The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

The Day After


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A few stray thoughts:

(1) My basic model of the current political-economic landscape is that the United States has hard decisions ahead: after at least two decades of profligate spending, we can either adjust to a leaner and more sustainable state that will allow the forces of creative destruction to do their often unpleasant but ultimately necessary work of fostering growth or we can embrace economic sclerosis, and congratulate ourselves for becoming a more “decent” society while permanently banishing millions of workers from the economic mainstream. I’ve clearly stacked the deck here in favor of entrepreneurial growth, perhaps unfairly. 

There is a foreign policy parallel. One of the arguments for an ambitious Pax Americana foreign policy is that while the U.S. is the world’s dominant economic power, this won’t always be true. And so our goal should be to use our relative military strength, founded on our relative economic strength to create a framework of rules and institutions that will make the world a better, safer, more productive place in the future, when our relative advantages will continue to wane. Abdicating this responsibility will make the world more dangerous, and thus making it more expensive to defend the “homeland” in the future when our relative power will have dwindled.

If you take this view seriously, then we should think about our foreign policy priorities through this lens of costs and benefits. I think that we need a proper counterinsurgency strategy in Afghanistan, and I hope that President Obama’s approach will get us most of the way there. But can we sustain another Iraq- or Afghanistan-like mission? Or would we be better served by retooling our military for maintaining control of sea lanes and extending the reach of hunter-killer teams dedicated to rooting out terrorist enemies who don’t require failed states as safe havens? For a long time, the world’s remaining rogue states looked like the most potent threat to American security. While I believe that Iran represents a serious threat to the United States and our allies, the incompetence and insanity of the Iranian regime is primarily a threat to Iranians. We absolutely need to maintain a united front against Iran and press them to abandon their nuclear weapons program. Yet we also need to think about right-sizing our national security commitments in line with our need to right-size the federal government.   

The United States is a rich country and we can afford to crush our enemies. I do, however, understand the growing number of conservatives and libertarians who wonder if we can afford to engage in the kind of nation-building that we’ve committed to under Clinton and Bush and Obama. As far as I’m concerned, we have no choice when it comes to Afghanistan: we have to make it work. The next time we consider an expensive foreign policy commitment, however …

(2) Secretary Gates’s Senate testimony is excellent, and he addresses the safe haven argument nicely. For an excellent critique of the president’s “deliberately constructed contradictions,” check out Steve Coll’s take. He is very persuasive on the invocation of dangers of the soft date for withdrawal.

The problem lies in how the Taliban and the Pakistan Army will read the explicit use of a calendar. Ahmed Rashid, on NPR’s Morning Edition, speaking from Lahore, voiced the same fear that seized me when I heard the President be so explicit about 2011: No matter how nuanced the invocation, Pakistani liberals fighting against the Army’s hedging strategy of support for the Taliban and Al Qaeda will be demoralized by the use of a specific date. They will interpret it as evidence that the United States has already made a decision to leave the Afghan battlefield and that it will ultimately repeat its past pattern of abandoning Pakistan periodically. This may be unfair, but the perception is inevitable.

Again, I’m willing to give the administration the benefit of the doubt because, as Secretary Gates has noted, the Taliban knows that the U.S. is divided over the war. But there’s no denying that setting an exit date — even as a goal — is problematic.

(3) Matt Yglesias linked to a very interesting analysis from Gilles Dorronsoro of the Carnegie Endowment on whether we’re sending troops to the right regions. Basically, Dorronsoro believes that we don’t have the willingness or the resources to vanquish the Taliban in areas where they have deep roots, and so we ought to fight them where they really are an invading force. One assumes that this strategy would limit the Taliban’s advances and give the central government breathing room to build security forces. Eventually, Kabul could reach some kind of accommodation with Taliban-dominated regions. This doesn’t sound like an attractive solution, but it does reflect the fact that the Taliban really does have considerable support in the south. It’s not unreasonable to think that we should focus on the low-hanging fruit, so to speak.

(4) Robert Kagan has a Keep reading this post . . .

Cautiously Optimistic


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There are plenty of things to be concerned about. Senator McCain is troubled by the president’s timetable.

What I do not support, and what concerns me greatly, is the President’s decision to set an arbitrary date to begin withdrawing U.S. forces from Afghanistan. A date for withdrawal sends exactly the wrong message to both our friends and our enemies – in Afghanistan, Pakistan, and the entire region – all of whom currently doubt whether America is committed to winning this war. A withdrawal date only emboldens Al-Qaeda and the Taliban, while dispiriting our Afghan partners and making it less likely that they will risk their lives to take our side in this fight.

Yet I think the president has given himself room to maneuver.

Taken together, these additional American and international troops will allow us to accelerate handing over responsibility to Afghan forces, and allow us to begin the transfer of our forces out of Afghanistan in July of 2011. Just as we have done in Iraq, we will execute this transition responsibly, taking into account conditions on the ground. We will continue to advise and assist Afghanistan’s Security Forces to ensure that they can succeed over the long haul. But it will be clear to the Afghan government – and, more importantly, to the Afghan people – that they will ultimately be responsible for their own country.

Assuming this really is a conditions-based decision, setting a target date for withdrawal isn’t necessarily a bad thing. The trouble is that the timetable might be so overoptimistic as to set unreasonable public expectations, and I think that’s what worries Senator McCain. Given the political constraints the president faces — less than a quarter of Democrats believe that a troop surge will improve the security situation in Afghanistan and a large and growing number want out — I’m inclined to give him the benefit of the doubt.

Spencer Ackerman wrote a useful scene-setting post before the speech, in which he suggests the influence of Petraeus and his framework for approaching the “transition to overwatch.”

Senior administration officials previewing the speech said July 2011 begins an open-ended process of gradual transition of combat responsibilities from U.S. troops to their Afghan pupils. The pace and ultimate endpoint of that transition has not been set, and officials said it would be evaluated “province by province.” Similarly, the correlative withdrawal of U.S. troops from Afghanistan is undetermined and will be evaluated based not on timetables, but on conditions on the ground — pending another review of Afghanistan strategy, which I am told is likely to occur by the end of 2010.

There are no guarantees, obviously, but the speech could have been much worse.

Michael Rubin has an interesting take on what he’s calling President Obama’s “finite commitment” at Forbes.com. His basic point is that while Bush’s Iraq surge demonstrated the credibility of the U.S. commitment to Iraq, thus delivering a psychological blow to insurgents who intended to wait out the U.S. presence, Obama’s Afghanistan surge creates a new political timetable that the Taliban can use to their advantage, i.e., if there is another strategic review at the tail end of 2010, well, that’s an excellent time to ramp up casualties. I’m not sure that’s true, but it is an important point.

Could the president have announced an open-ended commitment to Afghanistan as a first-term president? I know that we hate to be crudely political, but President Bush announced his surge strategy in 2006, after a Republican rout in the midterm elections. Reelection was not an issue and advancing a domestic policy program was not an issue. We can hope that presidents of either party will govern without regard for reelection, but that implies governing without any regard for public opinion. And given President Obama’s instincts, I’m not sure I want to see him act as a politically unconstrained philosopher-king.

I really want to know what Frederick Kagan thinks.

