Ramesh Ponnuru says that David Brooks is right to suggest that Mitt Romney is a perfectly fine Republican candidate:

In particular, I agree that the programmatic differences among the major candidates are small and not especially important: The party has reached a consensus on most issues. He’s right as well about the general-election appeal of a solid-citizen candidate. But there are several important questions Brooks does not address.

1) How much of that consensus would Romney actually act on? That question has to be asked about any candidate but for various reasons it has to be asked especially of Romney.

2) Can Romney mobilize public opinion behind the Republican program? Brooks describes Christie as someone who could do that, then drops the subject.

3) Is that consensus correct? If not can Romney supply what it lacks?

4) When new issues come up for which the consensus has no answers, what would President Romney do?

I suppose these are the kind of questions I'd be asking too if I were a Republican, but from an outside perspective they all seem like pretty small beer. It's true that the policy differences between Romney, Perry, and Christie are pretty tiny, but I also suspect that the differences in temperament and affect, which seem bigger, really aren't. The whole thing reminds me a lot of the Obama-Clinton primary, which involved a stupendous amount of sturm und drang over two candidates who, frankly, probably would have ended up being mostly the same in office.

As it happens, my preference for Romney isn't due to the fact that I think he's secretly more liberal than Perry. He probably is, but I doubt that would make any real-world difference, and liberals are kidding themselves if they think it would. My preference is based solely on the fact that in a crisis, I think he'd be pretty likely to act soberly and sensibly. I don't have the same confidence in Perry.

As for Ponnuru's questions, I think he's on the wrong track. In 2008, both Obama and Hillary Clinton had ambitious agendas that they had a legitimate chance at passing. The Republican Party had imploded, the financial meltdown provided a crisis atmosphere, and Democrats were likely to win big majorities in Congress. Neither Romney nor Perry has any of that working for them. The battle lines are drawn, neither side is likely to back down much, and even in the best case Republicans aren't going to win anything close to a filibuster-proof majority in the Senate. A Republican president just flatly won't be able to get an awful lot done. Conservatives are kidding themselves if they think otherwise.

So if Romney is elected president: (1) He'll act on whatever he can get the votes for, which probably won't be a lot. (2) He won't be able to mobilize public opinion any better or worse than anyone else. It's mostly set in stone on the big issues. (3) The conservative consensus isn't going to change, regardless of whether it's right or wrong, so that's not something to worry about. (4) What new issues? When was the last time that something so new cropped up that the conservative movement didn't quickly coalesce around a fairly limited set of correct responses? Even 9/11 and the financial crisis were swallowed by the prevailing conservative consensus pretty quickly.

Romney is an analytic tactician, but that should make Republicans feel good, not uneasy. He knows the base is suspicious of him, and he'll do everything he can to assure them of his conservative bona fides. He's sort of like Richard Nixon but with a different environment. Nixon didn't care much about domestic policy, so he was willing to do whatever Congress and public opinion favored. Romney doesn't care all that much either, but in 2013 that means he'll be willing to do whatever the tea party and the Republican leadership favor. Similar temperaments, different incentives. He'll be the most reliable conservative president imaginable. So instead of Ponnuru's critieria, Republicans should instead be focusing on (1) electability, (2) electability, and (3) electability. And Romney is clearly the most electable candidate in the Republican field.

From my perspective, that's not good. At the same time, I'm pretty sure Romney won't panic and do something really stupid just because the tea party is getting restless. At the moment, that's about the best I can hope for from these guys.

Here's the latest poll average from Real Clear Politics. Apparently, the more they see of Rick Perry, the less Republican voters like him.

From Ben Bernanke, in testimony before Congress today:

The recovery is close to faltering.

It's good to see that someone is noticing. In Bernanke's prepared remarks, after noting tight credit, slow consumer spending, financial stress in Europe, and other problems likely to hurt the economy, he got to this:

Another factor likely to weigh on the U.S. recovery is the increasing drag being exerted by the government sector. Notably, state and local governments continue to tighten their belts by cutting spending and employment in the face of ongoing budgetary pressures, while the future course of federal fiscal policies remains quite uncertain....In setting tax and spending policies for now and the future, policymakers should consider at least four key objectives. One crucial objective is to achieve long-run fiscal sustainability....A second important objective is to avoid fiscal actions that could impede the ongoing economic recovery.

This isn't really new. But every time Bernanke says it, he edges slightly closer to calling GOP members of Congress idiots for obsessing about short-term austerity and spending cuts when they should be obsessing over how fast they can shovel money out the door. What's more, he's being as clear as he can that if Congress does this, the Fed's monetary policy won't get in the way.

But poor old conservative Ben Bernanke is now, in the view of most current Republicans, a dangerous radical lefty hellbent on debasing the currency and getting his Kenyan pal in the White House reelected. I wonder if he ever sees any humor in this?

Austin Frakt read my defense of debit card fees on Friday and says today that it all makes perfect sense. But he's still annoyed by them. "That I feel this way is irrational, but I don’t care....The irrational, feeling part of me wants things to go back the way they were, even as the economist in me knows things are better now."

