A Message to World Leaders: Ignore the Financial Markets

May 7, 2012Jeff Madrick

A solution for the eurozone? Listen to the people, not to the markets.

For 40 years, there has been a tug of war between government in democracies and what we may call “the other government.” By the latter I mean, of course, the financial markets. James Carville highlighted his concerns when he announced that in the next life he would want to be a bond trader. Alan Greenspan followed the bond markets religiously for signs of increased or reduced inflationary expectations.

A solution for the eurozone? Listen to the people, not to the markets.

For 40 years, there has been a tug of war between government in democracies and what we may call “the other government.” By the latter I mean, of course, the financial markets. James Carville highlighted his concerns when he announced that in the next life he would want to be a bond trader. Alan Greenspan followed the bond markets religiously for signs of increased or reduced inflationary expectations.

Now Europe faces the threat of a financial market rebellion. Democracy has spoken loudly in this weekend’s elections on the Continent and in England. Voters said, "We have had all the austerity economics we can take."  They threw over Sarkozy in France and many Conservative and Liberal candidates in England. In Greece they ran for the extremes. The moderate liberal Pasok party won the least votes in memory, but it may yet form a coalition to run a new government. Italian election results will be in soon.

And democracy is working! The instinct among those in the financial markets is that democracy usually reflects the weak-willed demands of the public. But the public is generally right this time, and it has been many times before. Austerity economics is self-destructive when economies are so weak.   

Yet of course the financial markets’ initial reaction to the European elections was to sell, as if austerity economics was actually working to make nations' bond payments easier to handle. It was not! But the markets fear that a new strategy will make matters worse.

Political leaders should ignore the financial markets in the short run, pure and simple. This may drive up financing costs for a while, but the eurozone should absorb those and adjust policies. The European Central Bank (ECB) ought to accommodate its needs. The right policies are stimulus from the current account countries and the end of extreme austerity in the periphery. Wages should rise in the eurozone core and stabilize in the periphery; they can even rise from their current lows in places like Greece. The 17-nation Eurozone or the 27-nation EU should issue jointly backed bonds to provide social safety net support to the financially weak nations, to raise demand for them and get their economies going, while reducing the extreme financial pain and sacrifice that now jeopardize social stability. As examples, the Greeks voted for extremist parties, the Le Pen party did well in France, and the Tea Party runs amok in the U.S. Austerity fever even grips Washington, which makes the November election especially important.

What the crisis requires is elected government, not bond trader government. Any idea that the financial markets are rational should have been discarded four years ago. They have been absurdly wrong for decades. In the U.S., they persistently overestimated future inflation by driving interest rates too high compared to the CPI and the GDP deflator. Greenspan treated them as the height of rational forecasting, when indeed they were simply following the latest conventional wisdom. In my informal opinion, he used long-term rates as a guide to policy. Now the ECB remains too tight as well. In the U.S., the “rational” bond traders actually traded what they thought the market would think, rather than what rational foretellers of the future would think. It was Keynes’ beauty contest analogy—choose the woman you think others believe is beautiful. The belief that the markets were right was the fallout of extreme efficient markets theory.

The media too often treated the markets as rational as well. Bond traders implicitly endorsed austerity economics until fairly recently, and the media usually reported them as being right. The supposedly sophisticated financial media (with some noted columnists as exceptions) wondered what could possibly work if not austerity. Now there are signs that the press is waking up to reality and realizing that it, along with the financial markets, is not working.

There are some signs of the ice breaking. The German finance minister announced it was okay for German wages to rise. They have actively restrained wage growth to make their exports more competitive for over ten years. The main sources of their demand were the European periphery, where wages were rising a bit due to a property bubble caused by irrationally low interest rates offered in the financial markets. But there are still signs of backward thinking. Many in Europe think of growth policies as nothing more than making labor markets more competitive through deregulation and reduced wages. As if the more flexible labor markets in the U.S. are leading to rapid recovery.

In sum, what’s needed in Europe is fiscal stimulus, a more accommodative ECB, social transfers from rich states, higher wages in many nations, a change in the silly EU agreement to keep deficits absurdly low, and industrial policy to gear capital investment across the continent, free of prejudice and nationalistic tendencies. The elections may bring some of this about. Then, once policies are working to support growth and reduce financial burdens as tax revenues rise, the financial markets will at last respond constructively. They must be waited out for now.

