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Is the revolution over?
Megan McArdle writes:
There's a lot of sadness on liberal blogs these days. What happened to Hope and Change? Climate change is coming sometime next year, maybe. Financial regulation also isn't coming anytime soon, and what's proposed is the minimum set of politically feasible propositions rather than a sweeping overhaul. And health care?
There is more at the link and I suspect it is mostly or fully correct. Here is Ezra on health care reform and the very big chance that it might fail. I'd just like to repeat a simple question I asked at the beginning of the Obama administration: which would you rather have, the fiscal stimulus or $775 billion in public health programs?
Even better, how about $300 billion in stimulus -- the immediate stuff like aid to state governments -- and $475 billion in public health programs?
At the time no one except a few progressives thought such a question was particularly relevant.
Note that the economy has seemed to stabilize, more or less, and well under ten percent of the stimulus money has been spent to date. Moving forward, if no further major programs will be put into place, how would you like to spend the rest of that cash?
Seriously.
And I don't mean this post as a poke at Democrats in particular. Conservatives, libertarians, etc. all commit their own versions of this error, at least if they find their way to power. The basic mechanism is simply that policy advocates underestimate the opportunity costs of the measures they propose, as they tend to see those measures as more "win-win" than others are willing to believe.
Posted by Tyler Cowen on June 19, 2009 at 07:43 AM in Political Science | Permalink
Comments
I definitely committed this error to a certain extent but on another level it wasn't an error at all. It's a false choice between a bigger stimulus and more healthcare. If the stimulus was smaller the fight for a more robust public health plan would be no easier. I think it is less that the simply underestimate the opportunity costs, and more that the politicians and pundits opportunity costs aren't measured in dollars but in more nebulously defined political clout. Because of the way people (can't) deal with big numbers moving from a 200 billion dollar stimulus to a 700 billion dollar stimulus is much easier than having one 200 billion dollar stimulus and one 500 billion health care program.
Posted by: Michael Foody at Jun 19, 2009 8:21:15 AM
How should we spend the rest of the cash that we don't, in fact, have?
Posted by: Laserlight at Jun 19, 2009 8:25:45 AM
"Sadness on liberal blogs"??? That sounds like wishful thinking on the conservative blogs. Even Krugman, long an Obama skeptic, is coming around to being impressed with Obama now.
Obama's popularity is currently 25 points higher than Bill Clinton's was at this point in his presidency and 10 points higher than Bush's. Obama is by far the most popular figure in the nation. Meanwhile, GOP support is literally at a record low. On specific issue after issue, Americans support Obama and the Democrats.
Does doing health care, stimulus, energy, environment, financial reform, etc all at once spread his political capital? Maybe, but it also dilutes out the focus of people like Limbaugh, Gingrich, Lott, McArdle, Krauthammer, etc. who are trying to fight a rearguard action to prevent change. The progressives have far more political power, popularity and intellectual support than the opponents of change so they may as well press their advantage across the board while the memory of Bush and GOP rule are still fresh in everyone's mind. Why let their opponents concentrate their relatively small resources on stopping just one initiative?
Serious people did not expect this to be easy or perfect - that's a straw man. But for the first time in two generations, real progress is likely to be made on long-overdue reforms in health care, financial reform, energy and other areas.
Posted by: a student of economics at Jun 19, 2009 8:41:30 AM
The sadness does exist, it's not just a fabrication. A basic understanding of the situation suggests two sources: frustration at a slow and moderate Congress, as was quite obviously mentioned in the original post, and a lack of significant initiatives for homosexuals, which has become a surprisingly big issue for liberals. Only one of those things has to do with the President, and since the criticism is coming from his left it's unlikely to show up as disapproval of the President himself.
Posted by: Millian at Jun 19, 2009 8:55:54 AM
Tyler wrote: "Note that the economy has seemed to stabilize, more or less, and well under ten percent of the stimulus money has been spent to date."
I love this jab as much as the next anti-stimulus critic, but is it fair? In the Keynesian models that presumably justify massive fiscal stimulus, does the first round of money have to actually be spent, or is it enough if people expect that it's coming?
Posted by: Bob Murphy at Jun 19, 2009 8:57:03 AM
Obama is by far the most popular figure in the nation. Meanwhile, GOP support is literally at a record low.
