Monday, September 19, 2011

What Governments Can and Cannot Do

I recognize that it's difficult for a lot of editorial columnists to come up with ideas for their biweekly columns, and that it's anything but unusual to see a weak idea inflated to @800 words by nothing more than hot air, but you would think at some point their employer might say, "Look, if that's the best you can do maybe you should only be writing one column a week, or one a month."

But enough of that. Let's move on to a completely unrelated subject, David Brooks' thoughts on the "power of government". David Brooks opens by telling us that the government of Israel periodically appoints committees to revise public school curricula, that most of the committees don't do their jobs, and the few who belatedly complete their work may find that the government doesn't care about their proposals. To me, that suggests a government that's interested in looking like it's doing something about a problem, real or perceived, but doesn't actually care about taking action. You can find plenty of comparable examples from U.S. school districts and universities. For that matter, you can find similar examples in the form of reports and analyses from inside private businesses. The lesson Brooks draws?
Most people overrate their own abilities and exaggerate their capacity to shape the future. That’s fine. Optimistic people rise in this world. The problem comes when these optimists don’t look at themselves objectively from the outside.
To me, oddly enough, that sounds a lot like a personality profile for a typical nationally syndicated columnist.

Brooks attempts to relate the lessons of failed high school curriculum committees to the world in general:

The planning fallacy is failing to think realistically about where you fit in the distribution of people like you.... Over the past three years, the United States has been committing the planning fallacy on stilts. The world economy has been slammed by a financial crisis. Countries that are afflicted with these crises typically experience several years of high unemployment. They go deep into debt to end the stagnation, but the turnaround takes a while
So, according to David Brooks, history dictates that the government should engage in a lot of stimulus spending to ease the country through its financial problems, worry about how to lower unemployment and misery, not to worry too much about deficit spending during the time of crisis, and that eventually the country will pull through. Reading that alone, you might think he's finally started to read Paul Krugman's columns. But, alas, agree or disagree, that's the last coherent thought in his editorial.
The Democrats, besotted by the myth that the New Deal ended the Great Depression, have consistently overestimated their ability to turn the economy around. They regard the Greek crackup as a freakish, unlucky break, even though this sort of thing is a typical feature of a financial crisis.
Brooks just got through telling us that part of the history of this type of crisis is that countries will "go deep into debt to end the stagnation". Apparently he now believes that can be done without actually spending any money? In one paragraph he embraces the "myth" and in almost the next attacks the Democratic Party for agreeing with him?

More than that, other than hyperbole, what does Greece have to do with the economic problems of the U.S. economy. You don't have to look at Greece's situation for very long to see significant differences between their crisis and ours. Their government overextended itself to the point that it cannot service its debt. Our government has done what Brooks suggests to be the right thing by going "into debt to end the stagnation", but to the extent that we have a deficit crisis it's a crisis of will - a significant faction of the Democratic party and the overwhelming majority of Republicans won't raise taxes to pay our nation's bills. We could go a long way toward fiscal sanity simply by ending the Bush Tax cuts - the ones that were scheduled by the Republican Party to expire. The Republican Party won't let that happen, because the richest Americans (who are doing very well, thank you very much) would experience a modest tax increase.

As for the Democratic Party's supposed overestimation of its "ability to turn the economy around", it's only the Democrats who have embraced the notion that the government can quickly and easily fix an economic catastrophe? Then, pray tell, which of the candidates for the Republican nomination is singing a different tune and telling us, "No, don't blame Obama or the Democrats - the government is pretty powerless and we just have to wait this thing out"? Which past Republican President has shrugged off economic growth and argued, "It's just the business cycle - I don't deserve any credit"?
Republicans, who should know better, also have an inflated sense of the power of government. In the presidential debates, Rick Perry, Mitt Romney and Jon Huntsman argue about which one oversaw the most job creation during his term as governor, as if governors have an immediate and definable impact on employers’ hiring decisions.
In other words, Brooks is looking at equivalent rhetoric from politicians, "Everything good that happens from the day I'm sworn into office is my accomplishment, everything bad is the other party's fault," and imagining (or pretending) that it reflects deep and meaningful differences between the parties.

Brooks' attempt at a takeaway is that wise politicians should
...make the distinction between discrete good and systemic good. When you are in the grip of a big, complex mess, you have the power to do discrete good [such as paving roads or hiring teachers] but probably not systemic good [transforming the whole situation]....
[Their] discrete goods might contribute to an overall turnaround, but that turnaround will be beyond your comprehension and control. 
But when the crisis is large enough it can only be solved through large-scale government intervention. If Brooks dismisses the New Deal as contributing to the end of the Great Depression, perhaps he noticed the contribution of WWII? A huge government response to a huge problem. Similarly, whether or not you believe that the U.S. government bailout of the financial or auto industries was a good idea, Brooks' example of Greece is one in which but for a huge intervention by Eurozone nations, Greece would likely have already defaulted on its debt.

If Brooks is taking a big picture view, perhaps he's thinking, "Yes, and the suffering may have been a lot worse in the short-term, but five, ten, twenty years down the line the world won't look much different," he has a point. But that is not an argument that, when faced with unprecedented crises, a government cannot effect a systemic good. Would Brooks have allowed Greece to default? Would Brooks have allowed Ford and G.M. to go into liquidation? Would he have sat on the sidelines and watched as the world's largest banking institutions and insurance companies went into receivership? Does he believe that the outcome, or level of suffering, would be the same no matter which path the involved governments chose?

Brooks closes with the assertion,
Over the past decades, Americans have developed an absurd view of the power of government. Many voters seem to think that government has the power to protect them from the consequences of their sins. Then they get angry and cynical when it turns out that it can’t.
What does that claim have to do with anything that preceded it? (I would love to hear Brooks share a few examples, as it's usually his party of choice that's keen on regulating human behavior.)

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