The Price of Principle

By Nolan McCarty on July 20, 2010 1:37 PM | No Comments

In this era of polarized politics, the ideologically-driven behavior of our political leaders is often lamented. But in the end, both progressives and conservatives normally make short-term compromises with their principles in order to achieve some of their long-term goals. Senator Feingold’s unwillingness to do the same has resulted in the equivalent of yet another bank bailout.

On HuffPo with Keith Poole, Tom Romer, and Howard Rosenthal.
Continue reading The Price of Principle.

My Prediction for the Nobel Prize in Economics

By Nolan McCarty on October 9, 2009 10:51 AM | 5 Comments

Although I’m not an economist, I work in the part of Political Science just across the border and have many good friends in the economics profession. So just as they are, I am swept up in the excitement of the pending announcement of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (otherwise known as the Nobel Prize in Economics). There are a lot of great candidates this year including Jean Tirole, William Nordhaus, Paul Milgrom, Tom Sargent, and a whole host of my Princeton colleagues. But recently a dark horse candidate has emerged who now seems likely to win in a walk. So I’m conceding the inevitable. The 2009 Nobel Prize in Economics will go to Barak Obama.

Consider the following:
 
  • Whereas Tirole, Nordhaus, Milgrom, and others have made important and fundamental scholarly contributions to economic theory and policy analysis, only Obama has the audacity to hope for better economic policy in the future. Can he design a health care system that covers everyone and saves money? Yes, he can! Can he reengineer the financial system to eliminate systemic risk, protect consumers while maintaining the benefits of modern finance? Yes, he can! Can he reduce greenhouse emissions without reducing jobs and economic growth? Yes, he can! What actual economist would dare say those things? For his vision alone, he deserves the prize.
  • Obama has never been associated rational expectations theory or the efficient markets hypothesis. In fact, he’s turned his administration into one big Behavioral Economics Seminar.
  • I’ve heard rumors that Obama still plans to broker a peace treaty between Paul Krugman and Bob Lucas. Unfortunately, the track 2 negotiations seem to have broken down.
  • The Scandinavians could really stick it to George Bush by giving Obama two Nobel Prizes.
  • He taught at the University of Chicago.
How could he lose?

Indoctrinating Our Children

By Nolan McCarty on September 9, 2009 7:00 PM | 2 Comments

Nolan McCarty:  How was President Obama's speech?

Lachlan McCarty (4th grader):  Kind of boring.  It was all "Try Hard... Do Your Best" rephrased ten thousand ways.

Kennedy the Bipartisan

By Nolan McCarty on August 27, 2009 9:09 AM | 2 Comments

After the failure to achieve bipartisan legislation on economic stimulus and health care, the whole conception of bipartisanship is being assailed from across the political spectrum.  It is decried as naïve and panglossian, the attempt to actually turn politics into beanbag. Its practitioners are slandered as wobbly-kneed, weak-spined compromisers who would sell all their principles for a few extra votes.

But the greatest blow to bipartisanship may be the untimely loss Edward Kennedy.  Senator Kennedy’s contribution to bipartisan is absolutely unmatched.  He worked with
 
  • John McCain and Alan Simpson on immigration reform
  • Nancy Kassebaum on health insurance portability
  • Orrin Hatch on state children’s health insurance (SCHIP), AIDs funding, insuring religious freedom and national service
  • Chuck Grassley on Medicaid
  • Michael Enzi on AIDS funding, international competitiveness, and higher education funding
  • Bill Frist on bioterrorism
  • Kay Hutchison on cancer detection
  • Pete Domenici on mental health
  • Judd Gregg on student loan forgiveness
  • Richard Lugar on democratization in Latin America
  • George Bush on Medicare drug coverage (up to a point) and “No Child Left Behind” educational reforms
 
