issue: Politics

Middle-Class Tax Cut: The No-Brainer

Posted on by The Progressive Policy Institute

For all I know, by now House Democrats may have already made the informal decision whether or not to force a vote on extension of middle-class tax cuts and expiration of high-end tax cuts.

I understand that if the votes aren’t there, they aren’t there. But it will be extraordinarily disappointing if they decide against forcing the vote on grounds that it will make some of their Members “uncomfortable.”

This is clearly the last opportunity prior to November 2 for congressional Democrats to make an impression on voters, not only about their own priorities, but about what sort of policies we can expect if Republicans gain control of the House. The GOP has been able to disguise or draw attention away from their own agenda throughout this midterm election cycle. Making them vote against tax relief unless the bulk of it goes to upper-income Americans exposes their hypocrisy on taxes and on federal budget deficits at the same moment. And this strategy also happens to be very popular, as TDS Co-Editor Stan Greenberg is expected to personally explain to the House Caucus later today.

There are few true no-brainers is the complicated business of politics, but this may qualify. Having cynically enacted tax cuts scheduled to expire at a date certain in the future in order to disguise their impact on the deficit, Republicans are in no position to label that expiration a “tax hike,” particularly since millionaires will benefit like everyone else from the portion of their income that falls into the lower brackets.

No matter what happens in November, Democrats are going to have to begin forcing comparisons of the two parties and what they stand for going into the presidential cycle of 2012, lest that election become another “referendum” whereby Democrats assume total responsibility for an economic and fiscal situation they largely inherited. This tax vote is the perfect opportunity to begin that process.

This item is cross-posted at the Democratic Strategist

Photo credit: Andrew Higgins

Wrestling with the Kochtopus

Posted on by The Progressive Policy Institute

Ever since Jane Meyer put the Koch brothers’ political empire on display in the Aug. 30 New Yorker, there has been a vibrant debate over the propriety of the owners of the second-largest private company in the U.S. using their personal fortune (spawned from an enterprise that they inherited) to fund a variety of libertarian and anti-government causes, and not always in the most transparent ways.

For those on the left, that Koch-controlled foundations have doled out almost $200 million to conservative foundations over the past 10 years — including $12 million to Dick Armey’s FreedomWorks, a major force behind the Tea Party movements — offers the allure of an explanation for a disappointing political turn of events.

Why else would so many people be throwing in their lot with the foolish Tea Party? How else could someone be motivated to travel hundreds of miles to attend a Glenn Beck rally on the National Mall, let alone watch the guy’s television program? Surely, this movement must be manufactured anti-government populism, as fabricated as Koch Industries’ industrial polymers.

Here’s The New York Times’s Frank Rich, casting the attendees of the recent Glenn Beck rally in Washington as little more than the unwitting puppets of the so-called “Kochtopus”: “There’s just one element missing from these snapshots of America’s ostensibly spontaneous and leaderless populist uprising: the sugar daddies who are bankrolling it.” Meanwhile, Obama adviser David Axelrod puts it this way in The New Yorker: “What they don’t say is that, in part, this is a grassroots movement brought to you by a bunch of oil billionaires.” (If only the people knew! Then surely they’d come around to the side of common sense!)

Yes, there is a lot of money behind this right-wing populist uprising. But regardless of funding, one still has to contend with the fact that the Tea Party movement has tapped a powerful nerve in the collective psyche of mostly older, almost entirely white voters suffering a lot of anxiety about their future and wanting a simple explanation for their troubles and a villain to blame for it.

Given the underlying demographics and socio-economic forces at work here, it’s unclear how much Obama and the Democrats could have done to make inroads here, but certainly they could have done more. At the very least, it’s largely defeatist to think that the masses are being thoroughly manipulated by wealthy industrialists.

Rather, it makes more sense to say they are being enabled. The problem for Obama and the Democrats is that after the election, the energy that put Obama in the White House simply evaporated, and nobody on the political left was there to enable alternative path. Into the void came the Tea Party and its generous benefactors.

As for transparency: Could and should the Koch brothers be more open about what they are doing? Absolutely. Slate’s David Wiegel has argued that “The Kochs should come out of the closet” — that is, that they should be loud and proud about their support of libertarian and anti-government causes. Indeed.

After all, if they believe in a true free market, they should also believe in a true free market for ideas. And as any economist will tell you, markets always work best when they are transparent and all parties have full information.

If the case for limited government can’t withstand full disclosure of its sustainers and messengers, it’s probably not much of a case. Understandably, there is a certain discomfiting hypocrisy when you have populist uprisings against corporate power funded by wealthy industrialists, and some valid concern that many of the Koch-funded causes conveniently advocate the kind of light regulation that would benefit Koch Industries’ empire, much of which is in the fossil-fuel sector.

One of the challenges of the marketplace of ideas is, as Matt Kibbe, the president of Tea Party promoter FreedomWorks (which is funded by the Kochs) and a former Republican operative, told The New Yorker: “Ideas don’t happen on their own. Throughout history, ideas need patrons.” This is the reality we live in. Ideas do need patrons.

But for the marketplace of ideas to function properly, it also needs patrons not ashamed to stand publicly behind the ideas that they advocate. The Koch brothers should do this. But the marketplace of ideas also needs participants on both sides who can and do engage fully and confidently — not defeatists who assume that the only reason somebody might support an alternate idea is because the proponents of that alternate idea are backed by more money.

This article was originally published in the Providence Journal

Photo credit: HA! Designs – Artbyheather

The Perception Puzzle and the Democrats’ Challenge

Posted on by The Progressive Policy Institute

Back in June, the Pew Center for People and the Press released a poll that asked voters to place both themselves and the political parties on a scale of very liberal to very conservative. I picked this chart up again over the weekend, and stared at it for a while. Amidst the constant up and down of polling, I haven’t seen anything that better lays out the challenges that Democrats face both in the upcoming election and for the foreseeable future, so I think it’s worth re-visiting.

At first, this chart seems puzzling.  While there is remarkable consistency in where ALL voters place both Republicans and the Tea Party movement, there is a remarkable gap in how Republicans and Democrats differentially view Democrats’ ideology. (Independents come down in the middle, but since many independents tend to be closet partisans, the result makes sense as the average of the two.)

Why should this be the case? Why do Democrats and Republicans perceive the Republican Party about the same, but the Democratic Party so differently? And why does it matter?

One explanation is that Republicans spend a lot more time and energy painting Democrats as too liberal than Democrats spend painting Republicans as too conservative. As a result, the average Republican voter thinks Democrats are far more liberal than they actually are, whereas the average Democrat sees less difference between Democrats and Republicans.

This would explain why Republicans are much more enthusiastic right now about voting. If Republican voters see a larger difference between the two parties than Democrat voters, they are likely to believe that much more is at stake. If they think more is at stake, they are more likely to vote.

The second explanation is that Democrats think that the policies they support are quite sensible and reasonable, and they have a hard time imagining how anybody could not agree with them.  But the polling suggests that the Democrats’ policies might actually not be as moderate as many Democrats think they are, and the political center of gravity is a little bit further right than many Democrats would like to admit.

What this means that Democrats have their work cut out for them, both in the next two months and for the foreseeable future.

First, Democrats need to continue to make clear just how conservative the Republican Party has become, and therefore how much is at stake in these elections. Democratic leaders can’t take it for granted that average Democratic voters see a huge difference between the two parties since apparently, they do not. Certainly, Democrats are working hard to draw lines, but this polling suggests just how much work they have to do to make sure these lines stick.