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Understanding Republican China


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I’ve been reading Frank Dikötter’s excellent The Age of Openness, a short introduction to the history of the pre-1949 republican period in Chinese history. I strongly recommend it. Dikötter’s central argument is that after centuries of relative isolation, post-Qing China was tremendously receptive to ideas and institutions drawn from the West. He also argues that our understanding of that era has been dominated by self-serving myths about “warlordism,” a pejorative term that reduces lively debates about provincial autonomy and liberalism to polemical abstractions invented by communist ideologues. There was civil strife during the republican period, including a sharp conflict between north and south. While the number of dead was appallingly large – Dikötter cites Thomas Rawski’s cumulative total of 400,000 —  it was a far cry from the tens of millions who died during the imperial rebellions of the mid-nineteenth century. 

Before the 1937 Sino-Japanese War, the famines and dislocations that occurred were, as Amartya Sen might argue, mitigated by an active free press and representative institutions that, while far from perfect, were far ahead of any other country outside of Europe and North America. Moreover, the economy and calorie consumption grew steadily throughout the republican period. These advances were reversed by the massive economic and nutritional setback of the Second World War and the long Maoist era that only ended in 1978.

China’s administrative state also improved dramatically during the republican years, thanks in part to the diffusion of knowledge from agencies largely staffed by European civil servants. Rightly seen as a blow to Chinese sovereignty, these agencies eventually trained a large cadre of Chinese personnel in the art of managing a modern state.

Perhaps the most impressive strides were intellectual and economic. Dikötter is too careful a historian to draw any sweeping conclusions, so I’ll do it for him: China’s experience during the first era of globalization demonstrates the extent to which the rise of the CCP represented a devastating blow to human progress. The fact that the CCP loosened its grip in the last decades of the 20th century doesn’t change the fact that it has caused more death and destruction than almost any other modern political movement. Incredibly, our understanding of republican China has nevertheless been largely shaped by the CCP and its admirers.   

The Speech


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I’ll be blogging during and after the president’s speech on Afghanistan. 

Does Jason Chaffetz’s Anti-War Stance Matter?


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Jason Chaffetz, a conservative House freshman from Utah, wants U.S. troops out of Afghanistan.Here’s how Politico’s Daniel Libit writes it up:

Earlier this year, Chaffetz traveled to the region and said that, since then, he’s “become more engrossed in my conviction it is time to bring our troops home.”

“I am opposed to nation building, and I quite frankly don’t see or understand what victory looks like,” he said. “I believe, as most people do, that our military can do everything we want them to do. … But we’re asking them to fight a war that is not very well-defined. And we are asking them to do so with one hand tied behind their back.”

Chaffetz’s name has been floated as a potential conservative primary challenger to Senator Bob Bennett, and he defeated Republican incumbent Chris Cannon in a primary last year by running to the right. Yet Chaffetz also served as campaign manager and, for a brief time, chief of staff to Jon Huntsman, Utah’s moderate Republican governor who is now serving as President Obama’s ambassador to China. One of Chaffetz’s key issues was opposition to an amnesty for illegal immigrants. And like many Republicans in the Obama era, he has placed a heavy emphasis on the spending explosion. One gets the sense that Chaffetz is well within the conservative mainstream.

So what exactly is going on here? Chaffetz isn’t naive, and he is presumably very aware of the fact that his anti-war stance will draw considerable attention. My guess is that he is positioning himself for further reversals in Afghanistan. I’ve been arguing that we’re going to see a boomlet of anti-war Republicanism for a while now. In March, I thought that Mark Sanford would become its chief proponent, and I was obviously way off-base.

According to a new CBS News poll (you have to click on the PDF for the numbers), 55 percent of Republicans believe that more troops will improve the situation in Afghanistan as opposed to 23 percent of Democrats. But it’s a safe bet that Republican support for a troop surge is declining. In narrow political terms, Chaffetz could be making a shrewd calculation. He told the Politico that he thinks he will “suffer” for taking an anti-war stance. I’m skeptical. He is trying to get ahead of the curve. And he’s couched his opposition in very conservative-friendly language.

“I am opposed to nation building, and I quite frankly don’t see or understand what victory looks like,” he said. “I believe, as most people do, that our military can do everything we want them to do. … But we’re asking them to fight a war that is not very well-defined. And we are asking them to do so with one hand tied behind their back.”

I strongly support a troop surge a robust counterinsurgency strategy for Afghanistan and the troop surge that will require. I also don’t believe that President Obama is committed to this strategy, and that raises real questions about U.S. credibility. Strategy rests on psychology, and the Pakistanis are convinced — with good reason — that we intend to flee Afghanistan in the near future. That means they have every incentive to stick with the destructive strategy of underming Afghanistan’s central government.

Ultimately, conservatives should back the right policy rather than embrace the shrewdest political strategy. And like Bill Kristol and Fred Kagan, I believe that the right thing to do is to support the president to the extent he supports counterinsurgency. But there is a decent political and intellectual case for going down Chaffetz’s route.

Positive Environmentalism


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My friend Tim Montgomerie has written an excellent post on how conservatives should think about environmental policy.

Since Greg Clark MP became Shadow Secretary of State for Energy and Climate Change he has been careful to develop policies that are justifiable on other grounds than climate change alone. (1) Combating general forms of pollution, (2) cutting energy bills, (3) reducing dependence on energy imports from rogue regimes and (4) increasing the diversity of our overall energy supply all feature in Greg Clark’s environmentalism.  Let’s try and have a more mature discussion about the environment and energy and not close our brains whenever the two words ‘climate change’ are mentioned. I’ll support any ‘green measure’ that makes significant contributions to those other four policy goals.

Tim cites Clark’s initiative on reducing home energy bills as a prime example. Gregory Lean of The Telegraph described it as follows:

Shadow energy and climate change minister, Greg Clark, announced that a Conservative government would make £6,500 available to every household in the country to take energy saving measures. The money would be provided upfront, and householders would only have to pay back a proportion of what they saved on their energy bills each year.

It would attack the biggest single source of carbon dioxide; heating and powering homes is responsible for some 27 per cent of Britain’s emissions. And the Tories reckon that it will create a £2.5 billion a year industry providing up to 70,000 skilled jobs.

It’s worth noting that the U.S. federal government now spends large sums on home heating assistance to low-income families residing in extremely energy inefficient buildings. There’s a teach-a-man-to-fish element to this policy.

Known Skeptics


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I’m a fan of David Leonhardt, an economics columnist for the New York Times. To his credit, he published an excellent column two weeks ago that was highly critical of the House health bill. The basic gist of his latest column is very defensible: Democratic centrists who want to shave the cost of the health proposal should focus on fixing various loopholes and gimmicks.

But there are a couple of things that bugged me. Leonhardt favorably cites a detailed analysis by Ron Brownstein that is definitely worth reading. In the piece, Jonathan Gruber, an architect of the Massachusetts health reform, calls himself “a known skeptic” of cost-saving measures. It is certainly true that Gruber is a respected scholar who has raised thoughtful objections to health reform ideas. Yet he is also known as a staunch advocate, not surprisingly, of Massachusetts-style reform efforts. Moreover, he has long argued for a “coverage-first” approach to health reform, one that delays wrenching delivery-system reforms so as to achieve a political consensus. Is it possible that Gruber is letting his optimism get the better of him in service to a coverage-first approach?

