Ryan-Murray Deal

I support Congressman Ryan's deal. I do so for two reasons. First, government dysfunction is never a cause for celebration. It fosters a climate of economic doubt and a culture of self-perpetuating disdain. It's clear that many conservatives oppose this deal. Still, in order to make the spending reforms that are necessary for the long term of the country, Republicans will have to control Congress. In similar vein, if liberals want to have a chance of asserting the Warren agenda, they'll also need to control Congress. This deal recognizes those two competing truths. In essence, it ends the dysfunction by deferring those judgments to a later date. Second, the United States military is being gutted by the sequester. As I've argued before*, this cannot continue. Especially in the context of growing threats from China and a splintered but metastasizing collection of extremist groups. This is the essence of a compromise. It's a deal all sides can learn to live with.

* The title is a little harsh - Although I disagree with him, I've grown to respect Norquist.

GUEST POST: A cordial challenge to conservatives- Some misunderstandings on Income Inequality

This is a guest post from Alex Lenchner aka 'Curious Leftist'. He's an Economics specialist with a keen mind and a fine pedigree for analysis and debate - make sure you check out his excellent blog /s. I'm excited to host this post - while I disagree with some of his opinions, Alex reminds me that left-right political engagement is crucial. In the end, whatever our political colors, the vast majority of us seek a just, prosperous American future. I digress... Over to you, Alex!

One of the things I've noticed in politics is the way Republicans misunderstand or ignore liberal arguments against inequality. And to to be fair, income inequality is a tricky subject to talk about. Even the very best of economists struggle to find the best way to measure inequality. There are different types of compensation, e.g. labor income (wages), benefits, and transfers. There are different ways to measure income inequality, e.g. at the individual, family, or household level. There are also things that we should consider like hours worked. And don't forget that pesky thing called inflation. Trying to put all of these factors into an empirical paper can be a real mess, so on some level, I understand the lackluster debate over income inequality. But despite these complications, two things are clear when looking at the data, decoupling and income growth divergence are real and sizable (1). These are two incredibly important problems that show how income inequality has been growing the past few decades.

More often than not, most people can't even get past step one. The conventional debate on the subject is rife with political rhetoric that obscures the issue and gets us nowhere. Don't get me wrong, there are some right leaning economists and academics that cut right through the talking points and get straight to the heart of the problem. The points they bring up and issues they raise are good for the political debate and they help bridge both political parties to a sort of mutual understanding. But these people are often in the minority and there voices aren't heard all that often. The people I'm primarily talking about are Republican politicians, members of the GOP, right leaning journalists, and plenty of others. Even many on the left are bad about this. So with this in mind, it would be beneficial to some clarity on the issue.

There are 4 main issues I have with Republican arguments on inequality:

1. The false dichotomy between growth and distribution
2. While too much government regulation may be a problem, it isn't the problem
3. Income inequality is not purely due to individual initiative. Instead, it is mostly an institutional phenomenon
4. Liberals are not against income inequality per se

The False Dichotomy between growth and distribution

This I see all the time, especially from Paul Ryan, a GOP favorite. Take this quote: “Are we interested in treating the symptoms of poverty and economic stagnation through income redistribution and class warfare, or do we ant to go at the root causes of poverty and economic stagnation by promoting pro-policies that promote prosperity?”

This is a classic example of a false dichotomy. We can either redistribute income or promote economic growth, but not both. But liberals often talk about inequality because it can hamper growth. The fact is, high levels of inequality can lead to a less efficient and productive economy. Cutting public investment leads to under-investment in infrastructure, R&D, and education at multiple levels (2). The ways firms treat their workers and the amount workers are paid all factor that go into worker productivity. In fact, fairness is a very important factor that goes into worker productivity and motivation (3). Although the idea of “fairness” is rarely clear and has a heavy degree of subjectivity, there is a growing sense that the present disparity in wages is unfair. And there is some date to back this up, as the wedge between wages and worker productivity has risen considerably since the 1970s:

Factor this with the rapid rise in executive pay (4), then there will be a feeling of unfairness throughout the economy. So with this in mind, redistribution, i.e. changing marginal tax rates on the 1 percent (or through some other method of taxation) to help increase public investment and lower the gap between worker and executive pay could increase productivity and efficiency in the economy. We can redistribute wealth, thereby reducing income inequality, and make the economic pie bigger.

