Tag Archives: protectionism

Catching Up

Because I gave several talks in the UK last week, it has been some time since I updated the blog. Events have unfolded so quickly that it seems like an eternity. So let me play the lightning round to catch up.

Taxing Appointments

I have to say I’m fairly shocked at how quickly the promised smooth transition unraveled over tax and ethics problems. Stuff happens so Richardson’s withdrawal didn’t seem like a big deal in the big picture. But Obama’s vaunted vetting process was supposed to weed out annoying distractions like tax evasion. Is evasion too strong a word? For Geitner, no. He failed to give the U.S. government money that the IMF explicitly gave him to pay U.S. taxes. What did he think the extra money was for? Daschle’s case is more complicated, but only slightly. Unlike Geitner, it may be that no one ever explicitly told him he had top pay money on his perks. But a senator who wrote tax law ought to have known better. Assuming that Killefer’s only indiscretion was $900 in D.C. unemployment tax, I have much more sympathy for her. D.C., like many states, treat families with nannies as a small business and require not just social security taxes but payments into disability and unemployment funds. From experience, I know it is almost impossible to comply without a professional accountant. But Obama couldn’t push all three nominees and hers was the least important (I’m really not sure what a Chief Compliance Officer is supposed to do.)

Hitting the Ground Running

Several years ago Rose Razaghian and I published a chapter in an edited volume analyzing how quickly presidents make their first appointments to high executive office positions and how quickly the Senate confirmed them. Our argument was that increasing partisan polarization had slowed both processes. Early on I thought the Team Obama was going to reverse the tide and move more quickly than recent presidents. Just eyeballing things, I’m pretty sure that I was wrong. In a week or so, I hope to produce a report card detailing exactly how Obama is doing.

The Stimulus Package

I have very mixed feelings about the stimulus package. I’m generally sympathetic to the idea that now is the ideal time for the U.S. to make very significant investments in infrastructure, education, and energy conservation. But that is not what this package looks like. First, it has two many small tax cuts that seem likely to be saved rather than spent by consumers. Some tax cuts are very desirable, however. I would especially like to see a cut in payroll taxes. Those taxes are very regressive so lowering them would quickly get money in the hands of people most ready to spend it. It also makes sense on tax equity grounds. But a hodge-podge of new credits and deductions just lowers revenues and make the tax system more complicated. Nobody will be able to spend in anticipation of a tax cut that they can’t anticipate. The projects that the bill includes also don’t seem to be the sort that I want to put on my son and daughter’s credit card. I’d be happy to tell them that they will have to pay up big for a bunch of stuff that is going to make their lives better. But I don’t see a lot of those things in the package.


President Obama is taking heat in some quarters for reaching out to Republicans and getting so few votes to show for it. Nevertheless, I still think it was the right thing to do. First, he obviously has to get some votes in the Senate. Second, I think there may still be political rewards for having offered the hand and putting the Republicans in the position to spurn it. After all, the ultimate goal of “post-partisanship” is not to make nice, but to reclaim the center and build a permanent majority. In fact, I think he might have done more to give at least a few Republicans a stake in the House version of the bill. By securing only that the two most non-germane programs (family planning and sodding the Mall) were dropped, he gave Republicans the opportunity to continue to say they were ignored.


I’m certainly not alone in thinking that one of the biggest long term fears is that the financial crisis will rekindle economic nationalism and protectionism. Certainly those pressures were evident when the House version of the stimulus bill included a “Buy American” provision. If we go down that path, other countries are sure to follow. Protectionist sentiment has also flared up significantly in the UK. There have been several unauthorized “wildcat” strikes protesting that subcontractors at a UK power plant plan to use foreign workers (in this case Spanish). The union claims that the foreign workers are intended to undercut wages. The foreign companies have intimated that there are concerns about the productivity of British workers (not the least of which is their penchant for illegal strikes). In response, there have been rolling sympathy strikes leading to labor unrest similar to that 1970s. So Gordon Brown’s government has not given into striker demands, but protectionist sentiment seems certain to grow there, here, and everywhere else.

Amending the Constitution

Given my ranting about gubernatorial appointments to fill Senate vacancies, I have to profess support for Russell Feingold’s proposed amendment to require special elections. My only concern is that amending the Constitution is (rightly) hard and would take several years even if successful. The way I see it, its in the interests of the voters of each state individually to make this change. So states should just do it themselves and not wait for the amendment. (P.S. The negotiations over Judd Gregg’s replacement were just as objectionable as what went on elsewhere.)