Neo-Liberalism, the Submerged State and the Politics of Nudge

by Henry on July 25, 2011

A number of people (including Matthew Yglesias) suggested that they didn’t really understand my arguments about the deficiencies of left neo-liberalism, because they were too abstract. I’ve spent the weekend reading an Advance Reading Copy of Suzanne Mettler’s The Submerged State, which in addition to being a fantastic little book in its own right (and excellent value!), has a number of relevant – and quite concrete – points. Mettler wrote up a broad summary of her arguments last month for the Washington Monthly. But in the book, she goes into much more detail about the sources of the pattern of policy making that she argues against – the provision of welfare state benefits through semi-invisible tax breaks and forms of private provision rather than directly.

Mettler is quite clear about the origins of this direction in conservative thinking, and in interest group politics. The submerged state allows conservatives to have their cake and to eat it – they can on the one hand continue to rail against the evils of bureaucracy, and on the other provide benefits to their key constituents. It also allows politicians to buy off private interest groups who would otherwise oppose policy changes. But Democratic neoliberals also played a very important role.

After Democratic candidate Walter Mondale lost his bid for the presidency in 1984, the Democratic Leadership Council (DLC) formed in an effort to take control of the party away from liberals. The DLC championed tax expenditures, and in 1988 its affiliates in Congress pushed successfully for large increases in the EITC and for other new tax credits for the working poor. While Republicans had proposed tuition tax breaks as far back as the early 1960s, it was Democratic President Bill Clinton who finally called for their successful enactment in the form of the HOPE and Lifetime Learning Tax Credits, which he signed into law. Once Democrats controlled both Congress and the White House in 2009, tax expenditures constituted their policy tool of choice, as numerous new and expanded tax breaks were tucked into bills intended to encourage particular activities and to stimulate the flagging economy.

Here, Mettler’s claim is not that the neo-liberals of the DLC are evil villains, or that their policies are useless – some of these tax breaks (the EITC in particular) have been valuable. But the turn towards submerged state measures as the “policy tool of choice” has pernicious broader consequences. It means that people fail to understand the ways in which they actually benefit from government. This not only makes it hard both to build a long term constituency for welfare state expansion where such is merited, it cripples democratic debate – people have difficulty in talking coherently about the role of the US state in providing welfare, when many US state functions are systematically obscured.

This further leads onto Mettler’s concerns with the technocratic approach of key Obama administration decision makers to policy making, which rests on what Sunstein and Thaler, its two key proponents, have accurately described as ‘libertarian paternalism.’

Obama has surrounded himself with proponents of behavioral economics … Behavioral economists champion experimental research, conducted with the rigor of randomized drug trials, to determine which policies work and which do not. … Identifying systematic ways that people fail to act in their own interests, they seek policies designed to encourage them to do so. They favor such plans, for example, as automatic enrollments in pensions for workers without a 401(k) … Their approach is thus highly useful in shaping public policy to promote the attainment of salutary social and economic goals, such as saving for retirement and healthier eating habits.
While the attributes of behavioral economics, including its nonpartisanship, are therefore commendable, the approach circumvents the core ambitions that Obama prioritized in his campaign, namely, restoring the connection between Americans and their government and revitalizing citizenship. … These forms of interaction regard people primarily as consumers, as participants in markets, who need choices arranged for them in strategic ways so that they will be induced to behave appropriately. Fundamental to democracy is the idea that people are citizens, active participants in governance. It requires that people should be reasonably aware of what representatives do on their behalf; that they should be able to form their own views about such actions; and that they should be able to be involved in the political process and have their voices heard. Policy analysts need to consider, then, how public policies influence the health of democracy.

Mettler thus proposes abandoning ‘nudge’ politics in favor of evidence-based policy making that requires policy makers to “reveal” the operation of policies, and hence reveal governance to citizens.

This is a theory of politics then, under which the key problem is that Americans don’t understand the consequences of policies, and politicians and interest groups have systematic interests in obscuring them. Furthermore, the actions of leftleaning neoliberals (among whom might be included Sunstein and others) in favoring policies that are designed either to use conservative-friendly means towards liberal ends, or to invisibly shape actors’ market choices towards socially beneficial goals, can have unfortunate consequences. They make it more likely that individuals will fail to understand the ways in which the state benefits them – and hence make people more likely to think of themselves as disconnected actors making purely personal choices in a marketplace where they get no help from the state, rather than active citizens engaged in shaping their common destiny.

It’s clear that Mettler is a lefty – she is betting that if people understood these expenditures better they would be persuaded that the state can do a lot of good (and would also be better placed to push for reform where appropriate). But one could also imagine democratically inclined libertarians being in favor of a de-obscuring of the operations of government, both because it is appropriate in its own right, and because they are willing to make the opposite bet.

Furthermore, one could imagine leftwingers who have different priorities (e.g. focusing on the need to revive organizations that might both better inform citizens about their policy interests (and mobilize them around these interests), getting some valuable lessons from her arguments. Mettler talks about the role of civic associations and other organizations towards the end of the book, but they are not her focus. Equally, her arguments are not incompatible with these theories of politics (which might range from democratic Marxism through various forms of social democracy). Nor are they incompatible with partisan-friendly theories of politics. White and Ypi’s recent article on partisan justification (paywalled) emphasizes the ways in which political parties can educate and inform their members in the kinds of ways that Mettler is interested in.

Equally, the kinds of effects that Mettler’s account highlights are not exhaustive. Even restricting oneself to effects of the policy process (rather than the broader politics of group formation etc), one might look more generally at the circumstances under which (as Paul Pierson describes it), “effect becomes cause,” that is, under which policies generate constituencies that can create feedback loops in which the new constituencies demand more policies. Mettler discusses this in the context of the submerged state – but there are braoder implications. Such loops might have beneficial or pernicious consequences, depending on specific circumstances.

