Sunday, January 6, 2013

The silver lining of the continued stalemate three words: NO SOCIAL ENGINEERING.

No Democratic social engineering. No Republican social engineering. No big tax cuts blowing holes in the budget. No expensive new programs blowing holes in the budget.

What we'll have is minimal change in government. Gone is the ability to engage in any large-scale expensive wars. There won't be any half trillion dollar jobs program/stimulus. We'll have an incremental austerity because there aren't the votes for raising spending. We won't have huge spending cuts because there aren't the votes for that either.

We can probably remain in this state for quite a while. After all, what are the pressing national or international issues that require a major change? Our budget deficit is the biggest one I can think of. If the international financial systems go into another meltdown, that will be another, but it's not happening now. Neither is it clear that any regulation the US could pass would prevent it.

If this is an end to meddling government, I'm for it. If it's simply a vacation from meddling government, I'll take that too. However, I don't forget that huge government programs of yesteryear are cushioning the problems of today. We have programs that aid the elderly and sick, that protect our borders and international trade, that educate the next generation. I'm fine with stopping the fixing for a while, letting things settle, and see what, if any, pressing issues arise in a few years. Maybe there won't be big issues, maybe there will. Perhaps the best thing is to wait and see.

Tell me the truth--wouldn't you love a break from changes for a while too?

 Let's all give it a rest.


Couves said...

Nice post -- we'll make a libertarian of you yet ;)

Last Friday, David Brooks revealed some alarming statistics about our fiscal state:

"And so what we are looking at, the next generation, according to the IMF, is going to have one-third fewer benefits and one-third higher taxes if we act now.

If we wait five years, it will be 50 percent more taxes, 50 percent fewer benefits. It is just terrible for the future generations."

I'm having trouble finding the report.

ModeratePoli said...

Thanks for the compliment. I've been enjoying your comments on Plain Blog lately.

As for benefits, they have been overly generous. There's plenty of room to trim without taking us back to some horrid age. If we cut back medical care to 1960's levels, that would save more than enough.

By the way, I'll never be a libertarian, ranting about how we HAVE TO follow the exact letter of the constitution. Can you imagine me doing that? What a hoot! No, I'll be unmoored and team-less forever. (Cheers!!!!!)

Anastasios said...

Hmmmm. I doubt very much that there will be a rest over the medium term, much less the long term, although there is probably time for a snooze over the short term.

I say that simply because, as you have pointed out, the driving impetus behind change is need, at least need as identified by interested parties. As interest group balance of power shifts, so does the force behind change. We appear to be in the early stages of several major shifts in the relative power of various interest groups. Urbans are rising, rurals declining; millenials are appearing, baby boomers are aging, silent generation is dieing; minorities growing, whites declining; families growing less prominent, singles growing more so (this last a major but largely unappreciated shift to this point); neo-cons are growing relatively weaker, while realist/libertarians are growing relatively stronger. Many of the ascending groups feel that the state is not as responsive to their needs as it should be, many of the descending groups resent that and fear for their own status. Many of the programs you describe are viewed as too generous by some, while many of the ascending interests see them as laughably and ridiculously inadequate. Many argue that the current welfare state is unsustainable, while many others simply see that as the self-interested whine of the white middle class (I've got mine and I don't care what happens to you).

So, a moment of pause, not so much before the storm as during its early stages. We will not see its end during our lifetime. None of which has anything to do with ideology, but rather with the fact that interests are evolving far too rapidly and imperatives are too strong for there ever to be peace and balance for very long. The state is, after all, the servant of the people, and as Bill O'Reilly put it on election night quite correctly (albeit with an unfortunate phrasing) "people want stuff."

So, probably relative quiet for the next four years or so, I would agree. But, sooner or later, probably sooner than we think, the rapidly changing balance between groups will combine with events to produce either an ascendant Democratic or Republican coalition (likely Republican if it happens in the next ten years or so, probably shifting more Democratic after that window) and then the storm will break with full fury once again.

Truth > Spin said...

I'll add that nature and politics abhors a vacuum. While you may not seen a 'need' for change, an assessment which I do not share, there certainly is a need for politicians to look important and settle scores. Sometimes, in fact, the antes are highest when the stakes are the lowest.

