Matt Yglesias

Endgame

When the violent win blows the wires away:

— Not enough money to educate the next generation but plenty of funds to try to conquer Afghanistan!

— Krugman: “the Israel-is-always-right crowd has gravitated to people who don’t have any problem with the occupation — which means the American hard right, including the Christian right.”

— Why do Presidents even try to do anything.

— Against salary freezes.

— Senators filibuster deficit-reducing jobs bill to be pains in the ass.

Arcade Fire, “Month of May”.

Obstruction Cuts Both Ways

David Boaz attempts to mount a libertarian defense of the filibuster:

In the long run, though, establishmentarians like the New Yorker’s George Packer think that the purpose of government is to pass new laws, regulations, and programs; and they complain when the Senate or any other institution stands in the way of such putative progress. Those of us who prefer liberty, limited government, and federalism appreciate the constitutional and traditional mechanisms that slow down the rush to legislation.

That’s a bizarre argument. Bills to reduce taxes are “legislation.” Bills to relax regulations are “legislation.” People who want to move public policy in the United States in a more libertarian direction support the idea of having congress pass legislation. As I was able to get Jonathan Bernstein to agree, the impact of the idiosyncratic elements of the American political system is to enhance the influence of interest groups and decrease the influence of ideologues and technocrats. Libertarians shouldn’t like that very much, it seems to me.

The Paul Ryan Solution to the Individual Mandate Dilemma

With the moral and legal legitimacy of an “individual mandate” to purchase health insurance continuing to be the subject of controversy, it’s worth observing that conservative hero Paul Ryan lights the path to reformulating the exact same policy in a manner that seems to pass the right’s ideological litmus test. After all, once Ryan abolishes Medicare what does he want to replace it with? Well, with vouchers to buy private health insurance. And what’s the structure of the Affordable Care Act? Well, it’s vouchers to buy private health insurance. So why did Barack Obama’s proposals include an individual mandate and Ryan’s don’t? Simple. Ryan has solved the adverse selection problem without a mandate by simply saying that everyone gets a voucher, but the voucher can only be used to buy health insurance. In principle you “could” opt out from this system but nobody would.

The way it would work is that instead of imposing a mandate, and then offering subsidies to low and middle income people in order to help them comply with the mandate, you’d impose a progressive income tax (whose constitutionality I take it is not in doubt) and then hand everyone a flat voucher that could be used only to buy health insurance.

My proposed revision to the plan would make the underlying nature of the proposal more transparent, and in that sense would be a marginal improvement over the way the ACA actually works. But the point is that in practice they’d be exactly the same. And the latter policy—taxes to fund vouchers—is so uncontroversial, that even Paul Ryan thinks it should be allowed. So anyone who thinks about the issue for a bit will swiftly recognize that there’s no real principled objection here coming from the right. The real difference between Affordable Care Act coverage and RyanCare is that the idea of the ACA is to ensure that everyone—even poor people—get adequate health care. Under RyanCare, by contrast, over time only rich people will be able to afford health care. But with the money Ryan saves by not ensuring adequacy of care, he’s able to ensure that rich people will pay much lower taxes. This, unlike mandate nonsense, is a real point of divergence between the right and left in America.

The Win-Win Nature of LGBT Impact Litigation

By Ryan McNeely

When Ted Olson announced his intention to partner with David Boies to challenge Prop 8 in federal court, many observers suggested that while his goals were noble, he was not “right about the timing.” Some gay rights groups, wary of Olson’s track record, actually did question his motives — and many went on the record to say explicitly that the decision to bring the suit was a mistake, that Olson would lose, and that this loss would do serious damage to the movement.

There’s a general hesitancy in some quarters to use the courts to advance marriage equality at all, the theory being that it actually does more harm than good in the long run. Matt responded to a nice example of this type of thinking, when Megan McArdle argued that “If socially conservative voters hadn’t felt they needed to protect themselves from activist judges, we wouldn’t be seeing these provisions written into state constitutions…In general, courts are the wrong place to press these sorts of claims.” In Lawyering for Marriage Equality, Scott Cummings and Douglas NeJaime address this head-on:

Finally, we find that the evidence in support of the backlash account’s causal claim is weak…By focusing solely on court decisions, the backlash thesis fails to account for the influence of nonjudicial factors. Specifically, the legislative push for domestic partnership in California motivated, at least in part, the statutory prohibition on marriage for same-sex couples embodied in Proposition 22. And during their television advertising campaign, Proposition 8 proponents emphasized the specter of same-sex marriage being taught in schools over the fact that the right to marry for same-sex couples derived from a court decision, suggesting that the schools issue resonated more powerfully with voters.

