The Andrew Samwick Archives

Happy New Year, and Thank You

Andrew Samwick — Sun, 01 Jan 2012 19:42:38 +0000

I'd like to begin the New Year and end my run on CG&G by thanking Stan and my former co-bloggers (the FCBs) for the opportunity. I am up and running on my new blog, and I invite you all to join me there in the New Year.

The New Hampshire Primary -- Hitting the Snooze Bar Over and Over

Andrew Samwick — Tue, 20 Dec 2011 13:33:48 +0000

With less than a month to go until the New Hampshire primary, my usually hot seat as the director of a public policy center at a college in New Hampshire is, in fact, ice cold. There is literally no sign of the candidates, nor has there been for most of the year. It is like the year without a primary. (This is in marked contrast to how I spent 2007, and this day in particular.)

The way I would summarize this is to say that there has been no aggressive retail campaigning. Other than the debate in October, we have had minimal outreach from the candidates who have been invited to these debates. The key reasons, in no particular order, seem to be:

1. The debate schedule

There have been an enormous number of so-called debates this primary season. They have served primarily to divide the group into those candidates who say essentially nothing and those who will say just about anything. However you characterize these media events, there is little denying how unproductive they have been in helping a voting public make better choices. And more importantly, the packed schedule is keeping the candidates from focusing on retail politics in New Hampshire, like they normally do.

2. My location

In 2007, we had a wide open contest in both parties. But most importantly, we had a vigorous contest on the Democratic side, and the part of the state where Dartmouth is located tends to favor the Democrats. I am not surprised that we would see a dropoff in candidate visits, and maybe things are raging down by the Massachusetts border and in the North Country. But I would not expect candidate visits to dry up completely. I was not aware that any candidate had such a comfortable lead that this contest was over and not worth expending resources to campaign. Yes, Romney leads in the polls, but that's what retail campaigning in a small state is supposed to affect -- whether he can hold that lead.

3. This group of candidates

In 2007, John McCain was in the area all the time. Even in 2007, we never hosted a visit to campus by Mitt Romney. We saw the Mitt-mobile parked around the Green occasionally, but that was typically one of his sons or campaign staff. He may have done something at the Medical Center down the road. Fast forward 4 years, and they are all like Romney and none like McCain, which is to say, they are all invisible campaigners.

4. Raising and spending money

It is surprising how little role that money is playing in this contest. The top candidates are not spending money on large media buys. Television advertising has not been overwhelmed by political ads. An unmet need to raise money has not been a reason for candidates to drop out of the race and focus the remaining candidates on distinguishing themselves from each other. More generally, we are in the low-fundraising, low-spending equilibrium in which candidates are responding to weak campaign efforts by their opponents by conserving their own resources, including their time and travel. That won't continue to be the case later in the primary season, but it is certainly the case now.

These are my top four reasons -- please share any others that you think are important in the comments. For similar ideas, read this article in yesterday's Christian Science Monitor.

Building on the Work of Occupy Wall Street

Andrew Samwick — Sun, 27 Nov 2011 16:19:54 +0000

The best thing I've read lately about how to channel public frustration into constructive action is this column by Scott Turow, holding forth at Bloomberg last weekend:

By treating money as an analog for speech, the court’s post-Buckley jurisprudence has figuratively allowed the rich to speak through microphones while the poor can barely whisper, and tolerates a situation in which the voices of contributors are amplified to the point that they drown out the opinions of mere voters. I have never understood how permitting the wealthy so much greater influence over the political process can be squared with the vision of equality on which the country was founded.

As I've suggested before, some money in politics is speech, but too much money in politics is bribery in one form or another. Turow is quite realistic about what it will take to accomplish this:

Unfortunately, nothing less than a constitutional amendment is likely to reverse the situation. For now, the court’s conservative majority is firmly entrenched. And even were the court to become more moderate, with the replacement of one of the conservative justices, the principle of stare decisis, of respect for prior decisions, would mean that any effort to erase the damage done since Buckley would necessarily be incremental.

As for the Occupy Wall Street movement, it has been criticized by some for not having a realistic agenda, even though polling shows that millions of Americans, including me, are sympathetic to the basic message of the protests, if not the violent engagements with police that have occurred in Oakland, California, and elsewhere.