My guess is that Donald Rumsfeld would characterize himself as a responsible and engaged steward of the Iraq War. Dick Cheney would presumably characterize himself as an honorable public servant. While I’m not inclined to reject these self-assessments from Rumsfeld and Cheney, it’s by no means obvious that journalists are obligated to accept them at face value. The fact that Gruber calls himself a “known skeptic” tells us very little in itself.

Cognitive biases play a role in every journalist’s work. But I do think it is worth noting that Leonhardt only cites enthusiasts for the proposed legislation. Frustratingly, his only reference to the fact that critics exist is the following:

Complaining that Congress and the White House aren’t doing enough to reduce the deficit is always a popular pundit game. So it’s no surprise that the last few weeks have been filled with knowing claims that health reform will fail to control spiraling health costs.

Leonhardt is aware that there are economists and political scientists — not “pundits” — who are not convinced that Congress will in fact make the planned cuts in Medicare spending, or who believe that the net effect of the proposal will be to accelerate cost growth. He acknowledges that, “it is the execution of the ideas that can be problematic,” which strikes me as an understatement. Granted, Leonhardt only has so many column inches, but this still rankles.

I basically think that Leonhardt is one of the good guys. But if he wants to make the case for a more transparent, workable proposal, he might want to note that both the Senate and House proposals depend on sliding-scale subsidies that might prove impossible to implement, as Eugene Steuerle (an expert and former high-level government official, not a “pundit”) recently suggested. Yes, the Democrats have drawn on deficit-improving ideas from Gruber and other health economists, just as the Medicare Modernization Act contained a variety of deficit-improving ideas. But noting that Congress cut the deficit in 1993 is a non sequitur.

Sometimes, however, Washington really does succeed in reducing the deficit. Presidents Harry Truman and Dwight Eisenhower both did it. President Bill Clinton and Congress eliminated the deficit. Their 1993 budget bill was derided by some of the same people now criticizing health reform as an economy wrecker. Instead, that budget bill created the first significant surpluses since the late 1940s (and helped make possible the 1990s economic boom).

Let’s read between the lines. It’s true that conservatives complained about Clinton’s tax hikes in 1993. But conservatives in Congress backed efforts to restrain spending. Moreover, the “peace dividend,” i.e., sharp cuts to the defense budget, played a significant role. The geopolitical environment at present is rather different than it was in the immediate aftermath of the Soviet collapse. Had efforts to reduce the deficit in 1993 relied on cuts to Medicare rather than cuts to the military budget and tax increases, who knows what would have happened? I know that these subtleties aren’t lost on Leonhardt. I also know that leaving them out of the analysis gives us a badly distorted view of reality.

Understanding Obama’s Approval Rating


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Jeffrey Jones of Gallup has written an eye-opening survey of President Obama’s declining approval rating. Perhaps the most arresting number is the racial gap, which Ron Brownstein cited last month in his National Journal column on “The New Color Line.” Jones writes:

Given the 17-point drop in his approval rating among all U.S. adults, it follows that Obama’s support has declined among all major demographic and attitudinal subgroups, with one notable exception — blacks.

Blacks’ support for Obama has averaged 93% during his time in office, and has been at or above 90% nearly every week during his presidency. Thus, part of the reason Obama’s support among nonwhites has not dropped as much as his support among other groups is because of his consistent support from blacks. (With Hispanics’ approval rating down five points, greater declines among Asians, Native Americans, and those of mixed races account for his total seven-point drop among nonwhites.)

This is in tune with the conventional view that President Obama has always had a strong appeal among black voters. In late 2007, when Obama remained an unfamiliar figure, he lagged behind Hillary Clinton among a number of African American constituencies, particularly older voters. But after Obama’s victory in Iowa, when the candidate demonstrated his electoral viability, Clinton lost a tremendous amount of black support to Obama, despite lingering goodwill towards Bill Clinton.

But here’s the interesting part: black workers, particularly young black workers, suffer from an unusually high unemployment rate. V. Dion Hayes of The Washington Post offers a useful rundown of the grim statistics.

The jobless rate for young black men and women is 30.5 percent. For young blacks — who experts say are more likely to grow up in impoverished racially isolated neighborhoods, attend subpar public schools and experience discrimination — race statistically appears to be a bigger factor in their unemployment than age, income or even education. Lower-income white teens were more likely to find work than upper-income black teens, according to the Center for Labor Market Studies at Northeastern University, and even blacks who graduate from college suffer from joblessness at twice the rate of their white peers.

There are, of course, variables other than age, income, and education that might prove confounding, e.g., young black workers might be more likely to have family obligations that could cause employment disruptions. And I assume that the Center for Labor Market Studies has controlled for the concentration of black workers in economically distressed regions — another contributing factor.

The political upshot is clear: you’d expect that the hardest-hit workers would be least inclined to give President Obama the benefit of the doubt. Instead, a large portion of the hardest-hit workers are ardent Obama supporters.

One straightforward explanation for this phenomenon is ideological: the president has committed himself to a sweeping government-led transformation of the American economy in the name of generating high-wage jobs. While I don’t think this is the right way to go, and I’m guessing most NRO readers would agree with me, this kind of appeal might work for Democrats, and black voters overwhelmingly identify with the Democratic party. Jones suggests that this is not a sufficient explanation.

One reason Obama may have maintained support among blacks is their overwhelming affiliation with the Democratic Party. This is not a sufficient explanation, though, because Obama’s approval rating has dropped among Democrats even as it has held steady among blacks.

In fact, it appears as though Obama’s relatively small loss in support among Democrats has come exclusively from white Democrats. In late January/early February, Obama averaged 87% approval among white Democrats and 90% approval among nonwhite Democrats. Now, his approval rating among white Democrats is 76%, down 11 points, but is essentially the same (if not a little higher) at 92% among nonwhite Democrats.

Just as Bush’s job approval ratings came to depend on a demographic core of white evangelical voters based in the Mountain West and the Deep South, President Obama has an electoral redoubt of minority voters that may well stick with him regardless of changing economic circumstances. One potential concern for the Democrats, however, is that large numbers of competitive districts in next year’s congressional elections are concentrated in heavily white regions. And as Jones notes, Obama’s approval rating among white voters has fallen to 39 percent.

At the end of Jones’s analysis, he notes the following:

It is important to note that this pattern is not unique to Obama. For example, Bill Clinton averaged 55% job approval during his presidency, including 52% among whites but a much higher 76% among nonwhites and 82% among blacks.

Bill Clinton, however, governed during a time of robust job growth, and African American voters were among the main beneficiaries of the changed economic climate. It is possible that black voters have become more intensely partisan Democrats over the intervening years.

Persistent black support is something that President Obama should be very thankful for. If black voters decided to hold the president accountable for the deterioration in the employment picture, he would be in dire shape. One could argue — and many on the left will argue — that African American voters are right to be patient, and that the Bush administration is to blame for the downturn. This argument has a surface plausibility, yet one could just as easily argue that the unraveling of the housing market has much to do with policies that began long before the Bush administration. Moreover, the Obama White House made a decidedly ambitious case on behalf of its economic stimulus package.

