Kevin Drum

Individualism and Growth

| Tue Sep. 21, 2010 7:23 PM EDT

This comes from Yuriy Gorodnichenko and Gérard Roland, who find a correlation between how individualistic a country's residents are and that country's long-term economic growth. After some additional testing, they also claim there's a causal relationship:

We find a strong causal effect of individualism on income per worker, total factor productivity, and innovation as predicted by our theory. These results hold even when we exclude the Americas and Oceania where settler colonization played an important role. They also hold when controlling for measures of geographic distance, human capital, ethnic fractionalization, and other factors affecting growth....Moreover, even after controlling for measures of institutions which were previously found (e.g., Hall and Jones, 1999, Acemoglu et al., 2001) to affect long-run growth, culture continues to play a statistically significant and quantitatively important role, implying that culture has an effect on economic development that is independent of institutions.

Summary here. I'd be interested in seeing a statistical critique of this result. (Via Free Exchange.)

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The Coming of Big Tea

| Tue Sep. 21, 2010 3:26 PM EDT

I think Jonah Goldberg is right that the supposed "civil war" between the tea parties and the GOP establishment is mostly just a made-up media narrative:

It takes two to tango, and it takes two to fight a civil war. What seems lost on a remarkably diverse group of observers and political combatants, on the left and the right, is that there are no worthy Republican opponents to the tea parties. Among the Republican leadership or the "conservative establishment," you will not find a single full-throated critic of the tea parties.

....Both the GOP leadership and the major conservative outlets enthusiastically support Marco Rubio in Florida, Pat Toomey in Pennsylvania, Sharron Angle in Nevada (after some initial concerns) and Joe Miller in Alaska. Even supreme RINO John McCain won not by vilifying the tea parties but by claiming to join them, an approach more sincerely and successfully followed by other GOP candidates across the country.

Meanwhile, Rubio and Toomey chased moderates like Charlie Crist and Arlen Specter clear out of the Republican Party. And now Miller has pretty much done the same with Alaska Sen. Lisa Murkowski, who in a sad attempt to cling to power announced that she will run as a write-in candidate come November. Mitch McConnell, the Senate Republican leader, immediately moved to excommunicate Murkowski, stripping her of all her seniority and leadership positions.

In all three cases the "establishment" has said to the moderates, "Don't let the door hit you on the way out." And how have they responded to the allegedly barbaric, uncouth, tea-fueled hordes storming the Beltway castle? "Lower the drawbridge!"

Yep. This might change in the future, but for all practical purposes the tea party movement is the Republican Party right now. And the tea partiers aren't just a bunch of newbies getting involved in politics for the first time in their lives. They're rapidly becoming part of a richly funded, highly professional organization:

Leaders of the Atlanta-based Tea Party Patriots announced a $1 million donation Tuesday, from an anonymous single contributor....FreedomWorks, which is headquartered in Washington and endorsed 25 House and Senate candidates during the primary season, said it will expand that list to more than 80. The Tea Party Express, based in Sacramento, is planning its largest national bus tour at the end of October to get conservatives to the polls.

....The new push illustrates the movement's transformation since the primaries from a disorganized coalition of fiscally conservative activists to a measurable political force. But the tea party's rapid growth — along with the influx of cash and political professionals — has led some followers to worry that it risks losing its rebel spirit.

...."There is no question the movement has changed," [says Judson Phillips, founder of Tea Party Nation]. "The evolution of 'Big Tea' is the logical result of where this movement must go."

I don't know what this means for the future. My guess is that the tea parties will successfully push the GOP further to the right this year and then effectively cease to exist as they get entirely coopted by the Republican establishment and existing movement conservative organizations. "Big Tea" may be the logical endgame, but the emphasis there should be on big, not on tea.

POSTSCRIPT: And while we're on the subject, can we please knock off the faux surprise that tea partiers aren't just a bunch of deficit hounds? Of course they're opposed to gay marriage and abortion and illegal immigration and in favor of gun rights and prayer in school. Come on, people.