This portfolio disproves the notion that bipartisanship is the thing of naifs and the unprincipled. Clearly, Senator Kennedy was neither. The “Lion of the Senate” was a tough politician who never shied away from the rough-n-tumble of politics. Most, importantly he never compromised on the things that really mattered to him such as civil rights or improving the lives of the disadvantaged. Rather bipartisanship was a tool used to advance that agenda.  Perhaps because he was a Kennedy in Massachusetts, his job security allowed him to take the long view of politics that bipartisanship requires.  When bipartisanship failed, he could be a partisan’s partisan.  But he never burned the bipartisan bridges he would need on the next leg of his journey. Remarkably Kennedy did not settle for working only with moderate Republicans.  Two of his favorite collaborators, Orren Hatch and Michael Enzi, are among the staunchest conservatives to serve in the Senate.
There are many important lessons to be learned from Kennedy the Bipartisan.   One should not have permanent enemies. Find the common ground and seize it.  One need not inflate every small disagreement into partisan warfare. Patience will lead to progress. The Democrats would do well to remember these lessons as their disenchantment with bipartisanship grows.
But the most important lesson may be one for the Republicans.  Many of Edward Kennedy’s great successes came when Washington was dominated by the Republicans.  His ability to identify common ground and work with the Republicans meant that he continued to be a force regardless of which party controlled the chamber. By emulating his example, rather becoming the Nay Party, Republicans can make important contributions without abandoning their core principles.  

Easing My Way Back

By Nolan McCarty on August 17, 2009 7:23 PM | No Comments

After a summer schedule of travel not very conducive to blogging, I hope to ease my way back as things get interesting in Washington.  As a warm-up, here is today's post on Politico's Arena:

The public option is dead. Probably was even before the administration performed last rites. Basically, the mathematics of using the reconciliation process to get a public option never added up. Vote counting + budget scoring + parliamentarian forecasting equated certain failure via reconciliation. The only alternative left is the misnamed "bipartisan" approach. It is misnamed because it is not designed to get Republican votes, rather it is designed to get all the Democratic votes. And that was never going to happen with the public option hanging out there.

The only real surprise is that the administration gave up its "public option via reconciliation" threat so early in the process. This will lead many on the left to believe that they were sold out rather than understand that administration's hand was forced by political realities.

 

A Sign of the Times

By Nolan McCarty on July 8, 2009 9:57 AM | 2 Comments
It is a sign of the polarized times in which we live that partisans of different stripes can look at the same objective indicators – persistent and increasing unemployment—and come to radically different conclusions about what is to be done.  The Republicans see proof in the unemployment numbers that the original stimulus package was ineffective and misguided.  The Democrats see it as a sign that the original package was not enough and that we need another one.
Because I like to cast myself as a moderate, let me split the difference.  I think the original stimulus package probably was beneficial.  It was always unrealistic to think that it would prevent unemployment from going above 8%, but it is equally unrealistic to believe things would be better now without it. 
 
Yet I do not believe another package is what we need for two reasons.  The first is that the problem with the original stimulus plan is that the money has not been spent fast enough (mainly because too much of it went for pent up Democratic spending priorities rather than “shovel-ready” projects).  So a much better plan would be to reprogram some of the original package toward projects that will spend money more quickly.  Helping state governments avoid layoffs might be a good place to start.  The second reason that I’d oppose another stimulus bill is that I think unemployment numbers may not be a good indicator of where the economy is going or whether the first package worked.  As we observed in last recession (for reasons we do not quite understand), employment and wages only started improving after the economy had recovered.  So throwing another batch of stimulus at an economy that may be already recovering would not be prudent.

A Quibble with Josh's Quibble

By Nolan McCarty on June 22, 2009 3:29 PM | 2 Comments

My friend Josh Tucker graciously linked up to my post on public opinion on health care on The Monkey Cage.  He did suggest that my bottom line that opinion is not all that more favorable to reform (and may be less favorable) than 1994 might "underestimate the importance of Obama having a reservoir of public support behind him."

But I guess I forgot to mention (but the NY Times did too) that Obama's approval rating on health care is 44% and his disapproval rating is 34%.  Not terrible numbers, but not a reservoir.  The NYT/CBS report does not give comparable numbers for Bill Clinton in 1993-1994.  But my guess is that they were in the same neighborhood when his reform effort was getting underway.

Is the Public Now Ready for Health Care Reform?

