Republicans and the Urban Vote

Don't give up the urban vote, Republicans, writes urban expert Edward L. Glaeser.  Think of all the wonderful things that Republicans have done for the cities!

• Richard Nixon moved cities from public housing to housing vouchers.
  


• Cities are safer because of Republican backed community policing policies like CompStat.
  


• Republicans have championed school choice and accountability.
  


• Republicans have led in opening municipal services to private competition.

And so on.  So why does the Republican Party work on merely "winning suburban and rural votes and has stopped reaching out to city dwellers"?

I'll tell you why.  Because people take those housing vouchers for granted and know that Democrats will give them more.  They don't give a damn about better policing: the urban professionals buy into the activist liberal notion that the police are a bunch of lowlifes and the minorities think the police are out to get them.  The urban minorities have shown in e.g., Washington DC, that they regard schools as more of a jobs program than an education program.  And as for municipal privatization, I'll bet that most urbanites think about city jobs as their job-for-life birthright rather than an area for efficiency.

The only way the cities will come over to the Republicans is if and when they decide that the Democrats have screwed them over royally.  Until then, it's a cultural thing.  Urban people belong to urban tribes that define themselves in opposition to the unhip, responsible, racist-sexist-bigoted Republicans.

And anyway, Republicans benefit from the current situation, as Sean Trende points out.  Democrats are concentrated in: uber-liberal districts, like Seattle's 7th Congressional District with its 600,000 liberal hearts beating as one; and majority-minority districts, like Washington State's brand new 9th District with 50.3 or so percent racial minorities.

Until the the day of judgment, Republicans need to sharpen their message to the ordinary non-urban, non-liberal, non-identity-obsessed American.  Because there's a good chance that in 2016 that kind of American voter will be thinking and acting on the idea that it is "time for a change."

That's how politics works.  The politician knows that he cannot win the votes of people that define themselves in opposition to him, however he might have helped them.  But he can work on the waverers.

Keynesian Truth or Dare

What is the real truth about Keynesianism, that government fiscal deficits help get out of recession?

So let's rehearse the definitions, from Tino Sanandaji in “Why Keynesianism Works Better in Theory Than in Practice” at The American:

The first definition of “Keynesianism” is a theoretical explanation for recessions, a diagnosis of the illness. The free market will periodically fail to utilize all the capacity in the economy due to an inability to generate sufficient aggregate demand. In 2008, we witnessed a particularly dramatic example of this as consumer demand and industrial production plummeted as a result of a crisis in the financial sector. Keynes was once again proven right.

The diagnosis may be correct, but the medicine most commonly associated with it has been shown to be surprisingly impotent.

The second definition of “Keynesianism” is a policy recipe for coping with recessions, a cure for the disease of recessions. The promise is that the public sector can bring the economy out of recessions through deficit spending.

Frankly, I think that both of these definitions are wrong.  In the first place, my theoretical explanation for recessions looks to the Austrian theory of the business cycle, that recessions are caused by the collapse of the malinvestments of the previous boom.  Yes, demand drops in a recession, but the cause is the failures of the malinvestments.  (In the Crash of 2008, think of the failures of homebuilders and homeowners).  Income anticipated by the malinvestors, as evidenced by their debts, fails to appear, and so they must either cut back sharply or fail spectacularly.

The argument for Keynesianism is that by artificially maintaining demand with government spending we can jump over the chasm caused by the collapse in demand.  I think that confuses the issue.  The problem in a contraction is that the financial market has questions about the soundness of many investors and institutions, and so people are hesitant to lend to anyone.  The solution is to identify the sound investors and the unsound ones and prevent the unsound investors from polluting the rest of the market.  In the Crash of 1907, for example, J.P. Morgan and his assistants performed triage on the financial markets.  They refused to loan money to enterprises that they judged would survive without their help, and they also refused to help enterprises that they felt were bound to fail.  They did help people in trouble, but loaned money only to enterprises that they felt would survive if helped with an injection of capital.

You can see that the Morgan approach is actually doing what the Keynesians think they are doing.  Both are assisting enterprises to jump over the fiscal chasm.  But the Morgan approach is discriminating in its assistance.  It is saying: look, some of these plungers are past help.  But some folks are in trouble only because they are caught in the undertow caused by the panic.  We should help them.

