Matthew Yglesias's Blog, page 2392

The End of Bretton Woods

I did want to make one other point about Dani Rodrik's The Globalization Paradox, namely that at times he seems to me to be glossing over the fact that the Bretton Woods system collapsed for a reason. But it did. Conceivably western leaders could have responded to its collapse by creating a whole new system of fixed exchange rates pegged at different levels. But that would have been hard, and there would have been big credibility problems. The point is that it's not as if the Nixon administration rode into town in early 1969 intending for the system to collapse because Nixon had some some Milton Friedman papers about the virtues of flexible exchange rates. What happened was that European countries started amassing claims on US gold reserves that we couldn't meet, so we were forced into a fairly humiliating position.

You Can't Fight City Hall Without a Coherent Party System To Organize Preferences and Agendas

David Schleicher on the pathologies of municipal governance:

Employing tools drawn from economics and urban studies – particularly agglomeration economics, public choice, and the wisdom of Woody Allen's classic film Annie Hall – this essay provides a theoretical explanation for the prevalence of big city political corruption. The essay argues that the reason we see more government corruption in big cities than in other jurisdictions is that they are largely immune to the traditional cures for corruption, exit and voice. The location decisions of big city residents are, under dominant theories of urban economic theory, sticky in the face of bad governance, reducing the effect of inter-jurisdictional competition on the behavior of officeholders. Further, big cities rarely if ever see real partisan competition, leaving under-informed voters without the tools to punish all but the worst forms of unresponsive or corrupt governance. Traditional remedies – ranging from encouraging exit to non-partisan elections – either do not solve the problem or create substantial costs of their own. The essay concludes by arguing that election laws in cities should be reformed in order to encourage the development of political parties that are differentiated on local issues. Alternatively, cities should provide voters with locally specific party-like heuristics by allowing prominent elected officials like Mayors to endorse other local officials on the ballot. This would improve local democracy, and thereby address the root causes of urban political corruption.

The point here is that because cities are overwhelmingly Democratic in terms of national party politics, the partisan labels don't work as heuristics for structuring municipal decision-making.

Endgame

Used to believe in a lot more:

— I'm with my former professor Warren Goldfarb on Team Kuhn against Errol Morris' smears.

— I strongly recommend Kuhn's The Copernican Revolution as a more accessible intro than the more famous Structure of Scientific Revolutions.

— "75 years of economic research have apparently had no impact on perceptions, either among the public or among the political elite."

— John Winhtrop, un-American socialist.

— What are cities good for.

Rilo Kiley, "Science vs Romance" sheds disappointingly little light on the Thomas Kuhn's philosophy of science.

The Road To Carbon Tax

I mentioned this the other day, but when I read things like this I think that climate hawks need to reorganize a bit and re-engage with the case for taxing greenhouse gas emissions:

Sessions, 64, also said he's willing to consider tax increases, along with cuts in entitlement program costs, as part of an effort to craft a longer-term, bipartisan plan to tame the U.S. debt and deficit.

Tax increases will "be a bitter pill for me, but we have got to get this country on the right path," said Sessions, who became the ranking Republican on the budget panel in January.

Still, Sessions said he would question whether any tax increase were needed. "I'd have to challenge it, but I would look at it," the senator said.

Basically, the country needs higher taxes. But Democrats don't want to raise taxes unless they get Republican cover. But if Republicans ever vote for a tax hike, it'll have to be a regressive one. So if there's going to be a regressive tax hike, it should include some sweetener to make it appealing to some segments of the progressive coalition. To me that says—carbon tax.

Is that a likely scenario? No, of course not. But no scenario that involves Republicans agreeing to a tax hike seems likely to me. And yet Washington is obsessed with the idea of a bipartisan budget deal that involves Republicans agreeing to a tax hike. A carbon tax seems to me to be the most plausible way to put one together, and a bipartisan budget deal seems to me to be the most plausible way to get carbon pricing done.

Cutting Spending Involves Reductions In Levels of Service, Including Newsworthy Services

I've been in a kind of day-long twitter spat with the right-wing over the fact that the House Republican spending plan would involve cuts in tsunami warning programs.

So to pull out of the weeds for a moment on the blog, the point I want to make is this. If you insist on large cuts in "spending" what happens is that you need large cuts in what the government spends money on. That's primarily the military, Medicare, Social Security, and Medicaid. If you insist instead, as the House Republicans, on large cuts in non-security discretionary spending what happens is you get large cuts in all non-security discretionary spending programs. Cuts in schools. Cuts in tsunami monitoring. Cuts in hurricane tracking. Cuts in national parks. Cuts in financial regulatory enforcement. Cuts, cuts, cuts. That's what it means to "cut." If you want the government to spend much less money, it needs to do less stuff. If you want the government to spend much less money while avoiding cuts in the government's most expensive programs, it needs to really scale back on all the other stuff. That's what cutting spending is. The belief that spending should be substantially reduced requires the belief that the government should do substantially less stuff.

Firing Government Workers Leads To A Reduction In Overall Levels Of Employment

Here's a look at your year-to-year changes in aggregate employment:

What happened in New Jersey? Well, Chris Christie happened: "New Jersey's job losses were almost entirely due to cuts in government employment."

