Appearance and reality of Success

By Fester:

Much like Eric Martin downblog, I approve, support and desire more Senate pushback to dumb policy ideas contained in portions of the Obama stimulus package.  I want good policy, and I want an effective information loop:

I tend to agree.  Not only are such debates healthy, they are vital to the formation of good policy. The ability to engage in such dialectical exercises - with the likelihood that those policies that emerge victorious in the competition of ideas will be implemented - is what makes liberal democracies more efficient than more autocratic models.  Democracy has its advantages, this is one of them, and we would be foolish not to utilize it to the fullest.

Along these lines, I'm hopeful that the Obama administration can bring about a return to a method of governance modeled on the embrace competing ideas - not fear of dissent - both within the White House and Washington at large.  That was one of the more grievous structural flaws in the Bush administration's approach to governance - and the way the Republican Party acquiesced to that approach

Brad Delong has noted at various points a core political lesson that has been only partially learned, success must be both apparent and real for it to have lasting political pay-offs. 

Back in both 1977 and 1993 the Democratic congressional barons treated Carter and Clinton with utter contempt--as if they had no skin in the game, and were unaffected by either president's success or failures...

1994 was definitely a wake-up call: President Clinton's first two years were perceived as years of failure, and so the Democrats lost their seats and their majorities.

The Republicans learned half the lesson from 1994: in 2001 they believed that George W. Bush had to be perceived as a success, therefore they would follow him blindly and give him victories in whatever he asked for so that he would be perceived as a success. And it worked for a while--in 2002 and 2004. But by 2006 it became clear that stupid presidential policies lead to presidential failure--and take the party over the cliff. And 2008 looks to be more so.

Let's hope the Democrats learn the full lesson: Barack Obama needs to be perceived as a success and needs to be a success.

Senate Democrats have some serious skin in the game.  If their policies are both successful and perceived to be successful, then they can lock in a long term, durable majority (which is a whole lot more enjoyable than being in the minority).  This means they have a strong incentive to push back against ineffective political and policy gestures.  And the business tax cuts proposed in the Obama plan are ineffective political and policies proposals.  They have low stimulus bang for the buck and the GOP has minimal incentives to not criticize any Obama proposal or accomplishment. 

So the Senate Democrats are pushing back against a weak portion of the plan.  This is a good thing.  And the Obama team is at least signaling it wants to hear alternatives from its friendly critics.  That is another good thing:

as I said before, Democrats or Republicans, we welcome good ideas. And so the challenge for all of us, I think, is to identify good ideas, good spending plans, that deliver on my commitment to create or save 3 million jobs. I want this to work. This is not an intellectual exercise, and there is no pride of authorship. If members of Congress have good ideas, if they can identify a project for me that will create jobs in an efficient way, that does not hamper our ability to — over the long term — get control of our deficit, that is good for the economy, then I’m going to accept it. If Paul Krugman has a good idea, in terms of how to spend money efficiently and effectively to jump-start the economy, then we’re going to do it. If somebody has an idea for a tax cut that is better than a tax cut we’ve proposed, we will embrace it.

This actually is a good policy process. Start with an overriding vision --- save jobs, fill the output gap of a nasty recession, identify some basic constraints, and propose a variety of potential solutions given the goals, resources and constraints.  And then let people hack away at it with well reasoned arguments, stealing and integrating good ideas and discarding crappy ideas as needed.

And as part of this process, I would argue that Matthew Yglesias' proposal to drop the threshold point for the Child Tax Credit to $0 is a good stimulus idea. 

one proposal that seems to be in the Obama team’s plan for economic stimulus is to lower that thresholdto $3,000. That would offer about $18 billion worth of high-multiplier stimulus, because the beneficiaries would be poor families with a high propensity to consume the marginal dollar rather than wealthy households likely to use extra money to try to pick up some bargain investments. But this is a good idea that can be made better by dropping the threshold all the way down to $0. That would add about $1.7 billion per year in extra costs, so $3.4 billion over the forecast two-year life of the stimulus, and help about 800,000 additional children. And of course when it comes to stimulus, finding things to spend money on is the name of the game. This is high-multiplier stuff, so it’s worth doing.

Beyond stimulus, it’s an opportunity to do something about our scandalously high child poverty rate.

My small proposal to increase the effectiveness of the stimulus so that it is both successful and perceived to be successful is a step against local government anti-stimulus.  Some Federal social service and health contracts have local match requirements that state or local governments must front.  The most prominent match program is Medicaid.  By eitehr reducing or eliminating the local match requirement for a year or two, the states with large budget holes can maintain needed relief services while cutting far less of their budgets.  Federal Government can easily reduce the amount of counter-stimulus that state and local governments are adminstering due to balanced budget requirements by reducing or eliminating for a year or two the local matching requirements of federal grants and contracts for social services.  Reducing or eliminating the local match requirements beyond Medicaid will be an easy stimulus win with minimal implementation lag times and high bang for the buck. 

Iterative opposition and policy formation is a good thing.  It is a core component of good policy making.  So let's see more of this from Senate and House Democrats when there are easy public policy wins that are not being picked up off the table of option space. 

Comments

[All Mi T]

No end in sight

[anna missed]

I think they should initiate a 12 month moratorium on mortgage payments. It should be a voluntary program where mortgage payments could be differed and tacked onto the back of the mortgage schedule, as in a "reverse mortgage". People with a mortgage could elect, due to their specific circumstances, to not pay their mortgage for a up to year. This would free up an enormous amount of money that could be spent on other areas of the economy, like say the automobile industry - or taking the necessary steps to relocate or re-school for other lines of employment. The program would be very easy to administer and cost very little to put into effect.