In the Crash of 2008 the government did do a bunch of Keynesian stimulus.  But most of the money just went out in transfer payments.  Then there was TARP.  Love it or hate it, TARP was designed to inject capital into banks to make sure that semi-sound banks survived the crisis.  But there was another part to the government's bailout that hasn't received much press. Take a look at my TARP bailout page.  TARP's $700 billion was just the tip of the iceberg.  Here is the full story.

Gross US government bailout outlays	$4.6 trillion
US Government bailout guarantees	$16.9 trillion

You can see that the biggest item was the guarantees. What was that all about?  Well, for starters, there was $3 trillion in guarantees to money market mutual funds.

So there you have it: $20 trillion in bailouts, where the US government is using its position as the soundest investor in the market to keep everyone else afloat.  Makes the "stimulus" program look like chump change.

That is the real story about how to stop a contraction.  You flood the zone with bailouts and guarantees to make sure that only the insolvent enterprises run aground.  Your flood of liquidity and guarantees keeps the marginal enterprises afloat.  The sound enterprises out in deep water will ride things out anyway.

Keynesianism?  Well it sorta helps.  But its chief attraction is that it gives politicians an excuse to do what comes naturally: spend money on their supporters.

Notice, in retrospect, that the institutions that needed help, the banks and the auto companies, have been for decades the little darlings of the politicians.  The banks are part of the nationalization of credit under the Federal Reserve System, and the auto companies are part of the crony capitalism of the authoritarian welfare state.  The banks got into trouble because the politicians forced them to make unsound loans; the auto companies went under because they were forced, decades ago, to make promises to their unionized employees that could not be redeemed.

Then we have Fannie Mae and Freddie Mac.  There were not merely the little darlings of the political sector, but conceived, subsidized, staffed, and led by the political sector.  The miracle is they lasted as long as they did.

Obama's Second Term Agenda

President Obama made things pretty clear to America in his second inaugural speech.



First, the president is foursquare behind the entitlements.

The commitments we make to each other through Medicare and Medicaid and Social Security, these things do not sap our initiative, they strengthen us.  (Applause.)  They do not make us a nation of takers; they free us to take the risks that make this country great.  (Applause.)

Nothing there about what we are actually going to do about the spiraling maelstrom of entitlement-fueled debt.



Then the president committed himself to battling climate change.

 We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations.  (Applause.)  Some may still deny the overwhelming judgment of science, but none can avoid the devastating impact of raging fires and crippling drought and more powerful storms.  

Not a whisper about the fact that the science is broken and the crony capitalists are cleaning up.



Finally, the president celebrated lefty activism.

We, the people, declare today that the most evident of truths –- that all of us are created equal –- is the star that guides us still; just as it guided our forebears through Seneca Falls, and Selma, and Stonewall...

It is now our generation’s task to carry on what those pioneers began.  For our journey is not complete until our wives, our mothers and daughters can earn a living equal to their efforts.  (Applause.)  Our journey is not complete until our gay brothers and sisters are treated like anyone else under the law  –- (applause) -- for if we are truly created equal, then surely the love we commit to one another must be equal as well.  (Applause.)  Our journey is not complete until no citizen is forced to wait for hours to exercise the right to vote.  (Applause.)  Our journey is not complete until we find a better way to welcome the striving, hopeful immigrants who still see America as a land of opportunity -- (applause) -- until bright young students and engineers are enlisted in our workforce rather than expelled from our country.  (Applause.)   Our journey is not complete until all our children, from the streets of Detroit to the hills of Appalachia, to the quiet lanes of Newtown, know that they are cared for and cherished and always safe from harm.  

Yes.  The non-stop liberal legislation of the past 50 years is merely the start.  We've got to chuck the women, the gays, the immigrants, the gun controllers under the chin.  There is still so much to do!



Back in 2009 I was really afraid.  I was afraid that the Democrats would capitalize on their political opportunity and move towards the center and co-opt the moderates and nail down a 30-year political majority coalition.  They might have oriented economic policy to appeal to the enterprising as well as to their base.  They might have done Obamacare to entice some Republicans into the deal.  They might have pushed through the Keystone pipeline.



