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Posts Tagged ‘Congress’

Following Marc’s great post on congressional dysfunction, I’d like to point how political science tells us that the availability of government shutdowns actually causes the growth of government spending. The analysis follows the 1979 spatial analysis of zero-based budgeting by Thomas Romer and Howard Rosenthal.

Suppose that there is one dimension of politics: the size of the federal budget. There are a fiscally conservative party and a fiscally liberal party. For simplicity, assume the median, electorally decisive American voter is somewhere between the two. We could plot the parties’ and median voters’ positions on this dimension like this, where “C” is the conservative party, “M” is the median voter, and “L” is the liberal party:

Federal budget

 0|----------------------------------|--------|-----------|------------------------------------------| 100% of GDP
                                    C        M           L

Now suppose that there is a need to pass a budget. If the budget doesn’t pass, the government partially shuts down (S). Once the government shuts down, the median voter M perceives the outcome as being more favored by the conservative party, with ideal point C. The liberal party with ideal point L can make a budget proposal that must get approval from both parties, so conservatives have the opportunity to accept or reject it – in the latter case, the government stays shut down. After the budget is approved or rejected, there is an election, and the median voter M votes for the party with the closer budget position. Parties care most about winning election, then secondarily obtaining their preferred budget.

In this example below, once the conservative party gets associated with S, causing the shutdown, then L is able to propose its ideal point (L). Conservatives accept the budget, because otherwise they would remain associated with S, and the median voter prefers L to S, so would turn conservatives out at the next election.

 0|----------|-----------------------|--------|-----------|------------------------------------------| 100% of GDP
            S                       C        M           L

The median voter will only be willing to vote for conservatives who reject a liberal budget proposal if S is closer to their ideal point than the liberal budget proposal. Knowing this, L will propose something close enough to the median voter to prevent that outcome – and conservatives will accept it. Take the following example, where P is the proposal liberals make:

 0|----------|----|-----|----------|----------------------|------------------------------------------| 100% of GDP
            S    C     M          P                      L

P is infinitesimally closer to M than S is, so M votes for the liberal party, unless the conservatives also vote for the budget.

So once a shutdown happens, a bigger budget than the median voter prefer (let alone the conservative party) looks inevitable. Knowing this, conservatives won’t want the government to shut down to begin with. But that still means liberals have a lot of bargaining power, and the budget will tend to grow.

In real life, of course, shutdowns happen very occasionally. Why? (more…)

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Bob Higgs has used the concept of “regime uncertainty” to explain why the Great Depression lasted so long. In brief, the argument is that FDR’s escalatingly anti-capitalist rhetoric in the mid- to late-1930s spooked investors, who were uncertain whether they would be allowed to enjoy the future fruits of their investments. Therefore, investment declined, provoking a slump in 1938 and generally prolonging the Depression.

Some have argued that the prolonged period of high unemployment and anemic growth the United States has experienced in the wake of the 2007-9 “Great Recession” is also due to regime uncertainty. They blame the Obama Administration and Democrats in Congress for fostering a regulatory environment hostile to business.

But if that explanation of poor growth in 2009-10 is right, how can it explain poor growth in 2011-12, after Republicans took the House of Representatives? Under divided government, regime uncertainty is nil. The 2011-12 Congress is on pace to be the least productive since 1947 in terms of passing laws. Libertarians say gridlock is good — well, we definitely have gridlock, so where are all the benefits?

Here’s the evidence:

The chart shows inflation-corrected personal income, excluding transfers from the government. Real personal income today still stands below its level at the start of 2008. If these figures were divided by population, they would look worse still. There has been a very weak recovery.

Why should we not blame House Republicans as much as Democrats and Obama for the bad economy? (more…)

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Political scientist John Sides has contributed an interesting guest post to FiveThirtyEight, in which he reviews the evidence that social class influences the way Congresspeople vote. In particular, Congresspeople are unlikely to come from working-class backgrounds, and class seems to affect voting at the individual level. If Congress had the same mix of class backgrounds as the general American public, they would in general be slightly more liberal.

