross Douthat present competing theories on why climate change legislation is dead this year.  Douthat, surprisingly, admits that Global Warming is a genuine problem:

“…Conservatives who treat global warming as just another scare story are almost certainly mistaken.  Rising temperatures won’t “destroy” the planet, as fear mongers and celebrities like to say. But the evidence that carbon emissions are altering the planet’s ecology is too convincing to ignore. Conservatives who dismiss climate change as a hoax are making a spectacle of their ignorance.”

Douthat blames the demise of legislation on conservatives; in his words there is “seemingly an unbridgeable gulf between the conservative movement and the environmentalist cause.”  Of course, that framing of Global Warming is purposeful.  In Douthat’s mind, Global Warming is a problem for bird watchers to worry about.  In fact, Douthat provides the argument for inaction by making a dangerous assumption:

“…The assumption that a warmer world will also be a richer world — and that economic development is likely to do more for the wretched of the earth than a growth-slowing regulatory regime. But it’s also grounded in skepticism that such a regime is possible. Any attempt to legislate our way to a cooler earth, the argument goes, will inevitably resemble the package of cap-and-trade emission restrictions that passed the House last year: a Rube Goldberg contraption whose buy-offs and giveaways swamped its original purpose… Not every danger has a regulatory solution, and sometimes it makes sense to wait, get richer, and then try to muddle through.”

Douthat does not discuss the concept of externalities, and this is key.  An externality is the result of a transaction that is borne by neither the buyer nor seller directly, but rather by a third party.  In the case of our fossil fuel supplies, the externalities are only growing.  In addition to greenhouse gasses, you have pollution from coal plants that has measurable health impacts on communities surrounding them, and you have the ghastly side effects of hydraulic fracturing of shale for natural gas.  Of course, don’t forget about the oil spill in the Gulf of Mexico.  The scary thing?  We subsidize these fossil fuels.  Douthat, however, just wants to rely on unending growth to solve all of our problems.  Unfortunately, the Earth will not support unending growth.  Douthat would be wise to read Tim Jackson’s Prosperity Without Growth.

Paul Krugman, on the other hand, points the blame for the demise of climate legislation in a more

Krugman advises us to follow the money.

believable and useful direction.  In Krugman’s mind, we need to just follow the money:

“The economy as a whole wouldn’t be significantly hurt if we put a price on carbon, but certain industries — above all, the coal and oil industries — would. And those industries have mounted a huge disinformation campaign to protect their bottom lines.  Look at the scientists who question the consensus on climate change; look at the organizations pushing fake scandals; look at the think tanks claiming that any effort to limit emissions would cripple the economy. Again and again, you’ll find that they’re on the receiving end of a pipeline of funding that starts with big energy companies, like Exxon Mobil, which has spent tens of millions of dollars promoting climate-change denial, or Koch Industries, which has been sponsoring anti-environmental organizations for two decades.  Or look at the politicians who have been most vociferously opposed to climate action. Where do they get much of their campaign money? You already know the answer.”

That is the key of course.  Producers of fossil fuels do not want to have to account for externalities of their products.  They would rather society at large bear those costs.  We are slaves to growth and slaves to consumption, unable to see the forest for the trees.  As Krugman points out, 2010 is the hottest year on record.  Inevitably we will need to place a cap on carbon emissions; the longer we wait, the more difficult it will be.

Ross Douthat should read this book.

How do we solve these problems?  Herman Daly, an ecological economist, offers some viable prescriptions.  I will highlight one of the most important ones, which you will not see any politician advocate: ecological tax reform.  Right now labor and capital (the value added) is taxed; ecological tax reform would end value added taxes and instead tax that to which value is added: the throughput of resources extracted from nature (depletion) and returned to nature (pollution).  Ecological tax reform would reward entrepreneurs who are able to add value and innovation efficiently.  We want to encourage value added, and discourage depletion and pollution.  It sounds simple, but it goes against the neo-classical devotion to unending growth.  As such, Douthat and his fellow conservative denizens continue to believe in Business as Usual.


Are the bond vigilantes coming?

Beware, the bond vigilantes are coming! Or are they?

Get the kids, get the dog, and grab whatever weapons you happen to have within arms reach, zombies are coming!  Now, I’m not talking about the raised dead, like we all saw on Thriller, but rather bond vigilantes, about to pull the plug on good old Uncle Sam because they perceive us as unable or unwilling to pay our debt.  At the G20 summit this week, President Obama argued that more Keynesian stimulus was necessary until employment recovered.  The rest of the G20 balked, opting instead of fiscal austerity, because they fear the bond vigilantes.  Economist Paul Krugman, Nobel laureate, believes you can put that weapon down:

“Yes, America has long-run budget problems, but what we do on stimulus over the next couple of years has almost no bearing on our ability to deal with these long-run problems. As Douglas Elmendorf, the director of the Congressional Budget Office, recently put it, “There is no intrinsic contradiction between providing additional fiscal stimulus today, while the unemployment rate is high and many factories and offices are underused, and imposing fiscal restraint several years from now, when output and employment will probably be close to their potential.” Nonetheless, every few months we’re told that the bond vigilantes have arrived, and we must impose austerity now now now to appease them. Three months ago, a slight uptick in long-term interest rates was greeted with near hysteria: “Debt Fears Send Rates Up,” was the headline at The Wall Street Journal, although there was no actual evidence of such fears, and Alan Greenspan pronounced the rise a “canary in the mine.” Since then, long-term rates have plunged again. Far from fleeing U.S. government debt, investors evidently see it as their safest bet in a stumbling economy. Yet the advocates of austerity still assure us that bond vigilantes will attack any day now if we don’t slash spending immediately.”

However, advocates for austerity want to cut off unemployment benefits, when the housing market, and the larger economy, is still on life support.  They want to fire teachers, firefighters, and policemen around the country by slashing state aid.  In the halls of power, you can hear faint echoes of Herbert Hoover.  These austerity advocates often talk about Japan’s lost decade, and the inability of government spending to lift that country out of its recession.  However, no less than the Economist, Bible to the global business elite, brings up the much more pertinent examples of Canada and Sweden:

“The advocates of austerity… base their argument on cases in the 1990s, when countries such as Canada to Sweden cut their deficits and boomed. But in most of these instances interest rates fell sharply or the country’s currency weakened. Those remedies are not available now: interest rates are already low and rich-country currencies cannot all depreciate at once. Without those cushions, fiscal austerity is not likely to boost growth.”

What would be a sensible action to take right now?  Well, how about finally tackling entitlement reform?  Sure sure, Republicans would never undertake bipartisan work on entitlements in their Party of No posture, but stepping outside of political reality, now is the perfect time for politicians to compromise and craft a sensible reform of Social Security.  If not now, when?  It would send the right signals to those (imaginary) bond vigilantes that everyone worries about so much, but more to the point, it would deal with the long-term deficit, which we will have to deal with sooner or later.  Politicians will always try to punt that football down the road, but who is to say that there will be a better opportunity in the future?