Matthew Yglesias's Blog, page 2434

Default By Another Name

Brian Beutler writes about Pat Toomey's plan to have the government make good on its obligations to bond owners by defaulting on its obligations to seniors, soldiers, etc.:

"I intend to introduce legislation that would require the Treasury to make interest payments on our debt its first priority in the event that the debt ceiling is not raised," Sen. Pat Toomey (R-PA) wrote in a Friday Wall Street Journal op-ed.

If passed, Toomey's plan would require the government to cut large checks to foreign countries, and major financial institutions, before paying off its obligations to Social Security beneficiaries and other citizens owed money by the Treasury — that is, if the U.S. hits its debt ceiling. Republican leaders insist they will raise the country's debt limit before this happens. But first, they're going to try to force Democrats to accept large spending cuts, using their control over the debt limit as leverage. That means gridlock, and the threat that they'll come up short.

Now of course this is nonetheless a kind of default. A person whose creditworthiness is above question meets all his financial obligations. Another kind of person might manage to stay current on his mortgage and make minimum credit card payments while leaving utility bills unpaid and welching on sundry promises to friends and business associates. That's not grounds for foreclosure, but obviously it's going to hurt your standing as a borrower.

Israel and Egypt

Call me crazy, but my guess (and I'll certainly emphasize that it's a guess and not the product of deep understanding of Egyptian politics) is that the full of Mubarak and the rise of a more democratic Egyptian regime would be good for Israel. The peace agreement with Israel was signed by Anwar Sadat for perfectly sound reasons of state and its been maintained for thirty years for equally sound reasons of state. Egypt, unlike Saudi Arabia or Iran, is actually adjacent to Israel so if it's not at peace with Israel it's at war—in a non-theoretical way—and war with Israel is not in the interests of the Egyptian public or state. And I think that ultimately paying attention to reasons of state will shed more light on the future course of Egyptian policy than will attempting to parse the theological musings of the Muslim Brotherhood.

But it's easy enough to see how this fact could be obscured in the minds of many (or most) Egyptian people as the unpopularity and corruption of the regime comes to taint all the regime's policies, including the ones that make sense. Ultimately, lack of regime legitimacy has sapped legitimacy from the peace deal and that's bad for Israel. A more legitimate government will come around to Sadat's calculus but also would be in a position to invigorate peace in a way that Mubarak simply can't.

And I think a smart Israeli government would recognize this. Instead we have an Israeli government that's committed to a short-sighted and morally indefensible policy in Gaza that Mubarak has cooperated with but a successor regime probably wouldn't.

Waste And Reward In Health Care

Is it a contradiction to think that people both underestimate the value of health care and also that the health care system is full of waste? Very well, I contradict myself. Because I agree with Kevin Drum:

I think a lot of people seriously underrate the value of modern improvements in healthcare. It's not just vaccines, antibiotics, sterilization and anesthesia. Hip replacements really, truly improve your life quality, far more than a better car does. Ditto for antidepressants, blood pressure meds, cancer treatments, arthritis medication, and much more.

I think that's spot on. The consumer surplus involved in successful medical treatments is gigantic. Indeed, I would say that's probably a good start at an explanation for why there's so much waste. But from a policy point of view this is why I often find myself moored between the impulse to "control costs" and the impulse to "expand access." What I really want to do is promote good health and there are an awful lot of things we could do to do that at very low cost. That's things like getting surgeons to wash their hands properly and making sure we prioritize treating chronic pain over fighting a "war on drugs." In general, the most valuable treatments often entail very low marginal costs (though there may be substantial up-front research costs) and properly organized systems are able to deliver them both widely and cheaply.

Strange Disclaimer

I finished Neal Stephenson's The System of the World earlier today. It's the third volume in his enormously long Baroque Cycle, a work of historical fiction featuring such characters as William of Orange, Isaac Newton, the Duke of Marlborough, and King Louis XIV of France. I liked it so much that after reading several thousand pages of book proper I read through the acknowledgments and kept flipping all the way to a disclaimer page where I read (per usual):

This book is a work of fiction. The characters, incidents, and dialogue are drawn from the author's imagination and are not to be construed as real. Any resemblance to actual events or persons, living or dead, is entirely coincidental.

What kind of society includes this boilerplate with ever book? The disclaimer comes, after all, right after several pages of acknowledgments in which Stephenson talks about which historians' work influenced his portrayals of these historical events and historical characters. It is a work of fiction, but it's clearly not the case that any resemblance between the "Isaac Newton" character and the actual person, Isaac Newton, is a coincidence. Why lie like that? It's a heck of a world.

Progress: Technical, Economic, and Human

On the subject of the possibly slowing rate of technological progress it's worth stealing a point from Gregory Clark's A Farewell to Alms about the printing press.

If you read a conventional narrative history, or deploy common sense, it's clear that Gutenberg's invention of the Movable Type printing press was a transformative moment in human technological progress. It changed everything. And yet if you try to take a rigorous look at the economic statistics, it doesn't show up. It's invisible. There was no sustained increase in material living standards associated with the printing press. Or with clockmaking. Or with the sextant or the barometer or the reflecting telescope. Indeed, in terms of sustained increases in per capita living standards all the scientific and technical innovations of the 16th and 17th centuries produced absolutely nothing.

And that's because, to take the example of the printing press, books simply weren't a large enough share of overall consumption for massive increases in the productivity of book-making to show up in the data. When better machines for making clothes were in invented, overall productivity surged. But the printing press . . . nada.

