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Monthly Archives: December 2010

Patrick, responding to Conor Friedersdorf’s post at the American Scene, has a long and highly substantive comment.

Jim Manzi has a long and broad piece on different components of welfare programs at National Review.  Here he frames the key components of welfare programs:

First, welfare programs provide a safety net: a fail-safe provision of important goods that represents some roughly agreed-upon minimum baseline of subsistence for any member of the society. Second, they incorporate some element of risk pooling (and, more generally, economies of scale) beyond what is implied by the safety net: spreading out the costs of falling victim to some horrible disease in old age, for example. Third, these programs also may require prudent behavior on the part of beneficiaries. For example, Social Security requires that wage earners forgo some consumption today in order to provide funds for retirement. Fourth, the programs may redistribute wealth beyond what is required by the first two goals. Fifth and finally, they may be a mechanism for the government to provide certain goods directly, as in the case of traditional public schools.

What I find most interesting is that Manzi, despite invoking Edmund Burke, is proposing a fairly radical re-write of numerous long-existing institutions.  While he favors a phased approach, and admits skepticism of the theories he invokes, his argument is based on the idea that through research, technical analysis, and reasoning, we can make significant improvements to the efficiency and fairness of the economy.  Manzi is embarking on an essentially liberal endeavor.

Drawing from my breakdown of fiscal conservatism into four separate positions, I’ll explore and evaluate the recent tax compromise between the president and Republican leaders.

1.  For balanced budgets, and against deficits.

Extension of tax cuts + extension of tax credits + increase in unemployment benefits = Massive fail.  Grade: F

2.  For smaller government, meaning lower taxes and lower government spending.

On net a win, since the tax cuts exceed the increase in spending.  Grade: B+

3.  For reducing the percentage of the tax burden placed on the wealthy.

On net a win, since tax cuts are heavily skewed towards the wealthy.  Grade: A-

4.  For government spending that has a demonstrable return on investment, against wasteful spending that does not.

The payroll tax cut seems like the best idea, since it adds incentive to hire.  By contrast, further extension of unemployment benefits reduces incentive to work.  As for the income tax cut extensions, my sense is that there’s fairly little difference, ROI-rise, over who pays taxes.  People have ideologically-driven preferences, and fiscal conservatives lean towards shifting the tax burden away from the wealthy, but I don’t see this as being for efficiency reasons.  Grade: C

It will be revealing how fiscal conservatives break on the compromise.  If tea partiers come out in favor of the deal, they belong in groups 2 and 3.  If they oppose it, they belong in groups 1 and 4.  Thus far, they’re pretty quiet.

She says it’s wasteful spending.  She also thinks it’s not going away, because of this:

[Repeal would] have a pretty nasty effect on housing prices.  Even people with little or no mortgage would be adversely affected by a price drop in their largest asset.
It’s as if McArdle is unaware that a large mobilization of voters is suddenly interested in sensible ways to cut government spending.  Heck, the tea party movement began with this:
How many of you people want to pay for your neighbors’ mortgage that has an extra bathroom and can’t pay their bills?
Isn’t this exactly the outrage you’d need to overturn a popular policy?  Instead of harping on the tea parties, or ignoring them, thinkers should throw them good policy ideas.

I previously argued that government spending programs should be able to demonstrate a return on investment, or alternately, to pass a cost-benefit analysis.  Of course, not all cost-benefit analyses are created equal.  As an example, sports teams often ask cities to fund their stadiums, arguing that it provides economic benefit to the city.  These benefits, generally speaking, are “economic fairy tales”, based on numbers “pulled from thin air”, at least according to, well, sports teams.

Consider the following attitudes:

  1. For balanced budgets, and against deficits.
  2. For smaller government, meaning lower taxes and lower government spending.
  3. For reducing the percentage of the tax burden placed on the wealthy.
  4. For government spending that has a demonstrable return on investment, against wasteful spending that does not.

These all can be associated with fiscal conservatism.  Yet they’re largely independent positions–policy changes can be evaluated separately along each criteria.

The fourth position seems to be the gaining considerable steam: eliminating earmarks, for instance, has little effect on the first three, but definitely satisfies the fourth.  It’s also the least controversial of the four, the one most likely to find support across the political spectrum.

Is the tea party driving Republicans towards more sensible spending cuts?  Who predicted this?