Friday, March 16, 2012

Optical Illusions and Political Decisions

-- Posted by Neil H. Buchanan

"It would just look bad." Everyone, I think, has either uttered that sentence, or heard someone else say it, at some point in their lives. The idea is that the underlying merits of whatever is at issue might cut in one direction, but there is something about the "optics" that counsel making an otherwise-wrong choice.

This was brought to mind during the conference in Hong Kong that I attended a few weeks ago. One of the scholars at the conference, who teaches at an Italian university, had served on a task force for the European Union, which had been created to offer expert advice on tax treaty issues between EU countries and Hong Kong (and thus, ultimately, China). The task force had completed its duties the previous year. The professor noted, however, that he had not visited Hong Kong during the time that he was on the task force. He said that he had suggested that the members of the task force might benefit by actually visiting the country that they were trying to understand, but that this idea was quickly squashed, with a Continental version of: "It would just look bad."

Notably, the professor then added that his subsequent academic trip to Hong Kong actually had taught him something important about Hong Kong and its tax system -- something that might have been relevant to his work on the EU's task force. While I cannot say how big a loss it was to the ultimate report not to have included that insight, it was very clear to me that the professor was not engaging in (even light-hearted) grousing. There was really something valuable that had been lost, because the EU did not want it to look as if it was sending a bunch of tax experts on a junket to Hong Kong, at the expense of EU taxpayers.

The phenomenon of "bad optics" is everywhere in politics, of course. Entire job categories exist for consultants to deal with the optical elements of clothing choices, automobile ownership, etc. Appearances in a quite literal sense -- Dukakis wearing an over-sized military helmet, Kerry wind-surfing, the Dean Scream -- have driven political outcomes in profound ways.

The question of appearances, however, infects policy choices (as opposed to electoral posturing) as well. Four unrelated examples:

(1) "Midnight Basketball" -- During the earliest days of the Clinton Administration, the new President's staff proposed to fund community programs that were designed to deal with the then-pressing problem of (crack-fueled) youth violence in inner cities. One promising idea was to fund (for a tiny amount of money) the creation of youth basketball leagues, which would be run after nightfall in high-crime areas. The idea, of course, was to give at-risk adolescents something to do with their time, after the sun went down. Left with nothing else to do, it seemed, they were much more likely to break the law.

Even so, this plan was immediately attacked (by, if I recall correctly, the -- shall we say -- memorable former Senator Jesse Helms of North Carolina) as an example of ridiculous government spending. "Money for thugs to play midnight basketball?!?!?!?" The optics killed the idea. And then we went back to decrying the increase in youth crime (with some geniuses blaming it on a new class of "super-predators," in a particularly low moment of public policy discussion).

Indeed, the Midnight Basketball fiasco is merely one example from the broader category of government spending programs that fiscal conservatives have successfully attacked over the years, on completely non-merits-based grounds. Both Professor Dorf (here) and I (here) have recalled the bad old days of Senator William Proxmire's "Golden Fleece Awards," in which the Wisconsin Democrat would excoriate some government spending program or another for being wasteful, when in many cases he was merely attacking something that looked bad, merits be damned.

(2) Notwithstanding my views about the economic or constitutional aspects of the debt ceiling debacle of 2011 (among many links, see, e.g., here), one aspect of the Obama approach -- known to policy wonks as "prioritization" -- completely fails the optics test. Prioritization was the strategy by which the Administration planned to guarantee that the U.S. would not "default on its debts." In this case, that phrase meant "fail to make timely interest and principal payments on pre-existing U.S. debt securities." Professor Dorf and I argue (in our forthcoming article) that this is, at best, a cramped reading of the term "debt," but never mind. The Obama plan was to use incoming tax revenues to pay in full all interest and principal due to bondholders, with any shortfall in revenues resulting in a failure to pay other ongoing obligations of the federal government.

Admittedly, one can see the argument in favor of such a policy. If we are going to have to stiff someone, then the last people we might want to annoy are our creditors. Among other things, failing to pay in full on our debts runs the risk of increasing our future borrowing costs. I argued at the time that our debtors would not be so blind as to fail to see that the U.S. government was failing to pay its obligations in full, which meant that -- although our creditors would be pleased not to have been harmed in the immediate crisis -- they would surely take note of the fact that the government was, indeed, screwing over people with valid legal claims against the government.

That is one sort of optics, I suppose. The more direct optical problem of the Obama approach, however, is its blatant anti-populism. In my recent speeches about the U.S. debt situation, I described the proposed Obama approach as saying to the American people: "The only people who will be protected are foreigners and rich guys." That is, the holders of U.S. debt securities include foreign creditors (though not as significantly as people think) and wealthy domestic investors. There are also significant sums owed to U.S. state and local governments, and to pension funds, but the appearance would be unmistakable: "Domestic discretionary spending -- like medical treatment for injured soldiers -- is not prioritized, but payments to foreigners and rich guys would be." This would be political suicide, which is yet another reason that I never understood the Obama Administration's unwillingness to fight the necessary fight over the debt ceiling.

(3) The recent home foreclosure crisis is often made worse by the psychological effects of foreclosure on the homeowners. Falling behind on one's debts is shameful and debilitating, which can cause people to engage in all kinds of self-destructive behaviors, all of which can cause people to fail to protect their interests (missing deadlines for appeals, etc.). The result is a self-reinforcing spiral of debt. In responses to this very real problem, there has been some discussion of including money to fund debt counseling for homeowners, as part of the various policy responses to the foreclosure crisis.

My immediate response to this idea was: "Great idea, but it's never gonna happen!" In a world where media stardom can be had by decrying "losers" who cannot pay their mortgages -- even in the midst of the worst economic crisis in three generations -- the idea that we would be "paying deadbeats to cry to government shrinks" is just too juicy for opportunistic politicians to ignore. Good policy, impossible to enact. (If, somehow, this good idea was included in the recent settlements with the big banks, I will be pleasantly surprised. I admit that I have not yet been able to check on the latest developments in this area.)

(4) Each year, I organize tax-related panels at the Law & Society Association's annual meetings. Law & Society is an academic organization that makes great efforts to forge connections between U.S. and non-U.S. academics. (As my recent travels have reminded me, such connections are extremely valuable.) As such, the Association's annual meetings are held as often as possible (which means, roughly, once every five or six years) in a foreign country. This year, the meetings will be held in Honolulu. Although this is in the U.S., Honolulu was selected specifically to encourage participation from Pacific Rim scholars (Aussies, Kiwis, Chinese, and so on).

The timing of the conference (June 5-8), moreover, makes it clear that this is not a "winter getaway" for frozen American professors. Even so, I had more than a few U.S.-based professors (at both private and public law schools) tell me: "There is no way that I can justify spending my law school's money on a trip to Hawai'i!!" No matter that the conference is entirely legitimate, or that its location actually enhances its academic value, the optics are just impossible for large numbers of people. It just looks bad.

I do not pretend to have a unifying theory about all this. (I can blame this in part, I suppose, on continued jet lag. I doubt, however, that I would do much better when fully rested.) Three of my four examples (as well as the motivating example, from the Italian professor) are of policies or decisions that should have gone in the opposition direction, but for the optics. The remaining example -- Obama's prioritization plan -- is one in which the optics would actually move the decision in a better direction, because the defensible idea behind Obama's plan was based on too narrow a view of the policy environment.

So, even though I suspect that policy choices more often than not are deformed by concern over appearances, I know that it can cut in both directions. We do know, however, that there are many regrettable instances in which the inability to move past the optics causes us to make very poor decisions.