My view is that while there may have been a case for economic stimulus, something like Greg Mankiw’s stimulus proposal would have been a much better bet. Moreover, we’ve created a number of work disincentives (Casey Mulligan has been ably chronicling these measures) since the first panicked responses to the financial crisis that have undoubtedly cut against the stimulus, and there are more on the way. The Obama administration looks set to propose a new jobs tax credit that might already be dampening job creation by encouraging employers to wait for the tax credit. A while ago, I thought that a new job tax credit might be a decent idea. I quickly concluded that it could easily be gamed, and that payroll tax relief would be a more transparent and effective way to achieve the same end.

If Republicans developed a better and more effective pro-jobs agenda, will African American voters abandon the president in large numbers? I doubt it. I do think, however, that such an agenda, particularly one that pays special attention to the long-term unemployed and young workers, would yield political benefits all the same, leaving aside the fact that embracing such an agenda is the, you know, right thing to do.

I’m feeling strangely optimistic this Thanksgiving Eve. It could be that the wrenching economic climate will be with us for a while, but a generation of young people are relearning valuable lessons about the flaws of top-down approaches to public policy. Maybe we had to learn that central planning doesn’t work for ourselves, and not rely on increasingly hazy memories of stagflation. (I know, I know: “central planning” is unfair. “Central nudging” or “centralish wishful thinking” don’t have the same ring.) Granted, this is a pretty expensive lesson, and those of us who are in our prime working years are going to suffer. But we’ll come out of this funk eventually.

Is Obamacare Workable?


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I wrote my latest Forbes.com column on how wishful thinking is shaping the health reform debate, which I compare to the wishful thinking of pro-war conservatives like myself who backed the invasion of Iraq without giving due consideration to the challenges involved in stabilizing a fractious, war-ravaged, multi-ethnic society. The comparison is counter-intuitive, but I think it’s pretty apt. For example, many liberal hawks who turned against the war insisted that while the idea of invading Iraq was sound, the implementation was a disaster. Many on the anti-war left note that these problems of implementation were predictable long before the invasion actually took place. It turns out that there are some implementation landmines in the health reform proposals as well.   

For example, can the federal government actually implement the sliding-scale subsidies that are at the heart of both the House health bill and the Senate bill currently under consideration? Eugene Steuerle, a centrist based at the non-partisan Urban Institute, is far from an anti-government zealot. Yet he raises a number of difficult questions in his latest column.

Under Congress’s current plan, families and households would receive subsidies pegged to their income, marital status, number of children, and cost of insurance. To determine your subsidy in 2016 on the basis of your 2016 income, however, is pretty hard since you haven’t yet earned it. The idea is to rely on your tax returns—not some onerous welfare-type application. But your 2015 returns often aren’t filed until April 2016. So Congress has decided that your 2014 income tax return is the go-to source for info on your income- and family-status eligibility in 2016.

Furthermore, Steuerle goes on to explain, roughly one-third of workers experience some kind of employment disruption, whether it’s the loss of a job or a decision to take paternity leave, etc. The legislative proposals envision an appeals process designed to adjust subsidies in response to these income shocks. But of course this will require elaborate and expensive measures to minimize fraud and abuse. Steuerle cites the EITC as a cautionary example.

In the tax system, the earned income tax credit is usually paid out after the end of the year based on last year’s income. Attempts to pay it during the year have floundered largely because few know before December 31 what their total annual income will be. Yet, significant errors creep in, despite an elaborate system of reporting wages on W-2 forms and interest and dividends on 1099 forms. For instance, the net income of many self-employed—consider household workers paid in cash—is underreported by 30 percent or more.

To minimize these distorting effects, Steuerle calls for a flatter monthly credit that can be taxed away for richer recipients and supplemented by safety net programs like Medicaid for poorer recipients.

I also highly recommend an earlier Steuerle column on the unequal treatment of small vs. large employers and families in the insurance exchange vs. those receiving coverage from their employers. I should add that none of Steuerle’s columns make the case against moving towards universal health coverage. My sense is that he’d favor more expensive measures that are fully-funded and transparent. He objects not to the goals of the Democratic reform proposals so much as the disregard for thorny questions of equity and implementation.

Obama’s Opposite-ism


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Rajiv Chandrasekaran of The Washington Post has a well-deserved reputation as one of the most well-sourced reporters covering national security, and his front page story in today’s paper on the new U.S. approach to Hamid Karzai’s Afghan government reveals a great deal about how the Obama White House works.

As President Obama nears a decision on how many more troops he will dispatch to Afghanistan, his top diplomats and generals are abandoning for now their get-tough tactics with Karzai and attempting to forge a far warmer relationship. They recognize that their initial strategy may have done more harm than good, fueling stress and anger in a beleaguered, conspiracy-minded leader whom the U.S. government needs as a partner.

Note that President Bush was well aware of the need to reassure Karzai. As Chandrasekaran reported in May, the new administration had an extremely dismissive attitude regarding Bush’s decision to maintain a close working relationship with the Afghan president. Incredibly, the new vice president essentially insulted Karzai to his face.

If you’re looking for good Afghanistan coverage, I strongly recommend Peter Feaver’s posts at Shadow Government and, for a left-leaning perspective, Spencer Ackerman’s reporting at The Washington Independent. Feaver, political scientist at Duke, served in the Bush White House, and he offers impressively dispassionate, objective assessments. And though I find plenty to disagree with in Ackerman’s take on foreign and defense policy, he has a keen understanding of evolving debates within the Obama administration and the wider Democratic foreign policy community.

Ten days before Obama’s inauguration, Karzai told Vice President-elect Joseph R. Biden Jr. during a private meeting in Kabul that he looked forward to building with Obama the same sort of chummy relationship he had with Bush, which included frequent videoconferences and personal visits.

“Well, it’s going to be different,” Biden replied, according to a person with direct knowledge of the conversation. “You’ll probably talk to him or see him a couple of times a year. You’re not going to be talking to him every week.”

Furthermore, Karzai’s request for a bilateral summit was rebuffed in favor of a meeting that also included the newly elected Pakistani president. This is despite the fact that Obama’s advisors recognized that Karzai was the likely victor in the coming presidential elections. Interestingly, the Obama strategy was to work through governors and other officials based outside of Kabul deemed more pliable. One can imagine how President Obama would feel if, say, right-of-center European leaders like Angela Merkel and Nicolas Sarkozy negotiated directly with the governors of Utah and Texas over matters of shared concern. Granted, the situations are far from directly analagous. But if you believe that strengthening Afghanistan’s civilian government is worth doing, and if you believe that warlordism is a bad thing, propping up our own “progressive” warlords isn’t terribly constructive.

The consequences of this behavior were entirely predictable, but the Obama administration is only coming to terms with this now, after a paranoid and defensive Karzai engaged in ballot-stuffing and other short-sighted decision that have badly undermined the legitimacy of his government.

Although there is broad agreement among Obama’s national security team that Karzai has been an ineffective leader, a growing number of top officials have begun to question in recent months whether those actions wound up goading him into doing exactly what the White House did not want: forging alliances with former warlords, letting drug traffickers out of prison and threatening to sack competent ministers. Those U.S. officials now think that Karzai, a tactically shrewd tribal chieftain who is under enormous stress as he seeks to placate and balance rival factions in his government, may operate best when he does not feel besieged.