Second, Democrats need to be much more careful in considering how their policies play. They need to understand that a lot of voters see them as much further to the left then they see themselves. They cannot simply assume that just because that they see their policies and positions as moderate that they are self-evidently so. Democrats also must be more aggressive in making the case that the moderate policies that they do propose are, in fact, moderate, since they are working against prevailing beliefs.

These are the challenges Democrats face, and these are the keys to whether they can maintain control in November and beyond: drawing clearer distinctions with Republicans, and recognizing that the political center of gravity may not be as far to the left as many Democrats instinctively think it is.

9/11, Nine Years Later: A Day to Rekindle the Better Angels of Our Soul

Posted on by The Progressive Policy Institute

Tomorrow we pause to remember, as we have for nine September mornings, the lives and memories of those lost on September 11th, 2001.  It is hard to believe that the attacks of that autumn day are now approaching a decade in our past.  It just does not seem that long ago.  And yet, even with the passage of time, the legacy and the impact of the attacks on our national psyche and our national politics have not become much clearer.

If you visit Ground Zero today you see a bustling site of activity with skyscrapers rising, a transportation hub growing, and the National 9/11 Memorial taking shape with deep, cascading pools visible and trees now in the ground.  The portion of the Pentagon damaged in the attacks has been rebuilt, the entire building has been refurbished in the ensuing years, and the memorial park at the site of the impact is one of the most peaceful places in a monument-filled Washington, D.C.  The Flight 93 Memorial in Pennsylvania is being constructed as a national memorial under the care of the National Park Service and will be dedicated on the 10th anniversary of the attacks next year. These are the physical scars healing ever-so-slowly.

But some of the wounds remain raw, as evidenced by the raging battle over the Islamic community center in lower Manhattan and the proposed “Koran-burning” by a Florida pastor.  We have seen a marked increase in the anti-Islamic rhetoric in our national discourse. A recent Time/CNN poll showed that  61 percent of Americans are opposed to the Park 51 Islamic center near Ground Zero. The same poll showed that one in three Americans think Muslims should be banned from running for President and that one in four mistakenly believe that President Obama—a Christian—is a Muslim (I’m still unclear on what the problem is even if he was a Muslim).   Newt Gingrich, a potential Republican presidential candidate, went on Fox News and—breathtakingly—equated Muslims to Nazis.

To our detriment, the politicization of Ground Zero and the demonization of the broader Muslim-American community are seemingly creeping into the mainstream. When General Petraeus, the American/NATO commander of forces in Afghanistan, has to pull his focus from the field of battle to ask a Florida preacher not to endanger American troops already risking their lives in combat, I would hope it would be enough for us to take a collective step back from the slippery slope of demagoguery.

September 11th is the day to take this collective step back from the edge. It is not a day for partisanship and division. It is a day of remembrance, of collective mourning and most importantly, a day of national unity when every American, regardless of religious faith and ethnicity, stops to rekindle the better angels of their soul.  The physical scars of the 9/11 attacks have mostly healed. But we need to do a much better job— both as a nation and as individuals—of healing our emotions as well. The nearly 3,000 men and women who lost their lives nine years ago that morning deserve nothing less.

Hillary Rebuts the Declinists

Posted on by The Progressive Policy Institute

Among foreign policy mandarins here and abroad, it’s become axiomatic that America must radically downsize its global ambitions to avoid hubris and to match our straitened economic circumstances. Secretary of State Hillary Clinton is having none of it.

In a speech this week to the Council on Foreign Relations, Clinton vigorously affirmed the world’s need for, and America’s capacity to provide, strong global leadership. Even in a multipolar world, she argued, no other nation has the unique combination of strengths necessary to organize collective action against common global problems.

And, at a time when moral relativism has crept into U.S. foreign policy discourse in the guise of realism, Clinton was refreshingly unapologetic in pledging U.S. support for the “universal” values of liberal democracy. As she had done in an important speech to the Community of Democracies in Krakow July 3, she noted that authoritarian governments are cracking down on independent civil society organizations, and she pledged U.S. assistance to embattled NGOs.

Clinton’s confident assertion of a “new American moment” is in striking contrast to narrative of U.S. decline now fashionable among global elites. The story goes something like this:

As the Cold War ended, the U.S. found itself the last superpower standing, its system of democratic capitalism triumphant — and quickly succumbed to hubris. It intervened in conflicts all over the globe, rashly plunged into unnecessary wars, drank the elixir of free market ideology, and in general overestimated its ability to shape events and impose its will on others. Now we are overextended and facing a global backlash against U.S. imperialist pretensions.

What’s more, we’re broke and can no longer afford to maintain our old position as global hegemon. Meanwhile, economic dynamism has shifted eastward, and the rapid growth of China, India and others is fundamentally altering the world’s balance of power.

All this Spenglerian gloom points to an inescapable conclusion: America must retrench strategically. This entails defining our interests more narrowly, shrinking our military, ceasing to lecture others about democracy, and shedding the too-costly burdens of global leadership.

Clinton instead argued essentially for updating the liberal internationalist vision for today’s interconnected world. She stressed the need for America to once again be the chief “architect” of cooperative institutions, at both the regional and global level, for providing mutual security and prosperity, tackling underdevelopment and climate change, and defending human rights (with her customary special emphasis on women’s equality). Through such interlacing institutions, she said, the burden of providing “public goods” could be spread more broadly.

She also widened the definition of the Obama administration’s policy of “engagement.” In addition to engaging adversaries and rivals diplomatically, she stressed her determination to engage directly with the people and foreign publics in general.

Less convincing was her account of U.S. efforts to contain Iran’s nuclear program. Our engagement with China and Russia, she said, paid real political dividends when the U.S. Security Council last spring passed, “the strongest and most comprehensive set of sanctions ever on Iran. ”

True, but Iran’s continued intransigence suggests the limits of multilateral diplomacy more than its effectiveness. The underlying assumption that Tehran is eager to be welcomed back into the world community overlooks the regime’s self-conception as a revolutionary Islamist theocracy and challenger of the international status quo.

In a curious omission, Clinton had little to say about terrorism amid all the architectural metaphors. While al Qaeda may be holed up in Pakistan, its ideology has spread to affiliates in Iraq and, more recently, in Somalia and Yemen, where the gruesome pattern of suicide attacks and mass murder of civilians is more and more evident.

Containing this ideological contagion is of critical importance to the United States and to its vision of a world order upheld by a growing network of liberal democratic institutions. Let’s hope we hear more from the Administration on this subject soon.

It’s Time To Unmask the Republican Agenda

Posted on by The Progressive Policy Institute

With the arrival of Labor Day, and the end of Vacation Time for Americans lucky enough to have jobs with benefits, the options for changing the dynamics of the midterm elections have gradually but steadily narrowed. Significant external events could still happen, but probably won’t; the economy is not going to turn around between now and November 2.

Moreover, the opportunity to engineer a basic sea change in public opinion on the Obama’s administration’s agenda is probably past for the time being. Much as the White House’s earlier efforts to convince people that the economy would be far worse without unpopular market interventions made sense, basic judgments have been made by most persuadable voters. The same is true of health reform; the legislation’s beneficial effects will have to kick in before it gets a fresh trial in the court of public opinion.

What Democrats can — and must — do more of during the shank of the campaign season is to challenge Republicans to disclose their own agenda for the country, and draw greater attention to the extremist logic of where Republican positions of current events would lead. The vast majority of all Democratic messaging in the next two months needs to relentlessly focus on this single topic.