While too much government regulation may be a problem, it isn't the problem

Many Republicans and Conservatives like to make the claim that government regulation is primarily to blame for income inequality, “In just about every speech they give examples of small businesses trying to do something and being blocked by government regulations. The Republicans are not whistling Dixie here – they are sinking their teeth into very public angst about government being too large.”

All of these stories amount to mere anecdotes. While government regulation is certainly a problem for our economy, it isn't the problem. No political institution is perfect. Interest groups are going to have some influence on the political process and there is bound to be excessive regulation over some sectors in the economy. But to say that regulation is the primary reason for our present state of inequality just ignores history. The fact is, inequality has been rising since the 1970s. Over this period we've had a number of presidents with various economic policies and doctrines. Yet despite the continuous dynamic shift between more and less regulation over several administrations, inequality has continued to increase. What the right seems to underestimate is the importance of monopoly rents and the increased monopolization of markets as a result of imperfect information, network externalities, and anti-competitive practices. Other factors like regulatory chapter and inadequate enforcement of laws also play a role, but that's different from regulatory burden.

Income inequality is not purely due to individual initiative.

You don't normally see this claim from the right, that inequality is purely due to differences in individual initiative, but it sometimes pops ups (5). Inequality is shaped by individual and market forces, but individuals and markets don't exist in a vacuum. They are constantly being shaped by thing like the government, social rules, institutions, and other structural forces. Skilled manufacturing jobs are being replaced by unskilled service sector jobs. Skill biased technological change has replaced many unskilled workers with machines. Financial liberalization and free capital movements have resulted in global financial stability, causing unemployment on a large scale. Even things like racial and gender discrimination are still alive and well (6). And this just scratches the surface. Looking at this from a common sense approach and blaming inequality on laziness and lack of effort might seem practice, but it ignores decades, if not centuries of research and theorizing. With this in mind, it would be absurd to attribute inequality solely on individual initiative.

Liberals are not against income inequality per se

Many on the right have perceived the liberal crusade against inequality as a desire for “equality of outcomes”. And you see this claim a lot (7). But it's nothing but a strawman and shows the true extent of how many Republicans and GOP members misunderstand the liberal position on inequality. Inequality is going to happen in a market economy. The desire for profits and gain is a vital component in the capitalist system and it's bound to lead to inequality of varying degrees. And, for the most part, capitalism is a great system, and I've seen very few liberals attack the institution outright. What liberals emphasize are the things that constantly influence markets, e.g. institutions, social rules, norms, habits, and a ton of other factors. Some of these structures and constraints are good, some bad, and some negligible. But many of these factors lead to imperfections in the market system and cause differences in well being across the board. Often, these differences in outcomes aren't due to individual actions. It things like this that liberals are concerned about, and believe that a number of institutions, like the government and unions, can help fix. Will the process be perfect? No, and it would naïve to think otherwise. But it's better than ignoring the problem.

While you might see some liberals make very dumb comments, you shouldn't extrapolate those examples to all liberals. The fact is, liberals and many on the left are primarily concerned with equal opportunity, not equal outcomes.

Conclusion

Now, none of these arguments I made are original in any sense, but I hope they provided some clarity on an issue that is often obscured by political games. I definitely used vague phrases like “the right” and perhaps I generalized too much. But with that aside, the only way to make any real headway on the problem of inequality is to find a common ground between both political parties. And the only way for that to happen is for those on the right to better understand the arguments those on the left and vice versa.