Now, a new report empirically validates this thesis: Prop 8 was almost certainly approved due to false and misleading advertising that had absolutely nothing to do with any sort of backlash against “activist judges.” Cummings and NeJaime also hit on a key point that somehow constantly gets ignored by the process nitpickers: “Opponents were mobilized to place a constitutional ban on the ballot irrespective of the form in which marriage equality was passed.”

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Are Bicycles a Plot to Surrender the United States of American to UN Control?

One of the most unfortunate aspects of transportation policy in the United States is that it winds up playing as a “culture war” issue. It’s a contingent aspects of American life that the sort of people likely to live in walkable urban areas are overwhelmingly liberal, and this creates large distortions in the discourse around what should be rather dry policy debates. For example, John Hickenlooper is running for governor of Colorado. He’s currently mayor of Denver. And like many mayors, he’s acted recently to promote bicycling as a way to get around the city. There’s no particular reason that “100 percent of the space on roads should be allocated for the use of motor vehicles rather than bicycles” should be an article of faith of conservatism (you won’t find it in Hayek or Burke or what have you) but in practice it often is, so you get this kind of nonsense:

Republican gubernatorial candidate Dan Maes is warning voters that Denver Mayor John Hickenlooper’s policies, particularly his efforts to boost bike riding, are “converting Denver into a United Nations community.”

“This is all very well-disguised, but it will be exposed,” Maes told about 50 supporters who showed up at a campaign rally last week in Centennial.

Maes said in a later interview that he once thought the mayor’s efforts to promote cycling and other environmental initiatives were harmless and well-meaning. Now he realizes “that’s exactly the attitude they want you to have.”

I don’t really think bike commuting is going to take America by storm next week, but it is a cheap and healthy way to get around that will appeal to some people. And since in addition to being cheap and healthy, it’s also better for air quality than driving a car, it makes perfect sense for municipal leaders to try to ensure that transportation infrastructure accommodates cyclists.

“Animals Are Funny” Journalism Comes to ABC News

As I noted yesterday it’s both the case that scientific experiments involving animals also sound funny, and also the case that scientific research into important subjects often involves animals. There’s a case to be made that it’s a bad idea for the government to fund scientific research in general, but most people shy away from making that case because the arguments in favor of it are extraordinarily weak and exploring the issue would generally highlight that libertarian dogmatism is dumb. Instead, many in congress and the media seem inclined to simply apply an “Animals Are Funny” standard and decide that any American Recovery and Reinvestment Act projects that involve animals are per se wasteful.

The latest comes from ABC News’ Jonathan Karl who apparently thinks it’s none of the government’s business to ascertain threats to local agriculture:

ABC’s Jonathan Karl, who cited “among the highlights” of the McCain/Coburn press release not only the monkey study but also “nearly $1 million for the California Academy of Sciences to study exotic ants.” That’s doubly funny because they’re bugs and they’re “exotic.” But the reason you would want to study exotic insects (meaning non-native) is that they’re a threat to agriculture, either current or potential. Agriculture is a $36 billion-a-year industry in California–but this crucial context was ignored by ABC.

This seems important to me. More broadly, increasing the stock of human knowledge is important. You do that by funding scientific research. Including, yes, research on animals. Even “exotic” ones. It would be interesting to have a real debate about the merits of scientific research in general, but this business of trying to pick out individual “funny-sounding” projects and denouncing them is really shameful and pathetic.

Moral Consequences of Economic Collapse

When not marveling at Democratic reluctance to stand up for values of religious freedom that Republicans used to uphold until all the sane ones suddenly went MIA, I’ve been marveling lately at the surge of enthusiasm for repealing the 14th Amendment so as to modify the birthright citizenship proposal. Many countries don’t follow American practice in this regard, so if you want to play make-believe you can simply pretend that right-wing politicians suddenly noticed this fact and are intrigued on the merits by the Norwegian approach to citizenship or something.

Obviously, though, in the real world mainstream politicians were not up in arms about this a few years ago and they didn’t change their minds thanks to a close reading of Gerhard Schröder’s immigration reforms.

But what you’re seeing in both cases is more than mere opportunism. It’s the result of the years of very bad economic performance. One of the most important political books of recent years is Benjamin Friedman’s The Moral Consequences of Economic Growth. He details the fact that growth tends to foster liberal sentiments and open societies, whereas periods of growth failure undermine them. And we’re seeing that very dynamic unfold before our eyes in the United States today. The poor performance of the economy is dragging down liberalism as a whole into the ditch and not just because slow growth will impact the midterms. In terms of larger, underlying social dynamics people turn more selfish, more xenophobic, more suspicious, and more illiberal the longer these kind of conditions persist.

