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Doing As Much As We Can Do, Now

January 26th, 2010 . by economistmom

I’m anxiously awaiting the CBO budget and economic outlook report, which will be released later this morning. [UPDATE: here it is.] I’m trying to think optimistically about how the Administration and Congress will confront the newest numbers and do their best to help both outlooks–budget and economic.

Meanwhile, there will be a vote very soon in the Senate on the debt limit, and some amendments to consider that are designed to encourage fiscal discipline.  The Concord Coalition put out this issue brief yesterday with the strong message that while these measures are far from perfect and while we would construct them differently (we being unconstrained by politics), we shouldn’t let the perfect be the enemy of the good:

This year…the debt limit vote could be a catalyst for reforms aimed at improving the nation’s fiscal outlook. With public concern growing over the sharp rise in debt, members of Congress have a strong motivation to combine the “must pass” debt limit increase with measures demonstrating a commitment to rein in future deficits.

Three such measures will likely be voted on in the Senate this week. An amendment, offered by Budget Committee Chairman Kent Conrad (D-ND) and Ranking Member Judd Gregg (R-NH), would establish a task force to make recommendations for fiscal sustainability. Another amendment, offered by Majority Leader Harry Reid (D-NV), would enact statutory pay-as-you-go (PAYGO) rules for entitlement expansions and tax cuts. A third measure offered by Senator Jeff Sessions (R-AL), would establish statutory caps on discretionary spending (appropriations)…

We recognize that the three current proposals are not perfect. The Sessions amendment could be improved by adding an enforcement mechanism, such as sequestration to protect against a breech of the spending caps, and by suspending the caps during a recession. The Reid amendment could be improved by eliminating its PAYGO exemptions for the extension of several existing policies. While some of these exemptions are time-limited, including them would still make the task of deficit reduction more difficult. The Conrad-Gregg amendment could be improved by allowing limited, savings-neutral, amendments to the task force recommendations and by requiring public hearings around the country to receive input and improve the transparency of its deliberations. These changes would mirror a similar proposal in the House sponsored by Representatives Jim Cooper (D-TN) and Frank Wolf (R-VA)…

These ideas should not be fodder for partisan bickering, which the public has clearly grown weary of. If differences on the details cannot be resolved before a vote is needed to increase the debt limit, negotiations should not be abandoned. Another short-term increase in the debt limit, while not optimal, would keep the pressure on to reach agreement. Moreover, the upcoming Fiscal Year 2011 budget process offers an opportunity to fine tune whatever flaws might be perceived in the amendments currently before the Senate.

What is most important at this point is having the political will to act. Budget process reforms can encourage, but not guarantee, positive results. Our fiscal problems do not have a partisan origin and they will not have a partisan solution. Compromise will be needed. This is particularly true for a deficit reduction task force. Already, some have suggested that limitations be placed on what the task force may recommend, such as prohibiting tax increases or changes in Social Security. These or similar preconditions would simply enshrine partisan gridlock and undermine the very purpose of the task force.

For our part, we are willing to accept something less than perfect if it will help to move fiscal policy in a more responsible direction. As the debate continues over amendments to the debt limit, we urge others to demonstrate similar flexibility. No one is going to get everything they want. If perfection is the goal, failure will be the result. We literally cannot afford it.

I expect that some fiscal-hawkish senators will still let the perfect be the enemy of the good, claiming to be voting against the amendments that they would have written differently, that they think (or claim to think) do not go far enough.  But imperfections aside, we should keep in mind that these three types of measures–caps for annual discretionary spending, PAYGO for new mandatory spending and tax cuts, and a commission for reforms to the existing entitlement and tax systems–are complementary, not competing, proposals, and that if we really want to make progress on reducing the deficit anytime in the next decade as well as sustainably over the longer run, we really need all three and then some.

…Yes, and as the lead editorial in today’s Washington Post suggests, the “then some” (namely, “political will”) is a lot.

And by the way, the Administration’s proposed (non-security discretionary) “spending freeze” reported here by Lori Montgomery is not the big deal that some of the media reaction would suggest.  (OK, I had MSNBC on last night…)  But more on that later in the context of the new CBO numbers.

38 Responses to “Doing As Much As We Can Do, Now”

  1. comment number 1 by: SteveinCH

    Diane,

    Looking forward to your take on the CBO report. On the proposals on the table, I see them slightly differently. I’m for Conrad/gregg and think the potential improvements are pretty marginal. I haven’t seen the Sessions amendment so it’s hard for me to have a point of view but I’m leery of statutory limits only on one part of the budget. It’s probably still better than nothing.

    The place I diverge is on PAYGO. I think the arguments that have been made about the commission on Capital Gains and Games apply much more to PAYGO. There has been a huge runup in all types of spending. To limit PAYGO to some types of spending only doesn’t make a lot of sense, particular since, as I understand the Reid amendment, expansions in entitlements does not refer to annual increases in costs but only increases in beneficiaries or benefits (but not the cost of those benefits). As a practical matter therefore, it’s a limit on tax cuts and a Medicare Part D like expansion of an entitlement program. That’s not much restraint and provides more cover to politicians than the restraint is worth.

  2. comment number 2 by: SteveinCH

    I just quickly skimmed the CBO report…can’t read it all in one sitting, it’s too dense and here’s my quick reactions…

    1. The economic forecasts, particularly on inflation seem very optimistic. I don’t know that we’ve ever had a decade since the 50s when inflation has been below 2% every year for 10 years. Particularly with rising debt, it seems pretty unlikely.

    2. They may be required by statute, but the CBO forecasts certainly will require someone to do another “adjusted baseline.”

    A few examples of things that are unlikely to happen…elimination of the “Bush tax cuts” in their entirety. At best, we could see an elimination of the tax cuts on the “wealthy” by 2014. I doubt we will see total elimination on rates and I doubt you’ll see items like the child tax credit and the “marriage penalty fix” eliminated at all. Also, the assumption that AMT patch will go away seems highly unlikely.

