The president and Governor Romney gave dueling speeches in the swing state of Ohio yesterday, laying out broad economic themes, so it is incumbent on me to look under the hoods. Here's what I've got.
It is, of course, impossible for politics to be anything but deeply political right now.
By that cryptic statement, I mean that it's actually hard to listen to the core of what the presidential candidates are saying through anything like an objective lens. It's all positioning, framing yourself and your opponent, capitalizing on their gaffes while walking yours back, presenting plans but assiduously avoiding key details. And with the media, understandably, in full horse-race mode, an actual substantive analysis of the candidates' positions may be nigh impossible.
But I'm going to try anyway.
Their main argument is far less than you'd think about jobs records, the role of private equity, who best understands the economy, how much better/worse things would be if Congress would just cooperate. Such issues are obviously relevant and they'll be in the mix until Election Day. But I find it hard to believe those arguments will change many minds -- that they'll change the vote of someone who's already leaning toward one side or the other.
Their main argument is about the role of government in our lives. Neither believes that government should be a dominant force -- both stress the primacy of the private market in a capitalist economy. Both recognize that absent market failures, the incentive structure of the private sector will provide the best opportunities and allow people to make the best choices, in the sense of promoting the most well-being for the most people.
But the president sees more market failures, market barriers, inherent instabilities, inequalities and inefficiencies than does Governor Romney. And in this regard, he sees more of a role for government. He has taken to citing Lincoln on this point, as he did yesterday: "through government we should do together what we cannot do as well for ourselves."
I doubt Mitt Romney would disagree with that. But he would draw the line in a very different place.
For example, he has been extremely critical of the stimulus package, and, as Jonathan Cohn notes here, would not try to temporarily replace the lost demand in a recession-a clear market failure-through Keynesian stimulus. When it comes to health care, he does not view the "individual" market -- where people shop for health insurance on their own as opposed to as part of an employer or government group -- as part of the problem. He views it as part of the solution, and would provide individuals with a voucher to shop for coverage. He would not have rescued GM and Chrysler.
He does not see a federal role for safety net programs like Unemployment Insurance or nutritional programs -- he would turn these over to the states. That loses their countercyclical function, but it's also consistent with his position against trying to mitigate recession with government programs.
Similarly, he would reduce financial aid and cut back on Head Start (at least, those are the implications of budget cuts he has advocated).
This is the agenda of someone who, in reference to the above quote from Lincoln, envisions more people doing more things for themselves than they do now or than they'd do under President Obama's vision.
In the agenda the president spoke of yesterday, for example, government programs should help stimulate job creation in periods of high unemployment. It was in this spirit that he decided to rescue the auto companies, believing that absent government action at this time of credit market collapse (another market failure), no one other than the federal government would supply the needed capital.
Where he draws the "Lincoln line," market barriers like poverty block children from access to education. Left to their own devices, private firms will under invest developing technologies, like advanced batteries, and no firm could single-handedly undertake the R&D and interstate coordination of an updated energy-transmission grid. The market will fail to provide adequate, affordable health coverage. Financial markets will become increasingly unstable and will expose taxpayers to large losses.
The implications of these different visions for government will get a lot more attention than the visions themselves. If you believe in a lot less government, you can cut a lot more taxes (at least you can if you're really serious about all those spending cuts -- otherwise, you'll just have much higher deficits). And vice versa -- if you plan to offset large market failures, like millions of uninsured, you'll need more revenue.
So we'll continue to scrum around with jobs created and regulations and small business and tax cuts and deficits and fiscal cliffs and budget baselines.
But it would be better if we could get a lot deeper into this fundamental question of government's role, because that's the real substantive difference. That's what America is being asked to decide in the next election... not whose gaffes are more damning.
This post originally appeared at Jared Bernstein's On The Economy blog.
Follow Jared Bernstein on Twitter: www.twitter.com/@econjared
 |
 |
|
| Obama | Romney | |
|---|---|---|
| Electoral Votes (270 to win) |
332 | 206 |
| Obama | Romney | |
|---|---|---|
| Total | 65,899,660 | 60,932,152 |
| Percent | 51.1% | 47.2% |
| Democrats* | Republicans | |
|---|---|---|
| Current Senate | 53 | 47 |
| Seats gained or lost | +2 | -2 |
| New Total | 55 | 45 |
| Democrats | Republicans | |
|---|---|---|
| Seats won | 201 | 234 |
The President talks like a liberal, but walks like a conservative and the Governor talks like a TP kind of guy but wasn't the "strict conservative," he now proclaims himself to be, when governor.
Quite a conundrum...
While I agree that the R's have been ridiculously intractable, the President, until recently as he has begun campaigning for re-election, has not called them out on their lies, nor has he made an effort to educate the public with respect to more left-leaning economics. That is, it's not the R's fault when he doesn't fight back.
