The Government Isn't a Household

I was recently told that the balancing the U.S. budget is like balancing a family budget. If you're spending too much, cutting out a lot of little things can make a big difference. In the conversation, cutting back on the EPA was a theme.

The EPA budget in 2011 was about $8.5 billion. The Federal government spent $3,630 billion that year and brought in $2,314 billion. This is a deficit of $1,316 billion. So if we to eliminate--not merely scale back but completely remove--the EPA, we are shaving off a little more than 0.6% of the deficit.

Let's put that in perspective. Suppose your household make $50,000 a year (after taxes) but you spend about $78,435 a year (this keeps our household income and expenses in proportion to the Federal government: here our deficit is $28,435). Our EPA equivalent is an expense of $170.61. You're spending more than $28,000 a year than you earn and some people are arguing you can solve your problem by three fewer video games.

Yes, yes, I know. The argument is that if we do enough of these little cuts (and keep in mind, I'm eliminating the EPA, not just cutting it back), it adds up into a significant effect. Forget the fact that there aren't enough little cuts to use until you run into the politically tough stuff (Medicare, Social Security, defense). The household analogy is fundamentally flawed beyond that.

Imagine you attempted the same strategy but you needed everyone's approval before you made changes. You can't cut your cellphone budget unless your talkative daughter approves. The video game budget adjustments need approval from your kids. Hell, even your dog has to approve adjustments to how many new toys he gets.

Now spending your time and effort taking away a few video games seems really dumb. In fact, it might be better to spend more on video games just so the kids won't complain when you dip into their college fund (which is a really big expense and can solve the problem by itself).

Like a household budget, our budget needs to be balanced. But there's where the analogy stops because to change the Federal budget, you have to get approval from folks who are about as forward thinking as teenagers and as thoughtful as a family dog.

The Scarce Resource of Political Capital

A couple of days ago I participated in a round table discussion on the state of the economy. It was organized by the office of Representative David McKinley and included local business leaders and political actors. Two of Bethany's best students were there as well, about 12 overall.

While the main purpose of the meeting was sequestration, the businessmen wanted to express concerns about the EPA, making sure the congressman was aware of the barriers it sets up. The EPA's smothering them and, by extension, job creation. I emphasized regime uncertainty: the only way we're going to get the investment needed to bring job growth back up is for Congress to strike some kind of deal. There's too much uncertainty in the market. Everyone agreed, but I don't think people really got it.

Everyone seemed to believe that McKinley could do both: help strike a budget deal and weaken the EPA (and do other things, too). But he can't. He only has so much political capital to spend and making these things happen requires getting a lot of people on board. McKinely's a Republican so reigning in the EPA will upset some Democrats which will make it harder to strike a deal. And since he's a member of the Tea Party Caucus, increasing taxes is politically tricky, too. A common Sophie's choice in politics: what the country wants or what the constituents want. (Oh wait, that's not a good analogy; they will side with their constituents almost every time.)

This is why I like pork. If you think of it solely as a project (e.g. a bridge to no where), then yes, it's wasteful. No one seemed to like pork at the round table discussion and I regret I didn't defend it because pork makes things easier. If EPA deregulation and politically stable is what you buy with political capital, pork is a way to earn it.

Pork is cheap. Giving every Representative a $5 million pet project would cost a little less than $2.2 billion dollars. If that gives us a budget deal, we get stability and economic growth: that's worth hundreds of billions of dollars. Yes, it might take more than $5 million to get cooperation from some, but others won't require any pork. It's a good deal.

Political capital's a scarce resource. Like the money Congress is fighting over, you can't have everything. But if you sleep with the pigs, you might get enough to make everyone satisfied.

Quote of the Day

Alastair Smith on political tyranny:

But what if you really are trying to work for the common good? Is there no way of doing that?

None. If you’re working for the common good you didn’t come to power in the first place. If you’re not willing to cheat, steal, murder and bribe then you don’t come to power.

Read the whole thing; short and sweet.