This would be funny if it weren’t so depressing. The decision to maintain an arm’s-length relationship with Karzai was totally coherent and almost plausible, if you didn’t think about it for very long. But one wonders why Obama’s advisors didn’t lend more credence to the counterfactual: though there were undoubtedly discomfiting aspects to the Bush approach, what if it were nevertheless vastly preferable to the alternative? We now have our answer.

When then-Senator Obama was asked about his decision to oppose the Bush administration’s surge strategy, he noted, reasonably in my view, that his strategy of withdrawal plus aggressive regional diplomacy hadn’t been tried, and that it was entirely possible that this strategy would have yielded even better results. Many critics felt that Obama’s refusal to seriously contemplate the possibility that he was in error was a discouraging sign. My worry is that at least some of Obama’s advisors are driven by a crude opposite-ism: if the Bush White House did it, surely it must be wrong. I think this also applies to the frankly bizarre decision to try KSM in a civilian court in New York city — as though we’ve treated him as a common criminal thus far. Ross Douthat has written an excellent post on this subject at his new blog.

I’ll also note that during the early days of the Bush administration, relations with Clinton staffers weren’t exactly cordial, and there was a similar retreat from everything the previous administration had done. I wasn’t a huge fan of the Clinton foreign policy, but there’s something to the idea that politics should end at the water’s edge. Republican policymakers have been at fault as well. But the Bush years were akin to the Truman administration, when we confronted a new threat, or rather an old threat that had become far more potent. The 9/11 terror attacks forced a broad rethinking of the national security environment. It stands to reason that the transition should have involved close cooperation, including extensive conversations regarding the logic behind efforts to reassure and strengthen Karzai. The problem, of course, is that Obama had run against a caricature of the Bush foreign policy, and having demonized his predecessor he was, it seems, incapable of acknowledging his accomplishments. 

The Obama administration seems to have come around to see the wisdom of Bush’s decision to maintain a close working relationship with Karzai. The trouble is that it might be too late; a great deal of damage has already been done. I’m struck by the fact that Chandrasekaran published this story now, with the president’s Asia trip still fresh in mind. American relations with the great powers of East and South Asia improved dramatically, and even protectionist gestures over the last few months haven’t been enough to undo that. Perhaps this has led to a new humility on the part of the president. We can hope.

Walking the Walk on Bottom-Up Conservatism


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As regular readers, I’m a huge fan of Tim Lee and his concept of a bottom-up approach to understanding and improving society. And so I was struck by the final paragraph of Republican consultant Alex Castellanos’s New York Times op-ed on the Republican revival. 

Mr. McDonnell offered suburban voters, working women and independents a better way to increase jobs and expand the economy, from the bottom up. It was a stark contrast to what Americans are seeing in Washington, where elitist Democratic politicians, in bed with the Wall Street establishment, are taking Americans’ tax dollars away to invest in arrogant, top-down public-sector schemes. This helped Mr. McDonnell forge a powerful coalition involving not just independents but also young voters; he won the under-30 vote by 10 percent. Thanks for the opportunity, President Obama. On Tuesday, Nov. 4, in Virginia a New Republican Party was born. See you in 2010.

My concern is that Republicans haven’t yet lived up to Castellanos’s description. There is still an urgent need to make our financial sector more resilient and to end the string of bailouts that began in the mid-1980s and that gets bigger and more toxic every time. Yet congressional Republicans seem strongly inclined to defend the interests of the too-big-to-fail financial institutions rather than the interests of the entrepreneurs who depend on a financial system that works. I’m oversimplifying matters here, I realize, but I think that Castellanos is right to suggest that the alliance of the Democrats and Wall Street needs to be opposed — and right now, the Republican establishment isn’t doing the opposing.

In a similar vein, we need a bottom-up approach to health reform that facilitates business model innovation. This could be something along the lines of the Ryan-Coburn proposal, that precious few congressional Republicans actually backed, or, better still, something like Martin Feldstein’s call for universal catastrophic coverage. We’ve only seen tentative movement on this front, and health reform might be where Republicans are furthest along.

Bernard Avishai has an outstanding piece in Inc. on the economic ecosystem that is emerging around electric automobiles. I hope to write more about it. Avishai ends on an interesting note. After noting that the Obama administration has invested in R & D and pilot projects and direct grants to firms, he writes:

The point is, there are far too many living things in the emerging ecosystem to be anticipated by any government or major OEM. It will take an implicit partnership of hundreds, perhaps thousands, of suppliers to fill out the technology. The key is to bring them into alignment. “If governments act to consolidate standards,” Posawatz says, “they can really make a difference in catalyzing competition among suppliers.” He would not want to impose standards prematurely and cut off promising avenues for innovation. (Presumably, OnStar’s ambitions are also on his mind.) But when the catalyzers of the new auto industry are so entrepreneurial and distributed, technical standards hardened by government become virtual roads and bridges. They are more vital to electric cars than actual ones. The faster we get to standards, the better.

This principle, of catalyzing competition, is an endless subject I cannot do justice to here. To build out the grid Posawatz envisions, the government must help reduce other obvious barriers to entrepreneurial teams converging on a problem. The administration might look at an outdated patent office, which has been swamped by software developers in recent years — filings mainly from big companies, whose fat patent portfolios needlessly block or intimidate entrepreneurs. It might look at facilitating the exchange, categorization, and monetizing of intellectual property, which cannot flow unless governments engender mutual trust.

I’m more skeptical than Avishai about the need for direct government spending on firms. I do think, however, that you need pro-market government activism designed to reduce those “obvious barriers to entrepreneurial teams converging on a problem.” This is easier said than done. But this project would be at the heart of a bottom-up conservatism.

Upscale vs. Downscale and the 2009 Election


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Ramesh has written the definitive take on the implication of this week’s election for the Republican future for Time.

What these races suggest is that Republicans’ principal problem in recent elections has not been that they are too far right, or — as a lot of conservatives like to think — not far right enough. After all, voters turned on both moderate and conservative Republicans in the late Bush years. The problem has instead been that voters have not thought Republicans of any stripe had answers to their most pressing concerns. Addressing those concerns, rather than repositioning itself along the ideological spectrum, is the party’s main challenge.

Patrick Ruffini has followed up with a post on how conservative candidates should frame public policy solutions.

Because very few independents care about ideological name-checks, they won’t be swayed by scare tactics trying to persuade them that Candidate X is the ideological second-coming of Attila the Hun. We saw this with the thesis attacks. Candidates have wide latitude to run as who they actually are, so long as they can persuade voters they’ll deal with the bread and butter issues (which was McDonnell’s calling card).

In a purple state like Virginia, you can win by running as a liberal and a problem-solver (Kaine), as a moderate and a problem-solver (Warner), and as a strong conservative and a problem-solver (McDonnell).

The goal is not to bang on about the liberalism of your opponent, but rather to construct a narrative that connects your policy agenda to concrete outcomes.

Republicans can be specific, detailed, and confident in putting forward solutions relevant to the middle class, while also being more conservative than we have been in recent years (especially with the Bush era spending binge). There’s not an either/or tradeoff between conservatism and a policy focus, something the McDonnell campaign proved in Virginia this year.

Earlier this year, Ramesh and I wrote an article for NR on the notion, championed by a number of conservatives, that the GOP needs to move upscale, to increase its appeal among affluent, college-educated voters by moving to the left on social issues. We argued that many of these affluent voters who’ve turned to the Democrats are just as left-of-center on economic issues as they are on social issues, and that a shrewder strategy involved shifting towards a problem-solving mode.