Perhaps not much will come of the upcoming wheel spinning and yelling, but it makes our heads hurt nonetheless. :/

Happy New Year, MP, et al.

Couves said...

Well, maybe it's not your style, but I'm sure you're glad that at least others are concerned with following the letter of the Constitution. As recent events in China remind us, the consequences of not doing so are well documented .

I’m not sure how literally you mean it when you mention cutting medical care back to 1960’s levels… but can you imagine telling people “sorry, no more MRI’s for you!” I can’t.

ModeratePoli said...

@Anastasios and @truth,


This piece was not so well considered, and you have correctly pointed out some problems. I guess I let my hopes and preferences trump a hard-nosed realism. But there may be a bit of truth here: the pace of increased government involvement has to slow due to the lack of money to support it.

Also, in my comment to Couves, I said that there is a lot of money to be saved in Medicare. That's true, but I ignore how immensely difficult it would be to cut back medical treatment to 1960's levels. Ouch, that was a terrible oversight on my part. Mea culpa.

Cutting back on Medicare is so important, but so difficult because we would no longer be following the same ideal for medical care, which is to supply the best care possible. This doesn't always happen in actuality, but it is the model. To change the model to some other goal, such as cost-effective treatment, is a major change in policy and also in people's expectations. I'm ready but I'm in a small minority.

truth > Spin said...

MP - I wish I had your faith in the laws of nature as applied to the alternate dimension of Washington policy making.

You wrote, quite sensibly ordinarily, that "the pace of increased government involvement has to slow due to the lack of money to support it." This would be true in any normal universe, but I have my doubts about the beltway orbit.

Currently, the government runs trillion dollar plus deficits each year and in order to avoid a true price signal about our credit worthiness being visited upon a Treasury bond auction where these deficits are plugged, the Fed has been stepping in with Twist or QEx to buy this debt. For the maturities that the Fed thinks most control rate pricing, they have been not only the buyer of last resort, but also the 800lb buyer in snapping up 2/3rd or 3/4th of all the paper on offer.

So we get to a question of finding the rational limit. At what level / for how long can the Feb buy so many Treasury notes without there being consequences? I don't know that answer, but if you asked me a few years ago I would have said it was lower and over a shorter period than what they've been doing.

If there is no limit or it is well past the current activity, then why worry about tax inflow and outflow at all? The Fed conjures up their money with a keystroke via the magic of the double entry on the ledger, so it isn't limited. If they joined with municipal and state pensions, or anyone else who must buy such notes, then there is no reason for the cost of borrowing that the government faces to ever increase. And really, there is no reason the coupon term could not be pushed out from 10-20-30 year notes out to 50 years or longer, which would drop the payments - and free up government cash flow - even further.

Does that seem absurd to you? If so, where is the absurdity limit? Remember we are at more than 65% of all sales now. Would 70% be the threshold? Or 80% or even 90%? If it's that high, why not just allow all of it?

I no longer have faith that Washington knows limits. That people who hold positions of serious weight can openly talk about minting a trillion dollar coin is only the latest ripple in the looking glass.

The very question of limits was asked during the debate over the ACA at the high court. It was sidestepped via morphing the mandate into a tax and as a result, we do not have any idea where the line is that limits what the government can compel a free person to do. just as we don't know where the limit is to what the government can spend. At this point, only an artificial ceiling holds it back.

ModeratePoli said...


Firstly I'd like to say that my appreciation of this comment goes beyond 'like' to love or admiration. I envy your fluidity with words:

"I wish I had your faith in the laws of nature as applied to the alternate dimension of Washington policy making."

Back to the substance of your remarks, which is clearly more important: The US has been pushing the limits of how much can be borrowed, and hasn't yet received signals that it's getting close to "too much." The absence of those signals is very dangerous, because they come very fast and very painfully, as other nations have found out.

I can only guess why we've been able to run such deficits without inflation kicking up, but the possible inaccuracy of guessing doesn't stop me, as you may have noticed.

The world would have been in a major deflationary spiral in 2008-on if it hadn't been for massive deficit spending buoying us up. So, by some quirk in economics, maybe deficit spending in a downturn doesn't matter, or its effect is minimized.

If this deficit spending had been terrible, we should've seen major increases in the prices of imported commodities, but that's occurred mostly sporadically.

