As we head into a new year, I thought I’d share a few big picture things I’m concerned about to get me blogging again. Big picture perspectives conveniently avoid minutia, but I’ve realized that the debate is more often at this level anyway. Here they are, in no particular order:
- Europe: This literally scares the crap out of me. There’s a ton of Italian debt infecting European banks right now. If that debt starts tanking — the result of an Italian default or the collapse of the Eurozone — the European banks holding it will likely go with them. If those banks go, our banks might very well be next. Keith Hennessy lays it out as good as I’ve read so far. Without a doubt the most important economic X factor hanging over our heads right now.
- Employment: I’ve voiced my skepticism of short term policies designed to boost employment. Getting the country working again is crucial to getting our economy growing at a solid pace, but I don’t want to sacrifice our longterm prosperity in the process. I can’t help but think that getting ourselves geared for the longrun and, in so doing, reducing American uneasiness about the future is the best policy. The combination of simplifying the tax code, smart Wall St. regulation, and putting our fiscal house in order is most likely to instill confidence and empower Americans to start growing the economy again from the bottom up. If we have to build a bridge and fix our roads, let’s do it — but not under the banner of creating jobs. A bridge might be built either way, but I bet you ($10,000?) it’ll be a more useful one if its primary purpose isn’t to create jobs. Let’s create the best possible atmosphere for real, longterm jobs to come into existence organically.
- The weaponization of the Constitution — This is an old theme on this blog (and in American history, unfortunately) but it’s always worth repeating. Too often has our Constitution been harnessed as an affirmative circumvention of the democratic process. Too often do we seek a constitutional short cut that robs the country of democratic debate. As I’ve said before, I prefer slow but organic change from the bottom up to swift and radical change from the top down…even if I agree with the policy at issue. Whatever the particular policy is, and unless constitutional rights are clearly violated, it will always come second to progress through democratic debate in the form of laws being passed, amended, repealed, and eventually perfected by us, rather than the courts. Unfortunately, this will likely remain a gripe of mine for decades.
- Normalcy Bias: A term used by a friend of mine, and I find it to be a proper diagnosis of our national condition of rejecting common sense policy changes for fear of being too “radical.” Getting rid of tax expenditures/deductions is a good example of this. To quote Andrew Sullivan, “[r]emoving every single deduction in one heave would do more to empower market-based decisions in the economy and to throw lobbyists out of work than any other single measure. It’s the most important, simple, productive move we can make right now . . . .” Other examples include the continued promotion of employer provided health insurance, any discussion of steep cuts for some agencies (such as the DOD), as well as reassessing the utility of others (DOE?), legalizing marijuana, etc.
- Income Inequality: This concept is politically charged, but I think everyone should recognize that stagnant lower/middle class wages in the face of exponential growth at the top of the income distribution is not a positive thing. The challenge, of course, is what to do about it. Cries to raise taxes on the rich is not a solution to the problem, though income inequality might be a justification for additional taxes on higher earners in order to cure our fiscal condition, which is a separate issue. I see income inequality more as an education problem, as we are not supplying the highly skilled workers that advances in technology and globalization have demanded. We all know that lower skilled jobs are being shipped to cheaper pastures overseas forcing the American laborer to change course. This is nothing but global economic efficiency, and it results in cheaper products for us. College is not for everyone, as we still need welders and the like, but I imagine that acquiring practical trade skills in fields such as engineering and the hard sciences is a wise investment.
- Our Budget Deficit and National Debt: This is a massive problem, and the fact that this will not affect us until some time down the road is a scary way of looking at the issue. So is pointing out the fact that American debt is still low risk. Putting aside the argument that we shouldn’t casually be borrowing our way to debt levels upward of $16 trillion — even if yields on American debt are still low — let’s keep in mind that yields on Greek bonds were doing just fine until they weren’t. Germany too suddenly found itself with its own bond auction issues a few weeks ago. People are worried. Investor confidence is fueled by emotion, and emotion is steered by perception. We need to paint a picture of fiscal responsibility in order to definitively keep bond vigilantes at bay. We certainly aren’t Greece in terms of fiscal recklessness, but it’d be wise not to hold ourselves up against that standard.
Howard Foster comments on Justice Anthony Kennedy’s “moderation”, and then makes the case against moderate Supreme Court Justices more generally:
If Justice Kennedy had a way to decide such questions that he could apply in case after case, he might fairly be characterized as a “thoughtful” jurist. But he does not lay down any neutral principles for deciding constitutional cases. Rather, he agrees with one faction in one case, and the other faction in another case. The media refers to this form of adjudication as moderation. It’s more accurately described as unprincipled.