So here is my suggestion for how the Occupiers can rally around a single goal and reinvigorate their movement. The Constitution can be amended by a two-thirds vote of each house of Congress, followed by ratification by three-fourths of the states. The demonstrators should head for the public spaces in Washington where protests have long been tolerated and demand that Congress amend the Constitution to change our campaign- finance system.

Not a bad idea. Read the whole thing.

The Value of a College Degree

Andrew Samwick — Wed, 09 Nov 2011 13:16:43 +0000

Peter Orszag provides some clear and sobering commentary on the value of a college degree in a column for Bloomberg yesterday. The key message is here:

The effects of globalization are already moving up the wage scale, though, and that trend will likely continue. As Alan Blinder of Princeton University trenchantly noted in 2006, “Many people blithely assume that the critical labor-market distinction is, and will remain, between highly educated (or highly skilled) people and less-educated (or less-skilled) people -- doctors versus call-center operators, for example.” Instead, the crucial distinction is between those tasks that are easily digitized (and thus subject to substantial competition from workers abroad) and those that are not.

The college degree does not necessarily provide protection against having your occupation digitized in this way. The more important element of economic security is to be among the best adopters of the products and opportunities that are digitized. I suspect that it will remain the case well into the future that those who have college degrees will be on average better adopters than of digitized products and opportunities than those who do not have college degrees. The challenge for institutions of higher education is then to find ways to enable their students and graduates to be better adopters of these new digitized products and opportunities.

The Treasury Joins the Build While It's Cheap Chorus

Andrew Samwick — Thu, 03 Nov 2011 14:10:46 +0000

When I first started writing about this in January 2008, I was hoping the Treasury would get on board. This Treasury Note by Aaron Klein makes the case very well (h/t Mark Thoma):

In addition to laying the foundation for stronger economic growth, we must also work to address a crucial problem facing our economy today - unemployment. Investments in infrastructure today will put Americans back to work. And with over 1 million construction workers currently unemployed, now is the right time to invest in infrastructure. Eighty percent of jobs created by investing in infrastructure will likely be created in three occupations - construction, manufacturing, and retail trade - which are among the hardest hit from the recession. Treasury Department analysis shows that these sectors pay middle-class wages, so employment in these sectors bolsters middle-class jobs.

Better some than none at all. Better late than never.

A Tax Policy Rant

Andrew Samwick — Wed, 26 Oct 2011 12:44:35 +0000

I couldn't agree more with Pete on the discussions of tax policy that are now occurring as part of the Republican primary campaigns. The Republican primary campaign almost always gets sidetracked by some inane proposal for tax reform. This year it is the 9-9-9. And now we have another version of the flat tax, as if the crushing irrelevance of Steve Forbes to the primaries in 1996 and 2000 were not an indication of how unproductive the discussion will ultimately be. What are the prospects that a Republican President would actually be able to implement such a change if elected? They are equal to the chance that Republicans will both retain control of the House and secure a filibuster-proof majority in the Senate in 2012. In other words, absolutely zero.

The problem that we have with tax policy is that we don't raise enough revenue to cover our expenditures, not the particularly ways we choose not to raise that revenue.

Robert Shiller Joins the Build While It's Cheap Chorus

Andrew Samwick — Mon, 17 Oct 2011 12:55:48 +0000

Nicely written, "Making the Most of our Financial Winter." The novel part:

In every depression the nation has faced, there have been proposals for the government to do just this: increase spending on public improvements to create jobs for the unemployed.

An article in The St. Louis Post-Dispatch, written in 1877, during the 1873-79 depression, argued that the government could create a great many infrastructure jobs. “There are many needed improvements: the construction of the Texas and Pacific Railroad, the widening of the entrances to the Mississippi, the diking of its alluvial blanks, the clearing of obstructions from the beds of the great rivers of the West, the improvement of the harbors and rivers in the East, the completion of the post offices, custom houses, seawalls, breakwaters and other useful works of a national character,” the article said.