    On the spending side it’s similar. For example, CBO assumes no doc fix and discretionary spending growing at the rate of inflation (about 7 points below the historical average).

    Even with this relatively rosy set of numbers, the deficit never gets much below 3 percent of GDP and spending increases to over 24 percent of GDP in the out years while receipts top out a bit over 20 percent (both numbers high by historical standards).

    Net, net, a pretty depressing read for a Tuesday morning.

    I’ll be interested to see what others think.

  3. comment number 3 by: Brooks

    Re: WaPo’s editorial, I’m glad they support a commission, but once again they erred in implying a risk of an opportunity cost, writing:

    One danger of such a commission, though, is that it offers a year-long excuse not to do anything serious about deficit reduction.

    The possibility that X will not occur if Y exists is not a “danger” if X would not occur if Y does NOT exist. There is little chance that there would be significant progress on reducing our long-term fiscal imbalance this year without a commission that would not occur with a commission. Thus, there is negligible/no risk of opportunity cost of establishing such a commission.

  4. comment number 4 by: economistmom

    Steve: To be clear, while I don’t want to see “the perfect” become the enemy of “the good,” I’m not willing to give up on “perfect” (just yet)! In terms of PAYGO, I definitely oppose the idea of exempting the Bush tax cuts (even “just” the “middle-class” ones) from the PAYGO standard. It’s just too costly and would be the difference between sustainable and unsustainable–at least within the ten-year budget window. More on that when I get my Concord work on the CBO report done.

  5. comment number 5 by: SteveinCH

    Diane,

    I look forward to it. My point was in the Reid version of PAYGO, tax cuts are the only thing that are in. Not that tax cuts should be exempted but more things should be included.

  6. comment number 6 by: Brooks

    Bad news, although not unexpected. Senate rejected the Gregg-Conrad commission. Vote was in favor 53-46, but needed 60. http://www.businessweek.com/news/2010-01-26/senate-rejects-conrad-plan-to-create-deficit-cutting-commission.html

    Unless a decent version of such a commission is created with a mandatory up-or-down vote (or with fiscally neutral amendments) in Congress on its recommendation (if it reaches agreement on one), I think today should stand as a notable day in the history of the nation when the most gutless, most self-serving, most irresponsible politicians sacrificed the nation’s future for the sake of their own political careers, and shamelessly lied while doing it. I say they lied because those Senators are politically sophisticated enough to know that it is simply not politically feasible to get anywhere close to solving our long-term fiscal imbalance problem either solely via reductions in projected spending or solely via taxing “the rich” (or that plus cuts in Defense plus supposed savings from healthcare “reform”), but they nevertheless opposed the commission on the basis that it would lead to tax increases or that it would lead to reductions in social spending or some component thereof (Social Security and/or Medicare). Anyone who thinks either ideologically pure approach is politically feasible is either delusional, ignorant, an idiot or a liar, and those Senators are the latter. GRRRRRR!! Tough to resist profanity when writing about those m—– f——.

    What a bad week. First the Vikings lose* and now this. (Just kidding about putting the two in the same ballpark of importance to me)

    * and would have won if they hadn’t had 12 men in the huddle! WTF!?

  7. comment number 7 by: Brooks

    Re: above, for some reason some of my hyphens were deleted in my quasi-profanity. Add a few hyphens after m and f in case it’s unclear what I’m saying those a–h[4 hyphens] are.

  8. comment number 8 by: SteveinCH

    Not surprised but disappointed as well. I guess we can hope a presidential commission might do some good but clearly the probability is lower than a statutory one.

    What’s really discouraging about the CBO report and Diane’s next post is that the picture CBO describes assumes a whole bunch of politically difficult things and still gets to a place that is barely sustainable, if that, under very favorable assumptions.

    In effect, the CBO baseline takes the tax changes that most would advocate, makes unreasonably restrained assumptions about spending and arrives at a (barely) sustainable fiscal picture. In reality, the picture will be far worse than the projection.

    As to the Vikes, there certainly were a lot of what ifs in that game. As I tell my son’s basketball team (I’m the coach), sometimes you outplay the other team and you still lose. That was the sad fate of the Vikings.

  9. comment number 9 by: Brooks

    Steve,

    Well, I hope advocates for some decent commission tough it out like Favre, fighting on valiantly despite all the hard hits, but in the end running the ball into field goal range rather than throwing an interception.

    An important feature in any presidential commission would be a mandatory vote, up-or-down or with only fiscally-neutral amendments. Of course, it would still be quite a challenge to pass any recommendation, with or without such amendments, as today’s vote indicates. But it’s certainly worth trying, and would be worth doing even if it doesn’t result in enactment of the commission’s recommendation, due to the indirect effects I’ve mentioned in the past (the P.R., developing alternatives, learning from the process, etc.) that could help get us to some degree of fiscal responsibility sooner than we would otherwise.

    Oh, and President Obama, thanks a pantload for voicing support for this commission only a couple of days before the vote. Wish you had devoted even 1% of the time you spent advocating healthcare “reform” advocating, arm-twisting (and even some side-deal-cutting if necessary) for this commission. Looking forward to hearing you talk big about the importance of fiscal responsibility (and perhaps even your advocacy of a commission) in your big speech tomorrow night (oh, and that supposed “freeze” on discretionary spending should do the trick, so I guess we won’t really need anything more substantial, and we can just get back to passing a huge new healthcare entitlement).

  10. comment number 10 by: Brooks

    Steve,

    Follow-up re: above, actually I think it’s not technically (legally) possible for a presidential commission to obligate Congress to vote on its recommendation, but I assume there is some possibility of reaching an informal, but overt and explicit agreement (i.e., a pledge) with Congressional leaders that any recommendation will be brought to a vote.