This is obviously easier in the case of Republican nominees such as Rand Paul, Sharron Angle and Joe Miller, who have called for phasing out Social Security and Medicare. But many other Republicans are demanding elimination of any federal role in education, energy environmental protection or agriculture, and virtually the entire party is reflexively opposing regulations on a wide variety of subjects where corporate misbehavior has had a devastating effect on the national interest and middle-class Americans individually.

Even those GOP elected officials and candidates who have been careful to avoid such specific positions have accepted the party-wide argument that federal budget deficits must be immediately reduced if not eliminated even as new tax cuts for high-earners and corporations are provided and the defense budget is protected (if not expanded via a new war with Iran which many Republicans have been agitating in favor of for years now). By any sort of math, the Republican agenda means massive steps to eliminate regulations and scale back Social Security, Medicare, Medicaid and other basic safety net programs.

Democrats need to hammer away at these general and particular implications of the GOP agenda every day and in every competitive contest across the country.

To those who argue that this sort of “negative” campaigning would represent an effort to change the subject from its own performance in office, Democrats must respond: it’s Republicans who are trying to change the subject from a proper comparison of the agendas of the two parties and of individual candidates.

There’s no secret about the Democratic agenda; the administration and the congressional Democratic leadership have been trying to implement it since January of 2009, against the active obstruction of the GOP, which is using every dilatory tactic, most notably unprecedented threats to use Senate filibusters. The public deserves to know exactly what the Republican Party will propose if it gains control of either House of Congress.

At this late date, such a “negative” campaign by Democrats is the right thing to do, and perhaps the only thing to do that can simultaneously persuade swing voters and motivate a high turnout by Democrats. Waiting until next year to force the hand of Republicans is both irresponsible and politically feckless.

However much conservatives and many elements of the media insist the midterm elections are a “referendum” on the Obama administration or this or that Democratic initiative, they cannot wish away the fact that every contest that will decide control of Congress or of state and local governments involves a choice between a Democrat and a Republican–with the former being held strictly responsible for every discontent with the status quo, and the latter free to demagogue and make vague or wild promises without immediate consequences.

Every Democrat reading these words knows the sort of extremist and very unpopular agenda the GOP will be forced to advance in the very near future by its own loose rhetoric, the logic of its conflicting promises, and the growing radicalism of its cadre of politicians. It’s time to tell the country about it right now.

This item is cross-posted at The Democratic Strategist

Photo credit: Tim Bradshaw’s photostream

The Shelf Life of the Tea Party

Posted on by The Progressive Policy Institute

Will the Tea Party endure?  If so, for how long?

Steve Clemons writes:

I hope David Frum is right and that the Tea Party movement, which is growing in numbers and ferocity, will hit its limit, experience an Icarus moment, and plunge back into the fringe of American politics where pugnacious, jingoistic, narrow band nationalism has always lurked.

But Clemons is skeptical: “But there is no guarantee of this,” he writes, citing a prominent funder, who frets that “their political loss didn’t teach the Republicans anything; they actually got much worse.”

Kevin Drum chimes in with faith in the political pendulum that always swings back:

I think Frum is right and the mega-funder just needs to have a bit more patience. Parties rarely move to the center immediately after a big defeat. Usually it takes two or three before they finally get the message, and on that metric Republicans aren’t due for a move to the center until sometime after 2012.

Sure, when a party keeps losing, eventually there is a move to shake it up. But the problem is that Republicans are winning doing this, which the wingnuts in the party will surely interpret as a vindication for their, errr, patriotic turn.

But I’m still optimistic that the Tea Party movement does have a limited shelf life. Here’s why:

In all likelihood, at least some of these tea party candidates are going to actually have to govern.  Mike Lee is up by 25  points in Utah; Rand Paul is up almost 10 points in Kentucky; Joe Miller, Marco Rubio, Ken Buck are all leading as well in polls.

And governing is more difficult than campaigning.  Once in Congress, these wild turks won’t be able to deliver on their outrageous promises of ending big government and repealing healthcare. This will likely provoke disillusionment and then infighting among Tea Party types as to whether to find a new breed of “purer” Tea Partiers, or to remain loyal to their existing leaders. Disillusionment and infighting will sap the Tea Party movement of energy.

Additionally, Tea Party legislators, especially in the Senate, will effectively grind the wheels of governance to a halt. Moderate voters, who are now fed up with Democrats for not fixing the economy in two years, will still want somebody to blame for a sluggish economy. And this new batch of Tea Party fanatics, who like to run off their mouths into the deep recesses of ridiculousness, will now find that being accountable makes them the hunted rather than the hunters.

In many ways, this is just the latest step in a decades-long ratcheting up of opposition political rhetoric and promises. The party out of power always promises that there are simple solutions to hard problems that will solve everything, and accuses the party in power of being just too corrupt, incompetent, or whatever to see that. But of course hard problems actually have hard solutions, and the problems now are harder than before and the solutions are even harder. In short: it’s probably a bad time to be overpromising.

Photo credit: adulau’s photo stream

The Conservative Politics of Common Purpose

Posted on by The Progressive Policy Institute

The primary defeat of incumbent Alaska Sen. Lisa Murkowski (confirmed by her concession yesterday) by former judge Joe Miller is generally being interpreted as another scalp for the Tea Party Movement in its assault on Republicans deemed too moderate on this or that key issue. But there’s something going on a bit deeper, if you consider Alaska’s exceptional dependence on the federal government and the past political track record of politicians like Murkowski’s mentor, the late Ted Stevens, who aligned themselves with the anti-government GOP but emphasized their ability to “bring home the bacon” via appropriations.

In endorsing Miller on behalf of his Senate Conservatives Fund, Jim DeMint emphasized this dimension of Murkowski’s defeat:

Joe Miller’s victory should be a wake-up call to politicians who go to Washington to bring home the bacon. Voters are saying ‘We’re not willing to bankrupt the country to benefit ourselves.’

Now it wouldn’t be quite right to accept DeMint’s characterization of either Alaska voters’ motivations or Miller’s ideology at face value. After all, when Miller calls for abolishing the federal Department of Energy, he’s appealing to the rather selfish desire of Alaskans to control their “own” energy resources–whose value is a lot higher than any federal earmark– regardless of what it means nationally.

But it’s true that there’s an element of collective self-denial among those conservatives who are genuinely willing to take on federal spending categories that are popular among their constituents. Miller is just the latest of a number of Republican Senate candidates this year who have called for phasing out Social Security and Medicare. DeMint himself has long described these programs, along with public education, as having seduced middle-class Americans into socialist ways of thinking.

As Republican pols from Barry Goldwater to George W. Bush can tell you, going after Social Security and Medicare is really bad politics. And they’ve yet to come up with a gimmick, whether it’s “partial privatization” or grandfathering existing beneficiaries, to make major changes in these programs popular (I seriously doubt the very latest gimmick, “voucherizing” Medicare, will do any better once people understand the idea). Indeed, Republicans notably engaged in their own form of “Medagoguery” by attacking health care reform as a threat to Medicare benefits.

Yet the sudden Tea Party-driven return to fiscal hawkery among Republicans, particularly if it’s not accompanied by any willingness to consider tax increases or significant defense spending cuts, will drive the GOP again and again to “entitlement reform.” In Senate candidates like Rand Paul and Sharron Angle and now Joe Miller, we are seeing the return of a paleoconservative perspective in the GOP that embraces the destruction of the New Deal/Great Society era’s most important accomplishments not just as a matter of fiscal necessity but as a moral imperative.

