Republicans Need to Relearn How to Govern; Democrats Need New Policy Ideas

Harold Meyerson (Washington Post, May 10) was wrong to conclude that “The emerging Republican game plan for 2006…(reflects) their bankruptcy of ideas.” The Republican problem is not their lack of ideas but that the Bush administration has confused the politics of governing with the politics of campaigning. In 2005, President Bush proposed or endorsed major reforms of social security, taxes, immigration, and tort law. Most of these proposed reforms have not yet been addressed because the Bush administration would not work with Democrats to find a common ground, and the Democratic leadership would not even acknowledge the problems of current law that these proposed reforms would address. The prospect for comprehensive immigration reform is better only because of substantial support among the Democrats.

For all that, it is the Democratic Party that has been bankrupt of appealing policy ideas for the past 30 years. Marty Peretz, the editor of the New Republic, recently remarked that

It is liberalism that is now bookless and dying. Who is a truly influential liberal mind in our culture? Whose ideas challenge and whose ideals inspire? There’s no one, really. What’s left is the laundry list: the catalogue of programs…that Republicans aren’t funding, and the blogs, with their daily panic dose about how the Bush administration is ruining the country.

The policy proposals that are now bubbling up from the congressional Democratic leadership are a grab-bag of old ideas, some of which are remarkably dumb. An increase in the minimum wage is dumb because it reduces the employment of the least-skilled members of the labor force with most of the benefits accruing to secondary workers in non-poor families. An increase in the fuel economy standards is dumb because it reduces the cost of driving and applies only to new vehicles. One proposal that merits serious bipartisan attention is to revive the pay-as-you-go rules on federal spending and taxation that expired in 2002.

In summary, the Bush administration needs to learn how to govern, and the Democrats need to generate some appealing new policy ideas.

Republican Lunacy on Energy

My colleague Peter Van Doren and I wrote an op-ed that was published this morning at National Review Online that rips the GOP for their ideas regarding energy policy. Just when you think the Republicans can’t get any worse, they manage to surprise.

For those tired of all the populist hysteria surrounding gasoline prices, we’ve also got a piece in the Investor’s Business Daily today (subscription only) that presents data on what we term “the hardship price” of fuel. We looked at gasoline prices from 1949 to the present and adjusted for inflation and changes in per capita disposable income. In essence, we ask: How long would a person have to work to pay for a gallon of gasoline today compared to any other year over the past 57? Turns out that gasoline at the moment is less expensive by that metric than it has been during most years over that time. A very nice graphic is provided with the piece.
We’ll have the IBD piece on the Cato website soon.

Sensenbrenner Wants Your Cache

James Sensenbrenner, the same congressman who gave us the “two years in jail for not snitching” bill, now wants to force Internet service providers to keep a database of all the websites their users have visited. The bill leaves it up to the U.S. Attorney General to determine just how detailed those databases should be, but it could include not only detailed logs of websites visited, but of email, encrypted information, and the contents of conversations over VOIP.

Missing the Point

The Bush administration’s self-delusion about the state of the federal budget continues. At a speech at AEI yesterday, Karl Rove claimed that the growth rate in the nondefense, non-security portion of the budget had fallen. Fiscal conservatives who complain about spending are “missing the facts” Rove says. 

Yes “growth rates” are down in this small portion of the budget from the massive growth rates of earlier in the decade. But here, from the most recent federal budget, are the more important facts on Bush’s first five years. Data for fiscal 2006 are Bush estimates (actual 2006 spending is likely to be higher) in billions of dollars. 

2001 federal outlays 

Total: $1,863 

Department of Defense: $290 

Department of Homeland Security: $15 

Total outlays less defense and homeland security: $1,558 

2006 federal outlays

Total: $2,709 

Department of Defense: $512 

Department of Homeland Security: $44**

Total outlays less defense and homeland security: $2,153 

(**Homeland Security spending spikes in fiscal 2006 due to Katrina. To roughly take out this effect, I used the 2007 figure of $44 billion). 

What we have then over Bush’s 5 years is a 45 percent increase in federal spending and a 38 percent increase in spending excluding defense and homeland security. 

Of course, the Bush administration shouldn’t get a free ride for its massive increase in defense and security spending. Pentagon spending is notoriously wasteful, and much “homeland security” spending is either wasteful or properly the responsibility of state governments or the private sector. All added spending sucks more resources out the private economy and the average American’s wallet. 

Oil Unbound

There is a lot of worry in the public domain these days about whether we might be running out of oil.  That shouldn’t surprise - every time the oil industry goes through a boom cycle (and there have been six such price booms since the creation of the industry in the late 19th century), industry analysts and resource prognosticators have warned that, this time, the lights are truly going out. 

The worry, however, is overly broad.  There is virtually no limit to the amount of hydrocarbons available to the economy.  It has been estimated, for instance, that the amount of oil that we could theoretically extract from shale rock in the western United States is about three times as great as the proved reserves of oil in Saudi oil.  Other unconventional sources of oil such as tar sands (now being exploited with gusto in Alberta) promise even more.

But unconventional oil is expensive.  The reason it’s not exploited very aggressively at the moment is that conventional oil is still less expensive to deliver to market.  If conventional oil continues to increase in price - or if the technology related to unconventional oil extraction improves - that might change.

Worries about the depletion of conventional oil - and light crude oil in particular - are better grounded.  But how much better?

To worry about the future availability of light crude is to worry about the future availability of Persian Gulf crude oil in general and Saudi crude oil in particular.  If Saudi fields are running dry, then worries about conventional crude are probably well placed.  If not, then they probably aren’t.

