Topic: Government and Politics

For the Good of Barack Obama, Mr. Rangel Should Step Aside

Or am I reading too much into the Washington Post editorial, “Step Aside, Mr. Rangel,” when it says:

At a time when President-elect Barack Obama is holding frequent news conferences to reassure the markets and the American people that he is ready to lead the nation to economic recovery, the last thing he will need is a chairman of Ways and Means caught up in a swirl of serious allegations.

The cult of the presidency, indeed.

Pointless, Political, and Pork-filled

Greg Mankiw speculates on the best alliterative description of the stimulus package:

Instead of fiscal stimulus that is temporary, targeted, and timely, John Taylor suggests that it be permanent, pervasive, and predictable.

What the Obama administration is aiming for, it seems, is helpful, hopeful, and humongous.

Critics fear it might end up pointless, political, and pork-filled.

—–

Update: A reader emails me that Larry Summers now calls for stimulus that is speedy, substantial, and sustained.

Other readers think it will be:

big, bloated, and borrowed.
immodest, immoral, and imbecilic.
clumsy, corrupt, and counterproductive.
expansive, extensive, and expensive.
weighty, worrisome, and wayward.
politicized, pandered, and pathetic.
socialized, silly, and sorry.
random, record-setting, and ridiculed.
ultimate utilitarian utopianism.
absolutely abjectly apocalyptic.

Is Hillary Clinton Unconstitutional?

So Hillary Clinton is “on track” to be the nation’s top diplomat, huh?  Well, setting aside the wisdom of that decision – forget ideology; does she have both foreign policy expertise and a good working relationship with the President-elect? – it appears that there may be genuine constitutional problems with her expected nomination.  To wit, Article I, section 6, clause 2 reads:

No Senator or Representative shall, during the Time for which he was elected, be appointed to any civil Office under the Authority of the United States, which shall have been created, or the Emoluments whereof shall have been encreased [sic] during such time…

That is, under this “Emoluments Clause,” members of Congress are expressly forbidden to take any appointed position within the government which was created or whose pay has been increased during their current term in office.  Now, a January 2008 executive order, promulgated in accordance with a statute from the 1990s that addressed cost of living adjustments for certain federal officials, raised the Secretary of State’s salary, thus constitutionally prohibiting any then-serving senator who remains in office from taking charge of Foggy Bottom. (Sen. Clinton’s current term began in January 2007 and expires in January 2013.) 

Not surprisingly, this is not the first time such a conflict has arisen in executive appointments and nominations and, equally not surprisingly, Congress has on several occasions legislated around it:  To enable one of its own to assume executive office, Congress simply decreases the pay of that office to the pre-raise level for the full tenure of that specific appointee.

Although this legerdemain has been around since at least the Taft Administration – and was most recently used when President Clinton picked Sen. Lloyd Bentsen to be his Treasury Secretary – the move is called the “Saxbe Fix” after Sen. William Saxbe, whom President Nixon nominated for Attorney General.

The Saxbe Fix is not uncontroversial.  UCLA law professor Eugene Volokh, for example, cites Steptoe and Johnson partner John O’Connor’s objection that the Saxbe Fix is inadequate for circumventing the Emoluments Clause.  To O’Connor’s thinking, while simply lowering the salary – resulting in no “net” increase – does prevent the nominee from directly benefiting from a vote he or she cast, it would not substantively address the Framers’ intent to limit the size and scope of the federal government. That is, if, contrary to the Emoluments Clause’s terms, Congress can restore its Members’ eligibility for appointment by reducing the office’s salary, the Emoluments Clause ceases to serve its function as providing a constitutional disincentive for regular increases in the salaries of federal offices.

One could also argue that in this specific case, Congress did not act to increase anybody’s salary; it was that long-ago Congress that even gave that option to the president – and only in the form of an aross-the-board COLA, not some shady or opportunistic self-dealing.  But, of course, if we are to follow the text of the Constitution, there is no exception for offices “the Emoluments whereof shall have been encreased” by a non-shady COLA granted via statutorily-enabled executive order.

Whether anyone could challenge Hillary Clinton’s appointment in the courts is another matter.  Perhaps someone denied a passport, or who has had some other adverse action done to them by a Clinton-led State Department, would have standing to sue.  In any event, in this time of constitutionally questionable bailouts, it cannot hurt to be vigilant even about the most obscure text from our nation’s governing document.

Much more on this issue can be found in Eugene’s fascinating post here.

