Category: Uncategorized

With less than a month to go until the New Hampshire primary, my usually hot seat as the director of a public policy center at a college in New Hampshire is, in fact, ice cold.  There is literally no sign of the candidates, nor has there been for most of the year.  It is like the year without a primary.  (This is in marked contrast to how I spent 2007, and this day in particular.) 

The way I would summarize this is to say that there has been no aggressive retail campaigning.  Other than the debate in October, we have had minimal outreach from the candidates who have been invited to these debates.  The key reasons, in no particular order, seem to be:

<!--break-->

1. The debate schedule

There have been an enormous number of so-called debates this primary season.  They have served primarily to divide the group into those candidates who say essentially nothing and those who will say just about anything.  However you characterize these media events, there is little denying how unproductive they have been in helping a voting public make better choices.  And more importantly, the packed schedule is keeping the candidates from focusing on retail politics in New Hampshire, like they normally do.

2. My location

In 2007, we had a wide open contest in both parties.  But most importantly, we had a vigorous contest on the Democratic side, and the part of the state where Dartmouth is located tends to favor the Democrats.  I am not surprised that we would see a dropoff in candidate visits, and maybe things are raging down by the Massachusetts border and in the North Country.  But I would not expect candidate visits to dry up completely.  I was not aware that any candidate had such a comfortable lead that this contest was over and not worth expending resources to campaign.  Yes, Romney leads in the polls, but that's what retail campaigning in a small state is supposed to affect -- whether he can hold that lead.

3. This group of candidates

In 2007, John McCain was in the area all the time.  Even in 2007, we never hosted a visit to campus by Mitt Romney.  We saw the Mitt-mobile parked around the Green occasionally, but that was typically one of his sons or campaign staff.  He may have done something at the Medical Center down the road.  Fast forward 4 years, and they are all like Romney and none like McCain, which is to say, they are all invisible campaigners.

4. Raising and spending money

It is surprising how little role that money is playing in this contest.  The top candidates are not spending money on large media buys.  Television advertising has not been overwhelmed by political ads.  An unmet need to raise money has not been a reason for candidates to drop out of the race and focus the remaining candidates on distinguishing themselves from each other.  More generally, we are in the low-fundraising, low-spending equilibrium in which candidates are responding to weak campaign efforts by their opponents by conserving their own resources, including their time and travel.  That won't continue to be the case later in the primary season, but it is certainly the case now.

These are my top four reasons -- please share any others that you think are important in the comments.  For similar ideas, read this article in yesterday's Christian Science Monitor.

 

The best thing I've read lately about how to channel public frustration into constructive action is this column by Scott Turow, holding forth at Bloomberg last weekend:

By treating money as an analog for speech, the court’s post-Buckley jurisprudence has figuratively allowed the rich to speak through microphones while the poor can barely whisper, and tolerates a situation in which the voices of contributors are amplified to the point that they drown out the opinions of mere voters. I have never understood how permitting the wealthy so much greater influence over the political process can be squared with the vision of equality on which the country was founded.

As I've suggested before, some money in politics is speech, but too much money in politics is bribery in one form or another.  Turow is quite realistic about what it will take to accomplish this:

Unfortunately, nothing less than a constitutional amendment is likely to reverse the situation. For now, the court’s conservative majority is firmly entrenched. And even were the court to become more moderate, with the replacement of one of the conservative justices, the principle of stare decisis, of respect for prior decisions, would mean that any effort to erase the damage done since Buckley would necessarily be incremental.

As for the Occupy Wall Street movement, it has been criticized by some for not having a realistic agenda, even though polling shows that millions of Americans, including me, are sympathetic to the basic message of the protests, if not the violent engagements with police that have occurred in Oakland, California, and elsewhere.

So here is my suggestion for how the Occupiers can rally around a single goal and reinvigorate their movement. The Constitution can be amended by a two-thirds vote of each house of Congress, followed by ratification by three-fourths of the states. The demonstrators should head for the public spaces in Washington where protests have long been tolerated and demand that Congress amend the Constitution to change our campaign- finance system.