So what? We don't live in a monarchy or a dictatorship. Yet. (And no flames about Obama, the 3rd socialist president, the first 2 being FDR and Bush 2. It really is Bushama - or Bushbama.)
btw - take a look at Barone's take on the institutional hurdles:
No, Obama can't govern like FDR in 1933
Posted by: anon at Jun 19, 2009 8:57:35 AM
"We don't live in a monarchy or a dictatorship"
Um, so does that mean that popular support is irrelevant? I don't follow your logic.
Posted by: a student of economics at Jun 19, 2009 9:04:13 AM
Hey, are you saying that the stabilization of the economy has nothing to do with the expectation of the stimulus expenditures? How would you explain the stabilization, then?
Posted by: NPTO at Jun 19, 2009 9:08:35 AM
I don't really understand, especially the part about libertarians getting power.
When the problem is getting something complex exactly right, you'd better not do more than one thing at a time, unless you are in a purely opinion-based endeavor like politics where people's memories, your tenure, and the results cycle do not match up. In reality-based endeavors, "getting something done" is not the measure of success. We got a lot of loans done and got a lot of securitized deals done.
The problem is that the political fight is way too easy. They don't have to recognize reality until they slam into it like a brick wall years down the road. They don't understand or recognize trade-offs at all. Even if they have to log roll with the other side, the other side just demands more goodies. There is no third side that demands fiscal responsibility that must be reckoned with (see above).
Perhaps Obama is banking on a second term and he is more pragmatic than the lefties would like. That's the bad news.
Posted by: Andrew at Jun 19, 2009 9:12:29 AM
Economy is stable or stagnant? With high unemployment and little hope for a rapid recovery.
How should we spend the money? How about putting it in the hands of average citizens and letting the private sector have a little growth potential.
Krugman an Obama skeptic? Hardly! Krugman may want Obama to spend more at a faster rate but Krugman is far from an Obama skeptic. Granted Krugman thinks the only perfect policy is his policy but that doesn't mean that he isn't a big Obama fan. I suggest you look up the meaning of the word skeptic.
Gay commentators are increasingly angry at Obama policies.
Some critics like Bill Maher are complaining that Obama so far is more empty promises then results.
The antiwar crowd seem less interested in those pictures of coffins now that Obama is president and they are staying quiet for some reason.
And more people every day are convinced that we are on a path that will leave our children with a bleaker future.
Posted by: DanC at Jun 19, 2009 9:15:17 AM
Maybe Obama is employing a conservative strategy to take advantage of all the idle conservative resources.
Posted by: Andrew at Jun 19, 2009 9:26:40 AM
"Limbaugh! But Bush! Obama! Obama! Obama!"
I've sensed the same increasing - not decreasing - criticisms of Obama from the left, or at least growing unhappiness that he has not been more forceful, not moved more quickly, and not made breaks considered nearly strong enough from Bush administration policies on 'key' topics. Being located at a small liberal arts university, my personal experience is that the jubilance over Obama has long-since faded, replaced by mild criticism and significant disappointment. These people, at least, are disillusioned by not just the lack of action but the rhetoric.
Posted by: PM at Jun 19, 2009 9:31:01 AM
From Ezra's piece suggesting that the answer is staring us in the face: "Rather than protecting the private insurance system, the Finance Committee could include a public plan with the ability to bargain to Medicare rates, thus saving, according to the Commonwealth Fund, 20 percent to 30 percent against traditional private insurance."
I hate this argument so much. Government bargaining rates and saving 30% over private insurance and all that. You'd almost think there's no tradeoff. If you rephrased this argument as: "The solution is fundamental reform to reduce the amount of healthcare available by capping return on healthcare investment," that suddently doesn't sound like an answer, does it?
Posted by: JasonL at Jun 19, 2009 9:47:05 AM
This is probably a failure or at least a weakness in the mood and stability of most liberals and Democrats, myself included, more than anything else. No doubt, there have been some pauses this week, but that's definitely part of the legislative process. But a slight setback, if we can even call it that, isn't always a cause for alarm. My guess is, Obama knew all of this was coming, and since he has his eye on the bigger picture, he's not going to be fazed by the fact that this won't be a walk in the park. His calm and collected demeanor when problems come about is welcome and encouraging, just as it was back when a lot of people, myself once again included, felt Sarah Palin could be a real threat. There were indeed a few days when I was worried it was all over and after freaking out felt that he had to do something different to fight back. He didn't, because he was planning for the long term, his eye on the big picture.
