Danny ChaiSuper long boring political / economic post. Still less boring than the Getting Reps In Podcast.
I’m a conservative. A moderate one, but conservative nonetheless. I’m a registered Republican. Sorry if that makes you hate me, but whatever. That said, I hate today’s Republican Party, even conservatives in general. Hate is not too strong a word. I’m sorely tempted to change my registration to an Independent or even a Democrat. The only thing stopping me is my sneaking suspicion that I’ve never been called for jury duty because of my registration status.
Dunno if you read this Newsweek cover story by a prominent conservative about why Rush Limbaugh (and the faction he represents) is wrong, but I completely agree. It used to be that conservatives offered thoughtful, intelligent ideas based on empirical data. Now, too often, they simply repeat brain-dead mantras (tax-cuts good, government bad), without any real thought or examination of the facts. At heart, I’m an empiricist and a pragmatist much more than an idealist, and many contemporary conservatives offend me because they ignore evidence and don’t realize that they need to change. The quotation I love in the article: “Of course, we can keep repeating our old lines all the same, just the way Tip O’Neill kept exhorting the American middle class to show more gratitude to the New Deal. But politicians who talk that way soon sound old, tired, and cranky.”
Everyone knows I’m an Obamaniac, but I really like his economic policies so far. They’re not perfect. But they’re thoughtful, pragmatic, and somewhat creative. In terms of the stimulus, he proposes massive spending now, but has a goal of slashing the deficit by 2013. You could argue it’s unrealistic (although Krugman thinks it’s possible). But regardless, his approach mirrors my philosophy. Governments should temper recessions through spending, but should generally avoid deficits.
I also think it would have been too catastrophic for our economy to have let the automakers go under at the end of last year. At the same time, the U.S. can’t support them indefinitely. That Obama has communicated a willingness to let them go bankrupt if they don’t sell or radically reshape themselves appeals to me as a conservative who believes in free markets and in the principle that companies must be allowed to die. So I like the approach he’s taken.
In contrast, have Republicans offered anything useful or interesting? After doing nothing but criticizing, they were finally goaded into releasing their own alternative budget proposal, and it was almost comical. Only 19 pages, almost devoid of any real numbers, and it pretty much boils down to (surprise, surprise) tax cuts. No real thought, no real analysis of what’s going on, no creativity.
I also disagree with certain conservative circles’ relentless clinging to the idea that free markets are always the solution, when all evidence shows that they sometimes systematically fail.
Look, I’m a huge free-market guy. You can’t intelligently not be. And I think free-market principles should be applied to a bunch of domains where they’re not. For example, I’m a big fan of school vouchers. Apply the principles of market competition to schools, and it’s my belief that schools will improve. For similar reasons, I think teacher salaries shouldn’t have explicitly pay scales based on seniority. Schools should be able to pay teachers whatever they want. If schools value science more, then they should be able to offer science teachers more than other teachers. Yes, it’s “unfair” and kind of sucks for non-science teachers. But if that’s what it takes to attract good teachers away from industry, it seems better for everyone to do that than to have a huge shortage of talented teachers. If schools had the ability to compete for the best teachers with whatever salary they wanted to pay them regardless of experience, teaching talent would improve.
This might sound crazy, but I also think police and fire departments should not be run by cities, but should be contracted out. Each city should be required to use at least 2 contractors to enforce competition. Have them bid for areas of the city. If one performs poorly, give some of their areas (and money) to the other, or another contractor entirely. Contractors can’t run their programs inefficiently if it threatens their survival, so it would make the system better. There are huge flaws with this idea (like coordination between departments and how to cooperate with a competitor) so maybe it’s impossible. But regardless, I believe applying free-market principles in general improves the quality of services.
I have also become a huge fan of variable toll roads. The idea is, you charge a toll on a road where the amount varies depending on the time of day and traffic conditions to maximize traffic flow. When there are few cars, there may be no toll at all. The more cars there are on the road, the higher the toll. It basically applies market principles of supply and demand to roads. If prices are too high, people will either take alternate routes or travel at less peak times. Everyone benefits because traffic throughput is maximized.