Raising Compensation at Low-Skill Jobs

Ezra Klein reproduces a chart from David Autor’s “Polarization of Job Opportunities in the U.S. Labor Market” (PDF):

The structure of job opportunities in the United States has sharply polarized over the past two decades, with expanding job opportunities in both high-skill, high-wage occupations and low-skill, low wage occupations, coupled with contracting opportunities in middle-wage, middle-skill white-collar and blue-collar jobs. Concretely, employment and earnings are rising in both high education professional, technical, and managerial occupations and, since the late 1980s, in low-education food service, personal care, and protective service occupations. Conversely, job opportunities are declining in both middle skill, white collar clerical, administrative, and sales occupations and in middle-skill, blue-collar production, craft, and operative occupations.

This relates back to the point about education and wages that I was trying to make last week. The wages earned by food service workers isn’t a fixed element of the natural order. A cook in India makes less than a cook in Mexico who makes less than a cook in Germany. That’s not because cooks in Germany make better food than cooks in Mexico or India (indeed, in general the reverse is probably true). It’s because the overall level of skills and wages is higher in Germany than in Mexico or India. So if we get more people into the high-skill category, that not only raises those people’s wages it increases incomes across the board. Alternatively, increased immigration by foreign professionals would raise the incomes of non-professionals in the United States.

Alternatively, there’s evidence that if we sharply curtailed immigration from Mexico we’d raise wages for Americans who haven’t finished high school, especially Hispanics, albeit at the price of reduced living standards for the vast majority of the North American population.

The point either way is that “good” and “bad” jobs aren’t ontological categories. On the one hand, goodness and badness are relative—working at McDonald’s is a pretty good job compared to the job the average Chinese person has. On the other hand, precisely because of this relativity, broader social factors play a big role. Since labor market opportunities in China are generally unappealing relative to those in the United States, McDonald’s pays Americans much more than it pays Chinese people who, living in a country where the per capita GDP is $6,500 would be confused by the idea that making

Autolib

Car-sharing schemes have a lot of promise, in my opinion. Automobiles are extremely useful devices, so people generally want to be able to have access to them. Thus insofar as the only reasonable way to have access to a car is to buy one, people will tend to buy cars. Then, having bought a car and already committed to incurring most of the price of ownership (sale price, insurance, etc.) you may as well drive it a lot. Convenient short-term car rentals change the calculus—the amount you pay is pretty strictly proportional to the amount you drive, so you’ll still drive in circumstances when car-use is genuinely valuable to you, but in other circumstances you won’t drive. That leaves more money in your pocket for other uses and less pollution in the air.

Paris is getting in on the act:

Paris plans to launch the world’s largest electric car access scheme in September of next year. The city is hoping to emulate the popularity of its easy rental system for bicycles, known as Velib.

This time around, Autolib, which stands for auto liberte, will allow Parisians to rent an electric vehicle whenever they need to, with the goal of cutting down on car ownership, traffic and pollution.

I do think it’s a mistake to think programs like this will significantly reduce traffic congestion in major cities. Traffic congestion is caused by the same thing that causes bread lines in the Soviet Union—underpricing of a valuable resource. To curb congestion in a serious way, you need to do congestion pricing. But car-sharing has a lot of virtues.

Amare Stoudemire: Good for the Jews?

The world of Jewish sports fans has been roiled for a week now by speculation around New York Knicks acquisition Amare Stoudemire’s trip to Israel and Twitter-born hints of Jewish roots. The Wall Street Journal delivers the clearest explanation of the situation that I’ve seen:

Mr. Stoudemire said it was his family’s dedication to biblical scripture and his attendance at Sunday school that planted the seeds of an affinity to Judaism that he says has grown over the past decade. While he doesn’t consider himself religiously Jewish, he said he feels spiritually and culturally Jewish. [...]

Mr. Stoudemire’s interest in Judaism coincides with a stepped up relationship over the past three months with Idan Ravin, a private trainer who works with NBA players. Mr. Ravin says Mr. Stoudemire’s Hebrew comes from lessons in recent weeks with Mr. Ravin’s Israeli mother, a teacher in a Jewish school in Washington, D.C. Mr. Ravin, who accompanied Mr. Stoudemire on the trip, said Mr. Stoudemire is a quick read on foreign languages, and he speculates the skill is linked to his ability to decipher an opposing defense.

Not nearly good enough for the Law of Return, but should be good enough to serve as a marketing aid in the NYC market.