Footnotes:

1. For more see Matt Bruenig (http://www.demos.org/blog/trickiness-measuring-inequality) and Lane Kenworthy (http://lanekenworthy.net/2012/03/11/is-decoupling-real/)
   
   
2. As Ben Bernanke notes: “First, since the 1970s, R&D spending by the federal government has trended down as a share of GDP, while the share of R&D done by the private sector has correspondingly increased. Second, the share of R&D spending targeted to basic research, as opposed to more applied R&D activities, has also been declining. These two trends--the declines in the share of basic research and in the federal share of R&D spending--are related, as government R&D spending tends to be more heavily weighted toward basic research and science. The declining emphasis on basic research is somewhat concerning because fundamental research is ultimately the source of most innovation, albeit often with long lags. Indeed, some economists have argued that, because of the potentially high social return to basic research, expanded government support for R&D could, over time, significantly boost economic growth.” (http://www.federalreserve.gov/newsevents/speech/bernanke20110516a.htm)
   
   
3. Joseph Stiglitz highlights an important case study that demonstrates these effects: “A detailed case study by Krueger and Mas of the plants that manufacture Bridge/Firestone tires provides a particularly chilling illustration. After a profitable year management demanded moving from an eight-hour to a twelve-hour shift, which would rotate between days and nights, and cutting pay for new hires by 30 percent. The demand created the conditions that led to the production of many defective tires. Defective tires were related to over one thousand fatalities and injuries until the recall of Firestone tires in 2000”.
   
   
4. Lucian Bebchuk and Yaniv Grinstein concluded in their empirical study on the growth in executive pay, “the analysis indicates that the growth in pay levels has gone far beyond what could be explained by the changes in market cap and industry mix during the examined period. The growth of pay involved a substantial rise in the compensation paid to the executives of firms of a given market cap and industry classification. Although equity-based compensation has grown the most, its growth has not been accompanied by a reduction in cash compensation.” (http://www.law.harvard.edu/faculty/bebchuk/pdfs/Bebchuk-Grinstein.Growth-of-Pay.pdf)
   
   
5. Bill O'Reilly tends to makes this claim: “Nobody gives you anything. You earn it.” (http://nation.foxnews.com/income-inequality/2012/05/14/oreilly-fire-income-inequality-bull)
   
   
6. See the classic study “Are Emily and Greg More Employable Than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination,” American Economic Review 94, no. 4 (September 2004): 991–1013
   
   
7. See this article On Equality of Outcomes: http://www.dailykos.com/story/2010/12/14/929058/-On-Equality-of-Outcome

Shutdown, ObamaCare and what it all means

Interviewed by AJ Delgado (video below), I offer my thoughts on the shutdown, ObamaCare and the broader ideological disagreements sustaining the discord.

Immigration Reform, Intelligence, DoD, Hijackings.

A few thoughts this morning...

1) House Republicans are making an awful mistake on immigration reform. I get and respect that many members of the Republican caucus oppose the Senate's immigration bill. That's fair enough. But to simply offer intransigent opposition without response would be terrible mistake. It would play to Democratic caricatures of the GOP as a party that has no interest in governing. It would reinforce negative perceptions of the GOP in the eyes of Hispanic Americans. Most of all, it would represent a stunning neglect of the ultimate responsibility of elected officials to govern. There can be no doubt that America's immigration system is broken. It deserves and requires resolution. Yet, I fear that in much the same way as was the case with health care reform, by ceding the debate, Republicans will also effectively cede control over the contours of immigration reform. This will lead to the worst possible outcome - open borders, unfettered amnesty and a tremendous political defeat for the GOP brand. House Republicans need to listen to conservatives like Paul Ryan.

2) Members of Congress are complaining that the Intelligence Community regularly obfuscate their reports to the intelligence oversight committees. This is nothing new (see The Deep State). Yet, it's open airing speaks to a dysfunction at the heart of the US Government. Many intelligence professionals simply do not believe that politicians can be trusted to make objective decisions on the merits of particular intelligence operations. As a result, they do their utmost to sell those programs in uncontroversial ways. Don't get me wrong, misleading Congress is absolutely unacceptable and where it occurs, it must now stop. Nevertheless, Congress bears responsibility for its shifting rhetoric on the constitution of appropriate intelligence activities.

3) I share Chuck Hagel's concern over the looming impact of the sequester on the US Military. Unfortunately, until Democrats accept the inevitability of major entitlement reform, the prospects of an appropriate defense resolution are very low. It's stunning to me that liberals still refuse to engage in meaningful dialogue over entitlements. The numbers speak for themselves. In the interim however, it's crucial that Hagel resists efforts by President Obama to play politics with the sequester (a preference for which Obama has previously shown significant sympathy). For one example, it makes no sense that USN/USAF fighter squadrons are seeing degraded readiness. We should be closing bases before degrading our power projection capabilities.