However, I don't think that means we should go whole-hog on the deficit spending (as Krugman would have us do) for the reason I mentioned before. When you do finally get the signals that it is too much, it's too late.

I realize that I haven't provided any sense of the rules you can use to determine what is too much, other than signals from commodity prices. However, I think commodity prices are very closely watched, and their signals are widely repeated throughout our economy and our political discussions. I don't think our political leaders would ignore those signals, so they aren't flying completely blind.

But there's also been something else at work here. The surge in the Tea Party might have been due to fears about the huge increase in the deficits, and a renewed interest in fiscal conservatism. That has definitely been a brake on the spending and the printing of new dollars. And it may be part of a "natural balancing" that often occurs in our government.

So I see reasons to still have faith in how our democracy works to limit excesses in government.


As for ACA, I'm a supporter, partly because my daughter is a beneficiary of the mandated health insurance in Massachusetts. I was definitely concerned about the national version passing constitutional tests, but I didn't feel it as an affront, as you seem to.

I notice that "free" people are compelled to do all sorts of things, like pay taxes, take the testing regime for a driver's license, have car insurance, abide by fire regulations and building codes. Frankly, this doesn't seem much different, so I suspect that complaints are partisan, not based on clear and deep principles. Perhaps you could convince me otherwise, at least in your case. Should I set up a separate post/thread for that?

Truth > Spin said...

MP - I appreciate your kind words about my writing. More often than not, I cringe when I go back to reread something I've put down with too much haste.

I suspect that a big part of the market-based reason why the US is able to get away with not only borrowing so much, but also devaluing the dollar as it has, is that most of the trusty-worthy world who might become the flight to safely location is in similar straits (and of course the stickiness of being the global reserve currency). The EU, UK and Japan look as bad or worse. And China and Russia are not yet transparent or trustworthy enough to qualify. Other nations just aren't large enough to mop up enough of the cash to make a dent, so the world's investors keep dancing with the one that brought them, for now.

Those same global market are why commodities aren't the canary we might hope they would be. Too many of the industrial ones are affected by the economic conditions elsewhere, which doesn't really tell markets whether betting on the US is solid. One might infer that if the industrials are hot elsewhere that the US will enjoy some benefit, but it's so far from a straight line as to be almost meaningless, especially where that has been happening (China, India , Russia and Brazil, to a lesser degree).

And too many of the food stuff ones are as weather dependant as they are economic.
To your point about the Tea Party having possibly provided a brake on spending, since we can't prove a negative I suppose we will have to assume it's true. Heaven help us if the status quo represents restraint. ;/

I don't think we need a new posting on the ACA, but do let me make a few points:
I didn't take the Court's ruling on ACA as an affront, but I would have liked for the outer bound of compulsory power to be identified. While some of the American mythology deserves the passing wink and nod it is paid, the system of enumerated powers is core enough for me to be mindful of it.

I have many regrets about the bill and its passage. I wish the GOP never took up the Death Panel fight. Beyond being absurd, it prevented any rational conversation about the end of life care that takes up such a huge portion of total health spending. So long as we live in a resources constrained world, we will be setting priorities and certain conditions for care: in other words, rationing. We do it now and always will.

I also wish the Dems had not given in to labor demands that the so -called Cadillac Tax be neutered. That upper limit deductibility on plans was one of the main things that I thought would apply downward price pressure.

I also regret that by deciding to not engage with the Dems, the GOP lost the chance to insist on things that ought to have been included, such as tort reform and allowing plans to be offered across state line. I understand the Dems deciding to not include them as soon as it was clear they were going to have to carry the bill all the way.

Push come to shove, I would have voted against the bill if I were in the House, but I would wanted to engage the debate before hand to work on those above changes. If I could, I might have crossed the aisle to get them.

Anastasios said...

Actually, I'm going to weigh in slightly on Truth's side with regard to the ACA decision, which I found quite surprising. It would have been better to have a clearer decision and discussion about the philosophical merits, rather than the sense of a "side-step" by Roberts that upheld the legislation by shifting the frame of reference. A friend of mine, a lawyer, however has argued against that as naive. He reminded me that lawyers and judges and SCOTUS members are only human, and as such often find themselves caught between conflicting imperatives. He suspected that Roberts probably rather liked the legislation and thought it was a very good alternative to a more clearly constitutional but less conservative option such as single payer, but that Roberts also found himself confronted by a complex situation in which he was trying to maintain relationships on the court, honor past commitments to certain kinds of conservative theory, quietly express his disgust at Republican judges who had allowed this mess to befoul the court's docket (i.e. who had not quashed the suits early on), and dodge what he saw as a political nightmare for the court if the ACA were overturned on partisan lines. He hoped to rope Kennedy in as an ally, but when that failed, he danced the sidestep and hoped for the best, as we all often do in life.