Vikram Pandit’s Ignorance

One problem any large organization—be it the United States government or a multinational financial services corporation—faces is that it’s hard for the guy at the top to fully figure out what’s happening. Economics of Contempt pulls out an interesting, and slightly frightening, example from the handwritten notes of Thomas Fontana, head of risk management in Citi’s Global Financial Institutions group, from a September 14, 2008 (i.e., right before Lehman went under) meeting at the New York Fed:

First, we learn that Vikram Pandit, CEO of one of the largest bank holding companies in the world (Citigroup), apparently didn’t know what Section 23A was. For non-finance types, Section 23A is the law that governs transactions between commercial banks and their non-bank affiliates. If you’ve ever worked at a big bank, you know what 23A is — unless, apparently, you’re the CEO. This definitely isn’t a lawyers-only thing either — Fontana is a risk manager, and he was so surprised that he felt compelled to write, “VP [Vikram Pandit] doesn’t know what 23A is?” Oh, Vikram.

Good stuff. We also learn in the same post that Treasury Secretary Hank Paulson expressed specific concern that if Lehman failed it would cause big problems for money market funds, which is precisely what happened after Lehman did fail. There’s a been a common assumption that it was allowed to fail because policymakers in general, and Paulson in particular, didn’t appreciate this risk but perhaps they did.

Embedding Conflicts of Interest

Mike Hastings, the Rolling Stone reporter whose work ended the career of General Stanley McChrystal but has never been questioned in terms of accuracy, has been denied permission to embed anew with a unit in Afghanistan. “There is no right to embed,” explains DOD spokesman Colonel David Lapan in what I take to be an accurate, albeit besides the point, take on the legal issues.

And Adam Weinstein further explains:

Plus, there’s a disturbing precedent for Hastings’ treatment. Last year, US commanders in Iraq kicked Heath Druzin, a Stars & Stripes reporter, off an embed, ostensibly because he was a distraction to his host unit. But then an Army PR officer made the mistake of complaining in writing that Druzin’s reporting wasn’t sunny enough. “Despite the opportunity to visit areas of the city where Iraqi Army leaders, soldiers, national police and Iraqi police displayed commitment to partnership, Mr. Druzin refused to highlight any of this news,” she wrote to Druzin’s editorial director. Stripes then pulled out all the stops, calling the military’s move “an attempt at censorship and…also an illegal prior restraint under federal law.”

This is a sensitive issue for a lot of professional journalists, including friends of mine, but I think it’s pretty obvious that the military’s practice of doing these embeds constitutes a heightened version of the conflict of interest that’s endemic to the reporter/guy-who-talks-to-reporter dynamic. Cooperation from the military is a valuable career resource to either a journalist or a think tank researcher, and though that cooperation isn’t contingent on you adopting an absolutely uncritical stance toward what the military is doing it is contingent on maintaining a general spirit of good will. That means maintaining what the military regards as an adequately respectful attitude toward the military and its leadership and its prerogatives in American society, it means not embarrassing people unduly (see, e.g., Hastings), and it means hoping for good luck.

The military’s hardly unique in this regard. If you interview someone, come away with the impression that he’s an idiot, then write that he’s an idiot, then ask for a second interview you’re likely to be turned down. Which is why I’ve tried to develop a business model for myself that doesn’t depend on my ability to persuade important people to talk to me. And that’s true all up and down across the enterprise. But the military is an unusually closed world, and the field of operations in Afghanistan is unusually difficult to penetrate without official cooperation so consequently the dilemma exists in heightened form.

Bush and the Cordoba Initiative

Writing about the Cordoba Initiative controversy, Kevin Drum says “For once, I really do miss George Bush. The damage he did to the American cause in the Muslim world is incalculable, but at least he never countenanced this kind of lunatic bigotry.”

I think that’s very true. But here’s the thing: George W Bush isn’t dead. He’s alive and well. If he wanted to stand alongside Mayor Bloomberg and do a press conference, I’m sure people would pay attention. Perhaps he’s observing a kind of ex-presidential courtesy and staying out of things. But Dick Cheney hasn’t shied away from inserting himself into political controversies. He could stand up for old fashioned Bush-Cheney values of start lots of wars but steer clear of explicit anti-Muslim bigotry. But he doesn’t want to. Nor does his daughter Liz. Karl Rove was the architect of the Bush administration’s messaging and I see him on Fox News all the time. He, too, could stand up for the approach to conservatism we remember from the Bush era. But he doesn’t want to either.

Now why is that? I couldn’t quite say. But at a minimum it’s indicative that they don’t have a very strong commitment to either the principle of non-discrimination or the strategic conceit that the conservative vision of a “war on terror” is something other than a civilizational struggle with Muslims. It’s too bad. But it is what it is, and that’s not a vanishing from the scene of Bush-era officials it’s their abdication in the face of a line of argument they won’t pursue personally but don’t seem personally disgusted by or anything.