Obama and the Left

| Tue Sep. 21, 2010 12:44 PM EDT

Paul Krugman on (one of) the differences between George Bush and Barack Obama:

Bush and his handlers were masters of dog-whistle politics — of conveying to their base, in ways that went under the radar of mainstream media, the message that he was really one of them....Obama, however, seems to go out of his way to convey the message that although he rode to office on a wave of progressive enthusiasm, he and his people don’t respect the people who got him where he is....In fact, it often seems to me that there’s an almost compulsive aspect to the administration’s anti-dog whistling. Maybe it comes from hanging out with the political and business establishment, which leads to a desire to seem respectable by dissing the DFHs. But memo to the president: Wall Street will hate you anyway. All you’re doing is undermining the enthusiasm of people you need.

I agree, but I'll repeat a point I made a few weeks ago: this is baked into the cake of modern American politics. Every local race has its own dynamics, but it's still worth taking a look at the Gallup chart on the right to get a sense of the broad national hole that liberals are in. About 40% of the electorate self-identifies as conservative and getting their votes is critical for any conservative politician. If you piss off a few moderates in the process, that's life. After all, if you win the conservative base convincingly, then on average you only need to hold on to the most conservative 10% of moderates to win an election.1

But only 20% of the electorate self-IDs as liberal. So the math is exactly the opposite: you need to win nearly all the moderates in order to win an election. If you piss off centrists by playing too hard to the base, you'll lose.

This is a bummer, but it's reality, and lefties really need to suck it up and get less annoyed by the fact that politicians react to the world as it is, not as we wish it were. Like it or not, most pols just can't afford to give the liberal base too much rhetorical lip service until and unless it gets a lot bigger than it is today.2

Still, there's a mystery here. Not why Obama feels the need to market himself the way he does, but why he lately seems so clumsy at it. As Krugman implies, dog whistling can be subtle but still clear. So where's the subtlety in the Obama White House these days?

1To repeat: on average. Every district is different. But the national numbers still give you a good idea of what party leaders are going to do and which way most politicians are likely to lean in their rhetoric.

2Which, granted, would be more likely to happen if more liberal politicians tried to help out on this score. Still, the self-ID numbers have barely budged in over 40 years, so the basic imbalance isn't likely to change anytime soon.

Watching Feingold

| Tue Sep. 21, 2010 11:46 AM EDT

Maybe I'm being too complacent about my home state, but I don't think Carly Fiorina has much of a chance of beating Barbara Boxer in California's Senate race. She's just not a good enough candidate. (And this ad about Carly's yacht is pretty devastating according to my longtime focus group, aka my wife). But TPM reports that in Wisconsin Russ Feingold might be in much more serious trouble:

He's trailing in the polls against Republican businessman Ron Johnson — the TPM Poll Average gives Johnson a healthy lead of 51.6%-44.8%. In addition, Public Policy Polling (D) will have another survey out today, showing Feingold down by double-digits as a result of a "massive" enthusiasm gap between Republican and Democratic voters.

Thomas Holbrook, a political science professor at the University of Wisconsin-Milwaukee....explained that as of now, the race still has not heated up — and people still don't really know Johnson: "Right now people don't know much about him, other than he's the guy running against Feingold." As such, Feingold and his supporters have the task of defining Johnson negatively in the voters' minds.

"It's not clear to me that Feingold does negative very well," said Holbrook. "It's sort of out of step with his overall approach to politics. I remember over the summer seeing an ad, and I don't even remember what the substance was other than it was negative, and I just remember thinking it didn't fit well with Feingold himself."

Several commenters to this post make the point that much of Johnson's current lead in the poll average is due to the effect of Rasmussen's numbers, which are typically five points too favorable toward Republicans. So things might not be as bleak as they look.

Then again, they might. And that would be a tremendous loss. I was pretty annoyed at Feingold for his quixotic decision to support the Republican filibuster of financial reform, but that doesn't change the fact that he provides a uniquely honest and valuable voice in the Senate. That makes this a bellwether race to keep a close eye on. Do we really want to lose the only person who voted against the PATRIOT Act back in the dark days of 2001?