  11. comment number 11 by: Brooks

    I was glad to see Bruce Bartlett’s post today (prior to the vote) telling Senators to vote “yes” on the commission http://capitalgainsandgames.com/blog/bruce-bartlett/1443/support-budget-commission

    And of course he’s right about the absurdity of the arguments from opponents of (extreme) left and right. Not that the right is wrong that a recommendation would include tax increases or that the left is wrong that it would include reductions in projected entitlement spending — both would indeed be the case — but it is delusional or disingenuous for anyone to say that it is politically feasible to solve the problem with either ideologically pure approach.

    I should add, though, that the loudest voices on right and left were wrong in the degree to which they claimed a recommendation (or implementation thereof) would serve entirely or almost entirely the other ideological “side”, with the right claiming all (or almost all) we’d get are tax increases and the left claiming that all (or almost all) we’d get are cuts in Social Security and Medicare.

  12. comment number 12 by: Brooks

    This morning, Sen. Baucus, voicing opposition to the commission, said:

    Social Security is not a big problem for our fiscal situation. Social Security does not go “belly up” until the year 2043. SS is not a big problem in our fiscal situation It is NOT. It is NOT.

    How stupid or disingenuous. As I’ve explained on several occasions previously, it is idiotic to measure the degree to which Social Security contributes to our overall fiscal imbalance by its “solvency” or the “gap”. I won’t go through it all again, but suffice to say (as illustration) that such nonsensical thinking would imply that spending on Social Security would contribute nothing to our overall fiscal imbalance if only a greater portion of our overall revenues were going to FICA SS, even though that wouldn’t change the size of our overall fiscal imbalance one bit (since it would just mean that our “on budget” deficits would be that much greater).

    So is Baucus a moron or a liar? Take your pick.

  13. comment number 13 by: Brooks

    note: I abbreviated the “SS” in Baucus’ statement. Baucus said “Social Security” in both cases. Understandably (considering world history), people generally avoid using “SS”.

  14. comment number 14 by: SteveinCH

    I vote moron but that’s just my low opinion of the political class coming through.

  15. comment number 15 by: Brooks

    Steve,

    lol, but to me, an assumption of dishonesty in this case would reflect a lower opinion than one of idiocy.

  16. comment number 16 by: Jim Glass

    “How stupid or disingenuous. ”

    “I vote moron”
    ~~~
    Not at all stupid. What’s he going to do? Announce to AARP and the rest that Social Security *is* a big problem for our fiscal situation? With an election coming up only months away? After what just happened in Mass.?

    The guy is entirely intelligent and professionally astute — it’s just that his objective is not the same as yours. His objective is as many votes as possible for Dems in November.

    If he said Social Security *is* a big problem in the fiscal situation — especially after what happened last week — Obama would rip off his head, the rest of the Dems would throw his body on a pile of wood, and the rest of the Dem establishment — Krugman, Ezra Kelin, AARP, etc. — would rush to it competing to see who could get there the fastest with the most gasoline and matches.

    What happens to his career, his income, the welfare of his family, then?

    He’s sure not that stupid.

    There is no problem of lack of intelligence or courage among legislators like Baucuis.

    The problem is incentives — what is it their job to do?

    And the fundamental problem there is Constitutional — as David Walker said, the mechanisms of gov’t are not structured to provide for responsible inter-generational financing decisions … the Founders never simply imagined such a thing when they designed the mechanics of government.

    In fact, the structure is just the opposite. It is the rare human being who voluntarily incurs pain today on his own watch so strangers may incur less later in some distant future on somebody’s else’s watch. Where’s the reward for that?

    The entire gov’t is structured on a two-year election cycle, with all pain and reward from political action occurring within it. Nobody gets pain or reward today from what will happen 20 years in the future. So who’s going to do anything about that?

    It is not stupid or greedy or cowardly — it is how government works. It is entirely intelligent and rational.

    As I’ve noted before, in the private sector it is different. There’s a whole class of actors who *do* feel the state of future today. “Owners” feel changes in the future value of their assets come right through to them today, discounted to present value. So they fight to “protect the future”.

    *Nobody* in the political system is in any kind of similar situation, so nobody acts that way. It’s as simple as that.

    If we wanted to put Congress in that situation we could, say: Have all federal employees have their pensions 100% funded by perpetual US bonds — US consuls — so if the bonds fall in value (as from rising interst rates, declining US gov credit standing) the value of their pensions drops. That would give them a reason to wave a stick at Congress and beat it into paying attention to the future. We could add the legislators’ own pensions, and maybe put a lien on all their personal assets tied to the value of the consols — if the consols fall, the Congress people have to pony up *personally* accordingly. That would align everybody’s interests up squarely together.

    It’s not going to happen (soon) of course but that illustrates the point.

    As long as “budget hawks” keep saying fiscal policy results from a personal, character failings of today’s politicians — stupidiy, cowardice, greed — they will get exactly *NOWHERE*. Which is just how far they’ve gotten over the last 20 years.

    They have to realize the problems are *institutional* and start working on that. Forming new institutional arrangements that bring the state of the future into decsion-making today — as a matter of the legislators’ *self interest*.

    In the private economy, the rules of “ownership” as we know then didn’t just appear, *poof*. They evolved over time via the natural selection of political economy, with groups that adopted and improved them growing and spreading and those that didn’t failing in competition.

    Nowhere in *the world* does the equivalent of “ownership” exist in democratic governments. The needed institutions haven’t evolved yet.

    Which is why *all* modern democracies are on the *same* fiscal course to over the cliff as the US gov’t. Many closer to the cliff and heading there faster.