Shiller goes on to argue for the balanced-budget aspect of infrastructure improvements in the President's American Jobs Act proposal. I would take that, as well as add a zero to the proposals -- they are an order of magnitude too small -- and borrow to get them done while we are in our financial winter. The minimal interest costs can be serviced over the life of the productive investment.

What Should Happen With Occupy Wall Street?

Andrew Samwick — Sun, 16 Oct 2011 16:26:38 +0000

A note to Nelson D. Schwartz and Eric Dash of The New York Times. If you are going to put this in your article, put it in quotes and attribute it properly or keep it out of the news section of the paper:

Without a coherent message, the crowds will ultimately thin out, Wall Street types insist — especially when the weather turns colder. They see the protesters as an entertaining sideshow, little more than flash mobs of slackers, seeking to lock arms with Kanye West or get a whiff of the antiestablishment politics that defined their parents’ generation.

I don't think it is incumbent on #OWS to have a coherent message. They are people who feel that their freedoms are being constricted due to the corruptness of others. They are joining together to push back against that feeling. They win just by showing up and eschewing violence. If the NYPD and branch managers at Citibank can't figure that out and stop dehumanizing the protestors, then #OWS will win even more.

There are plenty of policy changes that could satisfy the protestors, even if they are not articulating them themselves. I can only speak for myself. At a gut level, I would like policy makers to:

Stop justifying action to prop up individual institutions based on vague notions of what will happen to the broader economy.
Stop using bailouts in lieu of bankruptcy.
Stop taking any political contributions from the financial sector, period. What was true of the health sector during health care reform is even more true of the financial sector today.

There hasn't been much occasion to test #1 and #2 as of late, so I would need to see more politicians take the pledge on #3. In terms of specific reforms, I would like to see policy makers enact the key ideas of the Squam Lake Report:

Capital ratios for all financial firms that increase with the size of the firm, the illiquidity of its assets, and its reliance on short-term liabilities for funding.
The use of regulatory hybrid securities to enable instant recapitalization of financially distressed firms in the event of a systemic crisis. (A requirement that each firm have enough such securities among its liabilities so that it would be well capitalized based on the requirements in #1 in the event that its existing equity had zero value would suffice.)
Compensation holdbacks from top executives at financial firms that vest on a long-schedule and are held in cash.

If the FSOC or the Congress had the guts to do this, the "Wall Street types" wouldn't have to rely so much on colder weather to clear out the protestors.

Last Night's Republican Debate

Andrew Samwick — Wed, 12 Oct 2011 17:40:29 +0000

Other words that weren't mentioned, even for their economic impact: Iraq, Afghanistan, education.

The Republican Debate at Dartmouth

Andrew Samwick — Mon, 10 Oct 2011 13:25:58 +0000

Dartmouth plays host to a Republican primary debate tomorrow, focusing solely on the economy. Here's a page of events for those in the local area. I'll be on Bloomberg TV tomorrow morning (around 10) as host Margaret Brennan broadcasts from the Green. [Update -- I blogged too soon. I've been bumped.] From the Washington Post's overview:

The Washington Post and Bloomberg TV, in partnership with WBIN-TV and host Dartmouth College, present the first debate of the 2012 campaign focused exclusively on the issue that matters most to American voters: the economy. Join us here on washingtonpost.com/debate on Tuesday, October 11 at 8:00 p.m. ET for the first debate to focus on the how to solve the nation's debt crisis and economic problems.

Charlie Rose will moderate the Bloomberg Washington Post Debate with co-moderators Washington Post political correspondent Karen Tumulty and Bloomberg White House correspondent Julianna Goldman. We'll offer live video streaming on our site and minute-by-minute coverage in our live blog hosted by The Fix's Chris Cillizza with conversation from tweets using #econdebate hashtag on Twitter.

Enjoy!

Learning from Solyndra

Andrew Samwick — Mon, 26 Sep 2011 14:52:29 +0000

The brewing scandal regarding Solyndra is an opportunity to consider which roles the federal government can and should play in developing alternative energy and which roles it should not. Take as a starting point the friendly column by Joe Nocera in Friday's New York Times:

But if we could just stop playing gotcha for a second, we might realize that federal loan programs — especially loans for innovative energy technologies — virtually require the government to take risks the private sector won’t take. Indeed, risk-taking is what these programs are all about. Sometimes, the risks pay off. Other times, they don’t. It’s not a taxpayer ripoff if you don’t bat 1.000; on the contrary, a zero failure rate likely means that the program is too risk-averse. Thus, the real question the Solyndra case poses is this: Are the potential successes significant enough to negate the inevitable failures?