An alternative strategy would largely maintain the Republican party’s social conservatism while moving to the center on economic issues. That shift on economic issues need not take the form of supporting higher taxes. It would, rather, mean placing less emphasis on tax cuts for high earners and more on tax cuts for people in the middle of the income spectrum. It would mean working harder to get the public to associate Republicans with free-market policies to make health care more affordable and secure for the middle class.

This strategy, in turn, would help Republicans shed some of the cultural baggage accumulated during the Bush years.

A Republican party that advanced downscale cultural conservatives’ economic interests, meanwhile, would not need to lean so heavily on their cultural resentments to win their votes. Republicans’ caricaturing of Democrats as effete and unpatriotic latte-sippers has reinforced the GOP’s own reputation as anti-intellectual and philistine, and this reputation has harmed it in upscale precincts. An economic agenda more attractive to the country would reduce the party’s reliance on cultural polarization.

My sense is that Republicans are moving in this direction. Rather than chase after social liberals who are allergic to the conservative base for a variety of reasons, including but not limited to aesthetic distaste, a growing number of candidates are running “common-sense” campaigns premised on the need for sustainable fiscal policies and the central importance of private sector job growth. This appeals to middle and working class voters who are keenly aware of the danger of their tax dollars being wasted, and who have grown increasingly skeptical of massive government undertakings. Incidentally, my guess is that this doesn’t just apply to big new domestic programs: the public also has far less appetite for expensive military interventions, which complicates matters for those of us who believe the U.S. should maintain or even increase its commitment to a stable Afghanistan.

Democrats focus on the Tea Party movement because it represents a kind of wish fulfillment. Conservatives delighted in the ideological exuberance of Howard Dean’s progressive youth, and they were unprepared for Barack Obama’s slickly post-ideological campaign that drew on the left’s energy while running a disciplined centrist campaign. We’ll see if history repeats itself. Like a lot of people, my gut tells me that Sarah Palin or perhaps Mike Huckabee will be the Howard Dean of 2012. Of course, that would suggest that the Republican nominee in 2012 will be the right’s answer to John Kerry, which is a prospect too disturbing to contemplate for very long.

More Wisdom from Katherine Swartz


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Also from the TNR interview:

I also think the other lesson that has come out, chiefly from Massachusetts and from Vermont… thinking through what is a minimal benefits package everybody should have. We’re trying to balance out the fact that if you add more required services to it, it’s going to cost a lot more. What is it that we are really trying to insure? I think we are working our way towards coverage against catastrophe, where catastrophe is defined relative to somebody’s disposable income, along with some cost-effective primary care services basically.

This sounds a lot like Martin Feldstein’s concept for health reform. It does not sound like the reform plan that will likely come to pass. So unfortunately, I don’t think we are working our way towards this goal; rather, I think we’re moving headlong in the opposite direction.

Mankiw’s Column on Implicit Marginal Tax Rates


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This might be one of the best newspaper columns I’ve ever read — I hope high school social studies teachers are assigning it to their students.

Klein on Brooks, and How We Think About Policy


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Ezra Klein takes David Brooks to task for arguing that new technologies have helped change the romantic landscape for young people.

Columns like Brooks’s irk me because they demean not only my lived experiences, but those of everyone I know. To offer a slightly more modern rebuttal, Sunday was my one-year anniversary with my girlfriend. A bit more than a year ago, we first met, the sort of short encounter that could easily have slipped by without follow-up. A year and a week ago, she sent me a friend request on Facebook, which makes it easy to reach out after chance meetings. A year and five days ago, we were sending tentative jokes back-and-forth. A year and four days ago, I was steeling myself to step things up to instant messages. A year and three days ago, we were both watching the “Iron Chef” offal episode, and IMing offal puns back-and-forth, which led to our first date. A year ago today, I was anxiously waiting to leave the office for our second date.

It is not for David Brooks to tell me those IMs lack poetry, or romance. I treasure them. Electronic mediums may look limited to him, but that is only because he has never seen his life change within them. Texting, he says, is naturally corrosive to imagination. But the failure of imagination here is on Brooks’s part.

I wonder if the Pauline Kael problem is at work here. One could write a similarly compelling narrative about how a slightly higher income greatly contributed to one’s happiness and well-being, and allowed one to spend money on a beloved grandmother or a worth cause. Yet a hike in the marginal tax rate ruined everything. And so a person with high-earning potential could feel very irked by writers and thinkers who advocate higher taxes, as they are demeaning her lived experience and the lived experience of everyone she knows, i.e., other high-earners who went to the same schools, etc. For progressives, the case for higher marginal taxes isn’t ultimately about demeaning these people — rather, it is about financing a high level of public provision, and perhaps about “rescuing” the affluent for bidding wars over positional goods.

There is no doubt that the new romantic landscape has been very beneficial for some. I tend to agree with Klein: it has been a boon to my social life and that of my friends. But the real argument is whether or not these new technologies have been of net benefit.

Isn’t it possible that these new technologies have had an uneven impact on the romantic marketplace, and that this is worthy of some consideration? I’m not sure about the impact. I’m more sanguine than Brooks, if only because I think the olden days were actually not that great. All the same, I’m certainly not irked by efforts to understand how technology shapes our lives in good and bad ways. 

One small example: in the past, it was relatively easy to lose touch with former flames. Now, by virtue of the pervasive use of social technologies, it is perhaps a little harder. Defriending an ex-girlfriend on Facebook is a big step. But not doing so means she remains “present,” and thus potentially harder to get over. This obviously doesn’t mean we should ban Facebook. It does suggest that good things and bad things sometimes go together.

I’m struck by the way different people approach public policy questions. Paul Krugman will sometimes argue that Casey Mulligan is wrong because his conclusions sound funny, i.e., when Mulligan talks about the power of work disincentives to raise unemployment, Krugman will say that Mulligan thinks the unemployed are “taking a vacation.” But in fact Mulligan is well aware that people’s stated motivations don’t always map onto their actual motivations. 

In a similar vein, many political arguments are made on the basis of gut-level convictions regarding what it means to be a decent person, e.g., decent people want everyone to have health insurance coverage. Indecent people only care about themselves, etc. Or critics of my generation’s sensibilities are critics of my personal life, etc. But of course some people are concerned about invisible impacts. I’d say that people who fret about the corrosion of competitive markets fall into that category. Yes, we can highlight the plight of people who don’t receive a transfer payment. We have a far harder time highlighting the plight of people who can’t find work because an economy is burdened by heavy regulation. And it’s possible that people who criticize, say, the rise of single-parent families do so because they really care about the hardships faced by single-parent families.

Rant over!

Peter Feaver on the Obama Foreign Policy


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Feaver, one of my favorite foreign and defense policy analysts, offers a prediction at his Shadow Government blog:

It could be that the decision to continue the bulk of President Bush’s war council (and thus its policies) reflected a decision to delay taking ownership responsibilities for the war. To my reading, that is the connective thread that stitches together various problematic aspects of Obama’s foreign policy thus far: peddling stale campaign rhetoric long after its sell-by date; repudiating his own comprehensive Afghan Strategy Review and launching a new one; developing a tin ear for civil-military relations and wartime alliance relations; spending so little time explaining his national security policies to the American people; giving his political team such a prominent role in national security; etc.

