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Posts Tagged ‘Democrats’

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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At Mother Jones, Adam Serwer details the Democratic Party’s platform’s ratification of the Obama Administration’s wholesale retreat on civil liberties. When stacking this sort of thing alongside the GOP’s attempt to become the Defenders of Medicare, I not only find it difficult to care who wins the next presidential election, but to understand why anyone else would.

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As Pileus readers know, the spending cuts Congress and the President agreed to in future budgets are a drop in the bucket of future deficits. Nevertheless, the cacophony of protest among partisan hacks is deafening. Jacob Weisberg has a particularly incoherent piece at Slate today. Two selections:

But for the federal government to spur growth or create jobs, it has to spend additional money. The antediluvian Republicans who control Congress do not think that demand can be expanded in this way. They believe that the 2009 stimulus bill, which has prevented an even worse economy over the past two years, is actually responsible for the current weakness. Their Hooverite approach—embedded in the debt-ceiling compromise—demands that we address the risk of a double-dip recession by cutting public expenditure now rather than later.

The deal that President Obama and House Speaker John Boehner tentatively agreed upon in early July was far from perfect, imbalanced in favor of spending cuts over revenues by a ratio of 4-to-1. But that $4 trillion “grand bargain” would have constituted a serious down payment on the deficit, and sent a strong signal to financial markets that our political establishment took the problem seriously. Instead we got this week’s sad bargain—a much smaller, deferred, and contingent reduction in spending projections. This sends quite a different signal: that our political system cannot, in its current configuration, cope with difference between what comes in and what goes out.

So let’s get this straight: the cuts in spending were both too large and too small for Weisberg. Bigger cuts would have been better, and so would no cuts – in fact, increases! Perhaps he means that there should be increases now, bigger cuts later – a respectable position. But that’s not what he says, nor does that position correspond to any recognizable negotiating position taken by either side in the debt ceiling debate. So why does all the blame accrue to “antediluvian Republicans”? (Never mind the ignorance about Hoover’s massive increases in federal spending.)

But the reliably behind-the-curve New York Times editorial board takes the cake with their proposal to abolish the debt ceiling altogether. So let’s get this straight: Politicians in DC are such irresponsible spenders that the only thing that could force them to get together and make even small cuts in future spending growth was the risk of financial annihilation. And the solution is? Take away the very risk of financial annihilation that finally forced them to exercise a modicum of fiscal responsibility!

Of course, if you abolish the debt limit, then under divided government we’d have the same game of chicken played at budget time, when the hostage would be the operations of the federal government. And I’m sure we can count on the Times editorial board to scream about not holding our economy hostage when the federal government shuts down or comes close to it. Maybe we should abolish annual budgeting too. Just let departments set their own budgets. It’s safer that way.

The right blogosphere is little better. Looking ahead to the super-committee, the only concern on the right seems to be that – horrors of horrors – the committee might try to raise some revenue by eliminating tax expenditures and deductions! So the GOP should have forced default instead! Because if you want long-run spending cuts, the right strategy is to gain control of one house of Congress and then maintain a position of complete and total intransigence on the only thing you can reasonably offer the other branches in exchange for spending cuts! Oh, and frighten as many independents as you can before the next election.

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Noel Johnson, Matt Mitchell, and Steve Yamarik have a new working paper answering that question in the affirmative. They look at state fiscal and regulatory policies and find that Democrats generally like to increase taxes and spending when in control of state houses and Republicans do the reverse. But when states have tough balanced-budget requirements called “no-carry rules,” Democrats and Republicans don’t differ much on fiscal policy. Instead they try to appeal to their constituencies by pursuing regulatory policies – in general, Democrats increasing regulation and Republicans cutting it. As the paper’s still in the working draft stage, they are looking for comments on it.

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Wasn’t it just five minutes ago that Democrats and Republicans alike were hailing their budget resolution from last week as “historic” and “unprecedented” in its cuts? Even the usually understated WSJ called it, as I pointed out only moments ago, “The Tea Party’s First Victory.”

I guess that was then. Today the WSJ reports that even that widely reported figure of $38 billion in hotly negotiated cuts was “hokum,” the real figure being closer to $20 billion. The Journal also reports that this revelation might mean that House Speaker Boehner is in danger of losing yet more backbencher support from those yahoos of media lore

Well, I for one am shocked, shocked that instead of cutting the budget by the whole one-and-a-half percent ($61 billion) the Republicans initially demanded, and instead of the one whole percent ($38 billion) they claimed to end up with, they in fact cut the budget by only about one-half of one percent.

Budget crisis? What budget crisis?

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Wall Street Journal editorials are usually very good, the WSJ‘s editorial page being one of the few of major newspapers whose authors are economically literate. The editors recently argued that last Friday’s late-hour budget agreement was “The Tea Party’s First Victory.”

Maybe it was. But consider this passage from the piece:

Republicans also showed they are able to make the compromises required to govern. We realize that “governing” can often be an excuse for incumbent self-interest. But this early show of political maturity will demonstrate to independents that the freshmen and tea party Republicans they elected in November aren’t the yahoos of media lore. A government shutdown over a spending difference of $7 billion and some policy riders would have made the GOP look reckless for little return.

Here the editors are misreading the political tea leaves. There is nothing that “the freshmen and tea party Republicans” can do that will change the opinion of most media outlets that they are “yahoos” bent on “reckless” endangerment of the republic. Indeed, that is one of the more charitable ways to describe what liberal pundits and editorial pages will write, not to mention think, about these Republicans. And when I say they can do nothing to change that, I mean it: Even if the Republicans had capitulated entirely to the Democrats’ opening offer of—what was it, $9 billion in cuts?—it would have been explained not as evidence of the ‘maturity’ and ‘reasonableness’ the WSJ seems to believe but because of something rather less flattering. (My guess: either (a) stupidity, (b) a secret Machiavellian strategem, or (c) some combination of the two.)

If I’m right about that, and the central currents of media and liberal opinion of these Republicans will not change, then why should either they or the WSJ bother worrying about it?

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