4) A new book on air hijackings has been released. The author covers the 'epidemic' in hijackings that afflicted the world in the 1960s/70s. Of course, things have since changed. The threat of suicide hijackings and the rise in politically motivated attacks (especially by Palestinian affiliated terrorist organizations) forced western governments to develop highly trained counter-terrorism capabilities. For example, the United States lead agency for plane focused hostage rescues is ACE (aka Delta Force). Combined with greatly improved airport security efforts, the ability to respond to and effectively resolve hijackings has meant that air travel is now substantially safer.

Election Observations in Florida

I am currently in South West Florida. I will be returning to the UK this weekend. While in the sunshine state I have been attempting to get a feel for ground level voter leanings concerning this year's Presidential election. There is clearly a close split between likely voters. However, I have been able to make a number of conclusions. 

1) Republicans are far more energized than Democrats. The Republicans that I have met are almost unanimous in their profound dislike for the President's policies. Contrary to press spin, the majority of this opposition is focussed on a fundamental distaste for the President's economic approach and not on his personality (although he is not popular in this regard). The energy that this opposition holds in terms of prospective support for Republican candidates (at the national and state levels) is considerable. In contrast to Republican leaning voters, many Democrats are less energetic in their contrasting support for the President. They feel that his economic record is weak and they regard him as having failed to live up to expectations. Not surprising when the President promised biblical level change.

2) Romney-Ryan need to do a better job of explaining their Medicare reforms. A good deal of older voters are concerned that these reforms will deny them medical care. This is largely the result of Democratic ad campaigns that unapologetically lie about the Romney/Ryan position on this issue (The Democratic Party has no plan so just relies on lies). To counter Democratic attacks, the Republican ticket simply needs to repeatedly say this. 

3) Far too few voters are attentive to Afghanistan as an issue. Iran has come up in a few of my conversations, but it disappoints me that most Americans seem to have forgotten about the fight our military (along with our coalition allies) are currently involved in. Supporting our troops means more than waving a flag and a yellow ribbon, it requires an attention to our military operations.

4) By Democrats and Republicans alike, the President is seen as offering few new proposals. In this sense, support for the President by moderate Democrats and independents is largely rooted in their discomfort with the more extreme portions of Republican Party policy. I firmly believe that Romney-Ryan have little interest in issues like gay marriage, abortion and pornography (and will largely ignore GOP religious fundamentalists). However, negative perceptions of the GOP on these issues are undoubtedly damaging the party's ability to reach out to new voters. I always come back to this polling data. Around 40% of Americans are conservative, 35% moderate and only 21% liberal. On these results, the GOP should be landsliding every election. Unfortunately, candidates like Santorum drive many voters away. I am confident that over time as the next generation of Republican leaders begin to run for office, we will be able to attract more of these voters. My generation cares very little for intervention in the private lives of our fellow citizens.

The need for a 'big tent' GOP

On Thursday, I attended a meeting of Republicans Abroad UK in London. It was a productive gathering that should enable Republicans in the UK to provide better assistance to the task of electing Romney in November. However, towards the end of the meeting, I had a little (loud) disagreement with one lady who was in attendance. I remarked that I'm not a fan of Sarah Palin. This particular individual did not appreciate my comment and stated something along the lines of 'You've never met her!'... I responded by saying that I didn't need to. (Why I dislike Palin). In the end, the lady's husband calmed the situation down by making a comment about how the Republican Party needs to be a 'big tent' organization and that we must respect varied opinions. If he was genuine in this belief then he is absolutely right. However, my concern about Palin is that she lacks any apparent intellectual curiosity and  thinks that this is something to be proud of. It isn't. For reasons of politics and patriotism, Republicans need to put forward candidates like Paul Ryan who have a deep grasp of important issues, rather than supporting candidates who have no clue about the most basic elements of policy. When it comes to foreign policy, I take this issue extremely seriously. Put simply, when we send Americans to fight and if necessary die, we must ensure that we have serious policymakers in positions of leadership. But... if people are willing to hear me out, I will hear them out.