You can respect this point of view even if you abhor its practical implications. But there’s little doubt it represents political folly of potentially massive dimensions. Certainly Democrats owe it to these brave conservatives to take them seriously in their desire to free middle-class seniors from the slavery of Social Security and Medicare, and draw as much attention to it as possible.

Photo credit: Steve Rhodes’ photostream

This item is cross-posted at The Democratic Strategist


Obama’s Iraq Speech Splits the Right

Posted on by The Progressive Policy Institute

To thank or not to thank?

Yesterday morning, that’s what we were wondering around the PPI offices — would Obama thank President Bush during his Iraq address that night?  I had a conversation with my colleague Lindsay Lewis, who had just heard White House Press Secretary Robert Gibbs mention that Obama was scheduled to call Bush that afternoon.  Might Obama directly thank Bush for adopting “the surge”, which, as the incomplete political narrative goes, was responsible for the decrease in violence in Iraq in 2007?

If he was explicit in his praise, I felt that the left would be apoplectic.  DailyKos and HuffPo headlines would read “The Jerk THANKED Bush”, not “Obama Fulfills Campaign Pledge.”  As polls indicate Democrats’ looming losses this November, that’s not what the administration wants floating around its mysteriously disenchanted base.

Lindsay, ever the astute politico, noted that by paying tribute to Bush, Obama was playing long-ball:  If he were to thank Bush, Obama would be positioning himself as a post-partisan Commander-In-Chief.  In political terms, he’d be positioning himself for the reelect.

Turns out that Lindsay wasn’t far off, and Obama even did him one-better: The president threaded a very fine needle that mollified critics on left and right:

This afternoon, I spoke to former President George W. Bush.  It’s well known that he and I disagreed about the war from its outset.  Yet no one can doubt President Bush’s support for our troops, or his love of country and commitment to our security.  As I’ve said, there were patriots who supported this war, and patriots who opposed it.  And all of us are united in appreciation for our servicemen and women, and our hopes for Iraqis’ future.

Turns out he didn’t go so far as to thank Bush, which keeps the focus on fulfilling his campaign pledge for the progressive base, but he succeeded in praising Bush enough to mute conservative critique and position himself as a post-partisan leader.  If you’ll pardon the phrase, Mission: Accomplished.

The conservative intelligensia are split.  Here Max Boot sounding… magnanimous, even:

I thought that this speech was about as good as we could expect from an opponent of the Iraq war — and better than Obama has done in the past. He even (for the first time?) held out an olive branch to his predecessor. … There was only a brief mention of Afghanistan, but what he said was pretty good.

Here’s Bill Kristol, sharing the love:

I thought his speech was on the whole commendable, and even at times impressive. … Not a bad tribute to the troops, and not a bad statement of the importance and indispensability of hard power. And, on the whole, not a bad speech by the president.

Truth be told, I’m happy to see them giving credit where credit is due.

Of course, every conservative didn’t feel so gooey inside.  Here’s Jennifer Rubin:

Obama is still candidate Obama, never tiring of reminding us that he kept his campaign pledge and ever eager to push aside foreign policy challenges so he can get on with the business of remaking America. All in all, it was what we were promised it would not be — self-serving, disingenuous, ungracious, and unreassuring.

And Jonah Goldberg:

I really disliked it…. If you read this closely, what Obama is saying is that not only do we owe it to the troops to rally around his discredited and partisan economic agenda (“It’s our turn”), not only is it a test of our patriotism to sign on with his environmental and industrial planning schemes, but that doing so “must be our central mission as a people.” I find everything about that offensive.

The point is that on some level, Obama succeeded in presenting himself as a post-partisan Commander-in-Chief.  Of course, anyone can concoct a reason why not to like a speech given by the president of a different political persuasion.  So while Rubin and Goldberg’s reactions are stock and trade, drawing even faint praise from the likes of Bill Kristol is a remarkable and welcome milestone.

An Iraq Milestone?

Posted on by The Progressive Policy Institute

Many commentators seem puzzled over President Obama’s decision to use an Oval Office speech to mark the “end of combat operations” in Iraq. The reason: Iraq is important to Barack Obama, even if most Americans are nowadays preoccupied with a foundering economy.

Iraq, in fact, may be the reason Obama is President. During the 2008 campaign, the very green Junior Senator from Illinois used his opposition to the war to distinguish himself from more experienced rivals like Hillary Clinton and Joe Biden. His anti-war credentials allowed him to ride the powerful tide of anti-Bush sentiment among progressives. It also buttressed his claims to be a Washington outsider, the most authentic agent of political change in the race. This appealed to independents.

So it’s little wonder that Obama takes his pledge to end the Iraq war very seriously. He undoubtedly regards it as a matter of keeping faith with his core supporters. At the same time, he was careful not to inflame old passions over the war. On the contrary, he rightly praised U.S. troops for their skill and valor, offered a graceful salute to his predecessor, and urged the country to move on.

In this respect, the speech was probably the most genuinely “post partisan” of his presidency. But it also raised questions about what Obama really thinks about the war.  He noted that U.S. troops, at tremendous sacrifice, toppled one of the world’s worst tyrants and gave Iraq a chance to embrace “a different destiny.” Does that mean he disagrees with the New York Times’ characterization of Iraq as a “tragic, pointless war”? Obama sounded ambiguous on the question of whether it was all worth it, but such reticence probably comes with the job of being President.

Whether the public will regard his declaration as an important milestone is another matter. Violence in Iraq is already down, thanks at least in part to the surge that Obama initially opposed but has since implicitly endorsed by putting the same general, David Petraeus, in charge of a similar escalation in Afghanistan. What’s more, 50,000 U.S. troops will remain in Iraq for the next 16 months, and at least some of them will be fighting al Qaeda insurgents. Truth to tell, the President did little more last night that endorse the timetable set forth in the Status of Forces Agreement (SOFA) the Bush administration negotiated with the Iraqi government.

For Obama, the significance of this moment is that it marks the transition to Iraqi responsibility for security. That’s fine, but America can’t simply wash its hands and walk away at the end of next year. Iraq didn’t ask to be invaded, or to be plunged into the hellish sectarian violence that followed. The United States has incurred an unavoidable moral obligation to help a decent political order emerge in Iraq. If that requires revisiting the SOFA, the administration shouldn’t be inflexible on the point.

In stressing the limits of America’s responsibilities, the President also drew parallels between Iraq and Afghanistan. The United States should stay in Afghanistan only as long as it takes to build the capacity of the Afghan government and security forces to defend the country against a vicious Taliban insurgency.

Obama, in fact, seemed to be implicitly advancing a new doctrine of limited U.S. military intervention. The unstated assumption: America probably will be forced to intervene again in failing and fragile states beset by terrorism or communal conflict. But we should make no open-ended commitments to counterinsurgency and national building. But war is seldom so tidy. The United States still has troops in South Korea, 57 years after the war there ended.

In all, it was an often confusing and even contradictory speech, as Fred Kaplan captured well today. It reflected the deep ambivalence of a man who rose to prominence on the strength of his anti-war stance, and now finds himself, as Commander in Chief, responsible for bringing no less than three wars – Iraq, Afghanistan and the fight against al Qaeda – to a successful conclusion.

Photo Credit: Jurveston’s photostream

The Dangers of the Beck-on Call

Posted on by The Progressive Policy Institute

Among the literature I picked up on Saturday while attending the “Restoring Honor” rally on the National Mall (purely to indulge my curiosity) was a three-by-five card asking me: “ARE YOU READY TO BEGIN THE REBIRTH OF THE UNITED STATES CONSTITUTION?” The card directs me to a website, the1789project.com, where I can pledge money to a PAC that will only support candidates who adhere to the Constitution.