To put it most simply, what’s needed is the will of the government of the people to ignore the financial markets and stop treating them like a more rational government than democracy itself.   

Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

Banner image courtesy of Shutterstock.com.

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More on the Case for the Public University as a Public Option

May 3, 2012Mike Konczal

Josh Barro has an editorial at the Daily, Making U. Pay, about the college affordability cost crisis.  Barro:

Josh Barro has an editorial at the Daily, Making U. Pay, about the college affordability cost crisis.  Barro:

What the University of Florida (along with every other American college and university) really needs is cost discipline...Colleges still need to employ a lot of highly skilled workers, and college costs are tied to their wages, which rise faster than inflation...colleges and universities have failed to mitigate this phenomenon. For example, over the last few decades, the typical public four-year college has seen a sharp expansion of its support and managerial staff — from 5.5 per 100 students in 1987 to 7.5 per 100 in 2007...

Unfortunately, consumers do not have the necessary incentives to impose cost discipline in the market. The perceived necessity of a college degree to find a middle-class job gives students few options but to pay up...State legislatures, too, should put pressure on public colleges and universities not to increase staffing relative to student populations, and to respond to budgetary strains with cost control instead of tuition hikes or reductions in enrollment...Colleges and universities should take greater advantage of technological advances that could finally improve productivity in the education sector, such as distance learning and video instruction...

These reforms, different though they are, have one aim in common: creating incentives for all actors in the market to make higher education not just cheaper, but more efficient. That may sound unromantic, but it’s necessary to maintain educational opportunity for all.

I agree with most of the piece.  Barro doesn't take his argument in this direction, but, with the risk of dragging Josh into a social democratic quicksand pit, it's useful to reframe this discussion as one of reclaiming a "public option" in higher education.  Much of the discussion on the technical efficiency of the public provisioning of merit goods focuses on scale and compulsion, which is relevant for higher education, but there's also advantages in cost control and baseline quality.  By holding down tuition, the public university can act as a check on runaway price inflation in the private university market.  Considerations about dynamic efficiency - improvements in quality - seem not as relevant here in the formal education market: private sector tuition is exploding as fast as public tuition.  If we are concerned that boosting demand through price subsidies is captured by incumbent suppliers, then boosting access through reducing tuition on public universities should negate those rents.

Dynamic efficency is very important when it comes to the online and future sectors of higher education.  However public options help here as well: having a strong baseline of quality is important for vetting the actual efficiency improvements of these new institutions.  Public options solve a certain type of informational problem.  If prices are lowered, it can be difficult for the government and citizens to tell if it is because market innovations have allowed for lower cost production or because they are providing services of a cheaper quality.  The private market is more incentivized to provide new benefit options and offer greater flexibility when they have to compete against a baseline product.  This creates the incentives mentioned above, but these incentives work more towards actual quality improvements instead of rent-seeking when they are competing against a public baseline.  We know for-profit schools are a bad deal because they statistically underperform public community colleges while having larger debt burdens.  Online education at California looks to have equally high drop-out rates. This was part of the important intellectual firepower over the debate on "vanilla products" that erupted during the early parts of Dodd-Frank, brought over to the education sector.

Tim Noah wondered to Matt Yglesias if we should impose cost controls on colleges; I think we should instead do what we know has worked - make sure a public option is available to all, and have a private market develop alongside it, filling in the efficiency gaps wherever they are.  I forgot to link to this, but Aaron Bady had a powerful defense of the California Master Plan, the mid-century public higher education model, when we did a bloggingheads a few weeks ago:


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Article on Mass Incarceration at Jacobin

Apr 25, 2012Mike Konczal

The Spring 2012 issue of Jacobin is now online.  It has a lot of great content in it; make sure to check out Megan Erickson's addition to the "unschooling" debate that goes back and forth in parts of the internet.

The Spring 2012 issue of Jacobin is now online.  It has a lot of great content in it; make sure to check out Megan Erickson's addition to the "unschooling" debate that goes back and forth in parts of the internet.

I have a piece - Against Law, For Order - on ideology, governmentality and "policy" in an era of mass incarceration.  It's about how criminal laws informs our markets and government policy.  Bits and pieces of it have appeared in this blog, but here it is in one place.  The piece ends up reviewing a lot of recent books on policing, with special attention to Bernard Harcourt's work on neoliberalism and policing, as well as Jonathan Simon's work on "governing through crime" - how policy is reworked to use the language and techniques of policing.  I hope you check it out!