The Broad-Mindedness of Richard Holbrooke

Lots of scuttlebutt today involving the name “Richard Holbrooke.”  An emblem of the Democratic Party foreign policy establishment, Holbrooke is revered by some for his ruthlessness and ability to crack heads.  A dedicated global interventionist, Holbrooke is high on the list of “people antiwar Democrats don’t want involved in an Obama administration.”  In addition to ruthlessness, let’s take a walk down memory lane and attempt to determine how well Holbrooke would fit in an Obama administration that is supposed by many to be broad minded and determined to evaluate all arguments on a policy before leaping in.  Here’s Holbrooke in 1994 chairing a meeting with mid-level officials to discuss NATO expansion:

Without having spoken to [Anthony] Lake or to the president, Holbrooke told the interagency group that there was a presidential policy to enlarge NATO that needed implementation.  Holbrooke also made clear that [Warren] Christopher had asked him to set up and run the mechanism to expand NATO.

The new assistant secretary of state had a reputation for abrasiveness, and at this meeting, he demonstrated why.  General [Wesley] Clark has recalled:

[Joseph] Kruzel spoke first, since he was the policy guy, and said, “Why is this the policy?  It’s supposed to be an interagency process.”  Holbrooke crushed him like a bug.  He said, “It is policy.”  Ash Carter walked out of the room.  Then, as the meeting was about to conclude, I said, “I don’t know that a decision has been made.”  Holbrooke said, “Anyone questioning this is disloyal to the country and to the president.”  My ears turned bright red…and I demanded that he take it back.  The room stopped.  I got ready to leave.  Holbrooke took it back.

That’s from James Goldgeier, Not Whether But When, pp. 73-74.  So here you have it.  Pursuing disastrous policies while impugning the motives of career military officials and labeling them anti-American if they have the temerity to object?  Check.  As compared to the tactics of the Bush administration, that’s not exactly “change,” but I sure can believe it.

The Left Embraces the Shock Doctrine

Last week Rahm Emanuel said to a prestigious audience, “You never want a serious crisis to go to waste. It’s an opportunity to do things you could not do before.”

And that’s just the strategy that bestselling author Naomi Klein accuses right-wingers of employing. Weaving a convoluted yet superficially simple tale of world events, she claims in her book The Shock Doctrine that right-wing ideologues and governments both use and create moments of crisis to implement their nefarious agenda.

“Some people stockpile canned goods and water in preparation for major disasters,” Klein writes. “Friedmanites stockpile free-market ideas.” Which is exactly what American left-liberals have been doing in anticipation of a Democratic administration coming to power at a time when the public might be frightened into accepting more government than it normally would. The Center for American Progress, for instance, run by John Podesta, who was President Bill Clinton’s chief of staff and is now President-elect Obama’s transition director, has just released Change for America: A Progressive Blueprint for the 44th President.

The ideas in that report mesh well with the opportunities that Emanuel identified. After re-emphasizing the opportunities that crisis provides, he told his audience that the Obama administration wanted to use the opportunity to implement central planning of health care and energy, higher taxes, a federal program directed at “training the workforce,” and tighter control of financial institutions and capital flows.

But Emanuel isn’t the only one. As I mentioned previously, Paul Krugman has also endorsed the “don’t let a good crisis go to waste” power grab.

And now Arianna Huffington, the founder of the left-wing bulletin board HuffingtonPost, makes the same point in a public radio appearance. On KCRW’s “Left, Right, and Center,” November 21 (at about 27:20 in the podcast), she declared: “A crisis is a terrible thing to waste. And it might be this particular crisis that will make it possible for the Obama administration to do some really innovative, bold things on health care, on energy independence, on all the areas that have been neglected.” (Hat tip: Thaddeus Russell.) Last year Huffington wrote a rave review of The Shock Doctrine, calling it “prophetic.” So it seems.

So … Emanuel. Krugman. Huffington. They’re all rallying around the theme that, well, that a left-liberal government should use this crisis to implement a more sweeping agenda than it could achieve in the absence of crisis. That’s the Shock Doctrine. Where are Naomi Klein and her legion of fans to expose and denounce it?

Of course, Klein might well decry their corporatist, big government/big business plans as just another example of Friedmanite/neoconservative/Pinochetist right-wing ideology. Anything other than local worker’s collectives smells like capitalism to her. So she can add the Obama administration to Milton Friedman, laissez-faire, the Bush administration, the Iraqi government, the Pinochet government, the Chinese Communist Party, and the ANC government of South Africa on the list of things that seem so many peas in a pod to her.

The San Francisco Chronicle says that Klein “may well have revealed the master narrative of our time.” The reviewer may have been more right than he knew.

Was There a Realignment?