I think it is highly unlikely that the national security team that is in place today will be in place one year from now. I would not want to bet which principal will leave, but the betting money is someone will leave. Personnel transitions tend to be associated with friction and other mischief, and the causal arrow can go in both ways: intra-team friction leads to early departures and new arrivals disrupt established modus vivendi. So my prediction is that the “no drama Obama” mantra will have proven unsustainable by November 2010. This is not something to celebrate nor is it something to dread. Every administration has to deal with shake-ups and I wouldn’t be surprised if President Obama proves he can deal with it better than most.

My guess is that the national security team that emerges from this transition will be more attuned to the exigencies of the political calendar.

Understanding High Risk Pools


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In “The Insurance Fix,” in the latest National Review, Thomas Miller and James Capretta offer a roadmap for health reform that addresses the anxieties of the insured and uninsured without sharply increasing regulation and centralization. They call for the creation of larger, better-funded high risk pools.

A better alternative, and one much less disruptive to current policyholders, would be to provide adequate and sustainable funding of high-risk pools. Today, most–but not all–states have subsidized high-risk pools that are intended to reduce premiums in the individual marketplace for people with expensive preexisting conditions. They are the most common way for states to comply with HIPAA’s requirement that workers leaving group plans have access to the individual market.

Unfortunately, these pools haven’t worked well, largely because they have invited a mismatch between funding and demand. State and federal subsidies for high-risk pools have been meager relative to the size of the problem they are intended to address, and insurers have been able to steer applicants toward the pools with impunity. Politicians tend to prefer rate restrictions and hidden subsidies to more transparent and straightforward funding for high-risk pools, because the former measures are off-budget and seemingly costless to taxpayers. In truth, that approach backfires, imposing heavy burdens on a very narrow base of private purchasers in the individual market.

There should be substantial new federal funding for these high-risk pools–but also new operating rules.

Note that Miller and Capretta note the inadequacy of existing HRPs, and call for their expansion. Ezra Klein objects to high-risk pools, and he offers a helpful link.

A high-risk pool is where a state creates a special insurance pool for people with preexisting conditions and then subsidizes their coverage. About 200,000 Americans are currently in these pools, the costs are high, the coverage varies wildly in quality and the service is often quite poor, as a couple thousand low-income sick people aren’t much of a political constituency. To put it simply, if you eventually developed a preexisting condition — asthma, say — would you rather a world in which insurers couldn’t discriminate against you or a world in which you could send in a form to the state of Missouri and ask if they had any room in their Big Pool o’ Sick people?

Thought so. For more on high-risk pools, see Harold Pollack’s interview with HRP expert Katherine Swartz.

But of course not everyone believes that banning discrimination, i.e., banning underwriting, will actually end adverse selection. If the incentives to engage in adverse selection remain strong, it will continue to happen, albeit in harder-to-detect and possibly more corrosive ways. This is why health policy experts have advocated HRPs and reinsurance, areas that have been neglected in the Democratic reform proposals. There is a small reinsurance component that is not adequate to the task.

I was, however, delighted to see Ezra link to a TNR interview with Katherine Swartz, who wrote the excellent book Reinsuring Health, which I’ve cited at The Agenda in the past.

Pollack: How about specific lessons of state risk pools?

Swartz: Minnesota and Oregon are the only two that have large enough numbers of people that have been covered, but again, I don’t think that the current structure of the risk pools is what we should be looking at if we are going to greatly expand them. They weren’t set up for this. They were set up, really, to take very small numbers of people out of the insurance market. They weren’t meant to be a substitute for public or private insurance.

Pollack: How about the reinsurance provisions in the various leading bills? I take it you believe that reinsurance would be useful in a state insurance exchange to address the really extreme cases that are going to come up.

Swartz: I think reinsurance is a way of more fairly and widely spreading the burdens of people who have extraordinarily high costs. It’s pretty random who lands in that top one or two percent in the population in terms of healthcare costs in any given year. So, having a broadbased population paying most of their costs makes a lot more sense to me than placing the burden on others who happen to be covered by that person’s particular insurer or insurance policy.

Swartz didn’t address the question directly — that is, she didn’t make note of the paltry reinsurance provisions in the main proposals.

Interestingly, Swartz has in the past advocated a public reinsurance plan aimed at the small-group and individual markets as an effective way of reducing premiums and thus increasing access to affordable insurance coverage. While I’m sure Swartz would be happy with a more comprehensive approach, the virtue of her proposal in Reinsuring Health is that it would cost far less than the reform model championed by the president and his allies. Granted, it would do very little to contain costs, yet that is true of the dominant reform model as well. Swartz’s public reinsurance plan does have the added virtue of not stifling business model innovation. 

Ultimately, I think we need to create the conditions for integrated fixed-free providers to flourish. The health reform debate we’re having is a sideshow that would be funny if it weren’t so powerfully counterproductive. Pretty serious misunderstandings and misrepresentations are being deployed to dramatically increase the role of the federal government in the health sector, and this will make the kind of business model innovation we need less likely.

The Perfect Outcome?


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At the risk of sounding Pollyannaish, I wonder if last night’s result might represent the perfect outcome for conservative reformers who want to revive the Republican Party.

Doug Hoffman’s defeat comes as a serious blow to the activists who fought against Scozzafava, a candidate well to the left of Arlen Specter. I was particularly impressed by the words of Scozzafava’s husband, Ron McDougall.

“This has been a difficult day for my family. But the needs and concerns of the men and women of the 23rd Congressional District remain paramount,” McDougall said. “As such, I wholeheartedly and without reservation endorse the candidacy of Bill Owens.”

“As a life-long labor activist, I know that Bill Owens understands the issues important to working people. On the other hand, Doug Hoffman has little regard for the interests of workers.”

“Hoffman’s opposition to the Employee Free Choice Act, coupled with his support for the failed policies of the Bush Administration make him a poor choice to serve the citizens of the 23rd Congressional District.”

I have to assume that when McDougall is referring to the failed policies of the Bush Administration, he’s not referring to the lack of spending restraint or the failure to adopt an effective counterinsurgency strategy in Iraq before 2006. Rather, McDougall’s believes that congressional Republicans would be best served by embracing the agenda of the hard labor left. This is an interesting view. While Scozzafava shouldn’t be held accountable for the views of her husband, one gets the impression that McDougall and Scozzafava are broadly in agreement.

Which makes the insistence on the part of E.J. Dionne and Frank Rich and other left-of-center observers that conservative critics of Scozzafava were attempting to purge a Republican moderate from the party seem more than a little peculiar. You’d almost think that the most politically useful narrative, rather than the most accurate narrative, was being advanced. But that’s not fair. In truth, Dionne and Rich and others believe that U.S. political discourse would be best served if conservatives embraced Scozzafava’s views, thus giving Democrats the freedom to move further to the left. This is an interesting view.

Hoffman, however, was not a flawless candidate. His lack of interest in key issues facing the 23rd congressional district was a serious liability, and the 2010 Republican nominee, whether it is Hoffman or Matthew Doheny or someone else, will have to have a stronger command of these issues. Had Hoffman won, it might have led to overconfidence and a raft of primary challengers who’d burn money conservatives could use more effectively elsewhere.

