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Category Archives: Fiscal Policy

  • Tea Party voters’ embrace of Rick Santorum largely perplexes me.  I feel completely baffled as to how these individuals think, and don’t know how to learn.  Will Charles Murray’s book help on this front?
  • This post from the Cato Institute and this and this from Ezra Klein have me thinking that the difference between right and left on fiscal policy is much smaller than I’d thought.  Is it just me, or are these gaps remarkably small?



David Henderson has a good post on how studying economics led him to combat his emotional feelings and adopt a more libertarian viewpoint:

I started to understand that the vast majority of income in a relatively free society is earned. It’s true that a small number of wealthy people did get their money by fraud or dishonesty. More common, especially in societies with lots of government controls, were people who got wealthy by using political pull. But I started to see that the typical high-income person in a relatively free society gets his or her income the old-fashioned way–by earning it.

What interests me about the post has less to do with the intellectual underpinnings of Henderson’s argument and more to do with the relationship between reasoning and emotion.  Even after adjusting his intellectual framework, Henderson retained the emotional effects of a prior framework:

Even though this was a full four years after I had realized that the vast majority of “the rich” get their money relatively honestly, I felt the old resentment at these people who had what I could not imagine myself ever being able to afford. I looked down at my fists and saw that I had clenched them in anger.

It’s fundamentally difficult to confront one’s own emotional intuitions, and if you surround yourself with like-minded thinkers (or include only the most extreme and moronic opponents) you never have to do so, because you’ll never have to change your views.  This is, in my humble opinion, a very bad thing.  It turns you into a fundamentally unthinking person.  Instead, I strongly advocate a deliberate attempt to seek out the most intelligent opposing voices you can tolerate, to engage with them in argument, and when tension arises between your emotions and reason, acknowledge and address the tension, no matter how difficult or painful.

Neither full-blooded libertarians nor allegedly liberty-loving tea-party enthusiasts really care much about governing. Libertarians, accustomed to dwelling on the margins of American politics, participate in elections without hope of electoral success, if they participate at all. For them, presidential campaigns offer at best an occasion to preach the libertarian gospel to the wary public, and the more table-pounding the better. As for the tea partiers, they seem less interested in practical policy solutions to America’s problems and rather more interested in fighting a culture war over what it means to be authentically American. Unless ostensibly liberty-loving conservative voters become convinced that the sensible liberalisation of drug and immigration policy is implied by the inspired language of the Constitution of Independence, the eagle will not soar for Mr Johnson.

I’d find this pessimistic take refreshing were I in a bad mood.  But it occurs to me another approach would be to try to build momentum for Gary Johnson’s presidential campaign.  Look, if you want to see a political candidate get elected because of X, Y, and Z, and you recognize that not enough other people care about X, Y, and Z to elect that candidate, then the best response would be to try to convince all those people that X, Y, and Z are important.  I file this defeatism under failure of marketing creativity.

As I mentioned in an earlier post, I’ve spent a lot of time playing Sid Meier games, especially Civ 2 and Alpha Centauri.  I probably learned more about social science from playing those games than in all my high-school coursew0rk.  One of the game’s lessons is that offensive warfare is usually really expensive; in order to build chariots and elephant warriors and bomber jets, you need to stop building temples and libraries and manufacturing plants.  This diversion of resources sets you back in the long run; building an impressive military now often leads to military disadvantage in the future.

Apparently, Matt Yglesias either also played his share of  Civilization games, or found some other way to learn their lessons:

If you think about the national security landscape of 2035 what’s going to be really important isn’t the defense spending decisions of the United States. It’ll be the fundamentals. How rich are we? How many skills do our people have? How many people live here? How much science can we do? Insofar as expending resources on today’s security priorities prevents us from investing resources in building national capabilities for the future, we undermine our longer-term security.

I liked to think of myself as both a pragmatist and an idealist.  All else equal, ideas that are easily enacted are preferable to those that would require more work, but there’s still an important conversation to be had about ideas that aren’t as easily implemented.

Jim Manzi makes an interesting point, blurring the lines between viable and non-viable:

If you think about it, any real solution to the federal deficit problem is currently politically impossible, yet we know mathematically that, barring a productivity miracle, the situation cannot persist indefinitely. Therefore, we know that some change that currently seems politically impossible is all-but-certain to happen sooner or later.

Predicting the future is both really important and really hard.  It’s supposed to be science–we build a model, validate it, and use it to make projections.  But in reality, building the model inevitably involves choosing from a severely limited set of data points, and predictions become dependent on unvalidated assumptions.  To a considerable extent, assumptions cannot be validated, since they are assumptions about the future.  When a company predicts its next year’s revenue, it assumes that within the next year, aliens will not invade Earth and enslave all humans.  This assumption is hard to validate; the best we can do is model its likelihood based on a historical absence of extra-terrestrial invasions, and a lack of flying saucers in the sky.  I don’t object to making this assumption, but we should be aware of its possibility.  There are a vast number of low-likelihood, high-impact events that could occur and drastically disrupt our predictions.  The longer the time-frame of prediction, the more implicit future assumptions we make, and the less reliable our prediction.

Of course, long time-frame future gazing is important.  When young choose which careers to prepare themselves for, they make assumptions about what careers will be available to them.  When politicians design budgets, they make assumptions about productivity growth over a long time-frame.  Both these sets of assumptions are highly dubious, as can be attested by auto-factory workers, young lawyers, and governments scrambling to deal with the aftermath of the financial crisis.