Problematics of Advocacy Evaluation

Ezra Klein’s looking to donate some money to an organization that does effective advocacy on international issues, and is soliciting opinions on who does a good job. I’d be interested too. But I’m also interested in what a difficult issue this is in general. I was at a conference recently that focused on the subject, and it drove home some obvious-but-underrated points.

One is simply that most of the time most things mostly don’t change. And that’s not because all the advocates are ineffective. It’s because (a) status quo bias is powerful, and (b) for anything worth doing there are advocates on the other side. The failure of the cap-and-trade bill has caused a lot of second-guessing of the main cap-and-trade advocates’ strategy, but it would be dumb to reason “health reform passed, energy reform failed, therefore every health advocacy group was more effective than every environmental advocacy group.” On the contrary! Common sense says that in both camps there were a range of groups with a range of effectiveness, and one passed but the other didn’t for reasons that have nothing to do with the efficacy of any one organization. I sometimes joke around the office that Igor Volsky is the most-skilled Wonk Room blogger and Brad Johnson is the worst, but that’s just a joke.

A related point is that advocacy matters, in the sense that you’re not going to get anything done if you don’t have any, but other things matter too. On the international front, there was a lot of good advocacy in 2006-2008 aimed at building a consensus around a big hike in foreign aid. And then came the financial crisis, recession throughout the developed world, and a big retrenchment of aid commitments. That’s someone’s fault, but it’s certainly not the One Campaign’s fault. If you’re fairly deeply embedded in a system, then you can kind of tell—whose work is taken seriously, who do people roll their eyes when they talk about, who is helpful to you and others who you talk to, etc.—but even so you end up relying a lot more on personal judgment than on any kind of really rigorous “objective” measures.

World War II

It’s really hard to ever prove anything in macroeconomics, but it is worth looking at the incredible surge in US economic output associated with World War II, a period during which normally politics was basically repealed and everyone just decided “F— it, we’re going to build as many tanks and bombs and planes as we can”:

A few things jump out here. One is that by borrowing tons of money to build as many tanks and bombs and planes as possible, the US government was in fact able to drastically ramp up total production. Another is that this wasn’t a magical process, but related to the fact that the war came at a time when there was massive resource-idling due to the fact that the Great Depression had led many years in which we undershot the longer-term trend. The third is that while we certainly could do this today—massive mobilization to invade and occupy Iran and Pakistan maybe—we neither will nor should. It’s just kind of a coincidence that the Depression led to a war that was both gigantic and just.

But the point is that if there were some gargantuan endeavor that both political parties agreed it was worth undertaking, then there’s not some law of nature preventing the government from massively reducing unemployment quite rapidly. You simply need commitment to mobilizing real resources. The difficulty is in developing any kind of political or intellectual consensus around what would be worth doing.

Endgame

Kill what you can’t live without:

— John Kasich is “sort of” the American dream.

— For-profit colleges lying to students—for profit!

— Return of the tax fairy.

— The alleged Obama spending surge is not actually happening.

— Texas GOP donors versus GOP on immigration.

— Michael Bloomberg is brilliant on the mosque.

— Exciting new music blog!

Kathleen Hannah as Julie Ruin, “A Place Called Won’t Be There”

Tax-Subsidies for State Borrowing

Bond, tax-empt bond.

Josh Barro has an interesting piece on problems with federal tax subsidization of state and local borrowing. I agree that this is an area ripe for reform, and have been trying to emphasize the need for some focus on improving state and local budget practices. Everyone has long known this to be a problem area, but the Great Recession has revealed that excessively pro-cyclical budgeting can be a major macroeconomic problem.

In that light, I think it’s unfortunate that Barro spends so much time criticizing the successful Build America Bonds program which is really neither here nor there in terms of any longer-term issues. He’s correct, however, that there’s something perverse about the way current subsidies scale up as states become less creditworthy:

But even if bond subsidies are a good idea, there is a key flaw in their current structure: the subsidies grow in value when an issuer’s credit profile deteriorates. Because borrowing subsidies are a percentage of interest payments rather than principal, they rise as states are forced by skeptical markets to pay higher yields on new bonds.

This means that instead of simply lowering the level of municipal borrowing costs, we skew the incentives by blunting market signals that should be telling officials to borrow less. Another issue that deserves mention in this vein, however, is simply the fact that attempting to subsidize investment through this kind of tax subsidy is hugely inefficient with the majority of the subsidy simply enriching bond investors rather than spurring new infrastructure creation.

The Bogus McCain/Coburn Campaign Against Waste in the Recovery Act

It’s very easy to describe most grants, whether foundation-funded or government-funded, as silly-sounding waste if you’re willing to use pejorative wording. And if like Senators John McCain and Tom Coburn you’re willing to combine that with widespread inaccuracy, then it’s easy to devise a list of 100 wasteful stimulus-funded projects.