Meanwhile, the candidate who was most strikingly successful, Bob McDonnell, was a staunch conservative who focused on creating the right conditions for job growth. That sounds about right to me.

Thinking About Revenue Sources and Conservatism


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In late September, Michael Boskin and John Cogan of Hoover touted a very smart state tax reform for California that should be a model for reform efforts nationwide.

The commission’s majority report recommendations were made public yesterday. They include a sweeping overhaul of the personal income tax code that reduces tax brackets to two from six; eliminates all deductions and credits other than for charity, mortgage interest and property taxes; and cuts the top statutory income tax rate to 6.5% from 9.3%. Most taxpayers would receive a 25%-30% tax cut and all would pay less. The commission also recommends abolition of the state’s corporate income tax and the elimination of most of the state sales tax that finances the state’s general revenue fund (as opposed to special funds for transportation, etc.). Finally, to replace the lost revenue, the commission recommends a broad-based, low-rate state value-added tax (VAT), collected on business net receipts (revenues less purchases from other businesses, including immediate expensing of capital), that is capped at 4%.

These reforms will reduce the volatility of state revenues by 40% (using commonly accepted measures) mostly by reducing the reliance on personal and corporate income taxes, and moderate the current tax code’s extreme progressivity. They also will result in a $7 billion net tax cut per year for Californians without raising taxes on any income group, as some of the new VAT would be borne outside the state and more of Californians’ taxes would be deducted against federal taxes.

Boskin and Cogan recognize the danger of creating a new revenue source, and they address it by proposing the abolition of the corporate income tax and also a hard spending cap.

Bruce Bartlett advocates a federal VAT. So do I, only I think it should fund a dramatic decrease in the personal and corporate income taxes. But I worry that Bartlett has stopped engaging center-right thinkers who disagree with him. Rather, he is increasingly harsh in taking on supply-siders. In a recent blog post, Bartlett wrote:

The other day the Wall Street Journal editorial page ran an article by Ernest S. Christian and Gary A. Robbins attacking the idea of a value-added tax for the United States. This is the second anti-VAT op-ed the Journal has run this year on top of two highly negative editorials. Only one piece has appeared favorable to the VAT and that was written by former Clinton administration Treasury official Roger Altman. Apparently, it’s okay for Democrats to get space in the Journal to promote the VAT because it allows the editorial page to maintain the fiction that only liberals favor such a tax as part of their nefarious plan to eventually tax 100% of everything. When I’ve queried the Journal about an article on why conservatives ought to support a VAT I did not get a reply.

This post appeared two weeks after the comment by Boskin and Cogan.

I understand where Bartlett is coming from. As you can guess, I don’t agree with every “Review & Outlook.” Because I think we need to cut spending (by a lot) and raise taxes (by not a lot) if we’re going to avoid fiscal disaster, plenty of conservatives — including many readers, I’m guessing — are inclined to think I’m not a real conservative. That’s frustrating. It doesn’t mean, however, that I want the conversation to end. On the central issue — whether the U.S. will once again become an entrepreneurial and dynamic economy that can lift families out of poverty and increase the standard of living for the middle class — I’m with the supply-siders, though I disagree on important details. My hope is that I can win some supply-siders over by arguing that tax cuts aren’t always the surest route to the kind of economy we all want; rather, we want the lowest sustainable tax levels to provide revenue and also the stability that entrepreneurs depend on. Of course, I’m also open to persuasion.

Now I sound kind of smug. I’ll add that I’m also totally crazy.

On Trita Parsi and ‘Iran’s AIPAC’


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Daniel Larison, one of the most astute observers of the American political scene, has returned from a too-long hiatus. Citing a post by Andrew Sullivan, he attacks Jeffrey Goldberg for characterizing Trita Parsi, an expert on Iranian affairs who champions an engagement policy while condemning the Iranian regime’s human rights abuses, as an objective ally of the regime.

The attack to which he is responding is fundamentally dishonest. Parsi has argued against additional sanctions on Iran on the reasonable grounds that additional sanctions would not force Tehran to make any concessions, would not undermine the regime and would not advance the cause of reformers. I don’t believe Parsi has argued for an end to all sanctions currently imposed on Iran, but even if he were to make that argument he would have legitimate reasons for thinking that sanctions have helped to weaken Iranian opposition forces and consolidate the regime’s hold on the country. If Goldberg had any interest in being fair to Parsi, he would have to acknowledge that Parsi has also argued for a pause in pursuing any engagement with Tehran in the wake of the June crackdown. That means that Parsi has changed his position on engaging Tehran to take a somewhat harder line than he once held. Whether or not this is the right move, this put him among those opposed to engaging the Iranian government under its current leadership at the present time. As far as I know, this remains Parsi’s position today. Obviously, he is nothing like “the AIPAC of Iran,” and referring to him as a lobbyist for Tehran is false and reprehensible.

Reprehensible strikes me as a wildly inappropriate characterization. In fairness to Goldberg, who has thought deeply and carefully about these issues, serving as “the AIPAC of Iran” is more complex than AIPAC critics think. I’m sorry to see that Goldberg retreated from this characterization.

Obviously, as I told Mother Jones, I wasn’t meaning to imply that Trita Parsi is a paid agent of the Iranian regime, or somesuch. I was implying that he has made himself the AIPAC of Iran in Washington. My bad. On the larger question of whether Trita Parsi functions as a lobbyist for the Iranian regime, based on what I know, I’d have to say yes: He has argued consistently against any sanctions against Iran, and an end to sanctions is obviously what the Iranian regime wants. So he is working on behalf of a stated interest of the Iranian government. Yes, he also criticizes Iran’s human rights abuses, but it’s been suggested recently that it is possible to lobby for a country while criticizing it at the same time.

Goldberg’s last link is to J Street, an avowedly pro-Israel group that has been strongly critical of settlement-building in the West Bank and Israel’s controversial efforts to contain the violence in Gaza. But he could just as easily have cited AIPAC itself, which aggressively lobbied the Israeli government in the 1980s to change its policies towards apartheid-era South Africa. At the time, the Israeli defense establishment maintained ties with the South Africans, a relationship criticized by elements within the Israeli foreign ministry as well as pro-Israel activists in Jewish communities throughout the West. This questioning of Israeli policy didn’t mean that AIPAC ceased to be a pro-Israel lobby.

And while Parsi is undoubtedly a believer in democratic liberalism who wants to see Iran radically reform its institutions, he objectively serves Iranian interests insofar as he discourages Western efforts to exert pressure on the regime. This doesn’t make Parsi a bad person. Plenty of Iranian dissidents believe that a democratic Iran should have a nuclear deterrent. Plenty want a denuclearized Iran, yet believe that Western pressure amounts to a kind of imperialism that should be actively resisted. This isn’t that complicated.

Iran doesn’t have an actual AIPAC. Instead, there is a loose network of policy scholars, activists, think tanks, civil servants, etc., who strongly oppose a forward-leaning U.S. policy in the Persian Gulf for a wide, sometimes overlapping variety of reasons. Some of these people have a real financial interest in a better relationship between Washington and Qom, but most don’t. On some issues, members of this loose network get important things right. A lot of realists have raised important questions about the efficacy of sanctions, and they are right to do so. But it’s also true that these voices help today’s Iran. The Iranians among them have added credibility. 

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