I wrote it a while ago so I didn't get to reference two of the big events in policing and incarceration that happened recently, but I think they fit into the framework I try to build.  The killing of Trayvon Martin by George Zimmerman appears to be, in large part, about Zimmerman believing Martin didn't belong in the neighborhood he lived in.  Maintaining order, seperating insiders from outsiders, and who gets to make those calls and what consequences they have is a central part of the neoconservative vision of policing I outline.

Meanwhile the 5-4 Supreme Court decision in Florence v. Board of Chosen Freeholders of the County of Burlington held that "Jail strip searches do not require reasonable suspicion, at least so long as the arrestee is being admitted into the general jail population."  Reading Justice Kennedy's logic, it looks like that since people put into a prison population could be dangers to themselves, guards and other prisoners, the guards have the ability to institute whatever techniques they believe are necessary.  Kennedy looks uninterested or unwilling to second guess the prison system.  Which means that people within the criminal justice system exist in a sphere of total government control and competency, a way of thinking I link back to the neoliberal vision of governance.

Sadly I couldn't find a way to link in one of the more interesting pieces I've read recently, one I'm still grappling with, Kate Redburn's Hate on Me at New Inquiry.  It's about the GLBTQ groups - including The Sylvia Rivera Law Project, FIERCE, Queers for Economic Justice, the Peter Cicchino Youth Project, and the Audre Lorde Project - who oppose New York State's "Gender Expression Non-Discrimination Act," which "would make violence against gender-nonconforming people a hate crime."

This is governing through crime - the best way to react to the social problems of violence and hate aimed at the GLBTQ community is to increase the policing and incarceration of those who do the violence.  Mandatory minimums, which translates into higher guilty pleas, which translates to more bodies in jail.  These groups oppose this because the police themselves are part of the problems they face, not part of the solution.  As Redburn argues, "Hate crimes legislation not only doesn’t change institutional bias; it further empowers this broken system by increasing law enforcement’s ability to arrest and imprison."  I find the challenges posed here important to understand as we all try to find a way to have a governance project built outside the logic of mass incareceration.


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The Path to a Stronger Democracy Lies in Strengthening Community

Apr 24, 2012Jeff Madrick

Two new books examine how putting capitalism before community has distorted the economy and put democracy at risk.

Two new books examine how putting capitalism before community has distorted the economy and put democracy at risk.

I participated in a panel discussion last week to help launch The Occupy Handbookin which I and about 60 others made contributions. It was mostly composed of economists and mainstream journalists, and the focus was income inequality. One wouldn’t expect anything much different from a discussion of Occupy Wall Street, which after all made “the 1 percent” a household tag line for what is unfair about the American economy.

But OWS is actually raising broader issues than that, and my sense in talking to a few early organizers is that they can’t seem to find answers to their questions. Granted, most of these questions are not entirely well formed as yet, but the economists’ view, it must be admitted, is a rather narrow one. Correcting inequality a bit and regulating Wall Street some are flimsy palliatives in the organizers' minds, I suspect. Even infrastructure investment sounds like a weak corrective to them. Do we never question the intense idealism of the Anglo-American economic model?

The Occupy Handbook is actually a fine, diverse, and sometimes contradictory set of contributions put together with remarkable speed by editor Janet Byrne. For example, it includes a couple of pieces by well informed anarchists and others by those to the right of center who believe America’s answer is better education (and that’s about it). Many concede OWS's contribution to the nation is awareness. There is no sound in American politics unless Washington is listening, I wrote. OWS got them to listen.

But there is another small book out just today that does propose rather serious alternative to the individualist/materialist American model of economics. It is called The Path to Hope, and it is written by two former French Resistance veterans who are now in their 90s. Stephane Hessel wrote Time for Outrage! a couple of years ago, a pamphlet of political anger—a cri de coeur—that called for public protest. It swept the world, selling millions, and was said to have a profound influence on the Spanish indignados and the Arab Spring. Now he has teamed up with the eminent sociologist, Edgar Morin, to put a little more meat on the bones of their rage.

I proudly wrote the prologue to the book -- proudly because, if highly rhetorical and abstract, their brief piece talks about much that is forgotten in the governance of nations and the true interactive meaning of democracy. I usually draw two circles in the air when I speak about these issues. One is the circle of free markets, defined by Milton Friedman, who basically argued in Capitalism and Freedom that left to themselves, markets can produce social goods more fairly and cheaply than government—from retirement security to highways to health care.

The other circle is community, which has long been the source of social goods in which people care for each other. Friedman’s circle is individualist. This circle is the circle of Hessel and Morin. It is the circle of compassion and community. Being American, I suppose, I tend to believe the circles should be of equal size. Since the 1970s, our potential tragedy is that the Friedman circle has gotten immense while the community circle has shrunk.

Hessel and Morin would argue that the community circle should be far larger than the Friedman circle. They are not pure anti-capitalists; they hold a significant place for business. But they say enough is enough. We have seen the power of finance capitalism to distort and undermine productive growth and equal opportunity. We are also witnessing the rise in Europe of ethnic bigotry again. This, they demand, must change.

In writing the prologue to The Path to Hope, I acknowledge that I don’t agree with all that Hessel and Morin write. They offer but an outline of high ideals of community and fellowship. But they are on the right track. They saw the rise of pure totalitarianism and they worry that if the fortunes of the rich are again threatened, they may side with those who would plunder democracy. I don’t think we are nearly there yet, but democracy in America is threatened and warped by financial power these days. We do care too little about each other, I fear. The Path to Hope is on sale now.

Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

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Virginia Foxx's Comment and the Intergenerational Problem of the Public University

Apr 20, 2012Mike Konczal

Scott Keyes at Think Progress notes the following comment from Rep. Virginia Foxx (R-NC), who chairs the House subcommittee on higher education:

Scott Keyes at Think Progress notes the following comment from Rep. Virginia Foxx (R-NC), who chairs the House subcommittee on higher education:

FOXX: I went through school, I worked my way through, it took me seven years, I never borrowed a dime of money. He borrowed a little bit because we both were totally on our own when we went to college, totally. [...] I have very little tolerance for people who tell me that they graduate with $200,000 of debt or even $80,000 of debt because there’s no reason for that. We live in an opportunity society and people are forgetting that. I remind folks all the time that the Declaration of Independence says “life, liberty, and the pursuit of happiness.” You don’t have it dumped in your lap.

A major problem with our leaders is that they are approaching what is happening in the public university through a mental model of a world that no longer exists.

EdwardMurray at DailyKos notes "Virginia Foxx went to the University of North Carolina-Chapel Hill in 1968. According to the National Center for Education Statistics, in 1968, the average yearly cost for tuition, room, and board for a public university was $1,245 which, in today’s words, is one thousand two hundred and forty-five dollars for a year’s worth of college. For today’s average college student, that dollar amount is roughly equivalent to the cost of a textbook and a garbage bag."  Quick and the Ed has notes "Representative Foxx would have paid $279 for the academic year—about $2,140 today. That’s about equivalent to what students pay right now at community colleges, not public four-year institutions—especially not public flagships."  Rebuild the Dream has a petition going on the matter.

Beyond the fact that it was much cheaper, how does University of North Carolina-Chapel Hill's tutition look on a chart?  Digging into UNC-Chapel Hill's Office of Institutional Research and Assessment website, which has online collections of several previously published yearly reports (data from here, here, here and here), we can construct the following graph.  Some years, especially earlier ones, are missing. Data is adjusted for inflation:


As you can see, tuition is roughly around $2,000 a year for most of the 20th century after the Great Depression.  Starting in the late 1990s and early 2000s it skyrockets.  It shows no sign of slowing down, either.  This is a political choice, based on what we want the university to do and how we want to provide it as a country.  There was a political consesus that made sure Virginia Foxx had college available as a publicly-provided good - her "opportunity society" is a world of high quality "public options" available to those who can use them - and now there is a new set of active choices to have students at UNC-Chapel Hill graduate with debt.  Foxx should know better than to ascribe it as a simple morality play.  If she doesn't know this, which is possible, that's a major problem.

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Why Is Spending Through the Tax Code Popular on the Right?

Apr 20, 2012Mike Konczal

Why is spending through the tax code popular on the Right?  Justin Wolfers and Betsy Stevenson have a Bloomberg editorial on tax expenditures that, beyond being a smart column on the topic, notes the distributional impact of these expenditures:

Why is spending through the tax code popular on the Right?  Justin Wolfers and Betsy Stevenson have a Bloomberg editorial on tax expenditures that, beyond being a smart column on the topic, notes the distributional impact of these expenditures:

The rich get such big subsidies for three reasons. First, they spend more on the things the tax system favors, such as homes and health care. Second, they are subject to higher tax rates, so they get more benefit from each dollar of deductions. Finally, they’re rich enough to take full advantage of their deductions. The poor typically have too little income to itemize, while many families in the upper middle class find themselves siphoned off into a separate tax system known as the alternative minimum tax, which allows fewer deductions.

They note that Grover Norquist and other conservatives tend to support tax expenditures.  Why is this?  One reason they give are various psychological biases - "It’s a tribute to our psychological biases that getting a subsidy through the tax system is treated so differently from receiving a government check or copping a fine."

Will Wilkinson at Democracy in America adds some additional reasons.  He argues that many on the right might think the following: "Tax deductions and credits are best understood as selective restraint, as selective acknowledgement of what is ours, on the part of a generally kleptomaniacal government."  He also notes that a lot of how people view this issue is tied up with how they view "giving and not taking" as equivalent actions.

I'd like to throw in another point to compliment these.  It's important to understand tax expenditures as a political project. This goes back quite some time on the Right with health care spending through the tax code - but let's focus on the Reagan era.  Conservatives think that tax expenditures help with privatization and their larger political projects.  Let's look at Heritage's Stuart Butler's 1985 article, released by Cato, titled: Privatization: A Strategy to Cut the Budget.  (Butler was writing this in a lot of venues, but the Cato one is online; we discussed this article recently here.) Butler is worried that President Reagan can't destroy the Welfare State.  He's shocked and appalled by the way that middle-class people rush to the defense of Social Security.  The outright assault isn't working.  What can conservatives do next?

They can use the tax code to create a private-sector welfare state to compete and ultimately win out against the government, removing the government from people's daily lives. Butler is concerned about "public sector coalitions" which are difficult to dislodge; why not create private sector ones?  Butler (my bold):

Complaining about public-spending coalitions achieves little more than high blood pressure. But developing methods to entice the public to choose a private rather than a public way of promoting their self-interest may achieve a great deal….But a distinction is drawn between government as a provider (implying that government should levy taxes and deliver services itself), and government as a facilitator (implying that it should encourage or require those services to he provided by the private sector). Privatization, in other words, means seeking to transfer programs into the private sector using the carrot of incentives, not the stick of aggregate cutbacks…
These privatization coalitions are the mirror image, so to speak, of the public-sector coalitions. And they are at the heart of the strategy to create a “privatization ratchet” to counter the federal ratchet. By providing a targeted benefit (such as a tax incentive or some regulatory relief) to those who demand or provide a private alternative to government, considerable rewards can be guaranteed to individuals within the coalition.  Members of that coalition can be expected to press for deeper incentives and to oppose any move to eliminate existing incentives…

Privatization thus turns conventional political dynamics on its head. Lobbying pressure develops for less taxation (if a tax incentive is given), and for private, not public, programs. Moreover, each legislative victory won by the coalition, however small, serves to strengthen it, thereby adding to its capacity to achieve furthen legislative concessions and a corresponding growth in the private program…tax incentives concentrate benefits on a small number of people and they act as the nucleus for the growth of privatization coalitions….Because tax incentives are so essential to a privatization campaign, supporters of the approach should be cautious in their support of tax simplification.

The battle here is between "government as a provider" and "government as facilitator."  Wolfers and Stevenson argue that the two are economically "identical."  Butler sees, I think correctly, that the two provide people with a very different experience of governance.  Since these actions are subsidized, the market is able to provide goods on better terms than they normally would; since they were ‘private’, they removed the linkage between people and the government.
And here the political gridlock that results from trying to deal with tax expenditures is a feature not a bug; they use Public Choice theory to note that this privatized welfare state has such concentrated gains and diffused losses that it would be very difficult for the government to try and make these benefits truly public again.  As a tax cut, they are stickier since those whose gains are so concentrated have so much to lose and will lobby accordingly (check out the home builders and the mortgage interest deduction, for starters).  Take one concrete example of a tax expenditure Butler walks through, the subsidization of IRAs being tax-free as a way of fighting Social Security, to see this hidden welfare state ratchet in action (my bold):
Social Security is a classic example of the federal ratchet in operation…Yet a minor provision in the 1981 tax act may eventually break up that coalition…By allowing all working Americans to open tax-deductible IRAs, Congress planted the seeds of a private alternative to Social Security…
It was not long after the passage of the 1981 act that banks and other financial institutions…began a massive campaign to encourage Americans to open retirement accounts. Soon after that, nonworking married women began to complain that limiting their deduction to just $250 was unfair and discriminatory (near beneficiaries). And politicians were quick to propose accommodating the near beneficiaries and increasing the standard IRA deduction. A privatization coalition was born.
The “tax loss” (as the Treasury puts it) of IRAs has vastly exceeded the original Reagan Administration projections. Yet repealing on reducing the deduction is already politically unthinkable—the coalition is too powerful and the privatization ratchet is in place….In short, the incentive has begun to divert the pressure of demand for a secure retirement income away from the publicly provided system (Social Security) and to the private alternative (IRAs)….From the budget-cutter’s point of view, the growing power of this IRA coalition offers the only real hope for spending reductions in Social Security, since the more Americans prefer IRAs as their primary pension vehicle, the weaker will become support for retaining Social Security in its present form.

For these conservative intellectuals, in order to slay the monsters of the New Deal and the Great Society they had to unleash an even more vicious beast - the political mess of our tax expenditure system.

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Rediscover Representative Democracy

Apr 18, 2012Herbert J. Gans

Vote HereTo create a more civilized economy and political debate, we need a democracy that represents more than just the rich and powerful.

Vote HereTo create a more civilized economy and political debate, we need a democracy that represents more than just the rich and powerful.

By now, common sense should tell us that whether our form of government is called a plutocracy or a corporate democracy, its three branches and the constituencies that control it are unlikely to solve the country's critical economic, political, and social problems. But what if we could enlarge the citizen constituency, and thereby rediscover representative democracy?

Representative democracy entitles all citizens to be properly represented by their elected officials, and right now, American democracy is clearly unrepresentative. Since the Reagan era, the already economically powerful have obtained more political clout than ever. As a result, many other citizens are deprived of their fair share of political voice and political power, as well as the help government can provide.

The economic and political power-holders will never surrender any powers voluntarily, and the recently emerged Occupy, union, and other protest movements have not yet raised national power-sharing issues.

Suppose, however, that new players could enter the electorate and other parts of the political playing field. They would add new issues and demands to the political agenda, remove some old political warhorses, and upset a variety of political applecarts. If more people feel that voting and other ordinary forms of political participation can do some good, they are likely to make themselves heard, and their elected representatives might then push the economy and politics in a more egalitarian direction.

Representative democracy will not come easily or quickly, and in a huge country like the U.S., it can never be fully achieved. Changing a political system long stacked to favor profit-seekers over rank and file citizens is politically very hard work, and neither the big corporations, other fat cats, or their organized allies are going to let go without a humongous struggle. Persuading larger numbers of citizens to vote, and to do so thoughtfully, may be no easier.

Still, representative democracy as an issue sits on high moral ground and opponents cannot reject it out of hand. Consequently, it is very much worth thinking about and publicly discussing it now, so that the right moves can be undertaken if and when the political time becomes ripe.

For example, if large and varied protest activities develop, or if the religious and cultural conservatives find they must vote their economic interests, the country might elect a liberally inclined populist president and Congress. If and when that happens, several essential first legislative and executive steps can be taken. One is to begin to rapidly enlarge the electorate by making voting faster, easier, and more pleasant. 

Another step is to require, or bribe, the relevant media to run political advertising free of charge, and at the same time start pressing for the public financing of elections.

These changes will take time and perhaps some political miracles as well, but when they can be accomplished, further progress might be a little easier.

For example, a larger and economically more representative electorate could well demand that government and private enterprise jointly become employers of last resort. Many more voters would also support progressive tax reform, especially if they understand that putting some money in more pockets will grow the consumer economy and thereby the rest of the economy. Even corporate executives that profit from the consumer economy might turn a bit more liberal.           

Eventually, however, a truly representative government will require reforming the governmental structure. In a properly democratic Senate, senators from the four smallest states, which have less than 1 percent of the population, would no longer cast the same number of votes as their colleagues from the four largest, which have nearly 33 percent of the population. Or maybe the Senate should be turned into the equivalent of the British House of Lords.

Fairer congressional districting is also needed, and the same reforms are needed in state and local government. A federally mandated recall procedure should be instituted for all levels of government. 

The Supreme Court needs reforming as well, for right now it is not accountable to anyone. At some point the country must figure out how to amend or revise the Constitution in order to modernize the intentionally weak and divided government with which the Founders saddled us. 