Right. Even though we won't admit it, most of us are far more likely to accept hidden costs than transparent costs. After all, they're hidden! We don't really know about them. Austin says there's a lesson here for healthcare:

Many policy experts and economists think it’d be far better if people knew the cost of health care, if they were aware what their full, employer-sponsored premiums cost, etc. I agree. Transparency is the right way to go.

But make no mistake, people will be annoyed. No, that’s not right. A $5/month debit card use fee is annoying. Suddenly learning that your income is lower than it would otherwise be by $10,000 because of your “employer-paid” premium is not annoying. It is enraging.

What will Americans do when they finally recognize the full cost of health care?....I think many people will be furious at how much of their paychecks are, effectively, being piped into the pockets of health insurers, health care providers, drug manufacturers, health IT gizmo creators, massive radiology machine developers, other device makers, and government programs. Some will think the return is worth the price. Many will not, particularly those who think insurers are wringing them dry.

Once you start thinking about it, you'll be surprised at just how addicted we all are to hidden costs. There are all the hidden bank fees, of course, which become enraging when they turn into transparent fees and we realize just how high they actually are. There's the hidden cost of healthcare that Austin points to — hidden because, in the American system, employers pay for most of it and most of us never really realize just how much we're really paying.

There are hidden taxes, too. If we want to reduce greenhouse gases, the single best way to do it is via a carbon tax. But that's transparent and produces a gigantic political battle. So instead we end up with direct EPA regulation, something that every economist in the world agrees is less efficient, less effective, and ultimately more costly than a tax. But the cost is hidden, so we all put up with it.

Ditto for tax expenditures, all those subsidies that we give people via breaks on their taxes. They don't seem like government spending, but they are — and they're less efficient than simply flattening the tax code and then making the subsidies directly.

Or there's Matt Yglesias's favorite hobbyhorse, zoning and construction regulations that hide the actual cost of keeping neighborhoods the way current residents like them. Or the hidden cost of supermarket "loyalty" programs, which fool us into providing retailers with valuable information in return for the mere illusion of lower prices.

We hairless apes have a seemingly infinite capacity to enjoy being fooled. But it's worth reminding ourselves every once in a while just how the high the cost really is for preferring inefficient hidden costs to the more efficient transparent kind.

Our Persecuted CEOs

Ezra Klein is in Cleveland at a conference filled with corporate CEOs. He reports back:

Business types really hate Barack Obama. Everybody sort of knows that, but it’s hard to get a sense of it if you’re not in the room listening to them laugh bitterly at questions like, “Does Obama understand the damage regulations are doing to business?”

....These folks really, really feel persecuted and unappreciated. The common response to this, of course, is that corporate profits have hit record levels in recent years and the top 1 percent has never been richer. But if you need more evidence that money doesn’t buy happiness, you should sit with some CEOs for an hour.

The fact that lots of blue-collar workers gave up on Democrats long ago and now vote mostly on cultural issues has been the subject of dozens of books and magazine articles. It's even easy to understand: In FDR's day, Democrats really did do a lot for these kinds of workers. Today, Democrats don't really do that much at all for them. So why shouldn't they just forget about economic issues and vote for the pro-gun guy?

Corporate CEOs are a different story. For decades, Republicans were the pro-business party and it made sense for business executives to vote for them. But what about now? Republicans are formally dedicated to blocking anything that might even remotely have a chance of improving the economy and thereby improve business prospects as well. And yet, CEOs show no sign of wavering loyalties. Just the opposite: they've largely bought the austerity/regulation/deficit fable hook, line, and sinker even though it makes not the slightest sense.

There's nothing really new about that, I guess, but it's still sort of freshly gobsmacking every time I see it in action. These are, supposedly, some of the smartest folks in the country. But they don't have a clue. You can't even say they're slaves of some particular defunct economist, as Keynes suggested. They're just slaves of folk economics at its folksiest and most vacuous — and most damaging. And they have every intention of taking the rest of us down with them.

Ezra Klein says it's not the protests themselves that have caused him to take Occupy Wall Street seriously. It's a Tumblr called, “We Are The 99 Percent,” full of personal stories of people who have, seemingly, done everything right but are still struggling with debt, unemployment, and a stagnant future:

This is why I’m taking Occupy Wall Street — or, perhaps more specifically, the ‘We Are The 99 Percent’ movement — seriously. There are a lot of people who are getting an unusually raw deal right now. There is a small group of people who are getting an unusually good deal right now. That doesn’t sound to me like a stable equilibrium.

The organizers of Occupy Wall Street are fighting to upend the system. But what gives their movement the potential for power and potency is the masses who just want the system to work the way they were promised it would work. It’s not that 99 percent of Americans are really struggling. It’s not that 99 percent of Americans want a revolution. It’s that 99 percent of Americans sense that the fundamental bargain of our economy — work hard, play by the rules, get ahead — has been broken, and they want to see it restored.