If you have a risk that the private sector won't take, it is because the private sector does not see it as a profitable risk to take. It does not get more profitable if the government takes it. It only formally shifts the risk of losses to the taxpayers.

The real question is not whether this program may pick more winners than losers. The real question is why, if we believe that social policy should be promoting alternative energy, have we not priced energy from fossil fuels at a higher price that reflects the social costs of using them? With the higher price of fossil fuels, investments in alternative energy like this one would be more profitable to private sector investors who would reap the gains or bear the losses. It is better policy to have the government's involvement at the macro level -- setting the price -- rather than at the micro level -- picking the winners. The Solyndra scandal is a good example of why.

Obama's Lack of Focus: Some Further Thoughts

Andrew Samwick — Fri, 16 Sep 2011 14:27:48 +0000

I recommend Bruce Bartlett's latest Fiscal Times column to you, where he discusses how "Obama's Lack of Focus Could Be Politically Fatal." I'd like to offer two refinements:

First, Bruce argues that with regard to the 2009 stimulus plan, the medicine was appropriate but the dosage was inadequate:

By way of analogy, suppose you went to your doctor for an illness and he prescribed the correct medicine. But for some reason, you were given a dosage only half as big as necessary to cure your condition. Consequently, while you got better, you were not cured and continued to suffer. Under these circumstances, it is clear that the problem was not the medicine itself, but the dosage. Had you been given the correct dosage in the first place you would have been cured.

I agree with Bruce that it is important to get the history correct. An alternative of no increase in fiscal policy would not have been better. But I would characterize the problem as the primarily in the medicine, not the dosage. My analogy is nutrition. The 2009 stimulus plan contained too much fat and carbs and not enough protein. Fat is the stuff that gets stored -- think of temporary tax cuts to households that could already have incrased their spending if they had wanted to. Carbs are the stuff that gets used up immediately, with no impact on long-term expectations -- think of the various tax giveaways to households and firms that will consume them immediately rather than invest them. Protein is the stuff that builds muscle and improves your ability to perform in the future -- think of public infrastructure investment. I think that $787 billion (calories?) were enough, but what should have been a meal for a contestant in a bodybuilding competition actually turned out to be take-out from a greasy spoon. There was a better way to deal with downturns. Known at the time.

Second, Bruce argues that the time the President spent focused on health care reform could have been better spent focusing on the economy. He writes:

He appeared to believe that he had done quite enough to turn the economy around and thus moved on to other issues such as health reform, the environment and energy policy, which occupied an enormous amount of White House attention in 2009 and 2010.

I think this was a mistake, not because I think the Affordable Care Act was inherently bad policy, as Republicans do, but because it diverted Obama’s attention from the economy and caused him to take his eye off the ball.

Politically, it was only a mistake to focus on health care reform first if President Obama is not going to campaign on it as a success. As I wrote last month regarding President Obama's Re-Election Chances:

At the level of policy, I don't see why Obamacare, Dodd-Frank, and ARRA are not policies that he can run on. And remember that I am a conservative saying this. [Ed. Some readers have reasonably questioned this assertion.] The first provides badly needed insurance reform and greater health care access to millions. It does so at too high a projected cost (primarily the design of the subsidies up to 400% of the poverty level), in my opinion, but it is a step forward. The second improves the framework for preventing financial crises and resolving them once they arrive. A lot will depend on whether the new regulatory structure actually raises capital requirements, clamps down on the most abusive practices, and puts a profligate financial institution out of its misery at its first opportunity. And the stimulus package was either too small if it was to be "timely, targeted, and temporary" or simply spent on the wrong things (consumption, not public investment). But the president can make the case that it provided assistance when assistance was needed. The economy may not improve rapidly enough for any of this to matter, but I reject any suggestion that he cannot make a credible case for re-election based on his policies.