My first reaction was: I wonder how much of this reflects IQ. Intelligence makes people think like economists and also increases people’s income and probably shifts class background toward mentally intensive occupations.

My second reaction was: Assuming the result stands, do we want Congress to reflect the same background as the American public? Should everyone be represented equally? It’s not obvious to me that they ought to. I’m on record here as supporting limiting in some way the right of government employees and contractors to vote. Even if you don’t share my libertarian proclivities on public policy, however, a slightly upper-class-tilted public policy regime might be desirable for straightforward reasons of stability. In a pure democracy that is strictly responsive to the median voter, businesspeople and professionals might become alienated from democracy itself. That may sound like a bit of a stretch for the United States, but not for many countries around the world where upper-class opposition to democracy has entrenched electoral fraud, clientelism, or military supervision of civilian authority.

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One overlooked electoral reform to decrease the power of special interests in the U.S. political process would be to expand the size of the U.S. House quite significantly, so that legislators cater to much smaller electorates. (More radically, state partition could also be promoted to expand the size of the Senate.) Accordingly, I thought today’s Daily Chart from the Economist was telling:

Of the world’s 22 most populous countries, the U.S. has the second-most people per national legislator.

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Marc Eisner notes the politics of fiscal irresponsibility. Such politics never seem to go out of style. Nevertheless, the coalition government in Great Britain is offering an object lesson in how to build political support for deep, wide-ranging cuts in government spending. With the UK’s finances in even slightly worse shape than the US’s, the Conservatives and Liberal Democrats have successfully made the case that there is no alternative. Here are some of today’s figures on polling on welfare cuts:

Making the long term unemployed spend 4 weeks doing unpaid work All voters CON voters LAB voters LD voters
Support 73 92 58 83
Oppose 17 3 31 14
Don’t know 10 5 10 3

Withdrawing Jobseekers Allowance from those who turn down a job offer or interview All voters CON voters LAB voters LD voters
Support 66 82 57 71
Oppose 21 8 33 22
Don’t know 12 9 10 6

More stringent testing for people receiving Disability Living Allowance All voters CON voters LAB voters LD voters
Support 69 86 58 70
Oppose 20 6 32 22
Don’t know 12 8 9 9

Putting a £400 a week maxium on housing benefit All voters CON voters LAB voters LD voters
Support 68 87 54 76
Oppose 20 6 37 12
Don’t know 12 7 10 12

Those are truly massive majorities.The British government is also cutting defense expenditures drastically and means-testing certain benefits, such as child care, so that the middle classes will no longer receive them. These policies are somewhat less popular but still enjoy majority support.

So how did they do it? One of the key requirements for the political “optics” of the cuts was the coalition government. With a social democratic party in the Lib Dems joining the Conservatives in supporting the cuts, the government was shielded from accusations of heartlessness or right-wing mania. Moreover, supporters of both parties outnumber Labour supporters. In the media, key Labour Party figures have been successfully characterized as “deficit deniers,” the people who caused the problem in the first place.

Coalition government is supposed to slow down the pace of change and create gridlock, just like divided government in the U.S. Nevertheless, it has worked well so far for Britain because it allows a formal structure that ties both parties to each other – neither party wants the coalition to fail, which would surely bring on a new election.

Unfortunately, this institutional characteristic of some parliamentary systems – endogenous election timing – is not available to American politicians. Nevertheless, Britain’s experience suggests that one way out of the fiscal mess in the U.S. would be a bipartisan, cross-chamber coalition of sorts, narrowly focused on solving the budget crisis. Given the midterm election results, the popular mandate is there for a radical fiscal house-cleaning, if anyone decides to take it up. Reasonable Republicans and Blue Dogs can join forces to create clear majorities in both houses and negotiate – in hard-fought, late-night sessions if need be – a package of radical spending reductions and tax reforms needed to close the budget gap.