At first, the idea offended me, as if free roads were some inherent right. Then I heard an explanation that made a lot of sense – freeways are Communism. In Communism, the prices of goods are set artificially low, which seems good. The problem is, you can never get them because there are constant shortages. That’s what freeways are. A free good that we spend forever (in traffic) waiting for. Anyway, read that Freakonomics article (and its followup) for a fascinating explanation of it.
So I believe in free markets. What drives me crazy is how many conservatives today have elevated the “free-market” from being empirically good in most situations to being a priori true all the time. They deny that free-markets ever fail, when empirically, that’s clearly not the case. Even Alan Greenspan, Ayn Rand acolyte Libertarian extraordinaire, has acknowledged that the markets failed. They sometimes do, and so we need regulations.
For example, free-markets must involve competition. A lack of competition (e.g. monopolies) throw markets out of whack. Therefore, we have special rules for monopolies, and those are good. Far from harming the market, these special rules protect it.
In my opinion, we also need special rules for all these financial firms (or any firms) that are too big to fail. And they are too big to fail. The failure of Lehman Brothers nearly took down the economy. I shudder to think what would have happened had the dominoes kept on going. We need special rules that either prevent companies from getting too big to fail, or apply special rules to them if they do. Again, these special rules protect markets, they don’t harm them.
So I disagree with many conservatives in their insistence that letting the “free-market” work by itself will always do the right thing. Again, I feel like it flies in the face of evidence.
For example, there was a link going around arguing that we should do nothing in the current crisis. The quotation that best sums the point of the article is: “Back in the 19th Century, there were a lot of steep crashes, guys got wiped out, and the economy came back quickly.” Hence, we should do nothing now.
Umm. That article in particular drove me crazy because #1, it cherry picks data, and #2, it’s wrong about the data it cherry picks. Why go back to the 19th century and ignore the greatest global financial calamity in centuries in the Great Depression? Saying that doing nothing has always worked fine except for the Great Depression is a pretty big exception. I’ve never heard the do-nothing’s argument regarding the GD. The conditions precipitating the GD had everything they want – adherence to a gold standard, a government who steadfastly refused to do nothing – and that lead to a 25% unemployment rate by the time FDR took office. Furthermore, doing something is what led us out of the GD. Unemployment dropped when FDR started deficit spending. When he raised taxes (to reduce the deficit), unemployment rose again. The GD in the U.S. only really ended with WWII, when we engaged in massive deficit spending (the national debt peaking at 120% of GNP). This deficit spending didn’t cause long-term harm to the country. To the contrary, it lifted us our of the Great Depression. Can we let go of the idea that temporary deficit spending in a recession is necessarily bad and that doing nothing works better?
At least that’s how I read it. It’s fine if you read history differently, if you interpret the data differently. But you can’t just ignore it, like that article does.
Furthermore, even the limited claim the article makes – that the economy came back quickly in the 19th century when the government did nothing – is wrong. It’s right that there were a series of steep crashes. I remember in AP U.S. History there being a bunch of “Panics of 18xx” that it was hard to keep track of. (Type “Panic of” in your Firefox/Safari search box and see the search suggestions – there were a lot of them.) So doing nothing and having a fixed currency was no guarantee of less severe contractions.
Did they come back quickly? This chart lists all the expansions and recessions in the U.S. since 1854. It’s immediately obvious that the economy did not come back quickly in the late 1800s when we did nothing – on average, recessions lasted much longer than after we employed a flexible monetary policy (the contraction starting in 1873 lasted for 65 months(!) before it hit bottom). The article’s claim is just straight up wrong.
So yeah, that article drove me crazy. We all disagree, and that’s fine. But at least use some data. When an article makes a claim based on both incomplete and inaccurate evidence, drives me nuts.