Monday, April 29, 2013

So Much For Sequester Leverage

By Mike Dorf

As a professional who flies with some frequency for work and other reasons, I was relieved that Congress decided last week to reallocate FAA funds in such a way as to reduce the disruptive impact of the sequester on air travel.  As a citizen and a Democrat, I was disappointed, though not really surprised, that once again the D's had lost a game of chicken with the R's.

The backstory should be familiar.  Despite the right's mantra-like talking point in which President Obama owns the sequester, it was more or less a co-creation of the Republicans and Democrats in 2011.  As part of that year's deal by which the Republicans agreed not to ruin the country's two-centuries-plus record of paying its debts, both sides agreed to the creation of the "Supercommittee," which would propose budget cuts and tax increases to cut the deficit.  The sequester was part of what the academic literature calls a "penalty default"--an alternative so distasteful to all parties that it ensures that they will strike a deal that's not as bad.

And it is by now also familiar that the Democrats miscalculated in thinking that the sequester would give them at least as much leverage as it would give the Republicans.  Whereas D's would be eager to avoid spending cuts to domestic social programs, it was thought, R's would be eager to avoid military cuts. What the D's had not realized was that many of the new breed of ideological Republicans are (to their credit) less committed to spending on national defense than are the older generation of Republicans. And so from the perspective of many libertarian congressional Republicans, the sequester has been win-win: Budget cuts they wanted for ideological reasons and an opportunity to use them politically as "owned" by the Democrats--even though any objective analysis would recognize that regardless of the precise sequence by which the sequester was proposed and accepted, it never would have been on the table were it not for the Republicans' willingness to hold the country's credit rating (and the global economy) hostage by threatening to refuse to raise the debt ceiling in 2011 (and subsequently).

There's another reason why the Democrats lost this latest round.  They have been saying for months now that the sequester's cudgel approach is senseless, so when the Republicans came along and offered to retarget cuts in a way that would have obvious benefits for the public, the Democrats were left in the politically weak position of having to say the following: The FAA should have its funding restored but only as part of a package that restores funding to social programs that benefit poorer Americans.  That may well be the political strategy, but you can't say that out loud or you sound like hostage takers.  We will cause avoidable travel delays until the Republicans restore funding for Head Start.  Seen in broader perspective, then, the Republicans had so out-maneuvered the Democrats that the Republican hostage-taking on the debt ceiling led to circumstances in which Democratic insistence on their own budget priorities looked like hostage taking.  And so the Democrats caved.

There are two mysteries here, one concerning policy, the other concerning backbone.  The policy mystery is why Democrats have accepted--indeed, affirmatively embraced--the whole framing of the underlying situation.  Professor Buchanan is the macroeconomist on this blog, not I, but still, one doesn't need a Harvard PhD in macroeconomics to know that in a rational world, the right's program of austerity would have been countered by the left's alternative of fiscal stimulus.  Instead, President Obama pivoted towards deficit reduction way too early, setting up a policy debate in which the two positions are the Republican cut-the-deficit-through-budget-cuts and the Democratic cut-the-deficit-through-budget-cuts-mixed-with-tax-increases.  Neither position is especially popular but the choice is false.  The great policy mystery is why no one in the Democratic Party has adopted the Buchanan/Krugman/Keynesian position, especially given how easy it should be to sell to the public.  Yes, I understand why pundits who regard themselves as serious thinkers think that the way to show their nonpartisan seriousness is by promoting "tough choices" on spending and taxes, but I don't understand why more left-leaning politicians--or even centrists for that matter--don't simply start telling the American people that what they want to hear is actually true: For at least another few years, you don't have to choose between low taxes and social spending.

That's the policy mystery.  There's also the backbone mystery: Why are Republicans more willing to stake out and stick with hardline positions than Democrats?  It's tempting to think that this is simply a matter of personalities.  For over two decades, the most successful Democratic Presidents--Bill Clinton and Barack Obama--happened to be centrist compromisers.  Clinton wanted everyone to like him, whereas Obama appears to value compromise for its own sake.  But maybe they're just outliers, a product of the tiny sample size.

I'm skeptical.  It's not just the Democratic Presidents, after all.  It's Congress too.  Harry Reid got rolled on filibuster reform at the beginning of the current Senate session, and while it's possible he might have opposed real reform based on long-term institutional calculations, that may be part of the point.  It's hard to imagine the modern Republican leadership caring much about such matters.