Still, a more clear decision would, I think, have been better. One of the more disturbing parts about the ACA crisis was the strange mutability of opinions, as formerly cherished Republican proposals suddenly morphed into a threat to free people. But, you take the deciions you can get, I suppose.

With regard to borrowing and interest rates, perhaps it is simply the case that Krugman and others were right about their theoretical arguments. That is the models that showed that under conditions of economic collapse and high liquidity the traditional relationships among borrowing, interest rates, and other economic factors would cease to function have been proven correct. As is often the case in all sorts of areas, when faced with a choice between common sense and experience versus well-researched and tested equations, you should probably favor the equations. Just ask Peggy Noonan, who was sure her gut-level sense of Romney's momentum and the movement of the electorate was oh-so-much-more-reliable than Nate Silver's number-crunching.

Truth > Spin said...

Anastasios, thanks for the minor plug.

On ACA and Roberts, I suspect your theory is as good as any other and I lean toward it, myself. Perhaps one day we will know whether Kennedy was gettable by the opponents and, if so, whether Roberts would have reshaped the opinion.

I think the best we can do about the economic matters is refer to the classic 101 caveat: all else being equal. And then recognize that all else is never equal in our wildly multi-variate world.

Thanks for the response, and please know that I read and appreciate your views.

ModeratePoli said...

@truth and Anastasios,

I too was surprised at the ruling on Obamacare. I expected it to be overturned on the grounds that is was overreach on the Commerce Clause, and indeed it was found not to comply. That is constitutional on other grounds I didn't expect, but I'm not familiar with what other arguments could be made.

@truth, I don't understand why general price trends of commodities wouldn't be an indication of the strength on our currency. This is what I think you're saying, but maybe I misinterpreted.

@Anastasios, I'm not familiar with any writings about the economic rules falling apart in certain models. If you have a link, I'd like to find out more. Thanks.

Couves said...

I'm enjoying the discussion, particularly regarding monetary policy…

Commodity prices are not used to calculate the official inflation rates that guide Fed policy. So I'd have to question whether commodities are really used as a canary in the coal mine. Real estate, stock markets and overseas markets are also refuges for dollars that don’t count towards inflation.

Anastasios said...


I think maybe the best explanation I've seen is, of all places, in Krugman's new intro to Isaac Asimov's Foundation Trilogy. It can be found at:

The paragraph I mean is toward the end, where he says:

"To take a not at all arbitrary example, a standard macroeconomic approach, the IS-LM model (don't ask) told us that under depression-type conditions like those we're experiencing, some of the usual rules would cease to apply: trillion-dollar budget deficits wouldn't drive up interest rates, huge increases in the money supply wouldn't cause runaway inflation. Economists who took that model seriously back in, say, early 2009 were ridiculed and lambasted for making such counterintuitive assertions. But their predictions came true. So yes, it's possible to have social science with the power to predict events and, maybe, to lead to a better future."

Anonymous said...

Just because gridlock might slow down federal government social engineering, that doesn't stop states or private companies from doing so for their own purposes.

Take Obamacare. One could call that social engineering -- although it's actually rather tame -- but it's designed to counteract the generally negative impacts of health insurance industry social engineering for healthcare financing and delivery.

ModeratePoli said...

I definitely see states continue with the social tinkering, or worse. Virginia has passed a law that some hope will use regulatory requirements to put abortion clinics out of business. I've written before that regulations should be for safety, not a back door prohibition.

ACA is valuable as an adjunct to that other social engineering program, employer-based health insurance, which hasn't been functioning so well lately.

I suppose I want a freeze on social engineering partly because I'm seeing too many fiscal experiments and not enough time spent analyzing the outcomes, so I want a moratorium until we've had time to collect and digest the evidence.

Anastasios said...