Great scene from West Wing. The President is a Democrat but his point stands.

The Republican Budget

Paul Ryan's budget shows that House Republicans are focused on advancing serious plans to resolve the extraordinarily high federal deficit/debt. The Democrats will scream that the Ryan budget will hurt the poor, but the simple fact is that Ryan has offered a plan that resolves America's fiscal crisis and preserves medicare/social security for the benefit of future generations. 

As the NY Times notes, 

'Under the House plan, the current $1.18 trillion deficit would fall to $797 billion in the coming fiscal year, compared with $977 billion under Mr. Obama’s plan. By 2016, the deficit would fall to $241 billion by Republican estimates. The Congressional Budget Office estimated last week that Mr. Obama’s budget would still have a $529 billion deficit in 2016.

The Ryan plan would accumulate $3.1 trillion in additional debt through 2022. The president’s would add $6.4 trillion, more than twice that total. The Republican budget cuts spending by $5 trillion more than the president’s plan.' [5.3 trillion/10 yrs]

Ezra Klein at the WPost argues that the Ryan plan resolves the debt on the backs of the poor. I challenge that premise.  49% of Americans don't even pay federal income taxes. In addition, the Ryan plan cuts tax rates to just two rates (25% and 10%) by ridding the system of the tax loopholes/inefficiencies that are used by the rich and that lose the Government huge amounts of revenue each year. At the same time, Ryan adopts the bi-partisan medicare proposal that Democrat Ros Wyden helped author. The Democrats have offered no solutions to the looming medicare bankruptcy. The US should not be a something for nothing society.  Klein suggests that the $5.3 trillion reduction is unnecessarily high..  My response? Not when our interest payments are this high.

Obama and the Democrats in Congress have abdicated the responsibility of governing. They are in full election mode. Look for more political scare tactics like this. There is no question that the GOP is taking substantial political risk in proposing this plan. Pain is rarely popular but sometimes it is necessary. Republicans are gambling that Americans will prefer a future in which medicare and social security are preserved for those who will need it, taxes are low and personal responsibility remains part of the American way of life. The Democrats want to drag America towards a European style social welfare system..  with high taxes and big government. There's nothing wrong with this (in a democracy people should be able to chose to live in whatever kind of system they want and many Europeans are v. happy with their system), but the Democrats are lying to the American people when they pretend that the rich alone can pay off the debt. 

The Republicans now have a plan in which the sums add up. Democrats have a joke.

40% of Americans identify themselves as conservative, 35% as moderates and 21% as liberals. This is a fight that Republicans will ultimately win.

Vote for Romney

Today, Republican voters (who have not voted early) in Florida are going to the polls to pick their choice of Republican nominee for the Presidency. They should pick Mitt Romney.

Republicans and 'democracy' in the Middle East

This has been annoying me for a while now. 

Republicans cannot condition support for democracy in the middle east on the basis of our personal affinity for particular ideologies. If the party is to stand for democracy in Iraq, it must also accept the need for Palestinian democracy, Egyptian democracy and democracy in Saudi Arabia and Bahrain. Without honest, genuine support for democracy across the Middle East, Republicans have a total lack of credibility to argue that america's foreign policy is centred around promotion of freedom. In this hypocrisy, Republican candidates serve to provide politically astute adversaries like HAMAS, Hezbollah and the Sadrists, with talking points to suggest that the US only supports those with whom it agrees. In an inescapable sense, this feeds traditional extremist narratives hostile to US interests..

IE -  the argument - 'Don't trust or work with the Americans or their agents, because they have no interest in your welfare but instead only care about pursuing a blindly, pro-Israel agenda'. This narrative serves to unfairly deligitimise the nature of America's regional actions and relationships.

Aside from the diplomatic damage caused, such wilful contradiction between words and reality, ultimately undermines the cause of freedom itself (to which america's extremist opponents in the middle east are ultimately ideologically averse). Supporting democracy does not mean that we should automatically agree with other democracies, but it does mean that we accept the notion that popular power is at its basic but ever developing level, a good thing.