I realize that I don't have hard evidence for--or even a good measure of--the phenomenon I'm describing.  But it certainly jibes with what I've casually observed, going back at least as far as the 2000 post-election fight in Florida, in which the Republicans committed hard fouls while the refs were looking the other way and the Democrats, instead of responding in kind, looked at those same refs in stunned disappointment like Tim Duncan, Rasheed Wallace or (for hoops fans of my generation) Danny Ainge after being whistled for a foul.

I also have the sense that the reluctance of Democrats to play political hardball is not universal and to the extent that it's true, is a relatively recent phenomenon.  Certainly LBJ knew how to give as good as he (or anyone) got.  And even today, there are Democrats who will fight.  But  the most notorious tough guy in the first Obama Administration--Rahm Emanuel--picked his toughest fight with the left wing of the Democratic Party.

So, where are the modern heirs to LBJ when it comes to tactics?  I'm sure there are some still around but I want to float a hypothesis for why we're less likely to see this sort of thing from the core of the Democratic Party these days: the declining influence of labor unions has muted the portion of the Democratic constituency most likely to hang tough and drive a hard bargain.  Labor is still a key constituency for Democrats at election time, but mostly because unions realize that the Republicans would be far worse, not because the Democrats actively promote much of an agenda favoring organized labor.

The foregoing hypothesis is hardly meant as an all-purpose explanation and it doesn't even quite work on its own terms.  E.g., although LBJ had labor support as President, he had earlier supported Taft-Hartley and so was hardly labor's man.  And it's not even clear that I've identified a real phenomenon or one that I've specified sufficiently to admit of falsification of my causal hypothesis or any other.  Still, I put this out there for discussion.

8 comments:

Paul Scott said...

So just a couple of notes to toss in the ring.

1. As Krugman has been lamenting for what seems like a year now, among the things Democrats seem to have adopted from the Republicans is a lack of caring about the facts - at least as to the economy. Even in the face of both academic pillars of austerity falling completely and catastrophically, and in spite of the real world facts that the greater the austerity imposed, the greater the negative economic consequences have been felt - even the left commentators and politicians are sticking to their guns that the deficit is a "crisis" and must be dealt with now. As Krugman puts it - they shouted about it so strongly that they are now stuck with the position no matter what actually happens. That used to be (well, used to be in the very recent sense, because I can certainly remember in my lifetime a functional, thinking conservative party) a position of only the right. Now it is the way both parties conduct business. Getting us here is certainly the fault of the Republicans, but the Democrats seem reasonably comfortable living with it.

2. I know these things are edited to maximize comedic effect, but I think John Oliver's segment on gun control had one of the most brilliant revelations about our system. He is interviewing a high-up in Harry Reid's machine and he asks what defines a successful politician. In what should not be a stunning admission, I suppose, the interviewee answered (paraphrasing) "getting re-elected." Only when pressed did he put, as a second priority, passing effective legislation. When those are your priorities, it is not surprising that facts don't matter so much.

3. Finally, just a note on general political ineffectiveness - and I think this is just Obama, not Democrats in general. It is stunning to me that after losing his hard pressed, but still very weak, gun control bill, Obama is still doing what he can to support the few Democrats that voted against it. If Obama is going to spend political resources supporting you no matter what you do, and, if #2 above is how most of those people think, why should any politician risk taking any position other than those most likely to get him or her reelected?

The Dismal Political Economist said...

The fallacy in this otherwise highly intelligent and thoughtful post is this.

“The great policy mystery is why no one in the Democratic Party has adopted the Buchanan/Krugman/Keynesian position, especially given how easy it should be to sell to the public.”

The American public has been sold the delusion of a balanced federal budget as being a great thing, and that the national debt is this huge burden that the current generation is passing on to future generations, who will be bankrupted by it.

Progressives have done a lousy job of selling fiscal policy, in part because the debt bogeyman is an easy sell and macroeconomics is a complex science. There is also the moral stigma of deficits, people who spend more than they have are terrible people and governments which spend more than they take in tax revenues are immoral.

Another problem is the President, who apparently is taken in by the debt fear mongers. Economics ain’t his thing.

One solution which nobody except myself seems to advocate is to do government accounting like business accounting. In this system government capital expenditures would be separated out in the budget. Until this is done, a budget and government accounting system which combines capital and operating expenses will fail to alleviate the problem of economic illiteracy.

Stefen Curry said...

Harvard PhD in macroeconomics to know that in a rational world, the right's program of austerity would have been countered by the left's alternative of fiscal stimulus. Instead, President Obama pivoted towards deficit reduction way too early, setting up a policy buy fifa 14 coins  lol elo boost  fifa coins online  league of legends boost

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