The most credible analyst who’s made the argument that Saudi reserves are overstated and that Saudi Aramco is near a production plateau is Matthew Simmons, author of Twilight in the Desert.  The most impressive criticism of Simmons’ arguments come from energy economist Michael Lynch, who maintains that Saudi production is not even close to reaching its peak. 

Time will tell soon enough who’s right (I’d bet on Lynch), but in the meantime, a new report out today about Arab investments underway in the oil sector suggests that someone forgot to tell OPEC that the wells are running dry.  Of course, one might argue that all that money is necessary just to maintain current production levels.  Maybe - but the increasing production figures coming out of OPEC aren’t figments of the imagination.

Précarité is the Price You Must Pay

One of the things I’ve learned in my study of the happiness literature is that people don’t take enough risks. The evidence seems to indicate that many people would be happier if they quit their job and either went into business for themselves, or found a new job that better matched their individual strengths—even if it is a job that pays significantly less. (You can take a quiz here, at psychologist Martin Seligman’s website, to find out what your signature strengths are.)

Because we are so risk-averse—so wary of experiencing losses—and because we tend to predict that the downside of a risky decision will be bigger than it actually will be, doing what is most likely to make us happy—taking the periodic entrepreneurial gamble—requires a kind of bravery. But that’s just the personal side of the matter. Culturally, we need a climate of opinion that values risk and rewards initiative with respect and praise, reinforcing and encouraging personal courage. Institutionally, we need a flexible labor market that allows us to easily enter and exit new jobs in search of a good match for our interests and strengths, and a system of laws that does not make it difficult and expensive for people to start their own businesses.

This interesting article from Sunday’s Boston Globe about Brett Zaccardi, who dropped out of college to start his own “alternative media and communications agency,” makes this point well, even drawing on psychologist Daniel Gilbert’s work on predicting our future feelings:

When it comes to career schemes, we do not have accurate imaginations about what life will be like for us in different situations, says Daniel Gilbert, professor of psychology and author of ”Stumbling on Happiness.” Our most accurate information about what will make us happy comes from snooping on other people to see if they are happy. And the best way to watch other people is to be in a variety of offices. Gilbert calls the informal process of judging other peoples’ happiness ”surrogation.” He says ”surrogation is the best way to predict if we’ll be happy. Observe how happy people are in different situations.”

So what do you need to know before you decide? Figure out what was bad about the jobs you’ve had so you don’t duplicate the problem. Then just start testing the waters – put a toe in the current to see how it feels. Then take a leap, and if you don’t like where you land, reframe your landing pad as just a steppingstone. And put your foot in the water again.

”We should have more trust in our own resilience and less confidence in our predictions about how we’ll feel,” Gilbert says. ”We should be a bit more humble and a bit more brave.”

Clearly, this kind of serial toe dipping and steppingstone strolling requires an institutional climate where labor market entry and exit is easy, and where starting a new business is not a huge hassle. The predictable consequence of this kind of openness and dynamism will be a bit of volatility in employment and earnings, but if that’s what it takes, that’s what it takes.

Now, compare this absolutely gob smacking exchange between writer James Traub and Ségolène Royal in Traub’s NYT Magazine profile of the French politician (via Virginia Postrel):

In fact, Royal seems innocent of any taint of economic liberalism. She regards Villepin’s peremptory imposition of the new law as a sign of a systematic failure to listen to ordinary people; but she does not view the national suspicion of market forces as a comparable source of paralysis. I was surprised, I said during our interview, that someone whose entire life constituted a triumph over adversity would join the campaign to insure against précarité….Royal countered my observation with a familiar refrain: “The problem is that everybody isn’t subject to insecurity. Do you see businessmen being fired for incompetence? The young see politicians, who also have a stable and secure job, being civil servants, lecturing others on insecurity. So the young graduate will say, ‘In the name of what am I going to sign an insecure contract?’ “

Then the conversation took an odd turn. Royal asked me, with the air of someone pulling out a trump card, “Are you in an insecure situation?” Actually, I explained, as a contract writer for this magazine, I have little security.

Royal wasn’t going to be put off the scent that easily. “Yes, but how many years does your contract last?”

“I sign a new one every year.”

Now she was frankly incredulous. “You could be fired every year?” For all her own experience, Royal apparently viewed précarité as a kind of socioeconomic stigma rather than the price you might choose to pay for freedom. Or maybe you could say that for her, as for the left generally–and not only in France–market liberalism and globalization have the status merely of fact, which is categorically inferior to a right. This is no less so if the fact appears to obviate the right. “The global economy shouldn’t be supported by wage earners,” Royal insisted. “They have to be able to build a future, like any human being.”

This is amazing in part because many of us have never had anything but an “at-will” contract, according to which we can be fired any minute. And we should consider ourselves lucky. Societies obsessed with abolishing précarité—the so-called precariousness of dynamic markets—tend to implement rules that lock people into the first career track they set foot in, or lock people (immigrants especially) out of the labor market altogether. Regulatory insulation against employment and wage instability does provide a kind of stability—just not the kind that makes for satisfied lives. You get, on the one hand, stable sub-optimal matches between individual strengths and jobs, since it is difficult under those conditions to dip your toes in lots of different currents. In which case, careers are less likely to be seen as “callings” and work is less likely to be experienced as meaningful and intrinsically satisfying (causing demand for things like six hour work days and six weeks of vacation to go up.) On the other hand, you get stable levels of high unemployment. Studies show that long-term unemployment delivers a big hit to happiness only slightly less toxic than divorce. As it turns out, a little précarité is not simply, as Traub writes “the price you must choose to pay for freedom,” but the price you must pay for happiness.