Another card tells me: “Politicians are destroying our country. We have the solution. Join us. We seek the modern day incarnations of Madison, Franklin, and Jefferson.” The card is for the “Get Out of Our House” project, or GOOOH. The plan, according to the website, is “to remove all members of the U.S. House of Representatives and replace them with everyday Americans just like you.” Wow. Just like me? I can only dream.

I was struck by the ways in which this resonated with the larger theme of the program: Restoring Honor. Restoring. This great hope that only if we could get back to some golden era, if only we could tap into this apparently forsaken “Constitution” document, if only we could get rid of all the “career politicians” and replace them with ordinary citizens, somehow all the problems of the world would solve themselves.

It’s a wonderfully alluring biblical narrative: the return to the lost Eden. One gentleman I spoke with assured me that if only we all would just stop and really read the Bible and take its teachings to heart, all of our problems would be solved. There would be no need for government. Everything would work perfectly. (He was handing out literature for “Project Restore”). Meanwhile, Glenn Beck announced over the loudspeakers: “To Restore America, we must restore ourselves.”

The idea of redemption through a return to first principles is nothing new, and it’s far from the exclusive province of the political right. One is reminded, for example, of the hopeful Port Huron statement, with its great emphasis on a return to participatory democracy driven by a return to values, and its explicit narrative of decline: “Theoretic chaos has replaced the idealistic thinking of old — and, unable to reconstitute theoretic order, men have condemned idealism itself. Doubt has replaced hopefulness — and men act out a defeatism that is labeled realistic.” Compare that to Glenn Beck: “My role, as I see it, is to wake America up to the backsliding of principles and values.”

Sure, I’m all for self-improvement. We could all be kinder, gentler, harder working, better people. But the very fact that self-improvement is a $10 billion a year industry (and growing) is a testament to the human condition never quite being able to live up to our ideals. “If men were angels,” wrote Madison in Federalist #51, “no government would be necessary.”

The flaw in the redemption-by-return-to-first-principles story is that there never was a golden age. Each era had its strengths and weaknesses, but we tend to remember the wisest statements because those are the ones that are passed on and consecrated. (And lest we forget: The America of 1789 was an isolated agrarian nation in which only rich, educated, white property owners could vote. Would we want go back, even if we could?)

The mild danger in the redemption-by-return-to-first-principles story is that it undermines the ability of political institutions to solve problems through the messy art of compromise. If the only acceptable solution to the mess we’re in is to start fresh (for example, to replace to whole stinkin’ lot of lawmakers with “ordinary citizens”), it won’t be long before that fresh start encounters the same timeless governance problem of aggregating diverse preferences, and start acting like “politicians.” The more serious danger is that the redemption-by-rededication is a kindred spirit of utopian thinking that slides easily into ends-justifies-the-means murder and genocide, from communist purges to terrorist jihads.

The current sputtering economy, or the toxic brew of declining revenues and spiraling debt and entitlement obligations, or climate change, or any of the hard problems we face as a society — these are not going to go away if only we learn to love thy neighbor. The only way they’ll go away is with patience and compromise and hard work. This is the world in which we live. We need to roll up our sleeves and be realistic.

Yes, we can all be better people. I’m trying every day. But a full and complete purge of sin as gateway to a lost Eden is not a substitute for the real challenges of politics. Politics, whatever its shortcomings, is the art of the possible. The return to a lost golden age is the art of the impossible.

Photo credit: Gage Skidmore’s photostream

Beware of Partisan Tax Zombies

Posted on by The Progressive Policy Institute

There has been growing chatter this week in response to James Surowiecki’s recent piece in The New Yorker suggesting we create a new, higher-rate tax bracket for the “super rich.”  It’s the kind of side story I should expect to see and not take too seriously when major tax changes are on the political agenda.  But I can’t just ignore this one, because it keeps getting more traction, and I think it baits extremists on both sides into all-too-familiar class warfare arguments, which are exactly the kind of discussions we should not be having right now.

As a Democrat, I am strongly in favor of a progressive tax system.  It’s one of the widely held values that defines us as a party, and it’s something we should not shrink from fighting for.  But there comes a point when the zeal for progressivity can overtake reasonable concerns about encouraging economic growth, and this year is not the time to let that happen.  Questions of distributional justice are important, and the Bush tax cuts did a lot to worsen inequality in our country that need to be remedied, but let’s keep the bigger picture in mind here.

The proposed “super rich” bracket is a supercharged example of how progressives are misdirecting our energies in the tax debate.  While there’s not much chance that it will make the jump to becoming an actual legislative proposal, the idea has struck a nerve on the left, which is already twitchy over the debate over whether to extend the Bush tax cuts for the top tax brackets, as Paul Krugman dutifully showed in his Times op-ed on Monday.   CNBC was quick to give the story more legs by bringing on Michael Linden from the Center for American Progress to endorse the idea in a segment on Monday.  Then they came back to it with another segment Wednesday night with Matt Miller (also from CAP) facing off with Stephen Moore from the Wall Street Journal.

For someone who has written about the Tyranny of Dead Ideas, Miller really let himself go a little zombie on this one, sounding too much like the “talking dead” with the old-school liberal argument for steep progressivity in the tax code and a deaf ear to the concerns about economic growth.  I’m not criticizing him personally as much I am CNBC for painting him that way, since Miller has repeatedly weighed in with very good thoughts about cuts for payroll and corporate taxes, but I think volunteering to step into the scripted left-wing role for this segment was a step backward from his earlier calls for a more radical centrism.

Is this really the kind of debate we are going to get dragged into this year?  With the country still languishing in recession, people in every tax bracket are looking to Washington to do what needs to be done to get the economy going again.  Do we really have to listen to the same broken records from both sides this time around (and they really are records, because these arguments haven’t changed much since the days of vinyl)?    This is the type of discussion that will drag the current tax debate into a predictable and unproductive battle of liberal and conservative clichés, which all but ensures that Congress will spend the fall in a tug-of-war over marginal tweaks to the Bush tax cuts and ignore other proposals for reform and stimulus.

We Democrats should not paint themselves into our usual corner in the tax debate by limiting our ideas to line-drawing, whether it’s the Administration’s line for the richest two percent or a new line for the “Ultrarich” in the top 0.1 percent.  Letting this happen would be a mistake for two reasons:

First, it obscures and marginalizes better policy questions at a time when sustainable economic growth should be our top priority.  Putting aside broader reform proposals, even the Bush tax cuts may not deserve to be lumped together and simply cleaved in two at the $250,000 line.  For example, rates on dividend income for the top brackets could jump from 15% to 39% in 2011, while capital gains income will stay at a lower 20% rate.  There is a good case to be made that the dividend rate should be kept in line with the capital gains rate, regardless of what happens to marginal rates, because having a disparity between these two taxes on investment negatively affects the cost of capital for utilities and other companies paying high dividends, which discourages spending on new capital and infrastructure.  But we likely won’t have that debate, because the distributional effects of playing with the dividend rate fall mostly within the top brackets, so they are on the wrong side of the dividing line Obama has drawn.

