Monthly Archives: April 2009

The Specter of a Filibuster-proof Majority

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Arlen Specter’s relationship with the right-wing of his party never been good. But he’s managed to keep the conservatives sufficiently at bay to win five Republican Senate primaries. But as the Republican Party becomes more conservative and retreats from the Northeast, his position became untenable. Even if he had been able to move right to fend off his second consecutive primary challenge from conservative Pat Toomey, he would have been extremely vulnerable to a Democratic candidate in the general election. So his decision to switch parties is not terribly surprising.

The big question today of course is the extent to which Specter’s switch will affect the success of President Obama’s legislative agenda. Of course, as many have already pointed out, the switch plus the probable seating of Al Franken would bring the Senate Democrats to the magic filibuster-proof majority of sixty.

But because there is no guarantee of Democratic unanimity on many of the more controversial aspects of the president’s agenda, the effect of the switch ultimately depends on how much Specter moves to the left as he tries to position himself within his new party. Keith, Howard, and I once published a paper that among other things estimated how much party switchers shifted on the liberal-conservative continuum. We found that on average party switchers moved 28 percentile ranks on a liberalism scale. Thus, a Democrat at the 40th percentile on liberalism would move to the 68th percentile. In the 110th Congress, Specter was the 55th most liberal member of the Senate. With the addition of new Democratic senators, he is probably the 62nd most liberal. Consequently, if he shifts the average amount, he’ll be the 34th most liberal. Such a move would put him solidly within the Democratic fold near Herb Kohl and Diane Feinstein. He would probably rank more liberal than his fellow Pennsylvania Democrat Bob Casey (even on issues other than abortion).

That’s just the average effect. There are reasons to suspect that Specter might go even further left. After all, he has to make party activists forget that he voted for the Iraq War, supported Bush’s judicial nominees, and was Anita Hill chief inquisitor (memories are long for these sorts of things). He has to avoid a serious Democratic primary challenge, and he has to raise a lot of money from groups and individuals who have pumped millions into past attempts to defeat him. So Obama just doesn’t get an extra vote for his agenda, he gets an easy vote.

The New CEO Survival Guide

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For better or worse, the United States is moving into an era where the government will be more involved in the economy and in the day-to-day decisions of American corporations. These entanglements will range from greater regulation of economic activity to temporary interventions like bailouts to substantial long term governmental holdings of equity.

Unfortunately, much of the debate on the question of how far the government should go has either been ideological or about the economic costs and benefits of particular interventions. Unsurprisingly, the ideological debate has pitted those who believe that government should never intervene in the private economy as a matter of principle against those who believe that government intervention is justified in any case where market allocations deviate from “socially” desirable outcomes. Somewhat more interesting are the economic debates about which forms of government intervention are most likely to achieve desired ends. A good example is the Krugman-Summers smack down over the Treasury’s toxic asset plan.

What I have long felt was missing from these debates is an assessment about the long term political ramifications of different types of government intervention. More specifically, I worry about how we can prevent certain forms of intervention from over-politicizing corporate decision making and turning the economy into one giant “pay to play” scheme.

Take the decision of the Obama administration’s decision to condition further aid to General Motors on the ouster of its CEO Rick Wagoner. Regardless of Wagoner’s merits or deficiencies in leading GM, the move sets a dangerous precedent in what it teaches other CEOs. Other CEOs presumably learned that their jobs may ultimately depend as much on their “political approval rating” as much as their economic contribution. CEOs will go to even greater lengths than they currently do to curry political favor and connections. More former politicians will be added to corporate boards and executive suites to provide insurance against ill political winds.

Of course, one might argue that such problems aren’t present in many European states where the government’s role in the economy is much more extensive. But there are many reasons to believe that those experiences will be hard to translate to the U.S. case. The first is history. There is ample evidence that corporate political activity has grown proportionately to the increased level of the government intervention in the economy. The second is our system of campaign finance that gives corporations foolproof opportunities to cultivate political connections. But the real problem may lie much deeper. Our entire political structure with its geographic basis of representation and relatively weak political parties makes it relatively easy for corporations and CEOs to build strong protective coalitions among legislators who are naturally inclined to represent narrow special interests.

So one has to worry that excessive intervention may turn our economy into a collection hyper-politicized entities like Fannie Mae and Freddie Mac. Of course, it would be another matter entirely if government-forced CEO ousters were to be a rare event going forward. But Tim Geithner told Katie Couric that the same fate may await other bailout CEOs.