It’s with this skepticism I evaluate Paul Ryan’s budget proposal, which operates over a  forty-year time frame.  The analysis Ryan cites is obviously wrong.  But I’m also skeptical of this critical analysis, since it assumes zero economic growth.  There’s a lot of good discussion on this topic, such as here and here, but overall I’d like to see more robust analysis of the proposal, with more flexible assumptions about future events.

Matt Yglesias is one of the smartest and most economically literate liberal writers, so I find this recent post on school vouchers a little confusing:

Republicans design a program that’s not a voucher program, it’s just a “free money for a small number of poor kids in the District of Columbia” program.

That’s what I’ve always understood to be the definition of a voucher program.  In the comments section, Stephen Eldridge clarifies:

Vouchers are intended to replace funds used for Public Schools–that is, if you use a voucher, you’re “getting back” your money from your state or local taxes that would otherwise go to a public school and giving it to a private school instead…the DC program is *additional* money, so the use of it doesn’t defund a public school.

At some level, public-school spending and school vouchers are substitutable, since any spending on one could instead be spent on the other.  Yglesias and Eldridge seem unconcerned about funding a small vouchers program in DC; note that its funding could instead be applied to public schools in DC.  Meanwhile, Yglesias and Eldridge seem highly concerned with a system that could automatically make this same substitution at a much larger scale.

The underlying question of whether tax dollars are better spent on public schools or vouchers, is a testable one, but it’s important to use the right test.  The test is not, Do DC students start using vouchers? as Yglesias worries it would be.  The test is also not, Does the vouchers program lead to better education outcomes? The correct test is, Does the vouchers program have a better benefit:cost ratio than public school funding?  If that question is conclusively answered affirmatively, it provides some support for the larger type of vouchers program that Yglesias and Eldridge oppose.  But answering the previous questions provide no such support.

I think the strongest conservative viewpoint on this topic is Jim Manzi’s, who doesn’t support the large-scale voucher programs Yglesias and Eldridge fear:

I have argued for supporting charter schools instead of school vouchers for exactly this reason. Even if one has the theory (as I do) that we ought to have a much more deregulated market for education, I more strongly hold the view that it is extremely difficult to predict the impacts of such drastic change, and that we should go one step at a time (even if on an experimental basis we are also testing more radical reforms at very small scale).

Maybe it’s because I played an absurd amount of Civilization in high school, but I have a soft spot for the idea of border realignment.  I don’t want to see wars of conquest, but I see a certain justice in rewarding countries that succeed economically by giving them sovereignty over countries that fail.  So I liked this suggestion that Brazil annex Portugal (gated, more here), even if seems even more implausible than my earlier policy suggestion.

Though I’m still somewhat confused as to public-sector unions in Wisconsin, I do have some strong opinions on how policy-makers should tackle the NFL labor dispute.  Step 1 is to repeal the NFL’s anti-trust exemption.  Step 2, use anti-trust law to break the NFL into 8 separate leagues, based on existing divisions.  Allow the 8 leagues to co-ordinate in developing schedules, including play-offs, but don’t allow them to collude on questions of expansion and contraction.  Step 3, use anti-trust law to prevent NFL teams from owning football stadiums.  Step 4, ban public funding of football stadiums.  Step 5, repeat steps 1-4 for the other professional sports leagues.

The result of these changes, I believe, would be thus:  The number of NFL teams would increase from 32, to somewhere between 50 and 100.  Major markets like New York,  LA and Chicago would grow from 3 to ~10 teams between them; many minor markets like Portland and Austin would grow from zero to one team; and middle market teams like Dallas, Washington and Denver would grow from 1 to 2 teams, which would share stadiums.  Individual leagues would relax ownership rules, in order to attract new owners.  Existing team values would drop.  Player salaries would drop.  Ticket prices would drop.  Employment would rise.  Quality of play would initially drop, but most fans wouldn’t notice.  Over time, innovation–both in business management and football strategy–would increase.

This is, of course, a fairly drastic policy change.  It would upset a number of powerful lobbies, including NFL owners, NFL players, the NCAA–which would face increased competitive pressure, and traditionalist sports fans–who want to compare Peyton Manning to Fran Tarkenton, even though they play highly different games.  However, the policy consequences listed above are both fiscally prudent (increasing employment, ending subsidies to sports teams) and highly progressive (transferring wealth from rich players and owners to poorer unemployed athletes and fans).  That is, these policy changes should be broadly supported by the bases of both major political parties.  And while I don’t expect any of these changes to occur soon–any serious threat of Step 1 alone would lead to a quick resolution of the current negotiation–I do expect them to happen eventually.

I find myself highly troubled by the ongoing class wars is the United States, mostly because of the amount of effort and energy being wasted on it.  America is an enormously wealthy country by international or historic standards.  Neither the American middle class nor the American upper class are oppressed group, yet each frames its argument as if the fate of the world depends on their getting a larger piece of the pie.

Scott Sumner makes an interesting argument about means testing.  Union-workers make a compelling case to defend their negotiating power.  No one wants their taxes raised or benefits cut, and its fairly easy to argue persuasively that your case is special.

And all I can think is, stop whining.  Deal with it.  There are serious problems in the world.  There’s a large budget shortfall, and the only way to address it is to cut spending or raise taxes.  There are honest arguments to be had about how to do so, but any argument that can be accurately summarized as “Don’t take my shit” is going to get mocked.  Here on this blog.  By me.