I think re-election strategies are fairly straightforward -- whatever you did, then that's what you campaign on. I don't see why a "They made the mess. We've been cleaning it up. Even though they keep hiding the key to the broom closet." theme wouldn't strike the right tone.

Meet the New Speech

Andrew Samwick — Fri, 09 Sep 2011 13:19:46 +0000

Aaron Blake and Chris Cillizza write in The Fix that President Obama almost granted me one of my wishes last evening. "There was a word missing from President Obama's jobs speech Thursday night: 'stimulus.'" Their statement reminded me of something I wrote in December 2008 when asked about the ideal stimulus package by the Economix blog:

If I had my druthers, the word ’stimulus’ would be expunged from public discussion, along with ‘bailout’ and ‘rescue.’ These words convey the idea that, because we have so mismanaged our economic and financial affairs, we are somehow able or entitled to conjure up additional funds out of thin air to fix our problems. There are two problems with this idea.

First, the purpose of government spending is to purchase goods and services that the government needs to meet its responsibilities, not to hand out resources to those who panhandle most loudly for them. The reason to spend more in a recession is not to employ idle resources — it is to be able to stretch the taxpayers’ money further by getting a better price for its purchases because workers without jobs will work for less and owners of empty factories will charge less. Second, there is no free lunch: the money we spend today is a loss to the Treasury, whether as ‘timely, temporary, and targeted’ tax cuts that have no discernible impact; payments to delay bankruptcy for large, mismanaged entities, whether A.I.G. or the Big Three; or the largest public works program since the Interstate highway system. That loss to the Treasury must be made up at some future date, by later cohorts of taxpayers.

Fortunately, both of these problems can be overcome by focusing all new spending on investment rather than consumption and on public investment rather than private investment. By their nature, capital investments last for years or decades, so that there is a better chance that those who are paying for the spending are reaping its benefits. Public investment also meets the criterion that the spending goes for projects that are within the government’s responsibilities. Repairing roads today removes the need to repair them for a number of years. In 2005, the American Society of Civil Engineers released a report card in which it estimated that $1.6 trillion would be required over a five-year period to restore the nation’s physical infrastructure to good condition. If I had a target of $500 billion to spend, every dime would go for public infrastructure investments, and we’d still have quite a bit of work left to do.

A couple of months later, the ASCE increased that estimated to $2.2 trillion (about half of which was not authorized over the five-year time period). I would stick to these criteria for how the Federal government ought to be passing legislation -- if you are going to spend money, address an identified need and get something of lasting value. So the first trillion of additional deficit spending goes to fixing the deficiencies in our public infrastructure.

Republican Debate: Some Quick Reactions

Andrew Samwick — Thu, 08 Sep 2011 02:18:44 +0000

Tonight's was the first Republican primary debate I watched start to finish. My bottom line is that, based on this performance, only Mitt Romney and Jon Huntsman looked like viable candidates in the general election. I was underwhelmed by Rick Perry, and sadly disappointed in the discussion of Social Security as a Ponzi scheme. There is a difference between a Ponzi scheme and a pay-as-you-go system. The Social Security Administration provides a very clear explanation here. The key excerpt:

There is a superficial analogy between pyramid or Ponzi schemes and pay-as-you-go programs in that in both money from later participants goes to pay the benefits of earlier participants. But that is where the similarity ends. A pay-as-you-go system can be visualized as a simple pipeline, with money from current contributors coming in the front end and money to current beneficiaries paid out the back end.

So we could image that at any given time there might be, say, 40 million people receiving benefits at the back end of the pipeline; and as long as we had 40 million people paying taxes in the front end of the pipe, the program could be sustained forever. It does not require a doubling of participants every time a payment is made to a current beneficiary, or a geometric increase in the number of participants. (There does not have to be precisely the same number of workers and beneficiaries at a given time--there just needs to be a fairly stable relationship between the two.) As long as the amount of money coming in the front end of the pipe maintains a rough balance with the money paid out, the system can continue forever. There is no unsustainable progression driving the mechanism of a pay-as-you-go pension system and so it is not a pyramid or Ponzi scheme.