On the Average Person's Economic Intelligence

Matt Yglesias posted these survey results on how best to create jobs.



This is why I put so little faith in the economic knowledge of the average voter. The third most popular idea to encourage job creation is to simply not fire people.

Which State Has the Least Educated State Legislature?

New Hampshire, with 46.6% not having a Bachelor's degree and 20.5% having no college experience at all. However it's part-time legislature made many of the degrees difficult to determine.

Maine is the runner up for Bachelor's: 42% have no Bachelor's degree.
New Mexico's the runner up for no college: 16.2% have no college experience.

Interesting, Delware's one of the lower ones for less than a Bachelors (40.3%) but one of the higher ones for percent having a doctorate (8.1%).

More information here.

Ignore CBO Estimates

We often hear that the estimates from the Congressional Budget Office (the folks which tell us how much laws cost or save the government) are non-partisan.

The final cost estimate produced by the non-partisan CBO -- that the health care measure would cost $940 billion over 10 years, and bring down the deficit over that same time period. [Source]

The $800 billion federal stimulus bill has boosted employment by 1 million to 2.1 million and helped the economy grow about 1.5% to 3.5% larger than it would have without the stimulus, the nonpartisan Congressional Budget Office said Tuesday. [Source]

The Congressional Budget Office, a nonpartisan watchdog, forecasts that the US will post deficits in excess of a trillion dollars in each of the next 10 years. [Source]

Even the more reasonable Matthew Yglesias will cite their scoring without ever questioning them.

While the CBO is supposed to be neutral, it doesn't take much thought to realize how naive that is. Since its creation in 1975 (thanks to some 1974 legislation), the CBO director's appointed by the mutual agreement of the Senate pro tempore and the Speaker of the House after considering the recommendations of their respective budget offices (though by tradition each chamber alternate this responsibility). In addition, either chamber may fire the director by resolution. So you'd think that if you're the CBO director, you have a pretty strong incentive to be partisan.

If I'm right, then when both chambers are of one party, the director should be that party as well (or at least sympathetic to it). This is somewhat easy to check. CBO directors aren't politicians and don't wear their affiliation on their sleeves, but thanks to some Googling and checking Wikipedia, I estimated the party affiliation of each director (excluding acting directors, which are covered by the white spaces). Here's the list of past CBO directors. The size of the blocks under the CBO heading is the length of that person as the director. If the director changed mid-year, I counted the full year if that person was more than halfway through the year and not in the year at all if he or she left before the halfway mark.


Even if you complain that so-and-so isn't partisan, or so-and-so isn't the party I assigned it, the correlation's strong enough that any single change doesn't change the overall pattern.

The chart above is not to be the definitive data which proves the CBO's partisanship, just an illustration that this neutrality everyone talks about is just hopeful thinking. And I'm first to admit my categorization isn't perfect. For example, the only reason I put Douglas W. Elmendorf as a Democrat is that he was a senior fellow at Brookings, which leans left if it leans any direction at all. The more important point is that of incentives: even if Elmendorf is non-partisan, that he can be fired by Democrats (and only Democrats) gives him plenty of reason not to be.

The Fake Endorsement

I've always known what a politician said and what they believed were often at odds but this brings it to new heights.

Trying to be even-handed and polite, the [visiting] Brits said something diplomatic about McCain’s campaign, expecting Bush to express some warm words of support for the Republican candidate.

Not a chance. “I probably won’t even vote for the guy,” Bush told the group, according to two people present.“I had to endorse him. But I’d have endorsed Obama if they’d asked me.”

Endorse Obama? Cue dumbfounded look from British officials, followed by some awkward remarks about the Washington weather. Even Gordon Brown’s poker face gave way to a flash of astonishment.

When I first read that, I was utterly confused. "Had to?" You're the President at the end of his final term. You're basically done with politics; you don't need to be re-elected or get any bills passed. But I suppose between the speaking opportunities and book deals, you want to leave on good terms with the party faithful. A good example of how strong of an impact incentives are.