But they didn't.  Instead, as Ron Brownstein has written, Obama and his people think they can now win elections just with their "coalition of the ascendant:" minorities, youth, and women, and without the old white centrists.



Maybe that strategy could work if it really delivered in economic prosperity.  But instead, with the huge costs coming up for Obamacare and the entitlements, we are going to see big-time economic stresses.



Obama is telling us that he proposes to do nothing about the government finances, not until disaster is staring us in the face.  In this, of course, he is a realist.  The entitlement beneficiaries--I am talking about you and me--are not going to agree to cuts until the crisis is upon us.  When it comes, we are going to see some kind of sovereign default: dollar inflation, debt "rescheduling", perhaps confiscation.  And we will see "cuts" in Medicare and Social Security, at least for the 401k classes who don't really "need" assistance.



It's all such a shame.  I just hope that what comes out at the other end is a better America and a better world.  Because otherwise the "coalition of the ascendant" is going to be royally screwed.

Three Liberal Injustices

Liberals are the ruling class in America, and that means liberal injustice.  Political power gives you the ability to lean on the scales of justice, and what's the point of power unless you abuse it?

The greatest injustice of the liberal era is probably the demolition of the low-income family.  There is no mystery about how this has happened.  It is an artifact of the administrative welfare state.  When you set out programs of free stuff, which people can get by qualifying as needy, then people will find a way to qualify.  The result, as Charles Murray has demonstrated in Coming Apart, is that in the bottom 30 percent work and marriage has collapsed.  He means that lower-income men don't work and lower-income women don't marry.  Lower-income children typically don't live with their fathers.  Higher income folks like you and me?  The top 20 percent are married, they work and typically don't get divorced.  There is a simple word for this: unjust.

Almost as bad is the sequestration of workers' savings.  It's hard for employees to see this, but easy to see if you are an employer.  About 20 to 30 percent of the cost of labor goes to the government for a range of programs ranging from Social Security, Medicare, unemployment, disability.  Of course all these monies are for the people.  But the people don't get to direct those monies; they are sequestered by the government and only available to people when they qualify, by age or by situation, for a disbursement.  This means that people are enrolled in a forced savings program but during most of their working life don't get the benefit of their savings.  Suppose people put that 20-30 percent of income in a savings account.  If they are prudent they would have enough money in 10 years to start a business, enough money in 20 years to send a kid to college, enough money in 30 years to retire.  Instead the money is given to politicians so they can buy votes.  There is a word for the sequester of the worker's savings: unjust.

The third great injustice is the nationalization of education.  It means that the culture of the ruling class is the only culture allowed in the education of our children.  When the First Amendment proscribes an "establishment of religion" it is demanding a separation between church and state, between the moral/cultural sector and the political sector. But the education of children is clearly a moral/cultural task.  The German ideal of education is "Bildung," an untranslatable word that means "form" or "image," the forming or development of a human being.  It stands to reason that any parent should have the freedom to direct the education of their children independently of the state and the views of the political ruling class.  It stands to reason also that a ruling class will abuse the power to educate our children, to mold them into mindless supporters of the regime, and that is what has happened.  Liberals like the current system because they are the ones that get to set the educational agenda.  But there is a simple word for the education system in America: unjust.

There are six ways of looking at the monstrosity of our modern ruling class: its cruelty, its corruption, its injustice, its waste, its ignorance, and its delusion.  Today we have dealt with injustice.  There will be more to come.

Life After Liberalism

There are two pieces out today on the topic of "An American Manifesto:" the question of life after liberalism.

Walter Russell Mead expands on his "end of the blue social model" notion with a discussion of "Liberalism 5.0."  He sees a continuation of the past, with increased order and increased liberty.  But his vision seems to call for more government.  He writes about the increase in laws that would accompany an end to the "drug war."

The 21st century, if we get things right, won’t see either the triumph of an all-powerful government or the return of the Articles of Confederation. The government will do more than it does now, and regulate activities that are unheard of today, but individuals will have more choices than they currently do and their rights and their property will be better protected.

Really?  But this will mean a continuation of the disciplining of the état policier, the government that sees its project as the aesthetic task of making society elegant, disciplined, and legible.

Or there is Charles Kesler.  In his view President Obama thinks his reelection means

that liberalism has returned to its natural role as modern America’s public philosophy or established religion... Reaganism was a blip, an anomaly.