    Which is more proof that the problem is *not* Dems or Repubs, nor the stupidity or lack of courage of US politicians — it is a structural problem with incentives in all modern governments world-wide.

    Within 20 years or so, as they start meeting the cliff, new structures *will* start evolving as the “natural selection” process kicks in and govts try to find ways to survive before they hit the canyon floor. Some will do better than others in this.

    If we want to help ourselves, we’ll stop blaming the problem on politicians’ sorry personalities, which can never be fixed, and instead start developing structural, incentive-fixing solutions to the problem, which will then be available “on the shelf” for quick action when the day arrives that we really need them and the political incentives become right for adopting them.

    Because if we don’t have them by then … yuch!

  17. comment number 17 by: Brooks

    Jim,

    Re:It is not stupid or greedy or cowardly — it is how government works. It is entirely intelligent and rational.

    Are you suggesting that “stupid, greedy and cowardly” is mutually exclusive with “intelligent and rational”? Hopefully not, because that would obviously be incorrect.

    It is possible that Baucus really applies that nonsensical framework (that the SS “gap” is the measure of how much SS contributes to our overall fiscal imbalance), although I shouldn’t say that would make him a moron since many who don’t seem to be morons get confused on that one. That said, as I said before, I think Baucus was being disingenuous and shamefully self-serving at potentially the great expense of the nation.

    Re: your contrast of time horizon in the private sector vs. public…

    the private sector it is different. There’s a whole class of actors who *do* feel the state of future today. “Owners” feel changes in the future value of their assets come right through to them today, discounted to present value. So they fight to “protect the future”.

    …I think you give private sector actors too much credit, whether or not directionally they are better than counterparts in the public sector. I can tell you from personal experience and from all I (and most folks) have read and heard that there’s no small degree of focus on short term financial results (e.g., performance this quarter or year) even at the expense of the medium-term, let alone the long term. As just one example from personal experience, large public consumer products companies often slash fourth quarter advertising even though they think it would represent a good investment, simply to “make the numbers” for the year, so everyone makes their bonus and/or gives management all the way up the line what they want, ultimately to look good to financial markets. And of course, there is no shortage of cases in which financial firms took excessive risks because the short-term upside was great. Etc. etc.

    Re: As long as “budget hawks” keep saying fiscal policy results from a personal, character failings of today’s politicians — stupidiy, cowardice, greed — they will get exactly *NOWHERE*.

    Straw man or (more likely) an honest misunderstanding on your part. Saying (correctly) that fiscal irresponsibility by our leaders reflects character failings doesn’t mean one is saying that the solution is to improve their character. On the contrary, the focus I see among “budget hawks” (including me) is on changing their self-serving political calculus — by affecting public opinion, by providing political cover (e.g., via a commission), by making fiscal irresponsibility more transparent and more politically costly, etc.

  18. comment number 18 by: SteveinCH

    If he’s not stupid, he’s a liar, simple as that because the statement is patently untrue. Therefore, he either believes his statement and is therefore not very informed or bright or he doesn’t believe it and therefore he’s a liar.

    I get the incentives in the system and why they are all wrong. On a moral level, it doesn’t excuse the behavior. Just because you are in a bad system is no reason to be a liar, particularly when the worst possible outcome for him is lack of reelection, not exactly death by stoning

  19. comment number 19 by: Brooks

    Steve,

    I agree that such behavior is immoral, and greatly so when the harm to the nation is great, and yes, you are correct to note that we’re not talking about someone whose life depends on it (just their cherished status and lifestyle as a member of Congress or the president). One thing I always wonder, though, is to what extent those guys rationalize to themselves on a kind of “overall ends justifies the means” basis, believing that (1) the nation is better off overall with them in office rather than some other guy, and (2) the only way for them to stay in office rather than that other guy getting it is for them to choose many of their positions and rhetoric based on political calculus (what will improve or not hurt their chances of re-election) rather than what they truly believe is best for the nation. In other words, I wonder if they truly believe that, in the broadest sense, taking those irresponsible positions and deliberately misleading the public (and even outright lying) is in the best interest of the nation when viewed from the “big picture” perspective of keeping the best/better person (him/her) in office. Hardly an original question*, but one I’ve long had.

    * It was actually only recently that I got around to renting Mr. Smith Goes to Washington — see the little speech the senior senator gives Mr. Smith about “compromise” so that he can do “a thousand honest things” (etc.) for the constituents http://www.youtube.com/watch?v=gpMWlZfQG1w&feature=related

  20. comment number 20 by: Brooks

    Correction on that quote from the movie: he said he “compromised” so he could “serve the people in a thousand honest ways”.

  21. comment number 21 by: Brooks

    FYI All,

    Conrad and Gregg are on PBS NewsHour tonight. I assume folks can catch the 7pm airing. (I saw a 6pm EST airing).

  22. comment number 22 by: SteveinCH

    Well,

    A college classmate of mine is in the Senate. I wonder if I’d get a straight answer if I asked her. She’s new though so may not “get it” just yet.

  23. comment number 23 by: Brooks

    By the way, McCain lost another chunk of what remains of my formerly great respect for him (he lost quite a bit during the 2008 campaign, most notably by jeopardizing national security and sound policy in general by his choice of someone to be a heartbeat away from the presidency). Today McCain voted against the commission, almost certainly (in my view) due to concern about the threat from the right — the primary challenge from J.D. Hayworth. Makes me thing the guy I liked in 2000 (and before) — the guy who seemed to be independent of the ideologues and an advocate of sensible policy — was all just schtick, positioning himself in that way simply because it worked politically for him. Even this cynic (re: politicians) thought that perhaps he was principled, having had such a different personal history that one would think would be conducive to putting country over personal ambition. Oh well.