Oh The Things You Can Filibust!

Matthew Yglesias claims dropping the filibuster is just a matter of when, not if.

The only reason filibustering has been allowed for as long as it has has been because of strong norms against its over-use. But those norms have been eroding for decades. The idea that Senate majorities are going to allow this trend to continue indefinitely is silly. The way this movie goes is that the downward spiral of obstruction continues until some majority gets sick of it and changes the rules.

Do a little backward induction and you'll find that doesn't hold. Knowing too much abuse will lead to the filibuster going away completely and permanently so senators have a strong incentive to push far and no farther. There's a cautious exploratory process going on by Republicans, but extrapolating mindlessly from the current trend isn't near enough to claim this strategy is on the way out.

And let's not forget retaliation: dropping the filibuster means you can't use it later when you might need it. And senators are reelected more often: those safe seats know a vote to drop the filibuster now is a vote to deny them an important political tool later. If we added some term limits that would help drop the filibuster, but it's just too versatile to expect to witness its passing any time in the foreseeable future.

I'll Start Voting When Politicians Start Being This Honest

HT: Michael Munger

In the Chipmunks Alvin Was the Leader...

In case you haven't been paying attention (or are more concerned about bigger news items), on June 8th the Democrats in South Carolina had their primary for the Senate campaign. To everyone's surprise, the winner was Alvin Greene: a man with no job, no campaign staff, and no known financial support.

When I first heard about Alvin Greene, my first thought was election manipulation. But as I learned more about it that seemed less likely. Polling places dropping the ball would need to be more systematic than is reasonably plausible and fraud on this scale would require massive resources. If Greene was behind it (perhaps using illicit resources the public doesn't know about) then his win would be more planned out. He'd at least have a website and be more eloquent when talking to reporters. Republicans simply don't have a motive to commit the fraud. DeMint, the Republican incumbent, won by nearly ten points and the Democratic party basically ignored the primary race. Remember, this is the state that tried to get the Confederate flag flown over its capital. It doesn't make sense that Republicans would pull such a desperate act (this also goes to the even stranger and less relevant accusation of a plant).

It's still very early to tell; perhaps various investigations will reveal an elaborate conspiracy. It's still a mystery how he got the filing fee. But right now my best guess is the following simple story:

Alvin Greene's life was in the toilet. He had no job, no prospects, no plan. Then he got a windfall: perhaps it was an inheritance, or from criminal activity. Maybe he really was saving (though longer than the claimed two years). Not sure what to do, he runs for Senator. Yeah, he probably would have been better off going to a technical school, but maybe he's a poor student or just didn't want to put up that much effort. He has a degree in political science, after all, and it hasn't seemed to have done him any good. But a senatorial candidate? That's easy and potentially very impressive on his résumé. In his mind, he didn't need to win; he just need to fill a gap in his employment history and make himself sound more impressive to potential employers. Yeah it sounds crazy, but I'm not the first person to question his mental health.

But then he won, mostly because no one paid attention to the race. Being listed before his opponent and sharing a name with a famous singer surely helped two. Cameras descended on Greene, especially after people learned about the felony charges. In his heart of hearts, Greene knows he doesn't deserve this. But admitting that would require him to take a hard look at himself and come to terms that not everything happens for reason. It's hard to recognize that you got something you didn't earn so Greene tells people he wasn't surprised by the results (really!?) and insists he went all over the state campaigning, though he can't remember any towns he went to.

Whatever the reason, this is a vivid example of what happens when a lot of people see their vote as cheap talk. Stampedes only happen when the entire herd runs to Greene pastures.

Back to Basics

Brilliant.

Public Choice and Police Videos

Here's an excellent piece on video-taping police while they do their jobs.

