Why Obama’s Budget Is a Mistake

Jonathan ChaitJonathan Chait wrote an interesting article today about how conservative pundits are now attacking Obama from the left, Conservatives Decide Obama Is Too Conservative. It had a particularly good catch from Matthew Continetti of the Washington Free Beacon who now says that Obama shouldn’t be trying to cut the deficit, but rather be pushing his jobs program. As Chait pointed out, this is a total reversal from what he said when Obama first proposed his jobs program. At that point, Continetti was pushing the same old conservative canard that the government can’t create jobs. It’s fun to read.

But Chait also pointed out something that is important about the mistake which Obama’s budget is: in his column today, Charles Krauthammer wrote that Obama should offer that the tax increases in his budget go half to reducing the deficit and half to reducing marginal tax rates. Jonathan Chait rightly notes that this is (yet another) conservative attack from the left. But here’s the thing: he and the others are only able to make this attack from the left because Obama has moved so far to the right. Just like I (and oh so many others) predicted!

I understand. There is not going to be a budget deal. This isn’t just because the Republicans refuse to do anything. The truth is that the Sequester is just starting to affect the economy. It will keep economic growth slow for the next two years. A Grand Bargain, as much as I am against it, would be good for the economy in the short term. The Republicans do not want that. They are hoping for a replay of 2010 in 2014. And they have a good chance of getting it.

For all of my adult life, I have watched the Democratic Party compromise in the name of being “competitive” with the Republicans. This was always a mistake. Reagan barely won in 1980 and only did win because Paul Volcker created a recession just in time for the election. And then, he lowered interest rates and created a boom, just in time for the 1984 election. Democrats learned the wrong lesson from those losses, just as Republicans learned the wrong lessons from Bush Sr’s loss. But whereas the Republicans obtuseness has only made them more conservative, the Democratic obtuseness has also made them more conservative. And that leaves us with President Obama.

Regardless of what the president thinks, offering compromises like entitlement cuts just moves the political debate further to the right. What he ought to have done is act like cutting Social Security would be as painful for him as sacrificing Natasha and Malia to the gods. But he didn’t do that—because he continues to hold on to the wrong lessons of the 1980s. And in the end, it might be good for his “legacy” (whatever the fuck that is). But it is not good for the liberal cause and it is not good for the Democratic Party.

Just ask Charles Krauthammer.

Afterword

People sometimes complain that I take too much knowledge for granted, so let me clarify my Paul Volcker comment. Paul Volcker was the Federal Reserve chairman appointed by President Carter. Inflation was very high, so Volcker made money less available (by raising interest rates). This threw the economy into recession. After inflation was under control (1982-83), he made money more available (by lowering interest rates). This caused businesses to invest and started an economic boom that we call “morning in America.” That was all Volcker’s doing; it wasn’t Reagan. In case you were wondering.

In gratitude, Reagan replaced Volcker with Alan Greenspan the first chance he got, which was 1987. (Note: the last two Fed chairmen were appointed by Republicans and kept on by Democrats.)

Two Errors from Matt Yglesias

Matt YglesiasIt’s a burden. You know that, right? Being very smart is a burden. I’m not talking about myself, in case you were wondering, because I’m not very smart. But young Matt Yglesias is, and his intelligence leads him horribly astray from time to time. Like today: two different articles really stood out for their very intelligent cluelessness.

First up, Yglesias explains, Why Aren’t There More Employee-Owned Firms? His answer: it’s the managers, stupid! Workers don’t care about owners; it’s the managers who make their lives hell. In fact, he claims that the self-employed are happier because they don’t have to deal with managers telling them what to do. Having spent most of my life self-employed, I can tell you that this is a crock. What you quickly learn is that your clients (or customers) are even worse and more unreasonable than any manager you’ve ever had.

Now, I don’t know why there are so few employee-owned firms, but I have some ideas. First, its about norms. I understand that modern conservatives have become revolutionary and thus inured to norms. But most people are not. I have had a lot of small businesses because my father did. And he did because his father did. I always knew I could start a business, because lots of people who were no better than I did the same thing. Those trailblazers who don’t know any people in business and yet start their own? They are the exception. (Ever noticed that in any given area, the convenience stores are mostly owned by one group of immigrants?)

Second, the reason there are so few employee-owned firms, is that in the real world (not the corporate and Wall Street world), owning your own business is really hard. When it is yours you are much more likely to do all the extra work. When you are just one-five thousandth, not so much. The same thing goes on with group projects in school. In my experience, one person ends up doing all the work. (That person, of course, was always me.)

So Yglesias was wrong about that. But he wasn’t finished! He asked a second question, Do Immigrant Engineers Depress Engineer Wages? His answer: not that I can tell! Now look: I’m very pro-immigration. I would like to see far more immigration into this country. But this is the most basic of economics. If the quantity of the supply of a product (in this case: labor) is increased, it will cause prices to go down. Would it be a catastrophic blow to engineer wages? Almost certainly not. And in the long run, it would be better for everyone.[1] But don’t tell me it will have no effect. That’s just dumb, even though it is doubtless the result of over-thinking.

Again, I have experience with this. Technology films do not like H-1B Visa employees because they are cheap. In general, they’re a little cheaper. But not much because the companies who provide them get paid excessively for it. (Often more than the employee himself gets.) But what is best about them from a corporate standpoint is that they are reliable, work ridiculous hours, and have no choice! That last part is critical. Going along with this is that it divides the labor force and makes it harder for native employees to unionize. That’s what’s going on.