By Nolan McCarty on June 22, 2009 10:55 AM | 2 Comments

To those of us who follow the way media reports on public opinion polls, it is no surprise to find out that the headline and lede are generally cherry-picked from among the poll's finding.  So that the reporting on the NY Times/CBS poll on health care focused on the finding that 72% of Americans favor "a government administered health insurance plan -- something like the Medicare coverage that people 65 and older get -- that would compete with private health insurance plans?"

 

That is a striking number.  But it is hard to know whether, as Paul Krugman suggests, it represents a fundamental change in public attitudes since the last time the Democrats tried to reform the health care system.  That's because the question had not been asked before.

 

But the survey did ask many questions that were asked back in the 1990s.  Looking at those questions gives a much more mixed picture of the changes in public opinion about health care reform.  There are a few questions that suggest substantial change over the past few years.  The public does trust the government substantially more than private insurance companies to provide coverage and hold down costs than it did in 2007.  But we did not have a comparable question from the 1990s.

 

On the questions that were asked in the current survey and the 1990s, the picture is one of tremendous stability in public opinion rather than marked change.  Some highlights:

 

  • On the question of whether the health care system required major reform, 85% of the current respondents said it required "fundamental changes" or needed to be "rebuilt completely."  But 90% said this on the eve of the failure of Clinton-care.  Indeed even at the height of the Republican takeover in 1994, 79% felt health care needed significant reform.
  • 57% trust the Democratic Party most to reform health care.  But 59% felt the same way in 1994.
  • 48% of the current respondents are dissatisfied with health care generally.  The number was 55% in 1993. 2003.
  • Today 57% of Americans are willing to pay higher taxes for universal coverage.  64% were in 1993.

 

What is more interesting is that neither 1993 nor 2009 are close to being peak years for public acceptance of health care reform.  Based on the questions asked at regular intervals, the peaks years seem to be the late 1990s and early 2000s.  Many of the questions were asked only in 2007 and 2009.  The public was generally more concerned about health care in 2007.

 

There are many reasons why health care reform may be more successful now that it was sixteen years ago.  But it does not appear that a sea change in public opinion is one of them.

 

CORRECTION:  My original post stated that 55% of Americans were dissatified with health care in 1993.  I missread the poll results.  That number came from a 2003 poll and I do not believe that question was asked before that.  My basic point stands.  

The Word of the Day

By Nolan McCarty on June 18, 2009 7:27 PM | No Comments

In the Treasury Department's white paper on its financial reform plans, the word "robust" is used 47 times in 101 pages.  Some choice examples:

·         [our plan will] promote robust supervision and regulation of financial firms. 

·         [financial holding companies] should be subject to robust consolidated supervision and regulation, regardless of whether the firm owns an insured depository institution.

·         [the SEC] should require robust reporting by issuers of asset backed securities.

·         [the SEC] should promote robust policies and procedures that manage and disclose conflicts of interest [for credit rating agencies].

·         The CFPA [consumer financial protection agency] should be an independent agency with stable, robust funding.

·         Regulators will need to require that CCPs [central counterparties] impose robust margin requirements

·         The CFPA should also establish a robust research and statistics department

 

It is too early to tell whether the new regulatory regime will be effective, efficient, and equitable.  But it will certainly be robust!

 

Getting the Numbers to Add Up

By Nolan McCarty on June 16, 2009 7:18 AM | No Comments
As reported in the New York Times, the Congressional Budget Office has thrown a bucket of cold water on President Obama's plans to reform the health care system.  According to the CBO analysis, the leading Senate plan would only decrease the ranks of the uninsured by 16 million, leaving 36 million without insurance.  This finding poses many problems for the push to reform health care.  Much of the anticipated cost savings from reform come from the fact that expanded coverage means more preventive care and fewer emergency room visits.  But if coverage does not expand much, these savings are illusory.  Consquently, a deficit-neutral plan will be hard to fashion.  As I pointed out last week, deficit neutrality is crucial procedurally in order to pass legislation by a simple Senate majority.  Moreover as the public becomes more concerned about deficits, a plan that increases red ink will be more difficult to sell politically.  Finally, the analysis gives opponents of reform a real opening.  Their argument will now be that Obama wants to spend a trillion dollars and completely reorganize the health care sector only to cover a third of the uninsured.
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