In at least three states, it is now illegal to record any on-duty police officer...The legal justification for arresting the "shooter" rests on existing wiretapping or eavesdropping laws, with statutes against obstructing law enforcement sometimes cited. Illinois, Massachusetts, and Maryland are among the 12 states in which all parties must consent for a recording to be legal unless, as with TV news crews, it is obvious to all that recording is underway...When the police act as though cameras were the equivalent of guns pointed at them, there is a sense in which they are correct. Cameras have become the most effective weapon that ordinary people have to protect against and to expose police abuse. And the police want it to stop...As journalist Radley Balko declares, "State legislatures should consider passing laws explicitly making it legal to record on-duty law enforcement officials."

Balko's advice, sadly, will probably not be followed. Polices officers are unionized and not getting their support easily translates into the deadly "soft on crime" label during an election. The public, in contrast, has a generally high opinion of police officers so painting yourself as questioning their honesty doesn't help you much.

So Many Things...

The authority does not have authority to do whatever they want to do.

That's Jackie Jeter, president of Local 689: Washington's Metro system's union workers. That, by the way, is the comment she issued on two employees being reinstated after the Metro system fired them. One was fired for being involved in a fatal car crash. It's up for debate if the driver was responsible for it (Metro believes he ran a red light). The other driver punched an off duty cop dressed as the McGruff the Crime Dog. That's not as bad a fatal car accident, but there's no doubt that it was his fault.

"Yes, he made a stupid mistake," Jeter said. "Should he have lost the job he had been on for eight years because of a silly mistake?"

Yes!

Governance Is Not the Same Thing As Action

In response to Sen. Hatch's stanch opposition to any tax increases in Obama's announcement to reduce the deficit, Ali Frick asks

How is it that fundamentally unserious people — people who do not want to govern and have no business governing — keep running for and winning governing office?

Because the constituents know he's governing; he's just not governing the way you want him to. And since they're right-wing and you're left-wing, that's exactly why they re-elect him. Reducing the deficit almost certainly means increasing taxes but battling another branch of the government, even if it means to stone wall, is a political tactic. And such tactics are used to manage the Union, even if management means preventing harmful policy. Especially if it means preventing harmful policy.

Following the Money

Mark Thoma has a cool chart about where your tax dollars go. When people want to fix the federal budget, they generally cite foreign aid or pork barrel spending or government wages or corporate welfare to cut. But these are all very small parts of the budget (they are in the "other" part of the graph...a total of 4%).



Suppose you're a congressman. You want to cut the budget? You might want to start with Medicare, Medicaid, or CHIPS which are health insurance for the elderly, poor, and children respectively. That will upset a lot of your constituents and I'm sure you're hear about it in the next election when your opponent tells the district you hate some of America's most vulnerable citizens. OK so you can cut Social Security instead, but that will only upset a smaller group of people with even greater fervor. Maybe you could cut the safety net expenses, but that won't be politically smart during a recession. Military's high, but a lot of this is concentrated in major contracts and military bases: a mighty large group of people to upset and has the public sympathy of defending the nation.

In other words, there's no easy way to cut the budget. The reason why these are the big areas of the budget is because they concern people with a lot of public sympathy, sympathy they were able to transform into payments. And it's that sympathy which secure those payments now. If they didn't have that public support (such as from Reagan's famed stories of "welfare queens" which promoted welfare reform), then things would be different. The best way to cut the budget is if hundreds of thousands of elderly people were using their social security checks to fund terrorism.

The Political Incentives of Being a Jerk

For as long as I can remember, Republicans act like dicks and Democrats act like wusses and for my more partisan friends, those qualities are endemic to their ideological opponents. Republicans are heartless: they hate poor people, gays, atheists, blacks, Jews, Muslims, and the suffering masses. It's no wonder they don't compromise and spread fear and misinformation to the electorate. And Democrats are bleeding hearts: they want subsidies for nice-sounding idea that comes across their desk and throw away the realities of the world for a fantasy worker's paradise. It's no wonder they have no backbone.

But when you add some economics, it's a strange story. Why is there no one willing to break the mold: a Republican who wishes to act even a little dovish to attract some swing support or a Democrat who's just a bit quicker to be hawkish? Such is only the stuff of fiction. The two parties must be locked in this equilibrium for some reason.