I understand where you are coming from. The problem is that history and society just rarely afford us those kinds of pauses. Even in seemingly quiet periods, things keep churning.

Let us take your example of employee-based insurance. It was hardly a piece of self-conscious social engineering. Rather it arose out of the exigencies of World War II, where companies who could not offer pay increases because of the fiscal controls of the war era began to offer pensions and insurance instead. Even the financial regulations themselves were not thought of as social engineering, but as needed measures to insure an affordable workforce in the face of a national emergency.

European healthcare systems also came out of the war, once again not so much consciously at first as in response to need -- health systems were devestated and governments were the only power centers able to step up and provide for day-to-day needs.

The problem is that these kinds of developments have long-term consequences that require very conscious response. It is the RESPONSE we tend to see as social engineering, not the original developments. It's like in sports, where the original infraction is not what the ref catches, but the rather the retaliation.

So I sympathize with your desire for a rest, but I think it just isn't possible. The changes that are going to drive future social engineering are under way all around us. The problem is, we don't know what they are. A factory owner in 1943, concerned about attracting workers and worried about asking them to work 60 to 80 hours a week at frozen wage-rates, did not consider that his offer of medical insurance was the pebble that would start an avalanche that two generations later would have half the country screaming at the other half. The authors of the original 401(k) legislation thought of themselves as tweaking the code slightly to allow for more convenient tax-shielding of long-term corporate capital savings, they had no idea that they would set off a complete revolution in the nation's retirement and financial systems, a revolution that ultimately means that more people than ever are looking to government to regulate financial markets and provide supplementary retirement income. I am sure that somewhere in the country, even as I type, someone is making a perfectly innocent decision that will set off an avalanche and having us all cursing at one another in fifty years as we try to figure out a way to deal with the mess they have caused. The only way to avoid that is a total freeze not just on social engineering, but on all social, economic, and governmental activity.

ModeratePoli said...


My initial reaction:

"...a total freeze not just on social engineering, but on all social, economic, and governmental activity."

Make it so.

Of course, we can't stop time or the occurrence of decisions or unexpected consequences. But I do think that the tinkering has slowed down and will continuing to be slower because the money to readily support tinkering isn't there.

We will probably have to make major changes in medical care systems in the next decade, but I don't think political visions of an idea system will drive the decisions. I think we will be much more pragmatic and money-conscious than that.

Anastasios said...

Chuckle. You realize that your "make it so" condemns everyone in the country to death, don't you, MP? That's the only way I know of to stop all social, economic, and governmental activity. If you are really that tired of the world, maybe taking up bowling would help? The pins go down with a very satisfying rattle. You can even name each one for a particularly hated person or political group. Golf balls on the driving range can also serve the same purpose, I am told (never had the least stomach for that game, myself). I am, of course, joking with you.

On a more serious note, the problem is that that your pragmatic adjustment may very well be my ideal-driven political tinkering. Or vice versa. So pragmatism and realism will offer no shelter from political hatred and intense passions. I fear the struggle over the ACA was but a small taste of what is to come.

Even more seriously, lack of money will not, I think, seriously inhibit planning, tinkering, meddling, and the like. Far from it, that situation is likely to speed up such activities, as people arrange and rearrange the system to free up resources for their favored projects. Adjustments to health-care and entitlements, enormous social engineering projects if ever there were any, will be done in the name of cost savings. Ditto major changes in defense policy. Ditto major changes in education policy (which may very well be looming as a fiscal crisis long before we get through with health care). Ditto the infrastructure crisis. Immigration reform, which is intimately tied up with economic growth, is also in the wings with pressure building daily. As resources grow constrained, activity will only grow more urgent, and political conflict only more severe. And as political conflict grows more bitter and severe, the determination of each side to see their social visions realized, cost and political consequences be damned, will only grow stronger.

So, no peace for the wicked, or the good, or for any of us. On the other hand, global warming does promise to make for some splendid Indian Summers!

ModeratePoli said...

@Anastasios, we have two predictions on the table: me with less tinkering; you with more. We shall see. I could spend a much longer time explaining why I chose my prediction, and why I think yours is wrong, but it doesn't settle anything. In any case, history will roll and then we'll find out.

I hope you don't mind me forgoing further argument. If you'd really like to hear my reasoning, I'm happy to share it.