Politics and Policy

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William Galston writes,

The document’s emphasis on the middle class is a thinly veiled repudiation of the Romney campaign, whose emphasis on “job creators” reduced the 2012 Republican convention to a gathering of the National Federation of Independent Businesses. As Sen. Mitch McConnell noted at a “Room to Grow” public event last week, Republicans must stop imagining that average Americans are anything like John Galt in Ayn Rand’s “Atlas Shrugged.” Few of them are entrepreneurs, let alone heroic individualists. Most of them are holding jobs or looking for them. A political party that doesn’t address their needs isn’t likely to get their votes.

Pointer from Reihan Salam.

Let me propose the following distinction between politics and policy. Politics is a set of gestures and poses that politicians use to win votes, either in elections or in Congress concerning legislation. Policy is what actually gets done.

The Obama team has been magnificent at executing gestures and poses and thereby winning votes. Their approach to policy appears to have been much more haphazard, with results that I imagine disappoint even many of their supporters.

My criticism of “Room to Grow” is that it while it purports to be a policy document, it is in fact a set of gestures and poses. I think that the way Galston and Salam discuss “Room to Grow” tends to confirm that. Rather than complain that these are just gestures and poses, they are willing to engage with the gestures and poses and ask how well they will work politically.

I seem to be the only one who cares whether there is a coherent, implementable policy agenda embedded in “Room to Grow.” Maybe it is premature to worry about that. If you don’t get the poses and gestures right, you won’t have the opportunity to implement anything. But I do not think you should come in as unprepared as the Obama Administration was to deal with actual policy.

Regulatory Arbitrage Uber Alles

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Mark Thoma points to an essay by Dean Baker accusing airbnb, uber, and other services of cashing in on regulatory evasion as opposed to the Internet or other economic fundamentals. Thoma comments,

Agree about the level playing field, but perhaps it will serve as a catalyst for changing regulations that “were originally designed to serve narrow interests and/or have outlived their usefulness”?

Or a catalyst for encouraging the incumbents to act differently. The original low-cost bus services between NY and DC ultimately spurred the legacy bus companies to set up low-cost subsidiaries in order to compete.

Unreformed Conservatism?

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James Pethokoukis writes,

Reagan-era nostalgia, unfortunately, is not much of a superpower. Without recognition that new economic challenges require new thinking and new solutions, this tired GOP sequel is unlikely to attract much of an audience.

He refers to the manifesto entitled Reform, Restore, Modernize. I also find it unsatisfying, but I think James is too quick to dismiss it the way he does. My main problem is that the “specifics” in the manifesto are mere bullet points stating wished-for policy achievements. Until they drill down into “how,” they have not done enough.

Looking at this manifesto and at “Room to Grow,” I am happy to see this sort of ferment but disappointed with what i see so far. Of course, as long as SNEP remains vaporware, I have to be cautious in my criticism.

Work for a Profit

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Let me re-post a recent quotation of the day from Don Boudreaux of Cafe Hayek.

from page 184 of Thomas Sowell’s 1995 book, The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy (original emphasis):

The call for more “public service” is then a call for more people to work in jobs not representing the preferences of the public, as revealed through the marketplace, but the preferences of third parties enforced through government and paid for by the power of taxation. Sometimes work for foundations and other nonprofit organizations is also included in “public service.” What is crucial is that public service not be service defined by the public itself through its choices of how to spend its own money in market transactions, but defined for them by third-party elites.

For my recent birthday, my daughters wrote me a song in which they included my line about wishing that one of them would work for a profit. If there is one notion that K-12 teachers and college professors drill into students’ heads, it is that non-profit is good and profit is bad. When I teach about the difference between profits and non-profits, I say that the main difference is that for-profit organizations are responsive to customers while non-profit organizations are responsive to donors.

Herbert Gintis on the Economics of Public Policy

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It his Amazon review of Complexity and the Art of Public Policy: Solving Society’s Problems from the Bottom Up.

First, neoclassically inspired public economics provides a very powerful and largely correct framework for analyzing when markets work well and when they fail. Second, markets are often fragile and easily destabilized unless properly regulated. Third, markets and regulating institutes are not alternatives but rather complements. Fourth, neoclassical economics cannot model state failure, and therefore overstates the latitude for government intervention in stabilizing the economy and correcting market failures. On reason for this failure is that government is subject to political forces that lead it to favor special interests rather than the general good. What Colander and Kupers tell us is that there is a second reason: the market economy is a complex, dynamic, and adaptive system more like a natural ecology than a man-made machine.