The central point here is that if republicans still believe in democracy as a moderating force (the underlying premise of the Bush ideology that Republicans have overwhelmingly supported since 9/11), then in favour of an ultimately more just, peaceful and stable middle east, republicans must be willing to accept that in the short term, while democracy may not always produce results that we would like, it is crucial to stand in support of freedom.

On the debt, Republicans must decide between Norquist and the nation.

Republicans in congress have a clear choice between common sense compromises on revenue or, an illogical orthodoxy that will paralyse the country's finances, gut the military and render the party totally divorced from the values of compromise, national interest and reason on which it was formed. In terms of the national interest, reforming the tax code by lowering rates and eliminating deductions, is very literally a small price to pay for a comprehensive deal. Refusing such a deal on the basis that more revenue is inherently wrong, is not just illogical in terms of the need for a debt deal, but serves only a small class of Americans- mostly ideologues like Norquist and tax lawyers working the system. Republicans must decide whether the party stands for an enlightened view of the national interest or for the whims of special interest groups detached from reality.

US Defence Spending

Although planned cuts to defence spending (around $450 billion/10 years) are necessary in light of the US fiscal situation, the fall-back cuts that will occur if Congressional debt negotiations fail will be catastrophic. As Secretary Panetta noted in his letter, such cuts would pose a real burden on America's force posture capabilities. These cuts would weaken dramatically our ability to deploy on short notice to high effect around the world. Further, the cuts would damage our ability to apply decisive force on major operations. As a party that has heavily supported US military action over the past decade and continues to regard itself as the national security party, for Republicans to sacrifice these cuts at the altar of an anti-revenue ideology, would be a moral and strategic failure of major proportions.

Don't Ask Don't Tell / Israel

NYTimes carries a great article today on Military recruiting in the aftermath of DADT's repeal. http://www.nytimes.com/2011/09/21/us/marine-recruiters-visit-gay-center-in-oklahoma.html

Interesting piece on tensions between WH and Congress over Israel
http://www.nytimes.com/2011/09/21/world/middleeast/house-gop-finds-a-growing-bond-with-netanyahu.html

Tom Rogan Thinks..

1) The guy who attacked Murdoch was a fool who distracted proceedings.

2) The Senate debt talks are encouraging. If Republicans reject this plan they will be ignoring their duty as elected officials to seek a meaningful and substantive resolution to America's debt crisis. The cut/cap agenda is not politically possible and neither is a solution that resides solely on cuts. If the United States is to avoid the disaster of debt failure then we Republicans must pursue the art of the possible. The senate plan appears to offer the closure of loopholes as a solution for revenue increases alongside meaningful reforms to medicare/defense, discretionary spending and medicaid. These attributes should be welcomed as reasonable alternatives to tax increases and clearly preferable to doing nothing. The plan appears to be one that supports Republican interests. The tea party revolt was staged on the principle of national unity in the pursuit of a common necessity. Willful inaction would be a betrayal of that bold legacy.

3) The collapse of the Tevez transfer to Corinthians is indicative of the big problem that Man City have. They want a lot of money for a player who is temperamental and has huge wage demands.

Tom Rogan Thinks..

1) Obama is speaking to the UK Parliament today. I hope he says that as part of a balanced relationship the US cannot be expected to subsidize European security.

2) The election of the Democrat in New York shows two things. 1) The tea party cannot win everywhere. The voters who went with the tea party candidate should consider the political value of their vote. 2) The Republicans need to do a much better job articulating the crisis facing Medicare. It should be the main Republican talking point at every stump speech to state that even with top rate tax increases the budget gap cannot begin to be resolved.

3) The Libya operation was always going to be complicated. The niavete of people who excitedly called for war was stunning. The Europeans must spend more on defence.

4) Obama has some good options for the next chairman of the joint chiefs. I think Ray Odierno would be the best pick. He has born the personal and professional burden of war.

5) Finally.. to all those who said that Obama is being anti-Israeli, read this poll.

6) The French Open is wide open. I still think Nadal will win. He sometimes takes a while to warm into the tournament.