  24. comment number 24 by: SteveinCH

    I feel for you Brooks. I don’t really have anything to say. I voted for McCain because I expected exactly what we are getting from Obama and Co (actually let me amend that, I expected card check to pass and it hasn’t yet). I didn’t really think he was a maverick (I thought that was media spin), but I did believe he cared more about the country than himself. I’m disappointed as well but not too surprised

  25. comment number 25 by: AMTbuff

    Brooks, you wrote: One thing I always wonder, though, is to what extent those guys rationalize to themselves on a kind of “overall ends justifies the means” basis, believing that (1) the nation is better off overall with them in office rather than some other guy, and (2) the only way for them to stay in office rather than that other guy getting it is for them to choose many of their positions and rhetoric based on political calculus (what will improve or not hurt their chances of re-election) rather than what they truly believe is best for the nation.

    Brooks, your conjecture is virtually identical to an observation that Len Burman made in his talk at the recent Fiscal Train Wreck conference at USC. Except that Len was relating the argument that he had actually heard from White House staffers!

    Len’s talk starts about 25 minutes into the morning session at:
    http://www.taxpolicycenter.org/events/events_011610.cfm

  26. comment number 26 by: Brooks

    AMT,

    Thanks for the link, but apparently I need Microsoft Silverlight to view the video, and apparently I’m unable to load that software. Do you know if it’s available via another site or by other means?

  27. comment number 27 by: AMTbuff

    Brooks, you could try a different browser. Silverlight is a plug-in and installs with minimal hassle unless your company has blocked it. The same point can be found in a much less humorous form at the bottom of page 7 of Len’s paper at
    http://www.taxpolicycenter.org/events/upload/BURMAN-ROHALY-ROSENBERG-LIM-USC.pdf

  28. comment number 28 by: Brooks

    Second time I was able to install Silverlight and I can view now. I’ll be back after viewing.

  29. comment number 29 by: Brooks

    AMT,

    yeah, I see what you mean. I meant it more broadly than just “we’re better overall on fiscal responsibility” in particular (I meant overall overall — across all policies), but same basic idea. Thanks again for the link.

    As I mentioned, the notion of that kind of rationalization is at least as old as Mr. Smith Goes to Washington (1939), and probably a lot older.

    I liked his chart of Alternative Projections of Debt Held by the Public (as a % of GDP) that showed a curve “With GDP Response”. Often when I refer someone to the debt/GDP projections in the CBO Long-Term Budget Outlook I add that, as awful as their Alternative Fiscal Scenario curve looks, if we actually went along that path our debt/GDP would grow even more rapidly due to rising interest rates and in turn, lower GDP, lower revenues, higher deficits and more debt.

  30. comment number 30 by: Brooks

    I don’t know if Stan Collender will post the comment I submitted over at CG&G*, but Stan makes an argument that he should at least have spelled out much more clearly — that the “bipartisan” and ideologically broad” composition” of the “no” votes on the commission makes it particularly unlikely that the Senate will get 60 votes for deficit reduction (and presumably also for a similar commission if they try again). The comment I submitted was:

    Stan,

    You make a big deal out of the “bipartisan” “broad ideological” composition of the 45 “no” votes. First of all, to state the obvious, the composition of the 53 “yes” votes was also very bipartisan. Second, what exactly is your point — that the prospects for 60 votes in the future would be greater if all/most of the 45 were on one side of the ideological spectrum (and we needed to move the public in one ideological direction) than it is because the 45 consisted of the two ideological extremes (and we need to move the public to accept some degree of compromise as the only realistic alternative to continuing along the path to disaster)? Why should we have that assumption?

    My guess is that, if the “no” votes were all on one side you’d write the same post, but just change it to refer to the insurmountable ideological divide (if I may mix metaphors).

    * As an update: Over the past week less than half of the comments I’ve submitted have made it past the apparent Stan filter — and that’s up from about zero during the few prior weeks since I challenged/refuted his arguments on the commission, and it’s quite possible that other contributors posted those few recent comments before Stan could delete them from the queue, or that Stan is allowing some token number through now that other contributors (and folks on other blogs) know about his apparent censorship. Of course, blocking even half (or any) is still quite lame. Unbelievable that I never got even a “yes” or “no” on whether or not he was blocking, despite numerous inquiries, both direct and indirect (Troy asked, and I asked Andrew and Bruce to ask, but don’t know if they did). I’m mentioning this matter again not to whine but to try to discourage this incredibly lame practice; how can we have quality discussion/debate over fiscal policy if it is so common for bloggers to censor opposing arguments and views? Geez. Question, of course, is to what extent it’s driven by hyperpartisanship vs. just plain ego/insecurity.

  31. comment number 31 by: AMTbuff

    Brooks, this is way off topic, but I have seen similar situations from both sides. If your aim is to persuade, be complimentary rather than argumentative. Express understanding of opposing motives and perspectives. And never, never post anything complaining about censorship.

    If a site manager is unfair to you, move on and don’t complain on that site or anywhere else. Other people are smart and they have eyes. They can draw their own conclusions without your influence.

    People who operate web sites have learned from experience that a small minority of posters have an addiction to complaining, and these few people cannot be mollified without a whole lot of time-consuming stroking. Once the site operator has you pegged as a troublemaker, your leeway for harsh content disappears.

    Hammering perceived troublemakers is a cost-benefit calculation, but the person being censored can’t help but take it as a personal insult. My advice is to work hard to soothe your opponents, rather than expecting them to tolerate your rough edges. It’s much easier said than done.

    FWIW, I never hammer anyone when I’m on the other side of the fence. But I’ve never dealt with hundreds of submissions per day. Heavy traffic undoubtedly requires a heavier touch.

    None of the above is meant as an accusation or description of you. It’s just generic advice for everyone posting on web sites. You are free to make any use of it you like. Since censorship is so far off topic, I don’t intend to comment on it further here.