The complex economy cannot be controlled, as the planners would like, but it can be influenced by very carefully formulated and judiciously applied “rules of the game” that move market dynamics in preferred directions. In this respect, traditional planners are like the Queen of Hearts in Through the Looking Glass who cannot stand the fact that she cannot order the flowers in her garden to heed her bidding, and employs a bevy of “gardeners” to paint the flowers to her specifications. The situation is worse for an economy because there is no regulatory counterpart to painting the flowers. “The [effective] government does not impose norms, or even force individuals to self-regulate. Instead it attempts to encourage the development of an econstructure that encourages self-reliance and concern about others.” (p. 9).

Gintis’ Amazon review essays, such as this one, are often outstanding. For the pointer to the book, I thank Tyler Cowen.

Another Proto-Libertarian

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Philip K. Howard writes,

Generations of lawmakers and regulators have written so much law, in such detail, that officials are barred from acting sensibly. Like sediment in the harbor, law has piled up until it is almost impossible — indeed, illegal — for officials to make choices needed for government to get where it needs to go.

I might term this sort of thinking proto-libertarianism. A proto-libertarian is someone who, like Peter Schuck, recognizes that government performance falls far short of its promises, yet still believes that government could function effectively at its current size and scope.

In Howard’s case, I would make the following suggestions for climbing further up the mountain of libertarianism.

1. Recognize that it is not only well-meaning government officials who can be prevented from doing the right thing by legal paralysis. Private individuals and corporations also are often prevented from doing the right thing, not only by law but by regulations issued by well-meaning government officials.

2. Consider that legislation may be an inferior form of law not just recently, or occasionally, but usually. Instead, consider the ideas of Bruno Leoni, which suggest that common law that emerges from individual cases represents a spontaneous order, while legislation represents an attempt at top-down control that works less well.

Room to Grow has Room to Grow

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My initial reaction to Room to Grow was negative. Let me try to offer a more balanced assessment.

A. One could argue that the purpose of the project is to shift the conservative conversation away from spending cuts, tax cuts, and a balanced budget. The idea is to focus on policies that will improve the way government deals with ordinary Americans in terms of health care, education, and work. My comments on that are:

1. I commend the conservative reform movement for trying to come up with policies that help ordinary people. I think that is the right thing to do.

2. Having said that, I think that the less populist parts of the conservative agenda, such as reducing taxes on capital and putting entitlements on a sustainable path, are also the right thing to do. Maybe it is prudent for conservatives to set those goals aside for a few years, but it would be wrong to abandon them altogether.

3. I think that one can argue that many progressives approaches for helping ordinary people have been at best ineffective and at worst harmful, with the latter a frequent result.

4. I think that there is zero chance that progressives will admit that conservatives have better approaches for helping ordinary people. I think that there is zero chance that the progressive media will credit conservatives with caring about ordinary people.

B. The glossy paper and colorful layout of RtG led me to expect a finished product. It is anything but that. I think it would have been better presented as a conversation starter than as a program. My specific complaints are those that I have outlined in earlier posts.

1. The chapters are not coordinated, and so the ideas do not fit together. In some cases, they are clearly incompatible with one another. For me, the lack of coherence makes it misleading for RtG to call itself an agenda.

2. Sometimes, problems are identified, such as the power of incumbents in health care and education to block innovation, without proposing bold solutions.

3. At least four chapters propose new tax credits.* I think we should be taking support for “merit goods” (aka social engineering) out of the tax code, not putting more of it in. While I support the thrust of reducing the tax burden on ordinary working Americans, I think that cutting payroll taxes would be a better approach than loading more tax credits into the system.

*Maybe more. I just remembered that the chapter on employment policies proposes a business tax credit for hiring workers who have been unemployed for a long time.

4. I worry that RtG lends itself to legislative gesturing. A member of the House or Senate can introduce one of these proposals in isolation, issue a press release, and say “Look at me. I’m offering a solution for X.” In fact, the sort of coherent approach to policy that I think is needed can probably only come from the executive branch.

5. I am increasingly convinced that all of our means-tested programs need to be consolidated along the lines I have suggested. At the very least, somebody needs to think about the interaction among them.

6. RtG did call my attention to two issues that I had not considered before: child-care subsidies; and potential marriage penalties embedded in means-tested programs. I will think about those issues and revise my ideas if necessary.

