Thursday, December 21, 2006

Important article

Why isn't Cheney right about the importance of a totally unfettered Executive managing foreign policy and responding to security threats? Even people who are thoughtful and sane, such as Judge Posner in some of his popular writings on these subjects, take the point about the importance of Presidential discretion in terms of energy and effectiveness.

One counter-argument is that an individual's decision quality will likely be more variable, for bad as well good, than the actions of collective institutions such as the U.S. Congress. Obviously, this point seems especially forceful after 6 years with the worst President in U.S. history, a man who knows less, thinks less, reads less, and is less emotionally mature than my 10 and 13 year old children. But of course one shouldn't over-generalize from how bad he is to the Presidency as a long-term institution, except insofar as he so vividly illustrates the variance and downside risk.

The highly regarded Harvard economist Edward Glaeser has an interesting new National Bureau of Economic Research Working Paper, "The Political Economy of Warfare" (# 12738, available on line at but to subscribers only) that could hardly be more timely in illustrating one of the broader problems. His analysis is not new, as he makes very clear up front, but is vital and under-appreciated.

To quote from the introduction:

"Why do countries, both democracies and dictatorships, engage in massively self-destructive wars? ....

"This paper ... presents a model of warfare where leaders benefit from conflict even though the population as a whole loses. Warfare creates domestic political advantages, both for insecure incumbents like Napoleon III and flr long-shot challengers, like Islamic extremists in the Middle East, even though it is costly to the nation as a whole. Self-destructive wars can be seen as an agency cost problem where politicians hurt the nation but increase their probability of political success. This problem becomes more severe if the population can be falsely persuaded that another country is a threat."

The paper's analysis uses a political economy model plus the following historical examples: Napoleon III, Bismarck, the European participants in World War I, and the U.S. from 1896 through 1975.

This is not a paper that will be criticized on the ground that extending the period analyzed would change the empirical conclusions.

Designing institutions without regard to agency costs is not an intellectually defensible course.

Friday, December 15, 2006

Party politics

Interesting article by political scientist Morris Fiorina in the recently published essay collection by Alan Gerber and Eric Patashnik, Promoting the General Welfare.

In "Parties as Problem Solvers," Fiorina notes the argument that he had been making for many years (and that I personally have considered persuasive) to the effect that national politics would function better if the parties were stronger. Several strands to this argument. One is that interest groups are weakened if the parties in effect cartelize and thus reduce any one group's market power. A strand emphasized by Fiorina held that "unified political parties led by strong presidents were more likely to act decisively to meet the challenges facing the country, and when they took their collective performance records to the electorate for ratification or rejection, the voters at least had a good idea whom to reward or blame."

He notes that the 1980s were the high water mark of responsible behavior by relatively united political parties.

He then notes what has happened since:

“In 2002 a Republican administration ostensibly committed to free enterprise endorsed tariffs to protect the U.S. steel industry, a policy condemned by economists across the ideological spectrum. Also in 2002 Congress passed and President Bush signed an agricultural subsidy bill that the left-leaning New York Times decried as an ‘orgy of pandering to special interest groups,’ the centrist U.S.A. Today called ‘a congressional atrocity,’ and the right-leaning Economist characterized as ‘monstrous.’ In 2003 Congress passed and the president signed a special interest-riddled prescription drug plan that was the largest entitlement program adopted since Medicare itself in 1965, a fiscal commitment that immediately put the larger Medicare program on a steep slide toward bankruptcy. In 2004 congressional Republicans proposed and President Bush supported a constitutional amendment to ban gay marriage, a divisive proposal that had no chance of passing. After his reelection, President Bush declared his highest priority was to avert a crisis in a Social Security system he insisted was bankrupt, by establishing a system of personal accounts [that had zero relationship to solvency – my addition], while disinterested observers generally pronounced the situation far from crisis and in need of relatively moderate reform – especially compared to Medicare. In 2005 the Republican Congress passed and President Bush signed a pork-filled transportation bill that contained 6,371 congressional earmarks, forty times as many as contained in a bill signed by an earlier Republican president in 1987. Meanwhile, at the time of this writing Americans continue to die in a war of choice launched on the basis of ambiguous intelligence that appears to have been systematically interpreted to support a previously adopted position.

“The preceding are only some of the more noteworthy lowlights of public policies adopted or proposed under the responsible party government of 2000-05. All things considered, if someone wished to argue that politics in the 1970s [with its lack of party discipline] was better than today, I would find it hard to rebut them. Why?”

Fiorina argues that the reasons for the failure of strong-party government to deliver the anticipated benefits include:

1) The change made politics more conflictual, with winning vs. losing being much more clearcut and all-important, leading to permanent campaigning and the disappearance of any intermittent efforts at actual governance. Party positioning for the next election becomes all-consuming all the time.

2) Voters were offered clearer and more polarized choices than they actually wanted, leading to much less responsiveness to public sentiment in a heterogeneous society.

3) The parties now seek 50% plus one vote, not maximizing their votes, since once you have a majority you can pass almost anything you like (well, Social Security privatization aside) without having to claim a popular mandate.

I offer some explanations of my own for the failure of party government to improve the political process, including a variant of #3, in my new book.

This whole subject requires a lot more thought from political scientists and from everyone who is interested in the proper (or at least adequate) functioning of our government institutions. For now, the only clear takeaway is: Be careful what you wish for, or you just might get it.

Thursday, December 14, 2006

Classic rock?

The new expanded reissue of Pavement's Wowee Zowee is enormous fun and well worth repeated listens. I had previously under-rated this album relative to Pavement's previous two and next one (Slanted & Enchanted, Crooked Rain, Brighten the Corners). Favorite new track: the minute-long, bizarre "Candy Lad," a tag-on to a live track on Disk 2. "Dad, you're into some messed-up music," my older son told me as it played.

Wednesday, December 13, 2006

Good appointment

Peter Orszag has just been named to head the Congressional Budget Office. Good news insofar as he is able to exert any influence, whether on policy or simply on measurement of policy.

Monday, December 11, 2006

Now available

After some delay, my new book, "Taxes, Spending, and the U.S. Government's March Towards Bankruptcy," is indeed available on-line.

Here are the links to it at Amazon and, with a better price, at Barnes & Noble.

I've just come back from a Tax and Corporate Governance conference in Munich, where I presented a paper on the U.S. disclosure and penalty regime for corporate tax shelters, which I will post shortly on SSRN.

A U.K. commentator of mine, hostile to my pro-government stance in the paper, apparently planned to compare me to the Bush Administration as an exporter of evil U.S. ideas that Europe ought to ignore. Luckily, he subsided on this comparison (at least orally) although his written comments may retain the reference.

It's a funny feeling to be an American abroad these days, if people consider you a representative of U.S. policy. One feels decidedly uneasy in a manner that has no precedent in my own lifetime experience as an American.

I told this commentator that his complaining (in connection with me) about the Bush Administration made me feel like Basily Fawlty, in the episode of Fawlty Towers where someone complains to him about Manuel's standard of service in the dining room, and Basil responds: "Do you think I don't know? You only dine here - I have to live with it!"

I do, however, feel a bit more entitled than Basil to dodge the complaint this way, as his power over Manuel somewhat exceeds my degree of influence over U.S. foreign and security policy.

Tuesday, December 05, 2006

Oedipus had nothing on this guy

Bush, discussing his father in a recent interview:

"I love to talk to my dad about things between a father and a son, not policy ...

[Does he consult with his father?] "No ... He understands what I know, that the level of information I have relative to the level of information most other people have, including himself, is significant ...

"I am the commander-in-chief."