Archive for July, 2013

A Grand Bargain?

Tuesday, President Obama proposed a “grand bargain” as part of his jobs tour (a tour that marks the third anniversary of Vice President Biden’s “Recovery Summer” tour). The grand bargain is relatively simple: corporate tax cuts (to 28 percent), including a one-time lower tax on profits earned overseas that would arguably entice firms to repatriate these funds and provide a temporary spike in revenues. These revenues, in turn, would be used to promote additional stimulus projects (a White House fact sheet can be found here). As President Obama explained (White House transcript):

But if we’re going to give businesses a better deal, then we’re also going to have to give workers a better deal, too.  (Applause.) I want to use some of the money that we save by closing these loopholes to create more good construction jobs with infrastructure initiatives that I already talked about. We can build a broader network of high-tech manufacturing hubs that leaders from both parties can support. We can help our community colleges arm our workers with the skills that a global economy demands. All these things would benefit the middle class right now and benefit our economy in the years to come.

Oddly enough, the New York Times was unimpressed: “only the packaging was new. The president essentially cobbled together two existing initiatives that have been stalled in Congress: corporate tax changes and his plan to create jobs through education, training, and public works projects.”


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  • Concord, NH is about to acquire a Bearcat “tank” with federal grant money, similar to the one that spurred protests from all walks of society in Keene, NH recently. (One Keene councilman looks back and describes the purchase as a “waste of money.”) More disturbing is the fact that the Concord police cited “Free Staters” and “Occupy New Hampshire” as examples of potential domestic “terrorism” justifying the armored truck’s acquisition.
  • The New Hampshire Union-Leader criticizes Chris Christie’s recent attack on Rand Paul and libertarianism: “New Jersey Gov. Chris Christie has no patience for people who are concerned that the government might be violating their civil liberties in pursuit of increased national security. That is going to make a run through the New Hampshire primary really annoying for him.” The Union-Leader‘s influence on the GOP primary is often overstated (they endorsed Gingrich last time), but they are most effective when in attack mode. Their attacks on Romney helped suppress his vote share well below what was initially expected in the 2012 primary.

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The Economist thinks so, and has dedicated a good deal of space to the question in the newest issue (here  and here). A few quotes:

Other states and cities should pay heed, not because they might end up like Detroit next year, but because the city is a flashing warning light on America’s fiscal dashboard. Though some of its woes are unique, a crucial one is not. Many other state and city governments across America have made impossible-to-keep promises to do with pensions and health care. Detroit shows what can happen when leaders put off reforming the public sector for too long.

The Economist sites an interesting statistic: the total pension gap for the states is $2.7 trillion (or 17 percent GDP).  In Connecticut, my adopted home state, the pension shortfall is 190 percent of annual tax revenues (Illinois is even worse, at 241 percent). Of course, this does not include the pension gap in the cities and, more importantly, the health-care benefits for state and municipal retirees.

There are some obvious fixes going forward (e.g., substituting defined-contribution pensions for existing defined-benefit pensions). But this does nothing to address the current unfunded liabilities that are largely the product of politics (e.g., to win the allegiance of public sector workers, promise glorious benefits at some time in the future when someone else will have to foot the bill). As recent events have revealed, efforts to force reform can carry high political costs.

When one considers the huge unfunded liabilities at the federal level, the additional problems in the states and municipalities may prove even more difficult to address. It is hard to imagine the federal government providing much in the way of assistance when it is being forced to draw increasingly on general revenues to cover its own obligations.

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The Onion mocks so many of us so effectively in this piece titled “Unambitious Loser With Happy, Fulfilling Life Still Lives In Hometown.”  It must leave Rod Dreher, author of The Little Way of Ruthie Leming: A Southern Girl, a Small Town, and the Secret of a Good Life, smiling!

Longtime acquaintances confirmed to reporters this week that local man Michael Husmer, an unambitious 29-year-old loser who leads an enjoyable and fulfilling life, still lives in his hometown and has no desire to leave.

Claiming that the aimless slouch has never resided more than two hours from his parents and still hangs out with friends from high school, sources close to Husmer reported that the man, who has meaningful, lasting personal relationships and a healthy work-life balance, is an unmotivated washout who’s perfectly comfortable being a nobody for the rest of his life.

Here is a link to Dreher’s book on this subject and a review of his book at TAC (where Dreher also blogs).