Not a bad idea.  Read the whole thing.

Peter Orszag provides some clear and sobering commentary on the value of a college degree in a column for Bloomberg yesterday.  The key message is here:

The effects of globalization are already moving up the wage scale, though, and that trend will likely continue. As Alan Blinder of Princeton University trenchantly noted in 2006, “Many people blithely assume that the critical labor-market distinction is, and will remain, between highly educated (or highly skilled) people and less-educated (or less-skilled) people -- doctors versus call-center operators, for example.” Instead, the crucial distinction is between those tasks that are easily digitized (and thus subject to substantial competition from workers abroad) and those that are not.

<!--break-->

The college degree does not necessarily provide protection against having your occupation digitized in this way.  The more important element of economic security is to be among the best adopters of the products and opportunities that are digitized.  I suspect that it will remain the case well into the future that those who have college degrees will be on average better adopters than of digitized products and opportunities than those who do not have college degrees.  The challenge for institutions of higher education is then to find ways to enable their students and graduates to be better adopters of these new digitized products and opportunities.

When I first started writing about this in January 2008, I was hoping the Treasury would get on board.  This Treasury Note by Aaron Klein makes the case very well (h/t Mark Thoma):

In addition to laying the foundation for stronger economic growth, we must also work to address a crucial problem facing our economy today - unemployment.  Investments in infrastructure today will put Americans back to work.  And with over 1 million construction workers currently unemployed, now is the right time to invest in infrastructure.  Eighty percent of jobs created by investing in infrastructure will likely be created in three occupations - construction, manufacturing, and retail trade - which are among the hardest hit from the recession. Treasury Department analysis shows that these sectors pay middle-class wages, so employment in these sectors bolsters middle-class jobs.

Better some than none at all.  Better late than never.

I couldn't agree more with Pete on the discussions of tax policy that are now occurring as part of the Republican primary campaigns.  The Republican primary campaign almost always gets sidetracked by some inane proposal for tax reform.  This year it is the 9-9-9.  And now we have another version of the flat tax, as if the crushing irrelevance of Steve Forbes to the primaries in 1996 and 2000 were not an indication of how unproductive the discussion will ultimately be.  What are the prospects that a Republican President would actually be able to implement such a change if elected?  They are equal to the chance that Republicans will both retain control of the House and secure a filibuster-proof majority in the Senate in 2012.  In other words, absolutely zero.

The problem that we have with tax policy is that we don't raise enough revenue to cover our expenditures, not the particularly ways we choose not to raise that revenue.

Nicely written, "Making the Most of our Financial Winter."  The novel part:

In every depression the nation has faced, there have been proposals for the government to do just this: increase spending on public improvements to create jobs for the unemployed.

An article in The St. Louis Post-Dispatch, written in 1877, during the 1873-79 depression, argued that the government could create a great many infrastructure jobs. “There are many needed improvements: the construction of the Texas and Pacific Railroad, the widening of the entrances to the Mississippi, the diking of its alluvial blanks, the clearing of obstructions from the beds of the great rivers of the West, the improvement of the harbors and rivers in the East, the completion of the post offices, custom houses, seawalls, breakwaters and other useful works of a national character,” the article said.

Shiller goes on to argue for the balanced-budget aspect of infrastructure improvements in the President's American Jobs Act proposal.  I would take that, as well as add a zero to the proposals -- they are an order of magnitude too small -- and borrow to get them done while we are in our financial winter.  The minimal interest costs can be serviced over the life of the productive investment.

A note to Nelson D. Schwartz and Eric Dash of The New York Times.  If you are going to put this in your article, put it in quotes and attribute it properly or keep it out of the news section of the paper:

Without a coherent message, the crowds will ultimately thin out, Wall Street types insist — especially when the weather turns colder. They see the protesters as an entertaining sideshow, little more than flash mobs of slackers, seeking to lock arms with Kanye West or get a whiff of the antiestablishment politics that defined their parents’ generation.