With a bipartisan mandate, who could run against the results? The anti-tax-hike and anti-spending-cut extremists on both sides will be neutralized. President Obama will have no choice but to endorse the outcome of such a negotiation. Imagine if he vetoed the plan. He would clearly be the one responsible for shutting the government down if it came to that. He couldn’t blame the Republicans – because the cutters would have substantial Democratic support. He’d merely be making himself look even more liberal, which I’m sure his political advisors realize is not the key to victory in 2012.

We can dream, can’t we? As unlikely as this scenario sounds, the bottom line is that spending cuts need not be politically toxic. If you frame the debate as one of responsibility versus madness, voters will choose the former.

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In the past, I have been quite interested in “Operation Drain the Swamp.” A piece by Brody Mullins and John McKinnon in  today’s WSJ suggest that Speaker Pelosi has some additional work to do in the final months of her reign if she is going to bring the operation to a successful conclusion. According to the article, a half-dozen members of Congress are being investigated for the common practice of pocketing government funds provided to cover expenses when traveling overseas. Members receive a per diem that can run as high as $250 per day. However, the costs of travel are often covered by their hosts (foreign governments, ambassadors).

Lawmakers routinely keep the extra funds or spend it on gifts, shopping or to cover their spouses’ travel expenses, according to dozens of current and former lawmakers. …Leftover funds can add up to more than $1,000 a trip for longer visits to expensive regions.

Those currently under investigation include: G.K. Butterfield (D-NC), Joe Wilson (R-SC) Alcee Hastings (D-FL), Solomon Ortiz (D-TX), Robert Aderholt (R-AL), and former Representative Mark Souder (R-IN).

Of course, who can blame our representatives for pocketing a thousand here and a thousand there. It must seem trivial when you are used to throwing around billions of taxpayer dollars. Should any of this  come as a surprise? Read the following:

There is no system for lawmakers to return excess travel funds when they return to the U.S. and investigators may conclude that House rules for the use of per diem are unclear. One lawmaker, Sen. Richard Durbin (D., Ill.), said that he mails a personal check to the U.S. Treasury after each trip. Congress doesn’t keep any record of the amount of per diem that is returned to the government.

Elected officials design the institutions and rules by which they are governed. Anyone familiar with principal-agent problems should not be shocked and horrified by more evidence that individuals design institutions to further their own self-interest. Additional evidence? The WSJ piece ends with a reminder:  “Investigators won’t make the probe public until after the election due to a House rule that bars announcements of ethics investigations in the months before an election.”

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In 2006, Speaker-elect Nancy Pelosi (D-CA) famously pledged to “drain the swamp” of corruption” and to “turn this Congress into the most honest and open Congress in history. That’s my pledge — that is what I intend to do.”  Time for an update on Operation Drain the Swamp.

Following the resignation of Rep. Eric Massa (D-N.Y.) and the just announced  trial deal with Rep. Charlie Rangel (D-N.Y), Politico is reporting that the  Ethics Committee’s next stop is Rep. Maxine Waters (D-CA).

Following the recent flurry of ethics problems, one might assume that the Speaker is feeling the strain of Operation Drain the Swamp. But, sounding a bit like Yoda, Speaker Pelosi proclaimed at this week’s press briefing: “Drain the swamp we did, because this was a terrible place.” (WaPo)

My guess: the Swamp is still full. If the events of the past decade are any guide, this is anything but an issue of partisanship—if you have any doubt, just ask  Rep. Jim Traficant (D-OH),  Rep. Tom DeLay (R-TX), Rep. Nick Miller (R-MI), Rep. Candice Miller (R-MI), Rep. John Conyers (D-MI), Rep. Jim McDermott (D-WA), Rep. Tom Feeney (R-FL), and Rep. Curt Weldon (R-PA).

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