But the Democrats’ very successes are intensifying liberalism’s contradictions, both fiscal and philosophical. And so "American liberals are coming to the end of their rope."  The old liberalism believe in progress as "something scientifically and rationally certain, benign, and steerable."  But the advent of postmodernism has made politics not a discovery process but just a dance of power, "more a matter of will than of reason."

So we may say that liberalism is reducing to a matter of power, of enticing people with enough "free stuff" for the ruling class to win elections, and that all the talk about "fairness" is just an apology for power.

The question then becomes, as I have argued, what the "religion" will be on the other side, after liberalism runs out of money with which to deliver "free stuff?"

One of the key roles of religion, according to Nicholas Wade in The Faith Instinct, is to deal with the freeloading problem, that in any society, it "pays" to work less and consume more, because the whole point of society is to share out the risks of life.  Thus every society needs to socialize people to feel good about making and feel guilty about taking.  Otherwise you have to restrain the takers with government, and government means force rather than persuasion.

Obviously modern liberalism has inverted this idea.  It encourages people to think that other people are freeloaders; it does not ask people to worry about their own freeloading.  Or "sin" as we used to call it.

I argue in "An American Manifesto" from recent left-wing scholarship that the way to the future is to reduce the amount of government and "system", and increasing the amount of face-to-face civil society.  Government is force, politics is division, system is domination, and all these things reduce society to a regiment of compulsion.

We need to reduce the incidence of government programs and get people to interact with each other to obtain their daily bread and spread the risks of life around.  When people interact together they are more sensitive to their contribution and the contribution of others.  The freeloader is not just "the rich" or "welfare moms" but a real person in their acquaintance.

But when people are stuck in a system they experience the helplessness of a mechanical existence and just go along to get along, taking advantage of the system as the system takes advantage of them.

There's nothing mysterious about this.  It goes back to Adam Smith and the "invisible hand."  The idea is that, for most people, they cannot get what they want in this world without doing things for other people.  Thus they can only satisfy their selfish wants by satisfying the wants of others.

Some people insist that this notion is invalidated by the inequality of power: exploitation.  People give a lot but get little in return.  There's no doubt that inequalities exist; the question is when these inequalities require the intervention of force.  And how likely is it that force will make things any better?

The Octopus Left Reviews ObamaCare and Cap-and-Trade

We all know Harvard political scientist Theda Skocpol as a leading light in the Defenestration of Cambridge.  That was the Harvard faculty campaign to toss Harvard President Larry Summers out of his office--ostensibly for the thoughtcrime of saying in a public forum that women were different than men.



She's also written an analysis (pdf) of two signature Obama initiatives: the successful Obamacare campaign and the failed "cap and trade" campaign. (H/T Powerline)



Skocpol is a lefty-liberal, and her analysis of politics is drenched in anti-right pejoratives.  But when you read between the lines you learn a thing or two.



You learn that the left is broad and deep in money and institutional muscle.  Skocpol's description of the money and the resources assembled to push Obamacare and cap-and-trade is a recipe of activist groups and foundations pledging millions here and millions there, and activists and staff resources all over the place, all in the campaign to punch their agendas through Congress.



But when she turns to describing right-wing efforts it's pretty thin gruel.  There are think tanks and then there are the Koch brothers.  And there is the Tea Party.



There is interesting stuff in her report.  First, that Republican elected officials turned sharply against the environmentalist agenda in the early 1990s.  What happened?  Skocpol says they were pushed by conservatives.

They used non-profit, right-wing think tanks to sponsor and promote a cascade of books questioning the validity of climate science; and they pounced on occasional dissenters in the academic world, promoting them as beleaguered experts.

There were "long-standing general-purpose conservative organizations" and "ideological funders" behind it all.  When you think about it, that's how politics is supposed to work.  People with an ideological ax to grind get books and ideas out there and push!



But there is no real identification of the supposed greedy corporations pushing against the sweetness and light of cap-and-tax.  Indeed, there were a number of large corporations that got co-opted into the pro cap-and-tax campaign.



There is no mention of Climategate and the anti-global-warming blogs.



Is it possible to get climate-change legislation through Congress ever again, Skocpol wonders?