Pollsters debate whether the 2008 election is a fundamental realignment of American politics, with liberals and Democrats now in the driver’s seat. But some ask, how can it be a realignment when the largest public opinion poll, the election-day exit poll, found liberals still a small minority of voters?

Twenty-two percent of those polled identified themselves as “liberal,” 34 percent as “conservative,” 44 percent as “moderate.”

One reason, not discussed in this article, is that liberal-moderate-conservative is a crude and one-dimensional view of the political spectrum. At the very least we should recognize that holding fiscally conservative views doesn’t necessarily make you a social conservative, and being a social conservative doesn’t make you a free-marketer. So when you add just one more dimension to create a matrix, you can get two new categories, whom we might call “populist” (socially conservative and pro-government activism, like Lou Dobbs and Mike Huckabee) and “libertarian” (fiscally conservative and culturally liberal).

In 2006, after another election that involved a sharp shift to the Democrats, Cato asked Zogby to poll voters on their political views. We asked half the respondents, “Would you describe yourself as fiscally conservative and socially liberal?” We were quite surprised that fully 59 percent said yes. And when we asked the other half of the sample, “Would you describe yourself as fiscally conservative and socially liberal, also known as libertarian?” we knew the number would go down. But it only went down to 44 percent. So 44 percent of American voters are willing to label themselves as “libertarian” if it’s defined as “fiscally conservative and socially liberal.”

Which is one reason that Democrats were able to roll up a big victory with an electorate that described itself as 78 percent conservative or moderate. Pollsters should ask more creative questions to get more revealing information about just where the electorate is and just what electoral changes mean.

Reply to Tax Policy Center on Corporate Tax Rates and Revenue

Len Burman, director of the Urban-Brookings Tax Policy Center, suggests  I was “careless” in a recent Wall Street Journal article when I said, “the Tax Policy Center (TPC) estimate of corporate rate cuts … is also nonsense because it’s entirely static. The estimate assumes raising or lowering corporate tax rates has no effect on corporate decisions about where to locate production, income or costs, and no effect on the economy’s performance.”

Burman says, “That is simply untrue (as we would have told Mr. Reynolds had he asked). If corporate tax rates were 10 percentage points below the top ordinary income tax rate, there would indeed be increased reporting of corporate income. But individual income tax revenues would fall too, quite possibly by more than the pickup in corporate revenues… . Investors would have had a huge incentive to channel their income through closely-held corporations instead of reporting it on their individual tax returns. Many S-corporations and partnerships, which are taxed at individual rates, would have chosen to be taxed as C-corporations at a lower rate… .I know the Wall Street Journal editorial page tries not to let facts get in the way of its tax-cut narrative, but those facts do matter.”

Was it “simply untrue” for me to say the Tax Policy Center’s corporate income tax estimates are static?  The footnote to their Table T08-0167 about “Senator John McCain’s Tax Proposals” could not be more clear: “Corporate income tax estimates are static (they do not include a behavioral response). Official estimates from the Joint Committee on Taxation would likely differ.”

Burman attempts to justify static revenue estimates by asserting that “quite possibly” there is no behavioral response to corporate tax rates, aside from shifting business income to and from the individual tax system.  But that just proves he is assuming, as I correctly said, that lowering corporate tax rates wold have literally “no effect on corporate decisions about where to locate production, income or costs, and no effect on the economy’s performance.” If that static assumption made any sense, then doubling corporate tax rates would double revenues (though more of the loot would show up on individual tax returns). That is certainly not what the economic literature suggests. Many countries in which income switching is impossible or trivial have cut their corporate tax rates to 25% or less with no loss in revenue as a share of GDP.

Trying justify static estimates on the basis of undocumented conjectures about the scale income shifting looks like an ad hoc rationalization. Guessing what might “quite possibly” be true has nothing to do with “facts.”  It amounts to abandoning economic theory and evidence in favor of a dubious hunch.

Under both the Obama and McCain plans the corporate tax rate would be 5-7 points below the individual tax through 2013.  Yet the Tax Policy Center mentions income shifting only in connection with the McCain plan.  If bias does not explain that, what does?

If income switching was as huge as Burman speculates, then the Tax Policy Center’s estimates of individual tax revenues from the Obama plan (which include a very modest behavioral response) are much too large, though corporate receipts would be somewhat higher.  In fact, that is exactly what I estimated in the 60-page paper cited in the byline to my op ed, which is mainly an empirical critique of Tax Policy Center methodology. I estimate that corporate income tax receipts under the Obama plan would be larger than the Tax Policy Center expects (because they ignored income shifting in Obama’s case).  But I also found their estimates of added receipts from higher tax rates on individual income, capital gains and dividends to be unbelievably rosy.