Democracy in America

| Tue Sep. 21, 2010 10:59 AM EDT

Here are three quick looks at our ruling class from my morning paper. What's noteworthy is that hardly any of it is really noteworthy. Look #1 comes from the California legislature, which still hasn't passed a budget nearly three months after it's legally required to:

Lawmakers have vacuumed up more than $6.9 million in campaign cash — more than $80,000 a day, state records show — since the fiscal year began without a budget on July 1. Much of the money has come from powerful interests trying to advance an agenda. The legislators have wooed lobbyists and donors over cocktails at a Beverly Hills cigar club, in luxury boxes at baseball games and at Disneyland. A dozen golf retreats were scheduled from July through September.

Meanwhile, billions of dollars in state bills are going unpaid due to the absence of a spending plan. Health clinics that serve the poor are threatening to close their doors, college students are forced to scrape by without their state scholarship funds, and child-care centers may have to shut down.

Look #2 comes from an all-too-routine federal contracting agreement:

In an example of how common it has become for government agencies to outsource seemingly routine tasks to former officials, the U.S. Customs and Border Protection has awarded a "strategic consulting" contract worth up to $481,000 over five years to a small firm staffed by former agency insiders....The fees work out to about $240 an hour — not including travel expenses or the cost of the conferences. Among those who will benefit from the contract are the agency's former commissioner and the husband of a current agency spokeswoman. It's legal as long as the officials observe a one-year ban on landing work from their former agency.

And finally, look #3 comes from the working class city of Bell, whose executives and city council members have conspired over the past decade to pay each other millions of dollars in salaries and benefits:

Bell spent nearly $95,000 to repay loans that then-City Manager Robert Rizzo made to himself from his retirement accounts, a draft state audit reviewed by The Times shows....."Public funds were used to repay [Rizzo's] personal loans, apparently without authorization," the audit says. The full audit by Controller John Chiang's office is expected to be released this week. Chiang's office had previously found that Bell illegally overcharged residents and businesses by $5.6 million in various taxes.

It's hardly any wonder that the tea partiers are so angry, is it?

Healthcare Timeline

| Tue Sep. 21, 2010 10:18 AM EDT

This is great: the Kaiser Family Foundation has a detailed timeline telling you when every provision of the healthcare reform bill will be implemented, starting with small business tax credits in 2011 and going all the way out to the cadillac tax in 2018. This is a great reference tool, and it's all part of a new website dedicated to explaining and tracking healthcare reform. It's a nice piece of work. (Via Ezra Klein.)

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No Class

| Tue Sep. 21, 2010 10:06 AM EDT

Michael O'Hare bemoans the lack of class in our upper class:

Real class is what the economic aristocracy of our country has almost entirely lost. The American rich are wallowing in a moral slough, grasping for more and more money they have no clue what to do with, and venting their frustration that climbing over each other to new heights of wretched excess brings no satisfaction by lashing out at every social institution, and at a government whose largesse is never enough for them.

....I wish I had more class; I certainly had ample opportunity to learn it. But I’m sure I know what it is, often I can tell when I’m getting closer to it and when I’m not, and it’s not what I’m seeing in our upper class today. High wealth and low class: it’s ugly and it’s dangerous.

To a dispiriting extent, the top stratum in America no longer really seems to care about America. They care about themselves, and their money, and keeping themselves safe from the huddled masses, but for all too many of them that's about it. I'm not sure I have quite the rose-colored view of the ancien regime that Mike does, but he's certainly right about today's millionaires. No class, no gratefulness for their success, and no sense of bond to the broader society they live in. This is not a winning combination for a country that aims to lead the world.

After November

| Tue Sep. 21, 2010 1:26 AM EDT

OK, so maybe Republicans can't repeal healthcare reform if they take over Congress in November. But they can try to nibble it to death:

For starters, Republicans say they will try to withhold money that federal officials need to administer and enforce the law. They know that even if they managed to pass a wholesale repeal, Mr. Obama would veto it.