Jared Bernstein, writing for the White House, observes that five of the allegedly wasteful stimulus projects aren’t ARRA-funded projects at all. It’s also easier to describe things as wasteful when you don’t describe them correctly:

Take for example an award that McCain and Coburn describe as “funding a WNBA Practice Facility,” when in fact the award is building a tribal government center that will create education and health facilities while also creating hundreds of jobs. Moreover, the tribe has agreed to disallow any commercial use of the facility.

In general, there are obviously a lot of unemployed people in this country who were previously working in the construction sector. That means doing construction projects now rather than later is a smart idea. But McCain and Coburn just seem to object, in general, to building stuff. For example, they reveal that the federal government gave $135 million in bond authority to the Vermont Economic Development Agency which, in turn, loaned $25 million to a ski resort to replace some lifts and buy new equipment. But what’s wrong with that? The money is going to be repaid. The government is facilitating the transfer of economic activity from the non-depressed future into the currently-depressed present, thereby alleviating economic misery.

Jon Chait observes that McCain & Coburn also seem to have decided that anything relating to animals is necessarily waste. Hence a small grant to fund research on cocaine addiction and relapse is turned into “Monkeys Getting High for Science.” Hardy-har-har. There’s a case to be made that the government has no role to play in funding scientific research, but it’s a mighty bad case. If you think the government should fund research in the health and medical fields then of course you’re going to be funding some experiments that involve monkeys. Even though monkeys are funny.

They also deploy some plain illogic. They go on and on about problems in the past with Pittsburgh’s North Shore Connector project which is going to extend the city’s light rail under the Allegheny River so it can serve the stadiums. They cite perhaps-persuasive evidence that the project has been mismanaged from the start, and arguably never should have been undertaken at all. That said, sunk costs in the past are irrelevant to whether or not a $65 million ARRA grant to finish the damn thing is a good idea. They also appear to object to the idea that this particular branch of the light rail will be for “entertainment” rather than for “commuters” but by this logic there should be no transportation to sports stadiums and movie theaters whatsoever. In the real world, of course, getting people to entertainment locales is a perfectly valid goal of transportation policy.

The whole list is full of nonsense like this. It’s true, of course, that if you don’t accept the underlying premise that it makes sense to engage in temporary spending boosts to counteract a downturn then you’ll discover that ARRA is full of not-totally-essential spending items. But counteracting the downturn is itself an essential government priority.

The Semi-Mythical Texas Miracle

Ryan Avent blogs on the possible sources of the Texas Economic Miracle and concludes: “I think all of these factors contributed. Take a tech-oriented region like Greater Boston or the Bay Area, subtract out a housing collapse and add in an energy boom, and I suspect you’ve covered most of the discrepancy in performance.”

We'd be hearing more about the Boston Miracle if doing so advanced a low-tax, deregulatory agenda (cc photo by Renes)

I’d go stronger than this. If instead of comparing states you compare metropolitan areas, you sort of wonder where this miracle is. Here’s unemployment by metropolitan area. How’s Greater Boston doing? Well, they’re at 8.2 percent and faring better than Texas’ large Dallas and Houston metro areas. Indeed, Houston’s doing worse than Milwaukee, Seattle, Kansas City, and a bunch of other large cities I’ve never seen described as miraculous performers. The top-performing Texas metro area is the rather small Midland, TX which is still in worse shape than Madison or Honolulu or Omaha.

States, for better or for worse, aren’t real economic units. So state-level statistics often represent somewhat meaningless aggregation effects. Massachusetts happens to aggregate Boston (better than any large Texas metro) with a bunch of smaller metros (Worcester, Springfield, etc.) that are doing terribly. But it doesn’t make sense to say that Boston shows liberalism works while Springfield shows that it’s failed; Boston is just a very different kind of place.

Americans Want to Soak the Rich

The sensible thing to do about Social Security in 2010 and 2011 is to do nothing. At some future point it may become the case that projected Social Security deficits are a problem for economic growth, and that would be an excellent time to worry about them. But as Gallup confirms yet again politicians who feel mysteriously compelled to discuss this issue do have one policy option the public supports—soak the rich:

Representative Ted Deutch from Florida has introduced legislation to this effect though as I say, there’s really no need to do anything at this point. If we want better-educated citizens in 2040, we need to start improving schools right now. But our ability to pay pension benefits in 2040 will be determined by economic conditions in 2040, not by promises made or not made in 2010.