I haven't followed OWS super closely, but I started taking it seriously when the right-wing media started sounding a little scared. That was sometime last week after several unions joined the movement, and while I can't point to anything specific, it felt as though the tone at Fox and its allies changed a bit from lighthearted mockery to something a little more serious, as if OWS was a real threat that needed to be put in its place.

Anyway, we'll see. To be truly effective, OWS will have to get a lot bigger and lot more persistent. It's still not clear if this is something that can grow to a million+ people and stay active for multiple years. Because that's what it will take. For more, Lauren Ellis and Tasneem Raja have a roundup of OWS activities, coverage, and an interactive map of ongoing and planned protests.

Over the past three decades, the growth rate in justifications for skyrocketing executive compensation has been nearly as high as the growth rate of executive compensation itself. Globalization makes a great CEO more valuable than ever. Tournament theory makes high pay inevitable. Companies are bigger these days. The skill sets of modern CEOs dwarf those of past eras. Pay is more closely linked to performance. Blah blah blah.

All of these things have a kernel of truth (aside from pay for performance, which is mostly a myth), but even collectively they don't explain much. What does explain a lot is two things: (a) stagnating worker pay has made a much bigger pool of money available for executive compensation, and (b) peer group comparisons inexorably ratchet up CEO pay. Because nobody wants to admit that their company is merely average, every company wants to pay its CEO more than average. But if every company wants to pay above the average, guess what happens?

Today, Peter Whoriskey of the Washington Post tells us that the practice of peer group comparison is widespread:

It wasn’t until recently, however, that its pervasiveness and impact on executive pay became clear. Companies have long hid the way they set executive pay, but in late 2006, the Securities and Exchange Commission began compelling companies to disclose the specifics of how they use peer groups to determine executive pay.

Since then, researchers have found that about 90 percent of major U.S. companies expressly set their executive pay targets at or above the median of their peer group. This creates just the kinds of circumstances that drive pay upward.

The chart on the right tells the familiar tale. Adjusted for inflation, cash compensation for line workers has actually decreased over the past few decades, and even when you include healthcare compensation it's grown only about 30% or so. In contrast, executive compensation over the same period has more than quadrupled.

Do they deserve this? Almost certainly not. There's simply no good reason that a CEO of 2011 is worth 4x more than a CEO of 1970. The reason their pay has gone up is simple: for all practical purposes, CEOs set each other's pay. And they keep raising each other's pay because they can. It's a pretty nice racket.

Rep. Eric Cantor, to the surprise of exactly no one, announced today that Republicans had summarily rejected President Obama's jobs bill. But all is not lost:

Mr. Cantor announced the House would consider elements of Mr. Obama’s jobs agenda in the coming month, including trade agreements the White House sent to Congress Monday and a tax break for government contractors.

So there you have it. The sum total of what the GOP is willing to consider is a trade pact with South Korea and a tax break for government contractors. Hold on a second while I perform a sophisticated econometric analysis of how many jobs this will create.

[Hold music playing.....]

OK, I've got it. None. This will have no noticeable impact on the economy at all. But then, that's the plan, isn't it?

Karl Smith looks at the latest housing and manufacturing data and feels optimistic:

There is no indication at the moment that construction is headed for contraction and the probability that manufacturing is contracting is headed downward. Thus, I believe a double-dip becoming less likely.

The Economic Cycle Research Institute looks at "dozens" of leading indexes and gets ready to slit its wrists:

The U.S. economy is indeed tipping into a new recession. And there’s nothing that policy makers can do to head it off....In fact, the most reliable forward-looking indicators are now collectively behaving as they did on the cusp of full-blown recessions, not “soft landings.”

So, who do you want to believe? I'd like to believe Karl, but unfortunately, I suspect ECRI has the better of the argument. There's just too much government stimulus coming to an end soon that plainly won't be replaced thanks to Republican unwillingness to do anything that might help the economy before next year's election. Obviously the stalemate in Europe isn't helping things either. As Greg Ip says, "A global economy with decent cyclical fuel and no obvious imbalances is being betrayed by politics. Policy has pushed us over the brink in the past when it was for our own good (ie, inflation was threatening). If it happens now, it will be the first recorded instance of it happening by obduracy instead of by choice."

We are deliberately creating a new recession. It is truly an amazing thing.

It's Greg Sargent Day here at the blog! Today he posts a chart that was worked up for him by the Tax Policy Center. The question it answers is this: if you applied various tax policies to estimated 2013 income, how would different income groups fare? Here's the answer for the very tippy top of the income spectrum:

The dark blue bar at the left represents Clinton-era policies. The light blue bar at the right represents the effects of healthcare reform plus Obama's current set of tax proposals: Letting the Bush tax cuts mostly expire for the rich, limiting the value of itemized deductions and some exclusions to 28 percent, taxing carried interest at regular rates, and eliminating tax breaks for oil and gas companies and for corporate jets.

So what happens? The well-off do better under Obama than under Clinton-era policies. The even-more-well-off also do better. The really-well-off also do better. And the genuinely rich? They do ever so slightly worse: their after-tax income is maybe 2-3% lower under the Obama proposals than under the tax rates of the Clinton era.

Class warfare! There's more at the link.