Despite being attracted to some of Dreher’s themes, I’m not sure his book has been subject to the critique it deserves.  But please pass along candidates for that honor. Nonetheless, it is an important book whose themes we should all consider.

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I have just posted a couple of my working papers to SSRN for those who are interested. They are as follows:

  1. Public Policy and Quality of Life: An Empirical Analysis of Interstate Migration, 2000-2012
    Individuals and households choose their political jurisdiction of residence on the basis of expected income differentials and jurisdiction-specific characteristics covered by the general term “amenities.” In addition to fixed characteristics like climate and terrain, amenities may include public policies, as in the well-known Tiebout model of migration. Do Americans reveal preferences for certain public policies by tending to migrate toward jurisdictions that offer them? This article tests whether state government involvement in fiscal policy, business regulation, and civil and personal liberties more often reflects an amenity or a disamenity for Americans willing to move. As identification strategies, the article estimates spatial, matched-neighbors, and dyadic models of net interstate migration for all 50 states, covering the years 2000-2012. The evidence suggests that cost of living, which is in turn strongly correlated with land-use regulation, strongly deters in-migration, while both fiscal and regulatory components of “economic freedom” attract new residents. There is less robust evidence that “personal freedom” attracts residents.
  2. Civil Libertarianism-Communitarianism: A State Policy Ideology Dimension
    This paper investigates the existence of a second dimension of state policy ideology orthogonal to the traditional left-right dimension: civil libertarianism-communitarianism. It argues that voter attitudes toward nonviolent acts that are sometimes crimes, particularly weapons and drugs offenses, are in part distinct from their liberal or conservative ideologies, and cause systematic variation in states’ policies toward these acts. The hypotheses are tested with a structural equation model of state policies that combines “confirmatory factor analysis” with linear regression. The existence of a second dimension of state policy essentially uncorrelated with left-right ideology and loading onto gun control, marijuana, and other criminal justice policies is confirmed. Moreover, this dimension of policy ideology relates in the expected fashion to urbanization and the strength of ideological libertarianism in the state electorate. The results suggest that the libertarian-communitarian divide represents an enduring dimension of policy-making in the United States.

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Two photos in the news elicited a few thoughts:

Photo 1

Dawn Blitz













Even though my brain knows that Japan is a US ally now and that World War II was a long time ago, it was still a bit jarring to see this picture of a Japanese military platform bearing the “rising sun” military flag amphibiously “attacking” the US coast as part of a military exercise.  Like South Koreans and Chinese – as the Wikipedia (!) entry on the flag notes – many people associate that flag with militarism and imperialism.  I do too.  In particular, I think of Nanking and Pearl Harbor.  I wonder why the US didn’t forbid the use of this flag after WWII, especially since it only inflames anti-Japanese sentiment around Asia.

Photo 2










Pretty darn cool for George H.W. Bush to shave his head in support of a child’s fight against cancer.  The child in the picture is the kid of one of the members of Bush’s security detail – pictured above.  But aside from thinking well of Bush the Elder’s action, I was struck by how large his security detail is.  If all of those men are securing a former President, imagine the cost to the US taxpayer!  Those men don’t come cheap in terms of salary and benefits.  Of course, it makes sense to offer protection to former Presidents, especially since this one was actually targeted after he left office.  But are this many security personnel required at this point in time – 20 years after he left office and years since the death of Saddam?

HT: Farley at LGM.

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So says the normally level-headed Matt Yglesias:

This raises “really tricky legal-type questions” about the permissible scope of eminent domain law, but a fully empowered mayor could get the job done. Detroit famously can’t get 40 percent of its traffic lights to work, and its 58-minute 911 response time for major crimes is abysmal. Abandoning whole areas of the city and forcibly relocating families into currently vacant structures closer to the core would be a drastic step, but in a way, it wouldn’t be so different from a normal eminent domain process to build critical infrastructure. In this case, rather than creating new services, it would allow Detroit to provide much better services to a new, smaller city. And with over 20 percent of the existing housing units in the city vacant, it would be feasible to rehouse a large number of people.

Why, those cretins living in Detroit don’t even know enough to live close to services! God, how stupid. Fortunately, we DC-based bloggers know better. They must be “forcibly” shown the error of their ways.

Here’s a better idea: Why not decentralize Detroit and let neighborhoods take care of their own services? Not only is it likely to be more efficient than a centrally planned, new city, but it’s also consistent with, shall we say, basic human rights?

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