The Promise of Foreign Doctors

The news that foreign-born doctors trained abroad practicing in America are just as good as US-born and US-trained doctors (US-born doctors who trained abroad are worse, presumably because going to foreign medical school selects for less qualified applicants) is an indication that we have far too few foreign doctors practicing in the United States. Our American doctors are the highest-paid doctors in the world, earning much more than Canadian or French or Dutch doctors, to say nothing of the Indian and Pakistani doctors who tend to emigrate here. And yet our doctors fail to demonstrate the kind of superior performance that would justify this sort of thing.

I often think that if the American Medical Association were renamed the International Brotherhood of Doctors, AFL-CIO that discussion of health care policy in this country might be much-improved. Then perhaps conservative and centrist elites would suddenly recognize that massive medical protectionism is a major impediment to improving productivity in the health care sector.

In terms of practical steps, I think there are two main issues here. One is international standardization of qualification standards. As the NYT explains, to practice in the US foreign doctors “have to pass a series of rigorous exams and complete residency training.” The goal should be to develop an international standard for medical training that can, in principle, be completed in any country so that a degree achieved in Bangalore or Brussels is just as valid a credential as one earned in Boston. Second, it would be good to develop some kind of system of transfer payments to compensate poor countries that train medical professionals who go abroad. If too many Indian doctors leave the country, then India is going to lose interest in training doctors even though they seem to have comparative advantage in doctor-training. You want to turn this into a proper trade in medical services where US taxpayers win through lower Medicare cost growth, but Indian taxpayers also win via compensating payments from the United States.

The more general points are that higher levels of immigration by skilled professionals is highly desirable, and that the general arguments in favor of free trade in goods also apply to high-end services. Asymmetrical application of arguments for economic liberalization to the low-skilled only exacerbates inequality and stunts growth.

Paul Ryan’s Strange New Respect

To just agree with Kevin Drum for a bit there’s something bizarre about the recent Beltway fad of praising Paul Ryan. I think that when progressives do this they’re mostly being ironic, holding up Ryan—who’s basically a fraud—and saying this guy is the honest and intelligent one! And it’s true that he beats the Mike Pence standard for idiocy in that he can sort of maintain a back-and-forth with a well-informed policy writer as long as the writer doesn’t press him on anything. But coverage of the Super-Honest Ryan Plan to Balance the Budget While Cutting Taxes Through Draconian Spending Cuts tends to overlook the fact that most people would pay higher taxes, and the plan wouldn’t actually balance the budget if you calculate revenue figures based on a real model rather than Ryan’s ad hoc stipulations:

On top of all that, as Drum says, his “plan” for draconian cuts in spending isn’t really a plan at all he just rattles off arbitrary numerical caps without saying what kinds of reduced levels of services he thinks this would entail. Are we letting people out of federal prisons? Selling national parks? And of course he doesn’t seem to know what the Federal Funds Rate is. So I’m not particularly impressed. I’m pretty sure we could have random congressional interns throw together a balanced budget plan as long as it was allowed to (a) raise taxes on 90 percent of Americans and (b) not balance the budget, but I doubt the authors would become the toast of the town for their rigorous thinking if they did.

Ezra Klein posits that statements like “Rationing happens today! The question is who will do it? The government? Or you, your doctor and your family?” at least raise the honesty level of the debate. I’m not sure they do. Or at least I don’t think this is a very honest description of Ryan’s plan. Voucherizing Medicare puts rationing decisions into the hands of the executives of health insurance companies. Refusing to keep Medicare expenditures in line with the growth of health care costs means the rich will get treatment and the poor won’t. Putting decisions into the hands of patients and doctors rather than the government has no relationship to his proposals.

Tax Incidence

One of the worst-understood elements of any policy debate is the question of “tax incidence,” who actually pays a given tax. The public tends to put a great deal of weight on the legal question of who, exactly, is supposed to hand the check over. Meanwhile, business lobbyists invariably claim that costs will be “passed on to consumers” to bolster opposition to the tax even though if this were really true it’s hard to see why businesses would be so upset.

Stephen Gordon has an excellent post laying out the truth, which is that statutory incidence is irrelevant and real incidence depends on elasticity. I’ll just copy his charts, click through if you want a detailed explanation. But first, as you can see here taxing buyers and taxing sellers has the exact same impact:

What does make a difference is changing your assumptions about elasticity:

Of course things can get more complicated in the long run. A tax on Pepsi would initially have little impact on consumers, since a close substitute (Coke) is available and Pepsi would mostly just lose money. But if the tax managed to drive Pepsi out of business, Coke would have more market power and prices could end up higher than ever. Or if you raise gasoline taxes, the short-run impact is going to be to cost people money since the elasticity is low, but the long-term elasticity looks different and eventually people will buy more efficient cars and municipalities will invest in less car-dependent infrastructure and oil companies will take a big hit.