The political tide can be turned over the next decade only by the creation of a climate-change politics that includes broad popular mobilization on the center left. That is what it will take to counter the recently jelled combination of free-market elite opposition and right-wing popular mobilization against global warming remedies.

But the problem is, as Skocpol recognizes, that it's difficult to get rank-and-file Democrats mobilized for something that doesn't provide them with "free stuff" in their pockets.  Anyway "liberals and friendly moderates need to build a populist anti-global warming movement on their own side of the political spectrum."



As if. As if liberals haven't been doing this flat out for decades.  But Skocpol is clear that carbon-capping legislation cannot be an inside deal in Washington.  It has to have popular support.  So she thinks that the CLEAR Act from Sens. Cantwell and Collins might do the trick.  Its "cap and dividend" approach taxes energy and then distributes dividend checks to voters.



So there is hope.  If the global warming movement is based on bad science that gets publicized and critiqued every day by chaps like wattsupwiththat.com and climateaudit.org, it will be very difficult for the ruling elite to advance its climate control agenda.



Skocpol presents an intriguing story of how elite interest combine to push big government.  But what interests me is how we can develop a politics to unwind the disaster of the administrative welfare state.  How can you get people to give up their "free stuff" even as it's the free stuff that is pushing the nation into bankruptcy?



I have a feeling that politics-as-usual won't do the job.  You can only take the free stuff out of our cold dead--or at the very least trembling, terrified--hands.  And that would take a revolution.

The Political Situation in Context

Should they or shouldn't they?

Should Republicans fight President Obama tooth and nail over debt ceilings, fiscal cliffs, and spending sequesters, or should they let them through?

Because the fights are really minor skirmishes on the march to sovereign default.  The federal deficit is about six to seven percent of GDP, and that can't go on forever.

And even though everyone is dumping on the Republicans for their intransigence (President Obama) or their timidity (conservatives) the fact is that Republicans have the whip hand.

When we hit default day then Democrats are going to have to call for tax increases on the middle class and/or spending cuts.  The American people won't like that.  Republicans?  We say cut spending, so nothing will change for us.

But what do the scholars and the experts tell us about all this?  I'm glad you asked, Senator.

In The Calculus of Consent, James Buchanan and Gordon Tullock argue that the government should use unanimous consent, not majority voting, as its default voting system.  Why?  Because that would minimize the ability of some people, even a majority, to force costs on other people.  Under unanimous consent, the supporters of a government measure would have to pay off the opponents in order to get their consent.

Shocked?  Appalled?  Well, the system of "logrolling" where solons vote for the other guy's measure in return for the other guy's vote for their own measure is already the way that politics is done.  What Buchanan and Tullock call unlimited "side payments" is just a formalization of this system.

But let's roll out a key quote from the end of the book:

[N]o social organization in which men (some men or all men) are allowed freedom of choice can prevent the exploitation of man by man and group by group... The relevant choice among alternative institutions reduces to that of selecting that set which effectively minimizes the costs (maximizes the benefits) of living in association.  The shift from market organization to political organization does not, in any way, eliminate the opportunity for specific individuals and groups to impose external costs on others...

This is central.  In any situation, where a decision-maker has the power of choice, he can use it to exploit someone else.  Let us stipulate Marx's notion that capitalism is exploitation.  As Chuck says:

In one word, for exploitation, veiled by religious and political illusions, [capitalism] has substituted naked, shameless, direct, brutal exploitation.

The same applies to socialism and communism, in spades.  That's what Buchanan and Tullock show in their analysis of political voting.  Any system of deciding social and political issues will impose costs on the losers.  In one word: exploitation.

People are selfish; the rules of capitalism as encoded in economics recognize this.  Thus:

[Its] organizational norms are based on the view that [selfish] behavior can be channeled in such a direction that it becomes beneficial rather than detrimental to the interests of all members of the community.

That is the means of Adam Smith's "invisible hand."  The question that Buchanan and Tullock ask is this:

Can the pursuit of individual self-interest be turned to good account in politics as well as in economics?

Buchanan and Tullock answer that we can do better, and one way to do this is to empower the minority to demand compensation when society wants to do something they don't like.

That's something that President Obama and the ruling class, the executive committee of the educated elite need to remember as they send the whole economy into the toilet.