Wednesday, September 07, 2011

What would Nixon do?

The opening of today's New York Times article on President Obama's forthcoming jobs package really turned my stomach:

"The centerpiece of the job creation package that President Obama plans to announce on Thursday — payroll tax relief for workers and perhaps their employers — is neither his first policy choice nor that of many economists. But it is the one that they figure has the best chance of getting Republicans’ support."

So typical of this Administration. They decide up front to advocate what they agree is very far from being the best available, policy - in order to give themselves "the best chance of getting Republicans’ support."

All this notwithstanding that the Administration's actual chance of getting that support is zero. Not 0.00001%. Zero. At least, leaving aside the payment of substantial ransom such as extending the high-end tax cuts. With or without payroll tax relief as a core feature, the Republicans will not agree to pass this legislation. So why would the Administration proceed as if winning their votes was the core design question? (Actually, I'll suggest a rationale below, but it isn't good enough.)

Let's turn our minds back to early 2009 and the big (such as it was) stimulus package. This included lots of tax breaks that the Administration, through its economists, knew would be less effective than alternative programs. They put these in to get Republican support. They got zero Republican support. They kept the tax breaks in anyway, and then of course grossly oversold an inadequately sized package as providing enough to get the economy back on track. Then, when the recovery fell far short of the rhetorical expectations that had been created, the Administration had encouraged the retort that stimulus just doesn't work (as opposed to its having been too small).

Now once again we have a flurry of proposals that are going to be too small in aggregate and deliberately poorly designed, in the hope of getting Republican support, which they have zero chance of getting.

But why did I title this post "What would Nixon do?" OK, I have keen memories of the old Trickster, though I realize that he is ancient history to anyone under the age of 45. But bear with me. One thing we know that Nixon absolutely for sure would have done (because he did it) is use every possible tool he had to push the Fed towards a more stimulative policy. Obama utterly failed to do this, whether through appointments or private sit-downs or public jawboning.

But there is also another standard Nixon trick that, sleazy though it was in context, the Obama Administration ought to think about. Nixon was a big fan of proposing legislation that he knew couldn't be passed, specifically because if it wasn't passed he would get a campaign issue. E.g., supposedly in 1970 he was disappointed by his success in getting the Democratic Congress to pass a tough crime bill that contained provisions that, under the quaint standards of the time, were considered odious by civil libertarians. Nixon had deliberately put these things in the proposed legislation, although they were largely symbolic and expected to have little actual impact on crime, because he wanted the Democrats to refuse to pass the legislation, whereupon he would make it a campaign issue and blame rising crime levels on them. They took the issue away by acceding.

How would such a scenario play out today? If Nixon faced Obama's current political circumstances, he would not be trying actually to enact stimulus legislation. He would know that he had zero chance of getting anything that would make a significant difference. He would want to propose something that the opposition WOULDN'T pass, and that he could then campaign on. (And it is clear this time around, unlike with the 1970 crime legislation, that the Congress won't accede in order to take away the issue.)

We could use a bit of that thinking today. Why not propose something that is actually big, dramatic, and well-designed? And why not make reasonable, economically supportable arguments about why and how much it might actually help? Then Obama could rightly criticize the Republicans and blame the labor market on them when they fail to pass it.

This would not just be Nixon-style maneuvering. It would also help make the correct point that, since at least mid-2009, we have actually been following Republican budget policies and they haven't worked. As things stand, by repeatedly acceding to them, even in what he proposes, he accepts a state of affairs in which they actually set the policy yet he takes the blame.

Meanwhile, Obama is collaborating in basic miseducation of American voters, by adopting all kinds of false or grossly overstated Republican claims about how regulatory burden and budget deficits are responsible for the jobs situation.

If people want Republican policies, they will pick Republicans to implement them. An abler, more courageous, and more farsighted politician than Obama would recognize the importance of laying the intellectual groundwork for good policy over many years.

OK, time is short and it's a bit late for all that now. So admittedly there is one clear political calculation that might explain how Obama is proceeding in his jobs proposal. If he proposed big infrastructure and public spending ideas to hire lots of workers and help get us out of the doldrums, and the Republicans refused to enact it, at least they would have a very strong case that they were acting in good faith. Rather than inviting the campaign charge that they are deliberate economic saboteurs, they would be following their own long-enunciated policy preferences in opposing the legislation. (McConnell has already previewed this by saying they won't enact failed policies, harvesting the legacy of Obama's 2009 overclaiming for the stimulus legislation.)

But even if the Republicans convincingly argued good faith in opposing such a proposal, Obama could still reply that they are wrong, and that they shouldn't be elected in 2012 because they will follow the wrong policies.

Don't call it stimulus, of course - call it creating jobs by hiring lots of people to build things that we need. Don't rely in public rhetoric on Keynesian multipliers that are counter-intuitive. Force the Republicans to argue that there will be no net job creation due to indirect effects - a freshwater economists' claim that is counter-intuitive wholly apart from whether it is right or wrong (and with the collapse of consumer demand I would say that it is clearly wrong).

By instead proposing watered-down, maldesigned, too-small Republican-style jobs legislation, Obama may hope to strengthen the claim that the Republicans are acting in bad faith when they inevitably reject it. But accusations of bad faith, which he will of course make extremely decorously if at all, will only go so far with the voters - especially once he has conceded that in general we need Republican-style policies, which they of course are the better-situated party to keep on providing.

And the reality is even worse. One lesson that voters might very well draw is that, if Republicans engage in bad faith obstructionism whenever a Democrat is president, we'd damn well better put them in charge so that they will have the right incentives. It doesn't make them nice people, but if they will make sure that things go worse when they are not officially in power than when they are, voters could very rationally view this as a good reason for electing them.


Anonymous said...

«if Republicans engage in bad faith obstructionism whenever a Democrat is president, we'd damn well better put them in charge so that they will have the right incentives.»

But Republicans are in charge, as they control the majority of the House which is where fiscal policy is made.

Sure for some crazy reason voters think it is Presidents that actually make economic policy, but they just carry it out, and at most they can propose it.

So your suggestions about doing nixonian campaign oriented proposals seems the right one even if your argument is flawed.

Because the Reublicans are not obstructing ecponomic policy, they are making it. They are not a rebellious and timewasting minority, they are in charge.

Daniel Shaviro said...

They're doing both. Obstructing monetary policy and any initiatives Obama would want (or anyone who wanted to address unemployment). Agreed that they are also basically making fiscal policy, though not 100% of the way (Dems block them to a degree too).