Which when you put your common sense cap back on merely reinforces the fact that there's a difference—a big one—between economically significant technological progress and technological progress that's significant in a broader sense. What's really needed in terms of economic growth are innovations that massively increase productivity in sectors of the economy that account for large shares of consumption. What we've gotten instead is the Internet, which (like the printing press) is transforming some culturally important, but economic marginal, pursuits.

Nonseverability

The giveaway in the latest court ruling against the Affordable Care Act is the judge's ruling that the allegedly unconstitutional "individual mandate" is "non-severable" from the rest of the law. That means that all the parts of the law are being thrown out. The provision reducing subsidies to for-profit student loans? Unconstitutional! Expanded Medicaid eligibility? Unconstitutional! Reduced prescription drug costs for seniors? Unconstitutional!

This is the view with the least support in legal precedent, but that does the most to advance the financial interests of the conservative coalition in the United States of America. And that's about how judging works. The interesting thing, looking ahead to the Supreme Court, is that Justice Kennedy, unlike Judge Vinson, isn't a dyed-in-the-wool member of the conservative political coalition. That said, he's pretty conservative on economic policy questions so I'm not really sure where the confidence of progressive lawyers that they're going to win this case comes from. Ultimately, big constitutional controversies just come down to what the median justice prefers to do.

The Transformative Impact of Ronald Reagan

Time:

[A]s the conversation progressed, it became clear to several in the room that Obama seemed less interested in talking about Lincoln's team of rivals or Kennedy's Camelot than the accomplishments of an amiable conservative named Ronald Reagan, who had sparked a revolution three decades earlier when he arrived in the Oval Office. Obama and Reagan share a number of gifts but virtually no priorities. And yet Obama was clearly impressed by the way Reagan had transformed Americans' attitude about government.

Brendan Nyhan casts some doubts on whether this transformation actually happened, citing public opinion data.

In some ways I think it's more useful to just look at broad policy outcomes. Suppose someone proposed to repeal Obama, then end Medicare prescription drug coverage, then repeal SCHIP, then repeal the Americans With Disabilities Act, substantially roll back the Clean Air Act and Clean Water Act, reduce Medicaid eligibility, and repeal COBRA. We'd consider that a gigantic rollback of the welfare state, right? This would be a more right-wing agenda than Mike Pence dares propose. And yet it would describe returning the American welfare state to its pre-Reagan status quo.

The remarkable thing, to me, is that if you look at the years 1977-2008 there was a clear trajectory to policy that continued more-or-less unbroken despite changes in party control of different branches of government. Environmental regulations got stricter, the welfare state expanded, and other forms of business regulation declined. The biggest welfare state expansion happened under GW Bush and the biggest deregulatory episodes occurred under Carter and Clinton.

Evan Bayh Off To Work On Prosperity-Enhancing Private Sector Job Creation

Be the change you want to see in the world:

Evan Bayh announced last year that he would not be seeking reelection, and gave a pious speech deploring partisanship. "If I could create one job in the private sector by helping to grow a business, that would be one more than Congress has created in the last six months," he announced. And now, just a few weeks into his post-public service life, he has already created a job — for himself: "Former Sen. Evan Bayh is joining McGuireWoods LLP as a partner in Washington, the law firm will announce on Monday."

As a Senator, Bayh had a professional obligation to try to shape American public policy in the best interests of the American people and of the world. As a lobbyist for McGuireWoods LLP, Bayh now has a professional obligation to try to shape American public policy in the best interests of McGuireWoods LLP's well-heeled clients. I'm not one of the large number of DC-based writers who frequently chats with Bayh, but if I were I'd be interested in learning why he thinks trading the former obligation for the latter one is a change for the better.

The Ideological Point Scoring We Need

I've been trying to resist the temptation to use the protests in Egypt as a mere venue for narrow minded point scoring, but damnit I just can't hold back any longer. If you think back to 2003, 2004, and 2005 you very commonly heard (neo-?) conservatives arguing as if the main thing liberals found objectionable about George W Bush's foreign policy was that liberals didn't like the idea of Arab countries being democracies. Liberals tended to say "no, no" that what we didn't like about Bush's foreign policy was that his foreign policy was (a) terrible, and (b) getting huge numbers of people killed while (c) accomplishing nothing or (d) aiding the geopolitical aspirations of Iranian hardliners.

And whatever else happens, I think what we're seeing in Egypt is a definitive refutation of that conservative argumentative frame. You don't see American progressives out in the streets leading pro-Mubarak rallies, you don't see Mohammed ElBarradei talking about how the Middle East is no place for freedom, and you don't see any of the other things you would predict on the hypothesis that criticism of the invasion of Iraq was primarily motivated by a desire to shield Arab autocrats from criticism.

The Solutions We Need

Mark Kleiman on the hugely successful HOPE crime control program:

Just to stress the key point in Keith's post on HOPE and related programs: not only do they reduce substance abuse and crime, they reduce incarceration. The more general point is that, compared to current practices, well-designed enforcement systems can bring about both less undesired behavior and less punishment.

I say that's the crucial point for two reasons, one ethical and one political. Ethically, keeping people out of prison is a demand progressives ought to unite behind, even when the mechanism that brings it about is coercive (threats of jail) rather than facilitative (offers of treatment). Politically, less incarceration means reduced cost: HOPE in Hawaii pays for itself about four times over. If you're a governor facing a fiscal crisis – which is to say, if you're a governor – doing community corrections right is, potentially, a source of substantial savings as well as a means of reducing substance abuse and crime.

The more you think about the bigger picture and the longer term in America, I think the larger this kind of problem looms. Americans households, despite current economic problems, have very high incomes by global or historical standards. But the USA is also a country where an awful lot of people are in prison and where an awful lot of people are victimized by violent crimes. Crime control reforms that tackle both issues simultaneously offer huge improvements in human welfare.