There's a case to be made, clearly, that laying off government workers and using the savings to cut taxes on rich people will boost economic growth over the long run. But insofar as what you're interested in is this recession right now it makes things worse. And for the past year this has been the main story of the labor market—private sector growth partially offset by public sector layoffs. You can like that pattern or you can dislike it, but what you can't do is what conservatives have been doing—implementing the layoffs and then complaining that Barack Obama's not doing enough to boost short-term job growth.

Making Sense of the Rationing Switcheroo

Paul Krugman observes the madness of conservative rationing rhetoric:

But nobody is proposing that the government deny you the right to have whatever medical care you want at your own expense. We're only talking about what medical care will be paid for by the government. And right-wingers, of all people, shouldn't believe that everyone has the right to have whatever they want, at taxpayers' expense. The Declaration of Independence did not declare that we have the right to life, liberty, and the all expenses paid pursuit of happiness.

And of course Huckabee knows this; he's being completely cynical here — and his whole party is going along.

I think it's actually worth exploring the logic of this position. I see two ways in which it can be rendered coherent, albeit repugnant. One is basically the "welfare state for me, but not for thee" of old people. Any effort to reduce government spending on health care for the elderly is intolerable socialism, and any effort to increase government spending on health care for the non-elderly is also intolerable socialism. That's cynical, but it also reflects the objective difference in the age structure between the parties.

Another way of looking at it is this. Currently Medicare is an unlimited commitment to pay for old people's health care. Ultimately, that needs to be transformed into a commitment that is limited in some way. The Obama administration's idea is to limit it technocratically, through comparative effectiveness research. The idea is that for some arbitrary level $X of taxpayer spending on health care, the funds will be allocated to the treatments with the highest cost-benefit outlook. Other treatments can be paid for out of pocket. The conservative alternative is to limit the commitment through high deductibles. The government will pay for whatever, but only if you've already spent $Y out of pocket. Since $Y will represent a higher share of your income the richer you are, this is a proposal that's much friendlier to wealthy old people than to less wealthy ones. And that, in turn, is very consonant with the conservative movement's general commitment to advance the economic interests of wealthy people.

State Department Spokesman Slams Conditions of Bradley Manning's Detention

I certainly wouldn't have expected State Department Spokesman P.J. Crowley to say that Bradley Manning's detention conditions are

Gates Slams Allies For Shirking

Robert Gates

I don't really know what this is supposed to accomplish:

In a deliberately undiplomatic speech to NATO defense ministers, Mr. Gates called on European allies to put aside their domestic politics and work with the United States to secure the "semblance of normalcy" that he said was emerging in some parts of Afghanistan.

"Frankly, there is too much talk about leaving and not enough talk about getting the job done right," Mr. Gates said. "Too much discussion of exit and not enough discussion about continuing the fight. Too much concern about when and how many troops might redeploy and not enough about what needs to be done before they leave."

Speeches aside, there's a free-riding problem built into the structure of American policy. We want out allies to share more of the burden, but we're not willing to formally commit ourselves to collective action. Gates could say something like "we think a big deployment is in the collective interests of all NATO members, but we won't lift a finger to do it unless everyone ponies up an acceptable level of support." But he's not going to say that. So how are NATO states not going to end up free-riding? Given the objective situation, I think what's been remarkable about the Afghanistan War is how little Euroshirking there's been. The Pentagon is actually quite effective at capturing European military bureaucracies, but over the extent of what this can accomplish necessarily erodes.

Commerce Cabinet Crisis XIV: Frederick H. Mueller

When Sinclair Weeks stepped down as Secretary of Commerce, President Eisenhower swiftly acted to tap Atomic Energy Commission Chairman Lewis Strauss for the job. Strauss was an important figure in the development of the H-bomb, an antagonist of Robert Oppenheimer, and one of the proponents of the "Atoms for Peace" strategy. But he ended up being an early victim of Senate confirmation limbo, hanging as acting secretary for months, and eventually forced to withdraw his nomination.

Into the breach stepped Frederick H Mueller of Michigan, a man so obscure he barely has a Wikipedia page. Further internet research reveals a somewhat strange life story. Way back in 1892, Mueller's dad, J Frederick Mueller, founded a furniture company in Michigan with some other duded. The year after that, he had a son, Frederick. Frederick graduated from Michigan State University in 1914 and by 1915 he had a controlling interest in his dad's furniture company. He then spent the next 40 years (PDF) being general partner in a furniture company he inherited almost immediately upon graduating from college. He had a lot of minor civic roles in Grand Rapids, was an active member of the Peninsular Club, and was basically a local bigshot in a not very glamorous city.

Then in his sixties, he suddenly changed direction and moved to Washington to be Assistant Secretary of Commerce. After a couple of years in that position he moved up to be Undersecretary of Commerce. When the Strauss nomination fell through, his rise from being a director of the Grand Rapids Furniture Manufacturers' Association to the lofty status of full-fledged cabinet secretary was complete. Needless to say, having scaled the heights he didn't manage to leave any mark on history.