Via Matthew Yglesias, I've found strong evidence that the Democrats are a much bigger tent party than Republicans. Because Democrats have to please a larger variety of voters, they have to be more willing to compromise and just don't have that much wiggle room when it comes to policy. Knowing this, Republicans have a strong incentive to be political bullies. This isn't a value judgement; it's a law of nature. If you know your opponents don't have a lot of flexibility, you make demands (especially since there's more than a little overlap between the two parties). Thus even with majorities in both chambers of Congress and a Democratic president, Republicans can hamper or even dislodge major policy changes. It's still a bit of a miracle that health care reformed passed but it's not surprising it took as long as it did.

How Obama Got People to Be Less Afraid of Being Republican

Robin Hanson proposes that Obama's election makes the public more conservative. No, the story isn't that Americans are secretly racist and have suddenly come to terms with their racism. Quote psychology experiments,

People were more willing to express potentially prejudiced attitudes when their past behavior had given them a bit of credentials as a nonpredjudiced person.

Bizarrely, Hanson cites recent polls that Americans are more in favor of gun control, less in favor of legalized abortion, and fewer people believing global warming is the result of human activity as evidence of this theory. What does racial issues such as affirmative action have to do with climatology?

People care what others think of them, even if those others are strangers. We care about it so much, we say we believe things we don't believe. If we value the truth on an issue low enough, ewe even fool ourselves into believing things we'd normally conclude are false. (Bryan Caplan calls this rationally irrationality.) In essence, we are paid (in the form of social capital) to conform.

The reason why we care so much about we others think of us is that we care what others think. We like to associate with people who are like us, a trend easily seen in grade school, high school, college, and beyond. This isn't merely shared interest but political opinion and values; constantly arguing with someone about politics gets exhausting for most people. It also makes it easier to talk to people since there's more common ground and you don't have to police your offhand comments or jokes.

There are lots of issues, though, and it's inefficient to list off your opinion on all of them. This is why we use labels (to the annoyance of some), such as Democratic, Republican, Libertarian, Populist, Christian, Muslim, Atheist, Jew, Protectionist, Free-trader, etc. In a single word, we convey a body of opinions to potential friends or mates. This is why it is normal for dating sites to post a person's political affiliation: it's a cheap way to convey important information.

But it's not perfect. Some issues are more important to some people than others and individuals are more diverse than the label's official or perceived hierarchy of priorities. We want to connect with people that share what we care about, starting with top priorities. People will then adopt most of the views of one group, including views they don't believe, to signal that they believe things that they find very important and distinguish themselves from the group that seems (rightly or wrongly) to disagree with them, even if they secretly agree with that group on less important issues. When an event convinces people that most agree with what you find to be really important, you will more accurately express your view of the less important things since you are less afraid of being mistaken for some other group.

To illustrate, consider two parties: D (Democratic) and R (Republican). Also consider two issues: A (being for racial equality) and B (being for less gun control). ~A means, then, that a group is perceived as being against racial equality and ~B means that a group is perceived as being against less gun control (or in favor for more gun control). Before Obama, one could argue that the public views the parties as so:

D (A, ~B)
R (~A, B)

Consider a person who has the preference of (A, B), but cares much more about A than B. In other words, he'd rather spend time with a person who's restricting gun ownership and is racially tolerate than a racist gun nut. U(A, ~B) > U(~A, B) (U stands for utility, economic lingo for satisfaction.) Thus, he will adopt policies of both racial tolerance and gun control to better signal that he's a Democrat, making it more likely he'll spend time with his preferred type of person. He might even start believing B, since he'll have to argue the point at parties and it's easier to argue something if you fool yourself into believing it's true. (This is where the rational irrationality comes in.)

But suddenly, Obama is elected president and it starts to look less like ~B is a staple of group R. If so many Americans were racist, it's hard to believe a black man could win (especially since he got 52.9%). Thus, the public perceives racism as being uncommon enough that it isn't a defining attribute of a major political party. At worst, the public's opinion on the stance is uncertain and the perception changes to this:

D (A, ~B)
R (?, B)

Now back to our hypothetical (A, B). No longer concerned with openly believing B will attract ~A people, he expresses his B opinion (or overturns his previous ~B opinion). He is no longer afraid of being mistaken for R.