....Republicans also intend to go after specific provisions. Senator Orrin G. Hatch of Utah, a senior Republican on the Finance Committee, has introduced a bill that would eliminate a linchpin of the new law: a requirement for many employers to offer insurance to employees or pay a tax penalty. Many Republicans also want to repeal the law’s requirement for most Americans to obtain health insurance.

Alternatively, Republicans say, they will try to prevent aggressive enforcement of the requirements by limiting money available to the Internal Revenue Service, which would collect the tax penalties. Republicans say they will also try to scale back the expansion of Medicaid if states continue to object to the costs of adding millions of people to the rolls of the program for low-income people. In addition, Republican lawmakers may try to undo some cuts in Medicare, the program for older Americans.

This is what America has to look forward to if Republicans win 40 seats in the House in this year's midterms. Plus endless manufactured investigations of the Obama White House. I sure hope all those wobbly centrists and disappointed Obama supporters understand what they're letting themselves in for if they give up now.

Shovel Ready?

| Tue Sep. 21, 2010 1:02 AM EDT

The Wall Street Journal reports that spending stimulus dollars is harder than it sounds. The director of the Detroit agency managing weatherization projects, for example, was ready to go before the legislation even passed:

But on the same day in March 2009 that Shenetta Coleman picked up applications from 46 companies, she received an email from the Michigan Department of Human Services telling her she couldn't award work to anyone.

The problem: Ms. Coleman hadn't met requirements for her advertisement. Those included specifying the precise wages that contractors would have to pay, and posting the advertisement on a specific website. There were other rules—federal, state and local—for grant and contract-award processes, historic preservation and labor standards. The bureaucratic obstacles Ms. Coleman hit took more than a year to clear. Some were mandated by the stimulus bill, the same legislation that was supposed to rapidly create jobs.

....Things are very different from the 1930s, when Franklin Delano Roosevelt was able to create the Civil Works Administration in a lunchtime meeting and watch four million people go to work in the next four months on roads, schools, parks and airports.

For better or worse, doing stuff just takes longer today than it used to. The whole concept of "shovel ready" really doesn't seem to exist except for projects that are so far advanced they probably have funding already.

What Should We Tax?

| Mon Sep. 20, 2010 7:58 PM EDT

Matt Yglesias touts progressive consumption taxation as a superior alternative to what we have now:

To me, a big part of what this whole series of back-and-forths does is re-enforce the idea that it would be desirable to tax consumption rather than income, and simultaneously to make the rate structure more differentiated and more progressive....Switching the tax base to one focused on pollution and consumption is hardly a panacea, but it really would be a huge step forward relative to a system based on wages and income. Ultimately, whether or not we make that shift one of these days is going to be a bigger deal than whether we fully extend the Bush tax cuts or only mostly extend them.

A couple of things about this. First, when you talk about consumption taxes most people think of VATs and sales taxes. Roughly speaking, though, you can make the long-run effect of an income tax similar to a consumption tax just by setting the rate at zero for capital gains, dividends, interest, and estates. And guess what? We're pretty close to that right now. Capital gains and dividends are currently taxed at 15% and the estate tax has been steadily decreasing for the past decade. Among major sources of investment income, only interest is taxed at normal rates, and even that applies only to non-retirement interest income.

And how does this compare to other countries? It varies a lot, of course, but in addition to a VAT, most rich countries also levy a fairly stiff income tax that includes taxation of capital gains, dividends, interest, and estates. On average, their rates are about the same or higher than ours. It's true that most European governments get a bigger portion of their revenue from consumption taxes than we do, but that's because they have high VATs, not because they don't have the other taxes. VATs are in addition to income and investment taxes, not instead of it.

Second, be careful what you wish for. Investment taxes in the United States were at historic lows during the aughts, and that was also the decade that produced a huge credit bubble and, subsequently, the biggest economic crash since the Great Depression. Maybe that's just a coincidence, but I wouldn't bet the farm on it. There might be such a thing as incentivizing investment too much, after all.