Second, Republicans usually do a much better job delivering their zombie rhetoric than Democrats.  As John Boehner so frequently demonstrates, the Republican response for talking about the top brackets is to use “small business” as a euphemism for rich people.  They have shaky new statistics every week about how the Democrats are raising taxes on small business.  But trying to explain away all the false numbers tends to put Democrats on the defensive, when they should be making an affirmative case for promoting economic growth.   And so far, Boehner and company are getting away with doing just that, because the President and congressional leaders are following our party’s tradition of being reactive on taxes instead of laying out a real vision.  So right now the public thinks the “Democrats’ plan” is pretty much whatever John Boehner and the tax zombies say it is.

Progressives’ top priority right now needs to be reviving economic growth and broad-based prosperity.  We can’t have a meaningful debate about economic inequality until we get our economy growing again.  Jobs and growth—not punishing the rich—are what Americans are interested in, and what we should be talking about.  Instead, progressives are limiting their talking points to justifying the dividing line between those who deserve tax cuts and those who don’t—the helps and the help-nots—and we’re letting Republicans own the growth side of the debate.

Democrats need to have something more than tired old thinking that says the Bush tax cuts are mostly OK for now, as long as we give them a quick liberal haircut—just a little off the top.  Instead of trying to repackage Bush’s mistakes, we should be framing the debate around the pro-growth virtues of a free-standing package of “Obama tax cuts.”  All we need now is for Obama to actually propose one.  I hope the zombies didn’t get to him too.

Photo credit: JamesCalder’s photostream

Is the modern partisan majority dead?

Posted on by The Progressive Policy Institute

Last weekend, Australia held a national election. And for the first time in 70 years, the land down under is now facing a hung parliament.

While Australia struggles to figure out how to govern itself, it’s worth reflecting on a larger trend: there is now a hung parliament in every major nation that is governed by a winner-take-all, “Westminster model” parliament (For those of you keeping score at home, that’s India, U.K., Canada, Australia, and New Zealand). And just about every other major industrial democracy relies on some version of proportional representation, resulting in multi-party governing coalitions of varying stability.

India obviously is an astoundingly heterogeneous country, so that makes sense. But it’s not immediately obvious why the four Anglo countries should be having such a difficult achieving political consensus these days. It’s enough to make one wonder: have we entered a new era of global politics in which it’s no longer possible for any party to win an electoral majority anymore?

Some quick background: The May U.K. election resulted in the first hung parliament in 36 years. Canada has experienced hung parliaments in every election since 2004, resulting in periods of minority government, though  prior to 2004, it had been 25 years since the voters couldn’t agree on a majority. New Zealand has had minority government since 1996, when the country introduced a mixed member proportional voting system.

And then of course, there is the good U.S. of A. (not a Westminster parliament, obviously, but also a winner-take-all system) where even though Democrats control both Congress and the Presidency, filibuster powers in the hands of an obstructionist minority sure makes it feel like a hung parliament.

But the big U.S. story this election is of course how the voters are growing increasingly sour on both parties, and no matter who winds up in control of the House and Senate come 2011, it’s not like any electoral majority is going to have anything close to a meaningful national mandate.  In the latest National Journal poll 28 percent of all respondents disapproved of both parties, and the number of Independents has been rising over the last six years to the point where the plurality of voters (36 percent) now choose to identify themselves as independents. And even if most independents tend to vote like partisans, the changing self-identification suggests they are less and less happy about it.

And while there are any number of possible explanations (Is it the hyper-adversarial nature of modern politics, stoked by the 24/7 media cycle, in which every trivial tiff is the new Waterloo? Is it something about the grim global economy, and the difficult reckonings that almost all nations are facing on some level?).  One wonders: have we entered a new era in which it is impossible for the majority of any modern nation to come together behind one banner? Is the modern partisan majority dead? And if so, what do we do about it?

Photo credit:  Marxchivist’s photo stream

Diagnosing our pervasive intellectual laziness

Posted on by The Progressive Policy Institute

David Brooks’ column today tackles what he sees as a pervasive intellectual laziness in modern political discourse, emerging in good part out of confirmation bias run amok and coddled by a culture that errs on the side of affirmation as opposed to challenge.

The ensuing mental flabbiness is most evident in politics. Many conservatives declare that Barack Obama is a Muslim because it feels so good to say so. Many liberals never ask themselves why they were so wrong about the surge in Iraq while George Bush was so right. The question is too uncomfortable.

Brooks figures maybe this has something to do with that simple fact that giving people what they want is always more profitable than the alternative:

In the media competition for eyeballs, everyone is rewarded for producing enjoyable and affirming content. Output is measured by ratings and page views, so much of the media, and even the academy, is more geared toward pleasuring consumers, not putting them on some arduous character-building regime.

Brooks is surely right on this point. But here are two additional ways in which the current media environment probably contributes to intellectual laziness:

1) Given the inexhaustible availability of content at any given moment, it is easier than ever to stay on a selective media diet, only munching on the news you know you like. Gone are the days when if you wanted to know what was going on in the world, you had only your local papers and evening television news to guide you. Today, you can read and read and read and watch and watch and watch to your heart’s content without ever so much as having to encounter an idea with which you disagree, or even a discomfiting fact.

2) The infinite chaos of the modern media stream might just be too overwhelming for anyone to approach without the crutch of an ideological filter. Imagine, for a moment, that you were truly agnostic as to some policy question, and you earnestly wanted to research it objectively. Where would you start? And more importantly: where would you stop? And when contrary ideas and facts emerged, how would you evaluate them? Picking an ideology to start provides coherence in a chaotic world (as it always has). And with the news environment more chaotic and expansive than ever, having a starting ideology seems even more helpful.

All of this suggests that those of us who agree with Brooks about the dangers of intellectual laziness built on ideology may be facing more obstacles than ever before. In short, we have our work cut out for us.

The McClellan Principle

Posted on by The Progressive Policy Institute

It’s a familiar argument: we know that putting a price on carbon will impose economic costs, but we can’t be absolutely sure that major climate change will happen. Therefore, we shouldn’t impose a carbon price, or at least we should avoid doing so in a recession, and be very reticent to do so at any point. The argument strikes many as logical and wise.

It is neither. And it won’t help make good policy or make progress towards consensus on what good climate policy should be.

At its core, the argument claims that any uncertainty about climate change means we should either give up, or at least wait indefinitely for better evidence. I call it the “McClellan principle.” Like the Civil War general, proponents of the argument counsel doing nothing until absolutely certain of success. The principle is frequently stated or assumed to be true in climate policy debates, often but not always by professed climate skeptics. To give a few recent examples, Stephen Calabresi states the principle explicitly in a Politico debate last week, while Steve Everley of Newt Gingrich’s American Solutions outfit uses the stealth version of the principle by listing costs of a carbon price while failing to mention climate change at all. But perhaps the most common form of the principle is simply as a concluding statement, thrown in as if its implications were obvious and unworthy of debate. The Wall Street Journal does this when criticizing California’s AB32 cap-and-trade policy in an April editorial:

While almost all of AB32’s benefits are speculative and uncertain, its costs are hitting businesses and residents now. This is one more blow to jobs and growth that California doesn’t need.

The appeal of the McClellan principle may come from the fact that it is cloaked in rational language, but it isn’t a rational approach to policy at all. In fact, it’s the inverse of the familiar “precautionary principle” advanced by many Greens (at least in the precautionary principle’s strong form). The strong precautionary principle would require a policy response even if uncertainty is large. The McClellan principle requires inaction even if uncertainty is small. Both principles are simplistic, and neither leads to good policy decisions.

The reason for this is that there are both costs and uncertainty about those costs associated with climate policy and with doing nothing. Both are real choices with consequences, even if we can’t say with complete precision what those consequences are.