Will The Debt Commission Listen to Young Americans Who Didn’t Go to Phillips Academy?

By Ryan McNeely

Caroline Matthews, daughter of MSNBC pundit Chris Matthews, is getting some media attention for her work with the group “Concerned Youth of America.” Billed as a “nonpartisan group dedicated to promoting fiscal responsibility at the local, state and federal levels,” the group purports to represent young people concerned with the budget deficit. Chris Matthews featured the group — wearing prison costumes to symbolize how the youth of America are being “imprisoned” by government debt — on an MSNBC segment during the 2008 campaign, and interviewed his daughter about the group’s mission seemingly without telling viewers that she is, in fact, his daughter.

Normally, this type of thing would just be another case of harmless nepotism. But the group has some credibility, as its leadership was recently invited to testify before the President’s federal deficit commission (where Caroline is interning this summer). And in an age of deficit hysteria, the larger problem is the elite media and political class’ tendency to listen to the voices of the well-off and highly educated — people who, like them, are least affected by the current economic downturn — about the need for immediate austerity measures.

So here you have Concerned Youth of America Founder & Executive Director Yoni Gruskin (U-Penn student, summer intern with the Peterson Foundation) being interviewed on CNN about the lack of job prospects for people graduating from Ivy League Universities, complete with his unchallenged claim that young people, despite being affected by the recession, are “more concerned” about the “bigger dangers” on the horizon:

The Daily Caller recently described the organization’s founders as a group of “concerned high school seniors,” and that’s technically true. The problem is this group was created in the halls of Phillips Academy, a highly selective private high school with a yearly tuition of $41,300, and the leadership currently attends such diverse universities as U-Penn, Yale, Harvard, Duke, Georgetown, and Johns Hopkins. Now, there’s nothing wrong with going to Phillips (I have a cousin who went there) or a well-respected university (I go to one), but an outfit with five or six leaders (out of eight) who attended a single tony prep school can hardly claim to represent “the youth of America.”

I would focus on the policy prescriptions of the Concerned Youth of America rather than the socio-economic status of its leadership but for the fact that they don’t have any policy prescriptions. Rather, they run a scary “Gross National Debt” ticker on the front page of their website and say explicitly that “we are not here to…prescribe specific policy recommendations.” So it’s just concern for concern’s sake. They do worry, though, that “soon, 20 cents of every dollar we pay in taxes will not go towards building highways or schools or a 21st century defense structure” but will go “into the pockets of our creditors.” I’m all for education and infrastructure, which is why instead of worrying about the debt clock I think we should be taking advantage of record-low interest rates to spur much-needed public investment. And If I were running an organization dedicated to looking out for the interests of young people, I would take a hard stand against any attempt to raise the Social Security retirement age while exempting all non-young people from benefit cuts, rather than vague deficit concern trolling. But that’s me.

Cause, Effect, and Foreclosure

I think Atrios’ second criticism of today’s Tim Geithner op-ed was spot-on, it’s analytically mistaken to state that the main problem facing the long-term unemployed today is skills mismatch. The recession has lasted so long that I imagine this problem will manifest itself at some point while unemployment is still fairly high, but at the moment we’re looking at an equal opportunity recession driven by inadequate demand.

But he’s previous criticism that Geithner didn’t dwell enough on foreclosures seems mistaken to me. It’s true that the housing market is increasing geographical rigidity, but geographical rigidity is no more our main problem than skills mismatch is. The only places with really low unemployment are giant empty square states that can’t support a huge influx of people. I keep reading about Texas’ economic miracle but they have an 8.2 percent unemployment rate so it’s not as if more mobility will let us all get rich in Houston.

That’s not to deny it’s a problem that people can’t pay their mortgages, but at this point that’s largely a symptom of deeper economic dysfunction. I’m paying my mortgage just fine but that’s because I have a job and hence an income with which to pay it. But if you get laid-off or have your hours cut back, that’s a different story. What’s more, if the road we take to reduced unemployment involves a years-long process of falling nominal wages then even people who don’t lose their jobs will find it increasingly difficult to pay off debts. We need more overall demand in the economy or else there’s not going to be a viable way out of these problems. You could try to do this through targeted interventions aimed at homeowners in distressed, but you don’t have to do it that way and there’s no particular reason to think that would be a particularly politically viable means of getting the job done. A lot of the commentary I read on this topic underrates the level of resentment that would exist around the notion of “responsible” renters/homeowners “bailing out” heavily-indebted scofflaws. An effort to raise the overall price level would in practice benefit underwater homeowners more than other people, but would mainly result in faster economic growth in general and make everyone feel better about the situation.