The problem with Social Security is that over the long-term, the flow into the pipeline is projected to be less than the flow out of the pipeline. Republican candidates should have been talking about ways to gradually phase in progressive reductions in that outflow to match the inflow. If instead they want to fix the projected imbalance with new revenues, they should have been talking about ways to separate that money from the rest of the government's budget with personal accounts.

In case anyone cared about the facts ...

Let's Hope It Is Just This Simple

Andrew Samwick — Tue, 06 Sep 2011 13:48:40 +0000

Kevin Drum has joined the chorus, with "My Jobs Plan: A Trillion Dollars for Infrastructure:"

All of us have our fantasies about what we'd like President Obama to say in his big speech next week about jobs. Here's mine: ask Congress to appropriate a trillion dollars to be spent on infrastructure upgrades over the next five years. That's it. That's the jobs plan. A trillion dollars to make us into a first-world country again. And as part of the enabling legislation, ask for emergency powers to temporarily streamline the regulatory red tape, interagency approval processes, environmental-impact statements, and labor rules that might otherwise keep the money from being put to work speedily.

Will a Republican Congress agree to do this? Almost certainly not—at first, anyway. But building and repairing infrastructure is no boondoggle. It needs to be done, it needs to be done now, and it would be an easy sell to a public cynical about the government's ability to do anything concrete to help them. Make the case aggressively and you never know. Free money is free money, and even Republican voters like the idea of clean water, safe bridges, pipelines that don't blow up, electrical grids that work, and dams and schools that aren't crumbling.

So that's it. A trillion dollars for infrastructure. That's the plan. Let's do it.

I couldn't have said it better myself. Just much, much earlier.

Potholes

Andrew Samwick — Thu, 01 Sep 2011 13:40:49 +0000

My colleague, Matt Slaughter, holds forth today on the link between infrastructure and jobs. He is a former member of the CEA and an expert in interanational economics:

There is a crucial connection between potholes and unemployment. America's crumbling infrastructure is eroding America's competitiveness in the global economy by eroding America's ability to attract and retain global corporations and their high-productivity, high-wage jobs.

This was not always so. Over much of the 20th century, America's strong infrastructure investment was a major factor attracting global corporations headquartered in other countries to invest and create jobs here. Rising U.S. standards of living were fueled by a strong infrastructure system that facilitated the growth of companies in America, both global and domestic alike: transportation systems to move people and products, electrical systems to power plants and offices, communications backbones to drive computers and creativity. By 2008, the U.S. subsidiaries of foreign companies employed over 5.6 million Americans -- nearly 2 million in manufacturing -- and exported $232.4 billion in goods. That's 18.1% of America's total.

Today is very different. America's decaying infrastructure costs the typical American worker hundreds of hours in lost productivity. It also costs companies time and efficiency in moving their products around -- and also out of -- the country. This decay is particularly stark for global companies, whose executives are witness to the dynamism of emerging economies like China and India that present them with ever-widening choices for where to grow jobs and investments around the world.

Read the whole thing.

President Obama Nominates Alan Krueger to be CEA Chairman

Andrew Samwick — Tue, 30 Aug 2011 13:48:56 +0000

An excellent choice. Here's the video:

One cannot help but notice the pleading tone of the President's remarks, for Congress to actually do something. I bet he wishes he was Prime Minister now.

What should the Obama Administration's fiscal priorities be? Public infrastructure investment, to build while it's cheap, debt-financed if necessary. There is some evidence that the incoming CEA Chair gets it.

The Real Advantage of a Parliamentary System

Andrew Samwick — Fri, 26 Aug 2011 13:11:01 +0000

In a column last week, Fareed Zakaria asked, "Does America Need a Prime Minister?" It is a question that often comes up when political gridlock makes it appear that we cannot respond to a crisis. My answer is no. Answer yes if you would have rather had the country governed with the Speaker of the House as the chief executive rather than the President over all of the last two decades. Prime Minister Gingrich. Prime Minister Pelosi. Answer yes if you would like to have more and possibly more influential Tea Party movements legitimized as parties of their own, or if you would like Bernie Sanders (Socialist-VT) to have more company serving in elected office on Capitol Hill.