The McClellan principle stresses that the economic costs of climate policy—primarily higher energy prices—are certain, while there is at least some chance that all the climate science models are wrong and that there will be no costs associated with doing nothing. Holding out hope that the Earth will not warm (or that we can do nothing about it) strikes me as absurdly Panglossian, but the basic premise that we can be more confident in estimates of the economic costs of policy—particularly that they will not be zero—is probably right.

The McClellan principle’s conclusion does not follow from this premise, however. Making policy based only on which kind of costs we think are more or less likely to be zero doesn’t make sense. We should instead do the best we can in estimating the two costs, both their magnitude and precision, and make the policy we can based on those estimates. That is of course incredibly difficult in practice. It raises questions about discounting of future costs and benefits, the tensions between national policy and global risks, and distributional impacts, among others. But it has to be the basic framework for making a decision. Both the McClellan and (strong) precautionary principles try to offer shortcuts, but in doing so they obfuscate rather than clarify.

I illustrating this is hard because conversations about climate policy are, unfortunately, so loaded with politics and preconceived ideas. Instead, let’s look at another issue loaded with different politics and preconceived ideas: crime. Imagine you are on a parole board considering release of a prisoner. There is a cost to releasing the felon (he might commit another crime) and a cost to keeping him in prison (prisons are crowded and expensive, and he might contribute to society if released). You know the cost of prison is not zero. The cost of release might be zero, or it might be big. But that doesn’t mean you should release the felon— or even that you should be any more likely to. Setting moral/ethical considerations about the prisoner aside, all we should care about is balancing our best guess about the costs of both options.

Of course, the way that parole boards work in practice—or at least the way most people demand that they work—is that any real chance of repeat offense is regarded as a reason for denying parole. So why is there such a dissonance between the way many people view parole decisions and the way so many view the climate policy debate? Why does the mainstream view on releasing felons appear to be a form of the precautionary principle, while the McClellan principle, if not the mainstream view on climate, is at least a major and usually uncriticized one? Surely a big factor is that the risks of crime are viewed as more personal and visceral, even if the chances of actually being a victim of a re-offender are low. It might be as simple as saying that most of us fear criminals more than we fear the more emotionally and temporally, if not probabilistically distant risks of climate change—and that mainstream positions are defined by what we most fear. That’s unavoidable to some extent, but it’s not a rational approach to making good policy.

Others, most notably Richard Posner, have made a similar analogy between major climate change and asteroid impacts—for which uncertainty is similarly paired with catastrophic downside risk. This analogy is useful because asteroid impacts are completely politically irrelevant—there’s no party line, and little fear—and as a result few people seem to have either a precautionary or McClellan principle-style reaction. A rational approach is the most appealing, though the same lack of fear may cause us to ignore the risk entirely and do nothing.

As these analogies hopefully illustrate, precision is important, but lack of it shouldn’t keep us from acting—on climate or on other problems of risk. Precision is just another factor in estimation of risks and costs. And whether the costs of action or inaction might have a chance of being zero doesn’t provide a shortcut out of the difficult task of balancing the two and making policy. Uncertainty matters, but it does not and cannot do the work alone.

I suspect that many people who advance the McClellan principle as their argument against pricing carbon would still oppose a price even if there were much less uncertainty about climate change risks (or would simply disbelieve claims of certainty). In their case, the McClellan principle may provide cover for less politically-acceptable positions, like an economic or political interest in fossil fuels or a very large discount rate. But many people who state the principle are not being disingenuous just to score rhetorical points. You don’t even have to reject climate science to advance the McClellan principle—you just need to point to the uncertainty within it.

But even for the intellectually honest, the wellspring of the principle’s appeal is, again, fear. Especially in a recession, the downside of pricing carbon sparks greater concern than climate change does, at least for many people. To them, the economic costs of a carbon price are very real, immediate, and personal, while the costs of climate change are distant and abstract. This is to some extent true for everyone, though if you are unemployed and live in a coal state, economic costs are certainly more apparent: a recent study suggests that unemployment and some measures of concern about climate change are negatively correlated. In a democracy, these perspectives cannot and should not be dismissed. They are valuable and should be listened to when considering climate policy, and in particular its distributional impacts.

But the fact that costs are tangible—that they are feared—doesn’t mean the McClellan principle is any more logically sound. Lack of certainty about climate change risks doesn’t justify inaction any more in Ohio than it does in California—or places at great risk from warming, like Bangladesh. The McClellan principle is ultimately based on fear, not reason. Stripping the principle of its thin cloak of rationality might therefore make a difference, however small, in the politics of climate policy. As I mentioned above, I’m certainly not the first person to try to do this, but the principle remains a resilient meme. It’s worth having the counterargument in your pocket.  Next time you hear it, ask its proponent what they would do on a parole board.

The Economist’s Strange Attack on Industrial Policy

Posted on by The Progressive Policy Institute

Last week’s The Economist leader and cover story, “Picking winners, saving losers”, painted an insidious picture of governments’ increasing intervention in market economies, arguing that the hideous Leviathan of the state was gobbling up one sector after another and warning that “picking industrial winners nearly always fails.” Now, put aside the fact that the government was forced into some sectors—such as automobiles and financial services—only after mammoth market failures and pleas for rescues from capitalism’s chieftains.  The more important fact is that the article feeds a Socialism-is-coming hysteria and ignores how picking winners—within limits—has worked in the past for the United States (and Japan, South Korea, etc.) and is needed more than ever to bolster our long-term competitiveness.

Of course, the debate about the appropriate role between the state and the private sector in market economies has raged for centuries. The debate is marred in part by vague terminology, and The Economist perpetuates this problem by throwing around a slew of terms—“picking winners”, “industrial policy”, “innovation policy”—without adequately distinguishing between them but while uniformly indicting them as inappropriate manifestations of government economic intervention.

It would be more constructive to envision a continuum of government-market engagement, increasing from left to right in four steps from a “laissez faire, leave it to the market” approach to “supporting factor conditions for innovation (such as education)” (which The Economist endorses, as, certainly, does ITIF) to going further by “supporting key technologies/industries” to at the most extreme “picking specific national champion companies”, that is, “picking winners.”  And while it is generally inadvisable for governments to intervene in markets to support specific national champion companies, ITIF believes there is an appropriate role for government in placing strategic bets to support potentially breakthrough nascent technologies and industries.

Ironically, The Economist asserts that, “Industrial policy may be designed to support or restructure old struggling sectors, such as steel or textiles, or to try to construct new industries, such as robotics or nanotechnology. Neither track has met with much success. Governments rarely evaluate the costs and benefits properly.” Yet, seconds later, the authors admit, “America can claim the most important industrial-policy successes, in the early development of the internet and Silicon Valley.” In one sentence, the article glosses over the point that the government, in this case the Defense Advanced Research Projects Agency (DARPA), “supported creation of ARPANET, the predecessor of the Internet, despite a lack of interest from the private sector.” (Italics mine.) But this point, as economists are wont to say, is “non-trivial.” In fact, it is the precisely the point.

Early on, companies were reticent to invest in the nascent field of computer networking because the sums required were enormous and the technology was so far from potential commercialization that companies were unable to foresee how to monetize potential investments. Moreover, such basic research often results in knowledge spillovers, meaning the company cannot capture all the benefits of its R&D investment (in economist’s terms, the social rate of return from R&D is higher than the private rate of return), and thus companies tend to underinvest in R&D to societally optimal levels. Of course, this dynamic pertained not just to the Internet, but applies today to a range of emerging infrastructure  technologies such as biotechnology, nanotechnology, robotics, etc. As Greg Tassey, Senior Economist at the National Institute of Standards and Technology (NIST), explains it, “the complex multidisciplinary basis for new technologies demands the availability of technology “platforms” before efficient applied R&D leading to commercial innovation can occur.” In other words, the levels of investment required to research and develop emerging technologies is so great that the private sector cannot support it alone, and thus, “government must increasingly assume the role of partner with industry in managing technology research projects.”