  32. comment number 32 by: Brooks

    AMT,

    I appreciate your well-meaning advice and I realize you don’t want to go on further with this topic and neither do I, but I have to make sure a couple of things are clear.

    First, I’m not coming at it from an ideological/partisan perspective. And yes, absolutely such censorship is common on ideological echo chamber blogs of right and left. But I was surprised to see it apparently happening on CG&G.

    Second, I don’t take such censorship “as a personal insult” or take it personally at all. It speaks to the censor, not to me, except insofar as I’ve managed to present strong enough challenges/refutations of the blogger’s arguments and views that they feel the need (out of hyperpartisanship, personal insecurity, and/or professional interest) to engage in an obviously extremely lame practice.

    Third, maybe I’m missing what you mean to say, but I don’t see the relevance of what you refer to as “a small minority of posters [who] have an addiction to complaining [and who] cannot be mollified without a whole lot of time-consuming stroking.” If you are equating challenging the bloggers arguments as “complaining”, I beg to differ. Seems to me that is a big part of the whole point in blogging with a comments section. If you are referring to complaining about being censored, I certainly didn’t do that until it became the norm, and even then I generally didn’t mention it in comments I submitted that were still being blocked.

    Lastly and most importantly, I strongly disagree with your suggestion. Although I wouldn’t want to overdo it from the perspective of the other bloggers, I think it’s extremely important to let folks know when such censorship is occurring (both so folks know that there are opposing arguments they aren’t seeing that may refute the arguments of the censoring blogger and to discourage the practice), and how else to do it but via other blogs? It generally can’t be done on the censor’s blog for obvious reasons. And as far as just staying silent and letting others form opinion on their own based only on their own individual experiences, that sure seems contrary to the information/opinion-sharing spirit of the blogosphere (particularly for a loose “community” of folks interested in a particular issue and engaging regularly in related discussion/debate), and I’m glad that’s the case.

    Oh, and as for “hundreds of submissions per day”, I rather doubt Stan and the other CG&G contributors are dealing with comment submission volume anywhere near that ballpark. There is absolutely nothing that can make the censorship that Stan is apparently practicing anything other than extremely lame. I dealt with the matter very diplomatically for the first two or three weeks, but when it continued and I couldn’t even get a “yes” or “no”, and it thus became very likely that it was occurring, I let folks know about it.

  33. comment number 33 by: Jim Glass

    I think you give private sector actors too much credit, whether or not directionally they are better than counterparts in the public sector. I can tell you from personal experience and from all I (and most folks) have read and heard that there’s no small degree of focus on short term financial results (e.g., performance this quarter …

    But the point is that the “short term result this quarter” is the change in price of the company’s stock or bonds — and that price reflects the best estimate of the company’s value indefinitely into the future, discounted to current value.

    Financial institutions translate expected long-term results into short-term results. So the “short term manager” is managing for the long term whether he likes it or not.

    E.g. if some policy will devastate a company’s balance sheet 15 years from now — by, say, legally committing to make clearly unaffordable payments of cash to employees and stakeholders then, to make them happy and cooperative now — it’s stock and long-term bond prices will plunge today, the owner will feel the pain now, up front … and fight to avoid that. Each $100 loss expected to occur15 years from now, with a 5% discount rate, creates a $46 loss today. The owner isn’t going to let the execs make that deal for their own convenience.

    There are no corresponding mechanisms in politics to make the pain of the future felt today. The time horizon is two years max and always shrinking from there. Every $100 loss expected to occur15 years from now creates exactly $0 political loss today.

    If a politician legally commits to make unaffordable payments of cash to constituents in the future, to make them happy now, in a way that will destroy the nation’s balance sheet then, he gets reward today … and no pain at all. The pain will all fall on somebody else’s watch in the future. So obviously he is going to go ahead and destroy the balance sheet.

    See the difference? It’s not the people, it’s the institutions they work through and the incentives they face.

    People are people. “People in the private sector” deserve no credit at all. Swap the people and you’ll get no difference in results.

    Put Max Baucus in charge of a portfolio of 30-year bonds and stocks, tell him he will be paid, and his family’s welfare will depend, entirely on the investment results, and he will be watching like a hawk for things that could affect the investments he selects up to 30 years ahead. Because every $100 change in its value 15 years from now is $46 today … 20 years from now is $36 today, etc.

    Put Warren Buffett in charge of an election campaign, tell him his entire wealth and his family’s entire welfare will depend on voter turnout at the next election 18 months from now, and he will do everything in his power to max that voter turnout — no matter how massive the cost he drops on the future, after that date. Because that is what he has to do.

    Just like all the politicians today.

    It’s not particular politicans being smart or stupid or cowardly or irresponsible or Republican or Democratic or whatever — it is the political institutions and incentives of our times, modern democracy. That’s why all the modern democracies are heading for the pretty much the same financial crisis at the same time. A lot of them worse than us.

    That ain’t coincidence — and it can’t be the fault of any one group of failing, irresponsible politicians in any one country … or any kind of “personal” failure by the politicians. Their “lying” or anything else. All those traits are symptoms of the problem, not the cause — which is the institutions and incentives of the system they are in.

    If one doesn’t recognize the problem, there’s no chance to fix it.

  34. comment number 34 by: Jim Glass

    If he’s not stupid, he’s a liar.

    Oh well, yeah, for sure. But think about it — it is all incentives again.

    If Tiger Woods lies, his wife smacks him in the head with a golf club and he loses $300 million … If you lie to your boss, you get fired … If I lie to my clients I’ll lose their business, face malpractice claims, maybe get disbarred.

    But if a politician lies, what happens?

    [] First of all, 90% to near100% of politicians are in totally safe districts. (As I just noted elsewhere, over the last 12 years 96% of Congressional incumbents have been re-elected … after the California gerrymandering 153 of 153 Congressmen and state politicians were re-elected, etc.)