I don’t mean to beat up on Yglesias. It was a slow news day unless you are naive enough to worry about North Korea or especially fond of Jonathan Winters. Just the same, he’s totally wrong about these issues. But in a totally Yglesias way!


[1] For the record, I think if we are committed to the dynamic economy that everyone seems to think is so great (I disagree), then we need to have really strong and well funded programs to provide for dislocated workers. As it is now, we provide almost no support for such workers and it is wrong.

Post’s False Equivalence on Obama Budget

Not EqualThe Washington Post published an editorial this morning, It’s the GOP’s Turn to be Serious with the Budget. With a title like that, you would think it would be a great read and a strong statement. Instead, it is almost entirely false equivalence, because, I guess, the Post doesn’t want to lose its status as a Very Serious Newspaper. But they couldn’t just pretend that the president hadn’t offered the Republicans what they wanted in entitlement cuts.

Let me go through the editorial, because it really is pretty much all bad. It starts with a statement about why we don’t get “compromise”—that great end in itself that all the professional centrists hold as the highest good. They follow this by attacking the National Rifle Association and the Sierra Club for valuing purity over governing. Note the false equivalence here? The NRA has manage to make even the tiniest of gun law reforms impossible. All the environmental groups combined couldn’t even get a permanent ban on deep water oil drilling after 13 million gallons of oil were spilled in the Gulf of Mexico. But that isn’t even my main problem with the Post’s attack. Interest groups are not in the business of “the art of the possible.” The NRA should be just as pure as it is. The problem is how the politicians treat these groups. In the case of the Sierra Club, it is about right. In the case of the NRA, it is out of all proportion to its actual power. But that’s not the NRA’s fault.

Next, the Post discusses how difficult the politics of the retiring baby boomers is. This is not true. There is no problem with Social Security. There is a problem with Medicare, but that’s just our broken healthcare system that is going to bring down our entire nation if it doesn’t get fixed. It is not a retirement problem. Any of the minor problems we may have could be fixed with a little more in taxes: raise the payroll tax cap! But the Post won’t even acknowledge that solution.

Here’s a great sentence that shows entirely where the Post is coming from: “Republicans want entitlement reform; Democrats want higher taxes.” Do you see that? Republicans want “reform” not “cuts” while the Democrats want “higher taxes” not “revenue reform.” Euphemisms for the unpopular conservative ideas and blunt reporting of the unpopular liberal ideas. Balance!

Finally, in the fourth paragraph, we get a sentence where the Post editors compliment the president: “President Obama’s proposed budget has taken a big step toward acknowledging reality.” Note that it doesn’t acknowledge reality, just takes a step toward it. This sentence is followed immediately with, “No, it’s not big enough.” And they spend the rest of the paragraph complaining about how unrealistic Obama’s plan is.

The next paragraph is probably the best in terms of looking at the situation objectively. The editorial states, “But Mr. Obama has injected a courageous note of realism where the Republicans so far have shown none.” And then, like the Serious Centrists they are, they celebrate the fact that the president’s base has greeted these cuts with horror. Nothing makes a professional centrist happier than a policy that makes liberals unhappy.

Now we get to the hypocrisy section of the editorial. The Post goes after Republican leaders for responding dismissively. For example, they note that Mitch McConnell said that the cuts were too modest. What is the Post’s problem with that statement? What all Republican leaders are saying (with the notable exception of Greg Walden) is exactly what the Post is saying: a good start but not enough—not nearly enough.

The rest of the editorial is just a call to all the “reasonable” Republicans (who the Post somehow “knows” exist) to step up to the plate. Strangely, they applaud John Boehner because he used the word “encouraging” even though he also explicitly said it was “the least we could do.” But you know the false equivalence brigade: if they say something nice about Obama, they’ve got to say something nice about Boehner. It’s the law!

What the Washington Post is trying to do in this editorial is push back against liberals like me who wrote that Obama’s gambit would not win the praise of the Serious Centrists. But they’ve only managed to prove us right. We never said that they would just dismiss Obama out of hand. In their minds Obama has taken the first step on a long journey, but he is still miles away from the promised land of Compromisia. So the calculus is: Obama dumping all over the wishes of his base equals Boehner saying it is “encouraging.”

That Obama budget really turned things around, didn’t it?!

Scott Turow and Novel Theory

Scott TurowThe great sculptor Felix de Weldon was born on this day in 1907. Six fingered bluesman Hound Dog Taylor was born in 1912. And ethnomusicologist and wacky performer Tiny Tim was born in 1932.

Manuel Neri of the Bay Area Figurative Movement is 83. Dennis Banks of the American Indian Movement is 76. Herbie Hancock is 73. Tom Clancy and David Letterman are 66. David Cassidy is 63. And Andy Garcia is 57.

The birthday contest winner is author Scott Turow who is 64 today. I really can’t say how good Turow is, but his books are always fun to read. I give him the day because I really feel that he taught me how to write a novel. I read a bunch of his novels in quick succession, and I picked up a lot of his tricks: pacing, character development, and most of all, how to fool the reader.

So happy birthday Mr. Turow!

Afterword

Here’s a song for all of the birthdays: