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July 07, 2011

Comments

Brendan writes that "the GOP's brinksmanship over the debt ceiling . . . is historically unprecedented."

Curiously, Brendan's post fails even to mention the 2006 vote on raising the debt limit, in which all 48 Democrats in the Senate--including Senator Obama--voted no. (That was when the debt was $8.2 trillion. Today it's $14.3 trillion.)

Historically unprecedented? Not hardly.

Brendan's update is fine, but let's be clear. The 2006 vote wasn't just about Senator Obama. Every Democratic senator voted against raising the debt limit. That's the "bipartisan norm" that Brendan thinks was operative before the current GOP "brinksmanship"?

As for Brendan's statement in his update that the global economy is precarious and the threat to economic stability is more significant today, that may all be true, but it has nothing to do with whether the GOP's brinksmanship is historically unprecedented or whether it represents a departure from bipartisan norms. That's the premise of Brendan's post, and it's a premise that simply ignores history.

BTW, most Republicans are willing to vote to increase the debt limit provided that significant budget cuts are agreed to. So far, the White House has rejected that offer. Both sides are engaging in brinksmanship, but (unsurprisingly) Brendan calls out only the Republicans.

See the intro paragraph - lots of bipartisan norms have broken down before this, and partisan fights over raising the debt ceiling are part of the overall trend. The 2006 vote certainly fits into that context, but there's no way it was at the level of the current fights. The Dems had no leverage and extracted no concessions as far as I know. Also, brinkmanship isn't equivalent to negotiating. The White House isn't making a threat; Republicans are.

The term "brinksmanship" is interesting here Brendan. It brings to mind the famous "car towards a cliff" scene in _Rebel Without a Cause_.

A little thought experiment:

Two people people are in car heading towards a cliff. The one driving asks the passenger to give him some more gas money so he can keep heading the same direction. The passenger says "I'll give you more gas money if you'll step on the brakes". Which one is (more) guilty of "brinksmanship"?

Yeah, it's not a perfect analogy but what has led to the unprecedented demands by the GOP is the unprecedented run up in spending that is causing us to hit the debt limit.

Besides, any reasonable financially minded person understands the threat of US default occurs if bondholders believe the US can't pay off it's debt, not because some entirely "notional" debt limit is breached.

"The problem, however, is that the US political system is choked with veto points (both constitutional and procedural) that can be targeted by opposition parties. The costs of those tactics can be extremely high."

I'm not sure, but in this paragraph, you seem to be bemoaning the fact that the opposition has many tactics that can stop the ruling party form doing whatever it wants. I'd be curious to hear your thoughts on this and whether the "costs" of not having these tactics available and in use are greater or less then the "costs" you claim above.

Brendan's terminology is delightful. Democrats negotiate; Republicans engage in brinksmanship. Democrats merely point out what will happen if the other party fails to accept their position; Republicans make threats.

Senate Democrats in the 2006 debt ceiling vote extracted no concessions because they chose to vote unanimously against the debt ceiling increase. It wasn't that they were prepared to vote for the debt increase if Bush acceded to certain budget cuts. They were never going to vote for the debt ceiling increase. No demands for concessions, no threats, no brinksmanship, just a simple unwavering opposition. How admirable.

FWIW, the 1995-96 fight related to the budget, not the debt ceiling, but I'm confident that the Republicans then were threatening and engaging in brinksmanship, whereas the Democrats were negotiating and pointing out what would happen if their position on the budget wasn't agreed to.

1995-1996 fight included debt ceiling too. See link in the post or https://www.tsp.gov/PDF/formspubs/GAO-AIMD-96-130.pdf

If Rob can't see the difference between (1) an essentially symbolic vote against raising the debt limit by the members of a minority party who everybody knows can't actually block the measure, and (2) a threat to vote against raising the debt limit by the members of a majority party who actually can, then, well, Rob can't see. Which is about par for the Republican course.

I don't agree that Brendan's chart shows that political polarization causes low GNP, for several reasons:

1. If polarization is significant, it's because it makes it hard to pass legislation. However, if I understand the term, it would seem that distance between the House party medians isn't the same thing. E.g., during much of FDR's Presidency, the Dems had so large a Congressional majority that they could easily pass laws, regardless of the distance between parties.

2. It's by no means intuitive that the ability to pass legislation should translate into GNP growth. Many believe that government does more harm to the economy than good. E.g., Mark Twain wrote, "“No Man’s life liberty or property is safe while the legislature is in session.” So, a paralyzed government may e more apt to lead to economic growth.

3. There are many factors more directly affecting GNP growth. It's unreasonable to think that political polarization is the key driver.

4. Given the uncertain relationship between polarization and GNP, that chart isn't a good enough fit to draw any conclusions from IMHO.

5. In fact, one could just as easily claim that the chart shows that high polarization is good for GNP. After all, from 1860 - 1930, there was an uninterrupted period of high GNP growth along with high polarization. (Not that I'm making this claim. I think no relationship can be deduced from this chart.)

Brendan thinks the difficulty of passing future debt ceiling increases is a major threat to US economic and political stability. I think it's just the reverse.

The US is now running historically enormous deficits with no end in sight. Our national debt is at an unprecedented peacetime level and rising rapidly. Even if our debt ceiling permits higher and higher levels of debt, at some point, the world will stop lending us money. We'll be like Greece, force to cut promised benefits, with riots in the streets.

Rigid debt ceilings should encourage our politicians to get our financial house in order before catastrophe is inevitable. Thus, the difficulty of increasing the debt ceiling should help lead to policies that maintain economic and political stability.

BTW this POV seems clear when one looks at personal debt. When a bank puts limits on how much a family can borrow, then the family is forced to live within its means. OTOH if they were permitted to continually increase their debt, they could keep living beyond their means and reach a debt so large there was no hope of ever repaying it.

Who is saying polarization causes low GNP? Not me.

David's point about Brendan's chart is well-taken. Brendan refers to the "costs of those tactics [referring to veto points]" and asks us to "consider" a "plot of partisan polarization in the US . . . against estimates of the US share of world GDP." I've considered the chart. If it's intended to suggest that the declining US share of world GDP is a cost of partisan polarization, it's meaningless. (And if it isn't intended to suggest that, what's the point of charting those data?)

Brendan presents nothing to demonstrate any causation between these two variables or even to hypothesize why there might be such a causative relationship.

The chart shows that the U.S. share of world GDP has declined steadily since about 1950. What could explain such a decline? The rebuilding of the European and Japanese economies after World War II? The subsequent development of the Four Asian Tigers? The shift in revenues to the Middle East resulting from the oil shocks beginning in 1973? The rise of China and India? The end of Communism in Europe? The development of Brazil and Mexico and South Africa and Israel and numerous others? No, it's partisanship in the U.S. Ridiculous.

In 1950 the U.S. GDP represented about 25% of world GDP. That situation was neither sustainable nor desirable. (Imagine the caterwauling on the left if the U.S. had continued its economic domination.) The decline in the U.S. share of world GDP may have coincided with the rise of polarization, but it also coincided with the increase in premarital sex, the growth of the black middle class and the increasing size of the American tuchus, all of which were equally irrelevant to the decline in GDP share.

With the possible exception of Matt Yglesias, is there anybody who finds this chart in any way explanatory of anything?

RE: "Matthew Yglesias:

A related point I would emphasize is that not only does the United States play a much larger role in the global economy than it did during the Gilded Age, but the federal government plays a much larger role in the domestic economy. A lapse of appropriations leading to a “government shutdown” had relatively modest implications in 1911 compared to what it means in 2011. "

Though I doubt either he or you (Brendan) intended, this is one of the best arguments against "the federal government play(ing) a much larger role in the domestic economy" that you've ever posted!

"We're too big to fail! The solution must be: Let's get bigger!"

ROTFL!

I also don't understand the purpose of the chart. My initial interpretation was you were attempting to illustrate the "costs" of polarization as a drop in US GDP vs the World, but you don't really say in the text.

In any case I found the sentence immediately following the chart intriguing:

"The post-World War II economic system was built around the US economy at a time when partisan polarization was relatively low, which increased stability and gave elites substantial room to maneuver in economic policy matters."

2 thoughts/questions:

a) I suspect the low polarization in the 50's was the result of the US economic dominance/stability after WWII, not the other way around (i.e. Why argue when everyone is doing relatively well?)

b) Do we want give "elites substantial room to maneuver in economic policy matters" in the first place?

It's not a causal claim about one variable causing the other - the argument of the post is that the costs of high polarization were lower when the US made up a smaller share of the global economy than they are today. As far as the low polarization of the 1950s and 1960s, it was largely about race, which split the Southern Democrats and created a virtual three party system. See my other posts on this.

I find it curious that no one mentions that in 2006 Bush was engaged in two unfunded wars,(the first administration to go to war and not raise taxes to pay for it),and was responsible for a loss of approx. $500 billion in revenue from 2001 to 2006 because of his tax break for the richest 2% of the population. Of course the Dem.s voted against an increase in the debt ceiling in 2006. I also find it strange that the Rep.s had no problem raising the debt limit 7 times under Bush. Remember Cheney's "deficits don't matter" comment? Not a single republican spoke against that comment, but now raising the deficit is anathema to running the government. Look at the economy. Please tell me...what positive effect did Bushes tax breaks have on the economy? NONE! According to leading economists there IS NO TRICKLE DOWN! So cut the bloated defense budget in half by withdrawing from the Middle East conflicts and stop building aircraft and such that the military says we don't need while raising taxes on the richest 2% and eliminating the income ceiling on Soc.Sec.

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