The Constitution, the President and Us

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In Room to Grow, Ramesh Ponnuru writes,

Confronted by presidential lawlessness, some conservatives are tempted to throw up their hands. They conclude there does not seem to be much conservatives can do about it besides such extreme, and for that reason impractical, measures as impeachment. But…we can make the case that the president must be bound by the laws and that executive dereliction of duty is a threat to national well-being…we could try to reestablish a political norm by raising the cost of violations of it and increasing the odds that future presidents will feel bound by it.

Good luck with that. I just finished reading The Once and Future King: The Rise of Crown Government in America, by F.H. Buckley. The main take-away is that once you have a chief executive chosen by popular election, you are in trouble. The “extreme” measure of the legislature removing the head of state happens much more readily in parliamentary systems, Buckley argues. He says we are just about the only country without a parliamentary system that isn’t pretty far along on the autocracy spectrum.

Buckley says that our founders did not want a popularly elected President. They wanted a President chosen by the House of Representatives. But they were afraid to take that idea to the people, so they instead proposed that the selection would go the House in the case of an electoral college deadlock–which they thought would be the norm once George Washington left office. Oops!

Buckley says that the problem with popular election of Prime Ministers, and especially of Presidents, is that they become much more powerful than legislatures. They have national legitimacy, they can present a unified front, and they can dominate the news media. Separation of powers is a pipedream.

Where we’re headed, ultimately, is for the Presidency to become more and more powerful, until we have the equivalent of Hugo Chavez or Vladimir Putin. That’s Buckley’s version of “Have a nice day.”

More RtG

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1. Adam J. White is the author on energy. Mostly it’s “Fracking. Woo-hoo!” Not much in terms of policy specifics.

2. James Pethokoukis writes on regulatory and financial reforms. He berates “too big to fail” and cites two approaches for dealing with it: restricting deposit insurance to banks that do not engage in securities trading or more exotic businesses; or requiring large banks to hold more capital, perhaps more like 15 percent, compared with the 6 percent or less that they can hold under current rules.

He also mentions copyright and patent reform, including Alex Tabarrok’s idea of having patents with different terms: shorter terms for innovations that are not expensive to arrive at (think of innovations in software) with longer terms for innovations that are expensive to arrive at (think of drugs that require hundreds of millions of dollars of research and testing).

What he fails to mention are reform of the FCC and the FDA, both of which are long overdue given new technological realities.

3. Carrie Lukas talks about policies related to work-family balance.

the Government Accountability Office estimates that in 2012 the federal government administered 45 programs related to early learning and child care, which cost taxpayers roughly $14.2 billion per year. In addition, there are five tax provisions to support individual spending on child-care services, which reduce tax receipts by approximately $3.1 billion annually. These resources solely benefit families using formal, paid child-care arrangements–overwhelmingly center-based care. Rather than favoring these choices, policymakers ought to make that support available to all families witih children under the age of five…since many of the current programs, like Head Start, are geared to assist low-income women, a new mechanism for support should be allocated on a means-based scale to help those with lower incomes most.

That makes sense. But, again, there is no integration with other chapters in the book. We saw that Scott Winship touted something like the “universal credit.” Are we going to fold support for child care into a sort of universal credit, or are we going to continue to take a fragmented approach to policies?

4. W. Bradford Wilcox talks about policies to provide incentives (or at least remove disincentives) for marriage.

the Earned Income Tax Credit (EITC) program could be transformed. Instead of depending on household size and household earnings–which creates the potential for a marriage penalty–it could become a wage subsidy for individual low earners.

…for other means-tested tax and transfer policies targeting low- and moderate-income families, couples could receive a refundable tax credit for the amount of money that they lose by marrying.

the marriage penalty associated with Medicaid should be eliminated

So far, in the various chapters of Room to Grow, I have seen three different Medicaid reforms, three different suggestions for changing the EITC, and new tax credits for health insurance, families with children, childless workers, and child care. Obviously, that does not bother the editors of this volume as much as it bother me. They might make an argument that the more ideas, the merrier. But I do not think that you can govern on the basis of solutions that are mutually incompatible.

I Won’t Be Going

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I am interested in the concept of the “smart grid” from a SNEP perspective. The IEEE is holding a conference on Intelligent Energy and Power Systems next week.

The aim of IEEE International Conference on Intelligent Energy and Power Systems is to bring together researchers from the areas of Power & Energy, Power Electronics, Intelligent, Predictive and Adaptive Control, Smart Grid and Industrial Electronics from leading universities, research laboratories and industry. This conference will be the place to discuss modern ideas, innovative concepts and experimental results.

The conference is in Kiev.