And doesn't your point about the deficits seem less relevant if the administration proposes an additional round of fiscal stimulus in the late summer early fall, as we learned it might earlier this week?
Posted by: Brian J at Jun 19, 2009 9:55:21 AM
With the exception of healthcare which obviously would cost a lot this post doesn't make much sense. Financial regulation is not traded off with dollars of stimulus nor is this the case for the climate change bill, although auctioning off all of the permits would obviously raise a lot of revenue. Progressives are just as upset about detainees and gay rights, again these issues are difficult but they have nothing to do with the current size of the deficit.
Posted by: j at Jun 19, 2009 10:03:03 AM
Some men here
They know the full extent of
Your distress
They kneel and pray
And they say :
Long may it last
-Morrissey
Posted by: Andrew at Jun 19, 2009 10:04:41 AM
I had not thought about today's politics this way. Without addressing the feasibility, desirability or likelihood of the contenders' desires, I see a large gap between expectations and potential outcomes.
For good or ill, Obama has promised to meet the needs/demands of his supporters. What we are beginning to hear now are the cries of "faster, faster" or "not enough".
Unfortunately for Obama most of his promises involve complicated domestic issues. He has to depend on Congress. An organization not noted for its alacrity. And to a great extent constrained by time, procedure and the reality of having to create legislation that satisfies 50% plus one vote.
The ideal of Hope and Change has run smack dab into the reality of Madison's factions.
Maybe there is hope for us yet.
Posted by: Steve C. at Jun 19, 2009 10:15:48 AM
The leading edge of the stimulus should have been health care.
Posted by: David Sucher at Jun 19, 2009 10:35:00 AM
You're posing a false dichotomy, Tyler. First of all, there's no reason fundamental health care reform needs to be tremendously expensive -- as even the Ezra Klein piece linked to explains. The United States spends twice as much money on health care as normal industrial countries and gets worse coverage, and SOME of that is subsidy of medical research and thus probably worthwhile, but most of it isn't.
Secondly, a smaller stimulus might have led to deficits exactly as large or larger, which was the major point of the stimulus (one often considered too small, not too large, to work). Since the world economy has in fact been shrinking at 1929-like rates as is, and since the United States economy is still awaiting the possible further blows from when the first unemployment checks disappear, I don't think you're right to assume any stability has been reached.
I'd like _more_ serious health care reform, a bunch of mass-transit and reforestation spending added to the stimulus, and a smaller deficit. If necessary, I'd be more than happy to tax the well-off to get there. But it's not clear that it would even be necessary.
Posted by: voxpoptart at Jun 19, 2009 10:35:24 AM
"Hope and change" is running up against the lack of revenue to do it. It is this simple. The way forward is to increase revenue by a massive amount.
Posted by: Yancey Ward at Jun 19, 2009 10:39:36 AM
Infrastructure, infrastructure, infrastructure.
Posted by: Mike at The Big Stick at Jun 19, 2009 10:41:39 AM
If necessary, I'd be more than happy to tax the well-off to get there..
I bet you would. Everyone loves to order what they want and have someone else pick up the tab.
Posted by: Colin at Jun 19, 2009 10:43:33 AM
On specific issue after issue, Americans support Obama and the Democrats..
Really? Issue after issue?
http://www.nytimes.com/2009/06/18/us/politics/18poll.html?_r=1&ref=politics&pagewanted=print
A substantial majority of Americans say President Obama has not developed a strategy to deal with the budget deficit, according to the latest New York Times/CBS News poll, which also found that support for his plans to overhaul health care, rescue the auto industry and close the prison at Guantánamo Bay, Cuba, falls well below his job approval ratings.
A distinct gulf exists between Mr. Obama’s overall standing and how some of his key initiatives are viewed, with fewer than half of Americans saying they approve of how he has handled health care and the effort to save General Motors and Chrysler. A majority of people said his policies have had either no effect yet on improving the economy or had made it worse, underscoring how his political strength still rests on faith in his leadership rather than concrete results.
Posted by: Colin at Jun 19, 2009 10:51:59 AM
There is definitely a trade-off between degrees of possibility and degrees of freedom -- especially with government.
Posted by: Niklas Blanchard at Jun 19, 2009 10:55:34 AM
"Obama's popularity is currently 25 points higher than Bill Clinton's..."
Hmmm. The bubble from Hope. Pop!
Posted by: Andrew at Jun 19, 2009 10:56:35 AM