In practice, there are more than two issues and people might still call themselves Democrats out of habit, fear of losing current friends, or because there's still enough about the party they like. But, in time, more will be willing to. In the meantime, expressing the secondary opinion will be more common. So, here's the punchline: Obama's election made Americans, and by extension moderate Republicans, seem less racist. Thus more people are willing to be seem as (or mistaken for) a Republican.

Control Breeds Suspicion?

Here's some data from the General Social Survey about how much confidence Americans have in various institutions. These are the averages between 1972 and 2006:

Institution	Percent With "A Great Deal" of Confidence
Organized labor	12.50%
Congress	13.70%
Television	13.80%
Press	16.90%
Executive branch	17.20%
Major companies	25.30%
Banks and financial institutions	27.10%
Organized religion	29.40%
Education	31.10%
Supreme Court	33.00%
Military	38.50%
Scientific community	43.10%
Medicine	48.30%

A few interesting things stand out in this survey, most of all the four government institutions: Congress, Executive branch, Supreme Court, and Military. It seems that the more direct control the public has over the institution, the less confidence they have in it. My initial guess is that more direct control means more attempts to grab the voters directly, meaning less believability of claims of neutrality. This would also explain why the press is ranked very low and the two highest are science and medicine--like the judges and soldiers, people see doctors and scientists as being coldly rational necessary for their job. Robin Hanson, though, would have a different opinion as to why people have so much confidence in medicine: we're afraid to be suspicious of them.

The Smell of the Marble

Millions are gathering in the National Mall this morning to bear witness to the swearing in of Barack Obama. There's anticipation in the air that Mr. Obama is something unique and new. A different kind of politician.

He's certainly different (Joe Scarborough mentioned this morning that Obama is less prone to the sin of pride, which undos so many politicians). But the incentives of office haven't changed. Norris Cotton, a New Hampshire senator from the fifties to the seventies, warned colleagues of smelling of the marble, as in the white marble that covers DC. "And when you can smell it, you'll like it. And you'll be ruined for life." Great unchecked power leads to abuse and despite the Constitution's efforts, much of the power in Washington is unchecked.

This goes double for the presidency, whose role has expanded over the centuries but is now joined with a sympathetic congress. It's entirely possible that Mr. Obama, bending to expectations that he's a different kind of politician, will rise above such abuses. But the hero worship is strong and the people euphoric. Unless we become much more scrutinizing, he'll smell the marble.

Tyranny of the Electoral System

Missouri's still counting and recounting but the absurdity of our electoral system is still clear. Ignoring the Show Me State, here are the results:

Candidate	% of Popular Vote	% of Electoral Votes
Obama	52.6%	69.3%
McCain	46.1%	30.7%

The spread between Obama and McCain jumps from 6.5 points to almost six times that amount (38.6). A large part of this discrepancy is because the plurality of the state gets all the state's votes. But it brings to bear another strange aspect of the electoral college: Pennsylvania has 25 times as many people as Wyoming, but only 7 times the electoral votes. Iowa has a fourth of the people Illinois has but only a third of the votes. In other words, the system disproportionately favors low populations states. (This was a major issue in 2000, when Gore received the popular vote but lost the election.)

People argue rural areas have to get extra voice. Otherwise the candidates would never pay attention to them and spend all their time in major cities. So what? Majorities always have a greater say than minority opinions. But no one says that gays, immigrants, and Jews should get extra votes. The only difference is these minorities (mostly farmers) are concentrated geographically. I'm sympathetic to the idea of giving the outside opinion extra muscle in order to curb the tyranny of the majority. But it's not clear why that minority has to have their own state before they get such an ability. Because we lack consistency, part of the minority becomes party of the majority and the bullying continues.