There is no moderate way to interpret anything. One can only interpret by the application of neutral principle, i.e., original meaning, plain meaning, application of precedent, textualism, etc. If the meaning of a phrase is so elusive that the judge is willing to split the baby, or flip a coin, then that judge is not acting as a judge but rather a politician.
We would be better served without moderate Justices. We should expect our presidents to appoint people to the Supreme Court who have records and judicial philosophies.
Having moderate public policy positions is, to me, itself a principle. It’s rooted in the assumption that the world is too complicated to paint with a singular ideological brush and that policy-making, more often than not, requires case-by-case analyses that emphasize the realities of a given issue, rather than some boilerplate way of seeing the world.
But being a Supreme Court Justice is different. Whereas legislators, as law-makers, are on the normative end of the process, the job of a Justice is to analyze existing law and apply them to a given set of facts. Whether it be a piece of legislation or a constitutional provision, a law is the end-result of a normative policy debate. Supreme Court Justices shouldn’t have a second crack at this process. Instead, they should adopt some sort of limiting principle that keeps them from straying into the realm of subjectivity.
I had an interesting discussion with a couple of buddies a few days ago about the morality of an estate tax.
My position was that an estate tax is immoral, not from the perspective of those who benefit from inheritance, but from the perspective of the decedent, as it impedes his ability to spend the already-income-taxed fruits of his labor as he wishes. As an additional factor, the well-being of one’s family is a major incentivizing force in our economy, so rewarding labor with added security for one’s heirs is something that, in my mind, promotes economic growth.
My friends responded with the contrary moral argument that it is unfair for children to receive a massive financial head start in life as compared to others less fortunately situated. In addition to doubting whether not having an estate tax provides any additional incentive for labor, they also flipped the entire argument on its head, asserting instead that added financial security for one’s heirs disincentivizes work from the heir’s perspective, and thus, potentially, negatively affects the economy at the other end. And rather than disincentivizing labor, they argue, it incentivizes spending, so as to ensure one has less that the government can take.
Tough call, I suppose. Taxing an inheritance as income seems fair, but it constitutes a double tax (though not from the heir’s perspective, of course). For me, the starting point is people keep and do with the money they earn as they wish. You have to have a pretty strong argument to disturb that basic rule, in my mind.
In reading Hendrik Hertzberg’s piece in the New Yorker this week, I’m surprised that there wasn’t more talk about the Fourteenth Amendment option in dealing with the debt ceiling fiasco. The relevant provision is Section Four, which, in pertinent part, reads:
“The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”
I feel like this not only makes having a debt ceiling unconstitutional, but even makes debate over raising the debt ceiling unconstitutional. “Shall not be questioned” are some pretty strong words, and to say that this is what Congress has been doing all summer would be euphemistic.
This is all, admittedly, Monday morning quarterbacking, but I would have supported President Obama had he raised the debt ceiling on his own, as the head of that branch of government that executes America’s laws. I might not be the most liberal person fiscally, but this wasn’t a debate over spending; this was a debate about paying our bills. And with such clear and on-point constitutional language to rely on, I would have respected such a bold move from our President.
David Frum laments that national security emerges as the debt deal’s biggest loser:
The economist Herb Stein used to advocate a simple model of federal budgeting:
a) Decide how much it costs to defend the country.
b) Pay for it.
c) Then see what else you can afford.
Adam Smith phrased the same idea more elegantly by saying that “defense is superior to opulence.” The point is that the defense of the nation is not just another line item. It’s the first obligation of government, more important than any other form of spending, and way more important than minimizing taxes.
For today’s Republican Party, the defense of the nation is at best a secondary priority.
Yet this budget deal treats defense as just another special interest. Worst is the enforcement mechanism for the deal: If spending targets are not met, the deal subjects Medicare and Medicaid to automatic cuts (presumably to punish Democrats) and subjects defense to cuts (presumably to punish Republicans). The enforcement mechanism could have included new taxes, but defense was substituted to clinch the deal. That way Republicans get to tell their Tea Party base that the deal contains no tax increases. But the substitution also reveals that for today’s Republican Party, the defense of the nation is at best a secondary priority.
David Frum is wrong, even by his own Herb Steinean/Adam Smithean standard. If our defense spending reflected the true price of defending the country, we could afford (or simply save) a lot. This is old news, but we have the most bloated defense budget on the planet by a long shot:
This chart, and other versions of it, continue to fascinate me. If we halved our defense budget, we’d still spend three times more than our closest rival, China. Perhaps I’m assuming that dollar amounts accurately reflect the extent to which we are defending our country, but am I wrong to do so?
We see this type of thinking in other contexts, too. Simply cutting spending on particular elements of our societal structure doesn’t necessarily mean those elements suffer. So long as the fundamental purpose of defense spending remains “defending our country,” we can make significant cuts in defense without jeopardizing this purpose.