An advantage of the parliamentary system that I do wish we could find a way to replicate in our non-parliamentary system is the requirement that a party cannot obtain control of the national executive branch without demonstrating its appeal in the national legislative branch. This is no guarantee of good government, but I think it would improve our system, at least based on the experience of recent decades. It is a feature of our system that we tend to elect governors, rather than senators, to the Presidency. We haven't elected a senator who wasn't facing another senator since JFK. So every 4-8 years, the party that does not control the Presidency has a shot at gaining the Presidency -- and thus "half" of the power in the Washington -- with a candidate who has had nothing to do with Washington and its current predicament. Look at the way all governors, from Carter to Reagan to Clinton to Bush, have run as "outsiders."

Stated differently, in our system, there may be insufficient reward to a political party for good behavior in the legislature, and not nearly enough punishment to a political party for bad behavior in the legislature. Since control of the legislature is the ultimate electoral prize in a parliamentary system, that is a problem those systems don't have to quite the same degree as we do.

A Failed Analogy

Andrew Samwick — Thu, 25 Aug 2011 14:20:52 +0000

I enjoyed this essay on the many failures of Steve Jobs, by Nick Schultz at NRO. But I think he misses the point with this cautionary tale for Washington:

There’s a moral here for a Washington culture that fears failure too much. In today’s Washington, large banks aren’t permitted to fail; nor are large auto firms. Next up will be too-big-to-fail hospital systems. Steve Jobs is a reminder that failure is a good and necessary thing. And that sometimes the greatest glories are born of catastrophe.

The analogy would have more meaning if thousands of Steve Jobses of varying degrees of quality had been bundled and securitized in the most opaque of ways, given ratings by agencies that were on the take, and funded by enormous amounts of debt backed by minimal capital. We didn't have that and thus we had very little to fear from failure on anyone of the many ideas Steve Jobs launched.

President Obama's Re-election Chances

Andrew Samwick — Wed, 24 Aug 2011 14:36:36 +0000

Dartmouth welcomed the Gallup Poll's editor-in-chief, Frank Newport, to campus yesterday for the closing lecture in our "Leading Voices in Politics and Policy" series. His assessment of President Obama's re-election chances was negative:

Ten presidents have run for re-election since we’ve had modern polling, since Harry Truman. Seven of them have been successful, and three have been defeated. … in August before his election year his current 38 percent job approval rating is lower than any other president who was successfully re-elected. So history would say he’s in big trouble.

There has been a rash of commentary in recent weeks about what the Obama Administration could have done better. (Pick up one thread here and follow it back.) At a very general level, I think President Obama's biggest problem is that he wants to be the president who transcends politics. The president who wants to transcend politics will be a patsy for a Congress that doesn't.

At the level of policy, I don't see why Obamacare, Dodd-Frank, and ARRA are not policies that he can run on. And remember that I am a conservative saying this. The first provides badly needed insurance reform and greater health care access to millions. It does so at too high a projected cost (primarily the design of the subsidies up to 400% of the poverty level), in my opinion, but it is a step forward. The second improves the framework for preventing financial crises and resolving them once they arrive. A lot will depend on whether the new regulatory structure actually raises capital requirements, clamps down on the most abusive practices, and puts a profligate financial institution out of its misery at its first opportunity. And the stimulus package was either too small if it was to be "timely, targeted, and temporary" or simply spent on the wrong things (consumption, not public investment). But the president can make the case that it provided assistance when assistance was needed. The economy may not improve rapidly enough for any of this to matter, but I reject any suggestion that he cannot make a credible case for re-election based on his policies.

At the level of tactics, President Obama's actions have been puzzling in some cases. He should never, as a matter of principle, allowed the Bush era tax cuts on the highest income groups to be renewed. He ran away from a fight, lost credibility with his base, and gained little in return. The critical part of engaging in that fight would have been to use the tools available to him through the political process to block the agenda of Congressional Republicans. I find it hard to believe that his fiscal policy changes he has enacted would have turned out materially worse for him if the Democrats did not have the majority in the Senate and the Constitution did not afford him a veto.

Sometimes, the way to transcend politics is to be extremely good at it.