I don't think it is incumbent on #OWS to have a coherent message.  They are people who feel that their freedoms are being constricted due to the corruptness of others.  They are joining together to push back against that feeling.  They win just by showing up and eschewing violence.  If the NYPD and branch managers at Citibank can't figure that out and stop dehumanizing the protestors, then #OWS will win even more.

There are plenty of policy changes that could satisfy the protestors, even if they are not articulating them themselves.  I can only speak for myself. At a gut level, I would like policy makers to:

1. Stop justifying action to prop up individual institutions based on vague notions of what will happen to the broader economy.
2. Stop using bailouts in lieu of bankruptcy.
3. Stop taking any political contributions from the financial sector, period.  What was true of the health sector during health care reform is even more true of the financial sector today.

There hasn't been much occasion to test #1 and #2 as of late, so I would need to see more politicians take the pledge on #3.  In terms of specific reforms, I would like to see policy makers enact the key ideas of the Squam Lake Report:

1. Capital ratios for all financial firms that increase with the size of the firm, the illiquidity of its assets, and its reliance on short-term liabilities for funding.
2. The use of regulatory hybrid securities to enable instant recapitalization of financially distressed firms in the event of a systemic crisis.  (A requirement that each firm have enough such securities among its liabilities so that it would be well capitalized based on the requirements in #1 in the event that its existing equity had zero value would suffice.)
3. Compensation holdbacks from top executives at financial firms that vest on a long-schedule and are held in cash.

If the FSOC or the Congress had the guts to do this, the "Wall Street types" wouldn't have to rely so much on colder weather to clear out the protestors.

Other words that weren't mentioned, even for their economic impact: Iraq, Afghanistan, education.

Dartmouth plays host to a Republican primary debate tomorrow, focusing solely on the economy.  Here's a page of events for those in the local area.  I'll be on Bloomberg TV tomorrow morning (around 10) as host Margaret Brennan broadcasts from the Green.  [Update -- I blogged too soon.  I've been bumped.]  From the Washington Post's overview:

The Washington Post and Bloomberg TV, in partnership with WBIN-TV and host Dartmouth College, present the first debate of the 2012 campaign focused exclusively on the issue that matters most to American voters: the economy. Join us here on washingtonpost.com/debate on Tuesday, October 11 at 8:00 p.m. ET for the first debate to focus on the how to solve the nation's debt crisis and economic problems.

Charlie Rose will moderate the Bloomberg Washington Post Debate with co-moderators Washington Post political correspondent Karen Tumulty and Bloomberg White House correspondent Julianna Goldman. We'll offer live video streaming on our site and minute-by-minute coverage in our live blog hosted by The Fix's Chris Cillizza with conversation from tweets using #econdebate hashtag on Twitter.

Enjoy!

 

The brewing scandal regarding Solyndra is an opportunity to consider which roles the federal government can and should play in developing alternative energy and which roles it should not.  Take as a starting point the friendly column by Joe Nocera in Friday's New York Times:

But if we could just stop playing gotcha for a second, we might realize that federal loan programs — especially loans for innovative energy technologies — virtually require the government to take risks the private sector won’t take. Indeed, risk-taking is what these programs are all about. Sometimes, the risks pay off. Other times, they don’t. It’s not a taxpayer ripoff if you don’t bat 1.000; on the contrary, a zero failure rate likely means that the program is too risk-averse. Thus, the real question the Solyndra case poses is this: Are the potential successes significant enough to negate the inevitable failures?

If you have a risk that the private sector won't take, it is because the private sector does not see it as a profitable risk to take.  It does not get more profitable if the government takes it.  It only formally shifts the risk of losses to the taxpayers. 

The real question is not whether this program may pick more winners than losers.  The real question is why, if we believe that social policy should be promoting alternative energy, have we not priced energy from fossil fuels at a higher price that reflects the social costs of using them?  With the higher price of fossil fuels,  investments in alternative energy like this one would be more profitable to private sector investors who would reap the gains or bear the losses.  It is better policy to have the government's involvement at the macro level -- setting the price -- rather than at the micro level -- picking the winners.  The Solyndra scandal is a good example of why.