    So when a politician lies to you, he has no opposition, you have no choice, what bad can happen to him?

    [] Even if he’s one of the few who does have an opponent, the election probably won’t be for years. Will anyone still care? Enough to vote against their own party??

    [] Politicians who don’t lie are punished.

    I wasn’t kidding when I said if Baucus told the truth: “Obama would rip off his head, the rest of the Dems would throw his body on a pile of wood, and the Dem establishment — Krugman, Ezra Klein, AARP, etc. — would rush to see who could get to it the fastest with the most gasoline and matches.”

    Baucus’s career would be ruined, his income, his family’s welfare, the works.

    [] Masses of people reward politicians for lying. Not just the “fooled” voters, but also people and interests who know he is lying congratulate him on it. In fact WE do it, no doubt you and I (More on this in a sec)

    Politicians have a “license to lie”. More than anyone else they are immune from paying a price for it, and are actually rewarded on a large scale for doing it. So they lie more than anyone — as they say, “when the lips move”.

    On a moral level, it doesn’t excuse the behavior. Just because you are in a bad system is no reason to be a liar

    Think about it again. I tell my kids not to lie, that it is wrong. But I also punish them when they lie and reward them when they tell a difficult truth.

    Now imagine a parent who tells his child, “lying is bad”. Then every time the child lies he is rewarded by the parent with candy, money, etc. Then when the child tells a hard truth he is *punished*, smacked and told, “don’t say anything like that which will get you in trouble again” … so then the child lies to stay out of trouble he gets more candy and money.

    This is kept up steadily. So now the child tells lies all the time. Is it really the child’s fault, or the fault of the system the parent set up for him?

    particularly when the worst possible outcome for him is lack of reelection, not exactly death by stoning

    The worst result can be pretty bad. It’s brave talk to say *someone else* should throw away their career and family’s welfare, just because it wouldn’t be, quite, “death by stoning”.

    And what if that someone else believes they are right on the merits … and they are praised by many as such, and for utilizing their “expedient disingenuousness” to further the public good … and everyone else in their job lies as much as they do.

    I always wonder, though, is to what extent those guys rationalize to themselves on a kind of “overall ends justifies the means” basis, believing that (1) the nation is better off overall with them in office rather than some other guy, and (2) the only way for them to stay in office rather than that other guy getting it is for them to choose many of their positions and rhetoric based on political calculus…

    Of course they believe that, and people tell them that all the time, and praise that behavior. We all like politicians who bring us the results we want — and when that’s what it takes its a virtue.

    Example from today: Stan Collender is ripping various politicos (Today Harold Ford in my own NYS) as being “not ready for prime time” for saying various obviously untrue/stupid things (logic: either ignorant or lying, take your choice).

    Ah, but when Obama was criticized for breaking his “negotiate on C-SPAN” pledge, Stan was Obama’s big defender. Stan never said “Barack Obama showed himself to be ‘not ready for prime time’ by promising everyone that his major legislation will be negotiated on C-SPAN. Laws just can’t be negotiated on TV. Only a naif or a liar would make such a promise…” Because Stan was on Obama’s side and wanted that bill to pass.

    I’m not picking on Stan, I respect him — in fact that’s the point, WE ALL do this. “Your politician is a damned liar. My politician is shrewdly massaging the public’s sensibilities to get our nation where we need to go.”

    Greatest example of all: FDR. Who criticizes him for running in 1932 on a platform promising to balance the budget by cutting waste from government? Nobody, because we like that he won.

    Hey, what’s worse than a politician lying to the whole country to deviosuly mislead it into a major war?? That’s certainly worth damnation if anyting is, is it not?

    FDR’s 1940 campaign mantra was : “I have said this before, but I will say it again and again and again: Your boys are not going to be sent to any foreign wars.” — even as he already had the navy fighting an undeclared war against Germany in the Atlantic, and was looking for a provocation to expand it into a declared one.

    But since we approve that war he’s never criticized in the history books for any of that — and in fact, many astute observers give such deceit the highest praise!

    “Roosevelt’s greatest contribution came in his using all his devious sneakiness as a ruthless political intriguer to put the United States in harm’s way in World War II.” — Brad DeLong

    That’s what we do. The politicians have gotten that message loud and clear. That’s why they do what they do.

    We tell them “deliver what we want!”. That’s their job, their priority #1 to get re-elected — which is most definitely their #1 priority.

    Nobody ever tells them: “Be truthfull”. Truth is a secondary consideratio. Utilitarian. “What is truth?”

    All politicians lie and deceive constantly — but how many politicians can you name who were voted out of office for lying? Just because of lying, not because of any other failure.

    At the moment, I can’t think of a single one.

    If you can’t think of at least a bunch, there’s our answer: Politicians aren’t punished for lying, they are rewarded for it.

    And we are the ones who reward them.

  35. comment number 35 by: Brooks

    Jim,

    Re:But the point is that the “short term result this quarter” is the change in price of the company’s stock or bonds — and that price reflects the best estimate of the company’s value indefinitely into the future, discounted to current value.

    I know the theory. I’m talking about reality. You don’t seem to be familiar with the latter. In the real world things are done to boost very short-term appearances contrary to actual performance (in a non-manipulated, non-contrived sense) to have very short-term impact on bonuses, careers and yes, share prices. Believe it or not, markets don’t really have perfect information, management and other players know that, and their incentives and rewards are often not dependent on longer-term performance.

  36. comment number 36 by: Jim Glass

    I know the theory. I’m talking about reality. You don’t seem to be familiar with the latter. In the real world things are done to boost very short-term appearances contrary to actual performance

    Wow. And all the spinning of short-term appearance to hide their long-term positions really helped General Motors and Lehman Bros a lot, eh?

