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Wednesday, February 04, 2009

A Few Notes on Obamanomics

1) There is, to be sure, plenty to complain about in the stimulus bill that's winding its way through Congress. Some friends of mine have called it a "disaster." I wouldn't go that far--after all, if underneath all the pork there is, as Ryan Avent observes, $500 billion in real stimulus spending, then that's better than $100 billion in stimulus spending, or none at all. The difficult economic question may be whether the stimulus package that finally emerges and is signed will have enough of the sort of "timely, targeted, and temporary" spending needed to generate some real recovery momentum, and thus compensate in some manner or another for the deficits which all this spending will result in. And even beginning to answer that question requires a parsing that is pretty deeply speculative. Some of what counts as directly generating an economic boost along Keynesian lines is pretty obvious, but some is not. For example, the House plan increases the Department of Education's overall budget by more than 100%--from $60 billion in fiscal 2008 to $135 billion next year and $146 billion after that. Pure liberal House Democrat bureaucracy building, right? And yet, what if it were the case that such increases in spending were attached to reforms that made a difference in, say, high school drop-out rates? Cutting those rates in half, Robert Reich points out, would potentially translate into $45 billion in additional tax revenues every year, to say nothing off lower welfare rolls and incarceration rates.

Tough, speculative guesswork. I'd rather that we not run up and trillion dollar tab engaging in such guesswork, but neither would I want non-progressive forces on the Republican side to so intimidate all the partisans in this debate that they fall back on Reagan-era nostrums that are completely inappropriate for our present situation. Thankfully, that hasn't happened yet, though it does seem as if, sometimes, the old guard--and in particular the Republicans--are driving this debate.

2) If there is anything in the House bill that I hope most to survive the pressures which Team Obama face in creating something that Congress will sign off on, it's the provision that infrastructure projects paid for out of stimulus funds be required to use American steel. Protectionism? In the right place, at the right time, in the right way...absolutely. Let's have more of it!

3) And as for the talk about curbing corporate pay, my answer is again: let's have more of it. This is the right kind of populism, an anger that isn't, I think, random resentment, but which speaks to a desire to oblige--or, indeed, if necessary and appropriate, enforce--a level of solidarity between all those who are dealing with the same economic crisis. It connects well with Daschle stepping down, even though everyone acknowledges that his confirmation probably would have gone forward with very little trouble. It's not about saving money, ultimately; there are no doubt all sorts of ways in which accountants could show that requiring senators to drive themselves, or taking away competitive bonuses from chief executives, is inefficient and unproductive. Rather, it's about empowerment and equalization, even if that equalization is superficial. The principle of the civic equality--yes, sure, you make more money than me, you work harder than me, you're luckier than me, you're worth more than me, but dammit, you still don't get to jump to the front of the line!--still holds.


Anonymous said...

You're funny Russell. It's about doing something, even if that something doesn't actually do anything.

Russell Arben Fox said...

It's about doing something, even if that something doesn't actually do anything.

Are you talking about the stimulus package in general, Nick, or just my third point about curbing executive pay and clamping down on the Washington lobbyist culture? If the former, then I don't think it won't "actually do anyting"; as I say, so long as there is some real stimulus-generating money in there, then arguably it's better than nothing. If you mean my third point, then I also disagree--demanding signs of solidarity and equality, even if just mostly symbolic, does actually do something. It just doesn't necessarily do anything that makes efficient or money-saving economic sense. Thankfully, there are other ways of justifying things besides economics.

Hector said...

Hey Russell,

I agree with you pretty much 100% here, especially about curbing executive pay.

I'd welcome your comments over at my blog! I just wrote a long post on contraception and 'Humanae Vitae', hopefully indicating respectful disagreement. Let me know what you think!

Anonymous said...

you've been drinking the kool-aid.

Anonymous said...

I mean that you're exhibiting one of the problems of populism -- that symbolic, but substantively meaningless, actions are given priority and that REACTING quickly and loudly ends up taking precedence over doing something correctly. Hey, as long as policy makes us feel like we're doing something, it doesn't really matter if we're doing anything, right?

Anonymous said...

Russell: How wrong you are! Even when I agree with you, you are wrong.

The Buy American portion of the bill is undoubtedly the worst provision in the whole thing, particularlly if it leads to a retaliatory set of trade tit-for-tats. Globalization may not make the cockles of your neo-populist heart warm, but a world full of trade walls is worse. See, e.g., the global economic and poltical system ca. 1930 to 1945.

I am actually willing to entertain the salary caps, but less for the reasons that you suggest. First, the ignorant populist masses need to be appeased with something, and cutting corporate pay is better than nationalizing the financial sector. Second, current compenstation practices create a really crudy set of incentives. Better to deincentivize than to incentivize short turn pumping up of stock prices. Ultimately, however, salary caps are ultra crude way of getting at this problem and we would be better off at creating bonus packages tied to longer-term measures of performance.

It goes without saying, of course, that I love reading you Russell. Please keep up the good work. (Typed without irony.)

Anonymous said...

The best place for salary caps would be in academia. Start with the administration and then move on to the professors ($35,000 to $40,000 tops). Then distribute the surplus to all staff making less, bringing them up to the earlier mentioned. Next, only the administration and professors will have an additional education tax, beyond the regular federal, state, etc., leaving them with approximately 50% of their earning. The education tax will go towards a national education endowment, and of course all individual college and university endowments will be group into the national one. Unfortunately, foreign students will be dismissed, the plan is to educate Americans first and ensure endowment funds serve Americans only. Implementing this plan would propagate what’s best from the minority of elite institutions to all institutions. This plan makes perfect sense and one can only wonder why the administrators and professors haven’t already implemented something comparable. Maybe they need a leader. I happen to know one that many could only hope to obtain. And once he gets to taking about this change, folks will be flocking to these new Meccas.