Such was the case with the initial development of the Internet, as government stepped in and provided initial R&D funding, helped coordinate research between the military, universities, and industry, and thus seeded development of a breakthrough digital infrastructure platform, making the Internet a reality decades before the free market ever would have (if ever) if left to its own devices. And this admittedly-successful industrial policy has indeed been a spectacular success. As ITIF documented in a recent report, The Internet Economy 25 Years After.com, the commercial Internet now adds $1.5 trillion to the global economy each year—that’s the equivalent of adding  South Korea’s entire economy annually.

Moreover, the list of technologies in which government funding or performance of research and development (R&D) has played a fundamental role in bringing the technology to realization is long and compelling. It includes: the cotton gin, the manufacturing assembly line, the microwave, the calculator, the transistor and semiconductor, the relational database, the laser beam, the graphical user interface, and the global positioning system (GPS), amongst many others. The National Institute of Health (NIH) practically created the biotechnology industry in this country. And yes, even Google, the Web search darling, isn’t a pure-bred creature of the free market; the search algorithm it uses was developed as part of the National Science Foundation (NSF)-funded Digital Library Initiative. (But Google hasn’t done much to spur economic growth!) The point is that companies like IBM, Google, Oracle, Akamai, Hewlett-Packard, and many others may not have even come into existence─and certainly would not have prospered to the extent they have─if the U.S. government was not either an early funder of R&D for the technologies they were developing or a leading procurer of the products they were producing. And if you don’t get Intel developing the semiconductors, or Cisco building out the Internet, or Akamai securing it, or Google making it accessible, then you don’t get the downstream companies like the Amazons or eBays, the latter of which 724,000 Americans rely on as their primary or secondary source of income.

Thus, while governments shouldn’t be creating and running such companies itself—that is for the free market to do—the government has a role to play in thoughtfully, strategically, and intentionally placing strategic bets on nascent and emerging technologies—as the United States did with information and communications technologies in the 1960s and 1970s—that have the potential to turn into the industries, companies, and jobs that drive an economy two to three decades hence. We call this innovation policy, as opposed to industrial policy. Today, this augurs the need for smart policies and investments in industries such as robotics, nanotechnology, clean energy, biotechnology, synthetic biology, high-performance computing, and digital platforms such as the smart grid, intelligent transportation systems, broadband, and Health IT. Explicit in this approach is a recognition that some technologies and industries are in fact more important than others in driving economic growth—that “$100 of potato chips does not equal $100 of computer chips.” Indeed, they are not because some industries, such as semiconductor microprocessors (computer chips) experience very rapid growth and reductions in cost, spark the development of subsequent industries, and increase the productivity of other sectors of the economy—not to mention support higher wage jobs.

Yet The Economist frets that governments aren’t very good at identifying and investing in strategic emerging technologies. In impugning governments’ ability to pick winning technologies, the article cites failures such as France’s Minitel (a case of a country picking a national champion company) and argues that “Even supposed masters of industrial policy {like Japan’s MITI, or Ministry of International Trade and Industry} have made embarrassing mistakes.” But this would be tantamount to pointing to the spectacular failure of Apple’s Newton and arguing that Apple’s no good at innovation. The Economist seems to suggest that if governments failed 80-90% of the time in picking technology winners (and ITIF actually thinks their success rates are much higher), then they must be pretty incompetent at the effort and should stop trying altogether.

But if private corporations followed that advice, then we would have no innovation whatsoever. Indeed, research by Larry Keeley of Doblin, Inc. finds that, in the corporate world, only 4 percent of innovation initiatives meet their internally defined success criteria. More than ninety percent of products fail in the first two years. Other research has found that only 8 percent of innovation projects exceed their expected return on investment, and only 12 percent their cost of capital. Yet companies have to continue to try to innovate, even in the face of these long odds, because research finds that firms that don’t replace at least 10 percent of their revenue stream annually are likely to be out of business within five years. The point is that just because innovation is difficult and success rates are low, this does not mean that corporations, or governments, should quit trying—or that their successes, like the Internet, can’t be spectacularly successful and have a profound impact on driving economic growth.

But The Economist laments that industrial or innovation policies are subject to capture by industries. What this neglects is that all countries, including the United States, already have de facto industrial policies that favor some industries over others. In the United States, for example, our regulatory and tax system favors agribusiness through farm subsidies, the oil industry through oil subsidies, airlines and highways at the expense of rail, and mortgage and financial industries. In fact, it is precisely because the United States has historically lacked an ability, or willingness, to have a clearly defined innovation strategy and an open dialogue about “making strategic decisions about strategic industries” that we’ve ended up with a de facto industrial policy ill-suited to supporting industries that will drive economic growth in the future. The Economist notes that “there is no accepted framework for “vertical” policy, favoring specific sectors or companies.” True. So let’s make one.

Finally, while The Economist criticizes President Obama’s new Strategy for American Innovation (released in 2009), it fails to come up with compelling evidence that breakthroughs such as mapping the human genome, unlocking nanotechnology’s potential, or achieving the technology-enabled transformations that need to occur in sectors from energy to transportation will occur solely because of the market’s ability to allocate capital efficiently. In this, it discounts the need for effective, intentional public-private partnerships to invest in and collaborate in the development and diffusion of these industries and technologies.

This critique is not meant to pick on The Economist, which is usually chock full of solid reporting and informed commentary. Rather it is take on the myth of America’s purely free market capitalist system and make the case for an informed innovation policy. It is also to note that countries (like the United States) find themselves desperately turning to industrial policy in a last ditch effort to save stumbling sectors such as automobiles because they have failed to make adequate investments in innovation policies that would support science and technology, R&D, and the development and diffusion of innovative processes and technologies that could have helped keep old sectors like automobiles at the technology frontier while supporting the development of new sectors to drive the economy forward.

Finally, it seeks to rebut the ideological and highly politicized assault on the idea the governments cannot make prudent, targeted bets on the industries of tomorrow. As Greg Tassey has noted, competition among governments has become a critical factor in determining global market share among nations. Indeed, the role of government is now a critical factor in determining which economies win and which lose in the increasingly intense process of creative destruction.

There are appropriate and inappropriate roles for governments to play in this competition. Supporting education, removing barriers to competition, supporting free and fair global trade, opening countries to high-skill immigration, and targeting strategic R&D investments towards the technologies and industries of the future are appropriate roles for governments to play in this competition. Other government policies, such as mercantilist ones which deny foreign countries’ corporations access to domestic markets, pilfer intellectual property by stealing it outright or making it a condition of market access, creating indigenous or proprietary IT standards, failing to adhere to trade agreements, or directly subsidizing domestic companies or their exports, are illegitimate forms of global economic competition. The United States—and The Economist—must abandon its fanciful, stylized neoclassical notion of a purely free global economic marketplace unfettered by any form of government intervention whatsoever, and recognize that governments play a legitimate and crucial role in shaping the innovation capabilities of national economies. As between corporations, it’s a competition; and, as with companies, the ones that develop the best strategies and skills at fostering, developing, and delivering innovation are the ones most likely to win.

Photo credit: chrismear’s photo stream