Meanwhile, and as soon as possible, the federal Department of Education should institute courses in everyday politics and economics, beginning in the first year of high school. The citizenry needs, and has always needed, all the help it can get to understand what politics and the economy do for and to them.

Greater representative democracy may take decades to realize fully, and even then it is no panacea; it will not eliminate economic or political injustice. It should do away with political polarization, but it will not eradicate political disagreement or economic conflict. In fact, if more people are politically involved, their elected officials will have to cope with a larger number of viewpoints, values, and interests among the electorate. However, if more people know they have a voice and a government that is really listening, America could end up with a more civilized economy and politics.

Herbert J Gans is the Robert S. Lynd Professor Emeritus of Sociology at Columbia University and the author of Imagining America in 2033.

Image courtesy of Shutterstock.com.

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Mark Schmitt: Why We May Want America to Decline

Apr 16, 2012

In the latest episde of our weekly Bloggingheads series, "Fireside Chats," Roosevelt Institute Senior Fellow Mark Schmitt and Edward Luce o

In the latest episde of our weekly Bloggingheads series, "Fireside Chats," Roosevelt Institute Senior Fellow Mark Schmitt and Edward Luce of the Financial Times ask whether the American decline we hear Republicans bemoaning on the campaign trail is really such a bad thing. In the clip below, Mark notes that as we fall, others rise. "One part of it is simply relative economic growth compared to China and India, and some of that is either that's just how life is going to be, or maybe you even want it to be that way."

Given that the economic dominance of the U.S. and Europe was never a natural state of affairs and that something truly awful would need to happen to keep countries like China and India from gaining power at this point in their development, Mark argues that "a certain amount of relative decline is not in itself the end of the world."

Mark and Edward also examine some of the growing disfunctions in America's political system, from rising inequality to political gridlock brought on by Republicans. Mark notes that "it's a poltiics in which paralyis benefits certain players, and they're going to use that." He explains that "we tend to think of paralysis in sort of game theory terms," as a "tragedy of the commons with two people each trying to do good things," but "that's not always true. Sometimes that's exactly what people want to create and benefit from." For more, including Mark and Edward's thoughts on the benefits of the German education system and the inside dirt on Larry Summers, check out the full video below:

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Dorian Warren: "Employers Are Mini-Dictators"

Apr 10, 2012

In a new episode of our weekly Bloggingheads series, "Fireside Chats," Roosevelt Institute Fellow Dorian Warren sits down with labor journalist Josh Eidelson to discuss

In a new episode of our weekly Bloggingheads series, "Fireside Chats," Roosevelt Institute Fellow Dorian Warren sits down with labor journalist Josh Eidelson to discuss workplace democracy -- or the lack thereof. As Dorian notes, even "people who proclaim to not want government involvement in their lives and who think that somehow it's a form of tyranny are perfectly willing to walk into work every day and have a private actor with total control over their lives." In the clip below, he argues that under current labor law, "with few exceptions, employers are mini-dictators. We have to do whatever our employer says, or otherwise they can fire us."

Join the conversation about the Roosevelt Institute’s new initiative, Rediscovering Government, led by Senior Fellow Jeff Madrick.

The solution, Dorian says, is to make it clear that citizenship isn't something that can be flipped on and off like a switch. "If we accept certain political principles and freedoms in the broader society," he asks, "why would we then check those at the workplace door every single day?" By launching "a long-term term campaign to reframe how we think of ourselves as citizens in the society, in the polity, and in the workplace," the labor movement can not only improve working conditions but also strengthen unions by ensuring they "have a central and permanent role in making sure democracy is a core aspect of every breathing moment that we have."

For more, including a look at an unusual alliance between unions and Tea Partiers and an explanation of why Republicans continue to attack public sector unions, check out the full video below:


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Forcing Both Parties to Get Specific About What Government Should Do

Apr 9, 2012Mark Schmitt

As part of the How We Value Government series, demanding that both Republicans and Democrats be forced to outline a real vision of government instead of proposing vague cuts or making specific defenses.

As part of the How We Value Government series, demanding that both Republicans and Democrats be forced to outline a real vision of government instead of proposing vague cuts or making specific defenses.

There's an old rule of thumb about Americans' attitudes toward government that's no less true for being familiar: Americans are "operational liberals" but "philosophical conservatives," the political scientists Lloyd A. Free and Hadley Cantril concluded in their 1967 book The Political Beliefs of Americans, based on their analysis of dozens of public opinion surveys. That is, we favor the specific services government provides, but we're distrustful on an abstract level and respond favorably to attacks on "big government."