Who wouldn't want to buy Justice? And what could be worse than being allowed to do just that?
Bernstein mentions Head Start as something that Romney would cut but Obama would expand. The government's own auditors have declared Head Start a total failure ("Zero effect on children's performance/skills by the the beginning of the 3rd year following").
The liberal's concept of "the role of government" doesn't allow for the existence of failure, even when it's staring them in the face.
Obviously the Government auditors were only testing academic skills, they had no way to measure social graces, so I guess it's good to know that the kids are learning something in return for a $multi-billion program. The auditors also mentioned it serves as a jobs program, so there's another fringe benefit.
The role of government is the central issue for all of us. Let's begin a fair and balanced dialog asap.
See? This is really the ONLY fair and balanced place. Faux won't listen to reason.
The problem though, is that neither Obama nor the Dems have been passionate enough to keep up their counteroffensives and they quickly revert to being punching bags for the Right.
Change that, and the Dems can own Washington for the next generation. Fail to do so, and America will be a grim place as long as the Right rules.
Without safety nets to pick up the pieces capitalism leaves behind, we'd be a totally different country, as FDR knew. Back then we were either going to have revolution or communism if something wasn't done to alleviate the pain caused by unfettered capitalism.
I don't know which direction this country would go if Romney and the GOP got their way and eviscerated the safety nets while cutting taxes even more for the wealthy. It won't be pretty, whatever happens.
Positive and negative externalities.
The externalities have to be large enough that if addressed would significantly change the purchasing choices of the consumer and diffused enough that they would not naturally be addressed in other ways ( like the courts with water pollution).
Beyond that there must be a process for the government to accurately price the externalities (so they know how much to interviene) and an understanding of the negative consequences from the government actions.
Given all of the above there is actually very little scope for Government action to address market failures successfully.
The rest of your post is about Government caused business cycles. Primarily caused by loose monitary policy and the popping of the resulting bubble.
A market failure in economics is a situation when markets produce either too much of something because the full costs are not paid by consumers or too little of something because consumers are not capturing enough of the benefits. People buying cars that pollute but not paying for the costs of pollution or not purchasing enough education that benefits society are two classic examples. Pollution is a negative externality in the first and benefit to society a positive externality in the second.
The existence of externalities alone is not sufficent to justify government involvement. Every action that humans take has some level of externality. Breathing has positive and negative ex
On the other hand, as comments below have addressed - we have a real problem when our elected "officers" vote themselves pensions and other benefits severely disproportionate to the benefit they confer on the respective fed, state or local government. I didn't see that addressed above, which I think is a must in any analysis.
Unfortunately, these policies get you elected but destroy countries.
This left focus on teachers, policeman and firemen is completely transparent to the people.
Many of us wish that the left actually had a platform, but most acknowledge that what we are seeing is the final death gasp of the "great society".
Good luck in finding yourselves.
Yet, up until a few weeks ago, deficits didn't matter. Nobody had much problem with the billions going to Halliburton, etc, half of which is probably sitting in the Caymans right now. How much of "Obama's" spending (in quotes because much, if not the majority, was set up before him and/or would've been a requirement under any president) went to anything besides keeping the national economy from running over the cliff?
And why should "conservative" even be allowed an opinion on this? They have zero credibility among anyone paying attention. Being so consistently wrong on something should mean your opinion is forfeit.
"It ignores the utterly poor efficiency thereof." How so? Seems very specious. It's shown that public sector workers do not make more than private, given the same education level. And no CEO salaries, etc.
The right's platform seems quite clear: turn America into a 3rd-world country.
Haliburton? Lord. Your hereos are not lacking in persuasive skills, that's for sure.
I mean it - I wish you well. Could I ask you your occupation?
1. Anyone who has worked for as many Fortune 500's as I have can contest; the private sector is not any more efficient. They succeed mostly due to attrition and monopolistic power.
2. Much of the government is outsourced to big business corporations (see military contracts, prisons, and health insurance)
Let's not forget where most of US national budget goes: to big business. Let's not get distracted by outlays to the poor, Medicaid, or frivolities. Thats pennies on the dollar compared to where most of our tax dollars go. Consider the “free” money provided to the Fed. I wish I could get trillions of interest free loans to “bet” however I want. But no one is complaining about that?
I don't believe that the Progressive platform is interested in Police, Fire, and Teachers per se. I think that the progressive platform is tired of wasteful government spending that does not benefit the US ecosystem as a whole - such as monies paid to health insurance companies, overblown military budgets, and the Fed. This money does nothing for us as a country. It is funny money that stays with the %1.
Economics is not that difficult. The market spends money, and people make money by producing/selling products. But when all the money is tied to military spending and financial “bets”, it doesn’t circulate or grow.