    You think that in reality, competent business owners and investors have no clue that interested parties engage in spin, eh? You do, but they don’t. Warren Buffet is fooled by the short-term appearance spinners every time. :-)

    Believe it or not, markets don’t really have perfect information

    A wonderful example of the fallacy of the excluded middle, linkable to the next time an illustration is needed.

    Since markets don’t have “perfect” information they can’t have very substantial information entirely adequate for the purpose cited.

    Believe it or not, it is entirely possible for information that is not “perfect” to be entirely adequate for a purpose.

    Let’s see the financial institution-versus-political institution example again.

    1) Company managers plus unions & other stakeholders, for short-term personal gain, reach a deal that legally gives them riches now, but will crush the business 15 years from now — when they figure they will all be gone. It will be somebody else’s problem then.

    The company’s advisors — accountants, actuaries, business seers — make an “imperfect, best estimate, could be somewhat worse or better” judgment that the cost 15 years hence will be $100X, enough to crush the company’s financials by then, reducing its financial status to “junk”.

    Of course, the markets take this information — as imperfect as this best estimate of $100X admittedly is - and threaten to immediately slash the value of the business today by $46X if the deal goes through.

    The owner, not wanting to lose $46X of wealth immediately, says “No Effing Way”! The deal is squelched. (Maybe the managers are fired — Warren Buffett would be annoyed, eh?). Thus the owner acts to protect the future solvency of the business, and it’s future ability to produce, employ, etc.

    2) The politicians plus AARP, unions, and other constituents, for short-term personal gain, reach a deal that legally gives them riches now, but will crush the government’s finances 15 years from now — when the politicians figure they will all be gone. It will be somebody else’s problem then.

    The government’s advisor, CBO — using the wisdom of accountants, actuaries, and economic seers — warns giving an “imperfect, best estimate, could be somewhat worse or better” judgment that the cost 15 years hence will be $100X, enough to crush the government’s financials, reducing its credit rating to “junk”.

    Of course the markets … no, wait, there is no market mechanism. Only a vote-counting mechanism within two years.

    Who steps in taking the role of the “owner” — with the personal incentive to say “no”, and the power to do it, to protect the future financial solvency of the government, and thus it’s ability to provide essential services, order, civil protection., etc?

    A party in that institutional role is what modern democratic governments need to evolve to end this fiscal mess they are all in.

  37. comment number 37 by: Brooks

    Jim,

    If you want to persist with the silly notion that the theory equals the reality despite what I’ve pointed out, I won’t continue trying to disabuse of that erroneous assumption. Maybe you should look into it a bit. Read up a bit. Talk to people with actual experience pertaining to this question. Whatever you’re willing to do to learn a bit rather than just persisting with that incredibly naive assumption. Good luck.

  38. comment number 38 by: Brooks

    Oh, but Jim, I probably should add the following, as you say “a wonderful example [of something] linkable to the next time an illustration is needed:

    You write:

    Wow. And all the spinning of short-term appearance to hide their long-term positions really helped General Motors and Lehman Bros a lot, eh?

    You think that in reality, competent business owners and investors have no clue that interested parties engage in spin, eh? You do, but they don’t. Warren Buffet is fooled by the short-term appearance spinners every time. :-)

    Believe it or not, markets don’t really have perfect information

    A wonderful example of the fallacy of the excluded middle, linkable to the next time an illustration is needed.

    Since markets don’t have “perfect” information they can’t have very substantial information entirely adequate for the purpose cited.

    Believe it or not, it is entirely possible for information that is not “perfect” to be entirely adequate for a purpose.

    It’s not often (at least on this blog) someone juxtaposes his calling out of someone else on a supposed classic case of a basic error of argumentation with his committing an error of roughly the same nature, but the above argumentation of yours is, as you would say “A wonderful example…linkable to the next time an illustration is needed.”

    I made the point earlier that you seemed to be overstating the degree to which actors in the (for-profit) private sector act to maximize the present value of future cash flows, and apparently completely equated the theory of markets pricing corporate shares (or bonds for that matter) accordingly with the reality, as opposed to markets being somewhat misled at times by short-term measures taken by managers to boost appearances at the expense of the longer term.

    You respond first with the (odd) straw man of two companies that present as examples of companies that engaged in “spinning of short-term appearance to hide their long-term positions” and who eventually got suffered from it, as did their shareholders and creditors. First, if anything, one would think that such examples would support my point and refute yours (that’s the “odd” part), since you’re offering examples of cases in which managers sacrificed the longer-term (the present value of future cash flows) to boost short term appearances, and who fooled markets for a while by doing so. Second, even if you had examples of companies that tried to mislead markets in the short term and were nailed immediately, that obviously wouldn’t support the contention that such is always or even nearly always the case (that’s the straw man part).

    You then say:

    You think that in reality, competent business owners and investors have no clue that interested parties engage in spin, eh?…Warren Buffet is fooled by the short-term appearance spinners every time. :-)

    I think that?? That’s news to me! Obviously I never said any such thing. I said that the opposite is not true (that they always have full knowledge of the extent of such spin, or even nearly so). And you respond with the non sequitur that if I’m saying one absolute/extreme is not true, I must be saying that the opposite absolute/extreme is true. That’s just silly.

    You then respond to my remark that markets don’t have perfect information — which I offered to challenge your apparent equation of the theory with reality regarding the supposedy utter inability of managers to manipulate short-term appearances that trick markets at all in their valuations — by calling my remark “A wonderful example of the fallacy of the excluded middle, linkable to the next time an illustration is needed.”

    And there ya’ have it. First you imply that my argument that one absolute/extreme is not true constitutes an argument that the opposite absolute/extreme is true, then you immediately proceed to (erroneously) charge that my remark reflects “the fallacy of the excluded middle” (i.e., a false dichotomy of only opposite absolutes/extremes). Well done, sir.