This small insight was true even at the peak of the Great Society and the era of "liberal consensus," and it fits as an explanation for much of the back-and-forth of American conceptions of government ever since. Whether it accurately represents public opinion or not, it's a good guide to the behavior of actors in the political process. Conservatives attack "government" as an abstract concept that has little to do with our real lives and mostly creates wasteful excess benefiting either bureaucrats themselves or other people. Liberals respond by trying to show the harsh reality of cuts to particular programs, especially safe ones that reach large constituencies. In 1994 and 1995, for example, voters were first drawn to Newt Gingrich's promises to eliminate entire cabinet departments, but as soon as the idea of cutting government was converted to the reality of shuttering national parks and slashing Medicare, the political tides turned swiftly in the other direction. George W. Bush won reelection in 2004 talking vaguely about the need to change Social Security, yet given the opportunity to put such a plan in action, he saw the public lose faith so quickly that he never found a single congressional sponsor for the legislation. Even Ronald Reagan, elected in 1980 in what we still see as a critical moment in shifting attitudes toward government, largely backed off from that agenda after the 1981 budget cuts and his own ham-fisted attack on Social Security.

Mitt Romney's announcement recently that he would eliminate several large government programs, but wouldn't name them lest he face political criticism, represents the conservative tactical approach to Cantril-Free perfectly. (Except they usually remember not to read the stage directions.)

The struggle over government thus often takes the form of this push-pull between the abstract, where anti-government conservatism reigns, and the specific, where people seem to appreciate government. The result, until recently, has been a happy dance through which both sides achieve their short-term objectives: Conservatives win their share of elections, which they can use to push through tax cuts, without worrying much about the size of government, while liberals get their turns at power and avoid major cuts to programs. The Cantril-Free paradox has even generated new paradoxes of its own. Conservatives often expand government as political insurance, albeit carelessly, as in the creation of the Medicare Part D prescription drug program in 2003. Liberals and Democrats are more likely to cut programs (such as the Medicare cuts of 1993 and 2010), both because they take government more seriously and in the hopes that showing a commitment to cutting waste and improving people's experience of government will ameliorate their abstract opposition.

Join the conversation about the Roosevelt Institute’s new initiative, Rediscovering Government, led by Senior Fellow Jeff Madrick.

But what's missing from this well-rehearsed dance is any effort to force the question, to make a real choice about what we want government to do. That missing element has been devastating in the last few years, when it seemed impossible to convince the public or Congress that an emphatic government effort was the only way to prevent a long and debilitating recession.

For the most part, as Romney's comment suggests, the 2012 election cycle is evolving into yet another battle between the abstract call for cutting government and the specific defense of popular programs, particularly those threatened by Rep. Paul Ryan's budget plan. But there are indications that the game might be changing. House Republicans have now tied themselves to the mast and voted twice for Ryan's radical plan. They've built up some defenses against the classic attacks about cutting Medicare and other vital programs: They've drawn a new line that defines Medicare and Social Security for current seniors and those over 55 as benefits that have been "earned," while for others they are unaffordable giveaways. They've redefined programs like unemployment insurance as if they were welfare. They've used deficit fever and misleading statistics to portray Social Security and Medicare as doomed, so that the only option is their cuts.

Meanwhile, embracing the need to reform entitlement programs, Democrats have (correctly and responsibly) blunted their own ability to play the old game. As Slate's Dave Weigel wrote after the Republican victory in a special election in New York City last year, Medicare is "not really a wedge issue -- it's the slow death of a wedge issue."

These two changes directly challenge the politics of "operational liberalism." Going forward, it might not be enough to pick a few appealing government programs that reach the middle class and use them as political ammunition. And that could be a good thing. Instead of focusing on narrow specifics, this change demands a full-throated defense of government as a whole -- programs that benefit "other people" as well as ourselves, programs that represent the shared benefits of our social contract. And it demands that we open up the "submerged state," which obscures government programs and encourages the illusion that government programs benefit only someone else.  It calls for a full-fledged commitment to making sure that government programs, especially Medicare, are in fact sustainable for the future.

The biggest risk to the promise of shared prosperity, assisted by government, is that liberals and Democratic political operatives are living in the past and believe that they can replay the old Clinton game against Gingrich over and over again.

Mark Schmitt is a Senior Fellow and Director of the Fellows Program at the Roosevelt Institute.

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