The example of the outsized political power of the financial industry today is one possible example of the latter. I suspect that one could trace back this power in large part to decisions both by conservative politicians and by left-leaning neo-liberals to free up financial markets in the 1980s and 1990s, which both strengthened the financial industry and increased its appetite for more and further policy concessions. A set of policies which were (in part) the result of good intentions – the belief that increased market size and the consequent efficiencies were necessarily going to benefit ordinary citizens – may have had quite the opposite effect, because it created a political constituency that was able to argue successfully for concessions that dramatically weakened the US and world economy, and to shape political, academic and media debate so as to systematically exclude critics. I haven’t seen any good history which really puts the facts together to either confirm or refute this hypothesis – but it is plausible that the obviousness of this hypothesis explains at least a little of the neuralgia that my previous couple of posts have exacerbated.

(NB that I owe the initial Mettler-theories of politics connection to Peter Frase).

Update: corrected to remove a misleading suggestion (that Mettler’s work doesn’t fully cover Pierson-type policy effects).

{ 70 comments }

1

Andrew F. 07.25.11 at 4:38 pm

So Mettler’s view is that tax expenditures (credits and deductions) keep Americans from appreciating the role of government, making Americans more inclined to listen to a conservative call to shrink government. If we turn those tax expenditures into explicit transfer payments, the conservative call will be undermined, and progressive policies can flourish.

But I don’t see how, for example, turning the mortgage deduction into an explicit transfer payment will make Americans more willing to fund unemployment benefits. Mettler seems to believe this will happen because Americans will become better educated about the government, and will feel more connected to the government.

Neither of those theses is well supported. In fact they seem doubtful.

The problem of the poorly informed voter seems largely a function of the complexity of policy, scarce time and energy to expend on learning about policies, aversion to cognitive dissonance, and possibly an insufficient education to fully grasp policy (contributing to the time/energy needed to understand it).

Telling Americans that they’ll need to wait for a check from the government, rather than simply not paying income to the government, isn’t likely to remedy this – nor to enhance appreciation for the government.

2

Cranky Observer 07.25.11 at 4:43 pm

I strongly recommend Bruce Wilder’s final comment from the previous thread:

http://crookedtimber.org/2011/07/19/20991/comment-page-6/#comment-370414

Cranky

3

Rob Hunter 07.25.11 at 5:00 pm

Seconding Cranky Observer (#2) about Bruce Wilder’s comment, which packs a number of important arguments into a compact, cogent statement.

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Russell Arben Fox 07.25.11 at 5:08 pm

Henry, your comments put me in mind of Sigal Ben-Porath’s Tough Choices: Structured Paternalism and the landscape of Choice, a book I’ve been meaning to blog about for months. She has some strong criticisms of “libertarian paternalism”, though I think she’s often unwilling to follow through on those criticisms. I’ll have to check out Mettler’s book, and see if in some ways it complements Ben-Porath’s arguments, maybe even improving upon them.

5

Bert 07.25.11 at 5:17 pm

“One could imagine” a lot of things. But imagining that altruism and education are even remotely equivalent to the power of mass-merchandised, jingoistic politics is not just naïve, it’s tragically irrational.

Why do people choose Froot Loops over oatmeal and a grapefruit for breakfast, even though they know the latter is better for them (and I loves my Froot Loops!)? Because Kellogg has done a better job of selling convenience over nutrition. Today’s politics has (d)evolved to the same level. YOU don’t have to sacrifice – the other guy does. But most of us don’t seem to realize we already ARE the other guy.

While I’m a big fan of Behavioural Economics (love the Intemporal Choice work of Daniel Read) I think it’s a bit too soon to use it as a proactive “weapon” in the political toolbox. If anything, it tells us that most people believe they can “double-down” on their previous losing bets and still come out ahead. Combine that type of behaviour with the propaganda machine of the right, and the result of the 2010 US elections is easier to understand. Also, “neo-liberal” DLCers are making the self-defeating mistake of trying to sell oatmeal by saying it’s Froot Loops, but even if it works, all it does is convince people that what the “real” liberals are saying is a bad choice is actually good.

The DLCers have unwittingly(?) advocated the Neocon arguments that all taxes are bad, that it benefitrs the middle class to transfer their wealth to the rich, and that government is inherently evil. And “Greed is good,” of course. That this strategy filled their campaign coffers with money from institutional donors only reinforced the mistaken notion that this was a successful political strategy. Again, just look at 2010 for the truth of that.

Of course, like Froot Loops, the Necon strategy is packaged so well that too many in the “silent majority” don’t see the best outcome they can expect: Great news! We’re only going to shoot you once.

6

Myles 07.25.11 at 5:18 pm

I think this is a very persuasive argument, but one that, in fact, does not support a great deal of left-wing politics (as Henry notes, libertarians could take the opposite bet, but he thinks that it actually does support left-wing politics). For example, the strengthening of unions have been a persistent left-wing goal, but it does not follow from the “reveal” mode of policy-making that unions should or should not be stronger in the polity. Indeed, it could be argued that indeed some of the pro-union politics of the past several decades depend on obscuration rather than clarity (card check, for example, in which the secret ballot would have played a strictly negative rather than positive role).

This is a wonderful good summary of the theory of politics as applied, but I would in fact argue that obscuration and clarity are qualities of both left-wing and right-wing approaches, and that the notion that people would prefer a specific kind of politics more only if they knew more about it (it certainly smells like “only if the Tsar knew!”) is, to me, pretty daft.

This is in addition to the more important argument that obscuring the precise mechanisms of the welfare state serves to uplift human dignity. The more we make invisible the ways in which the individual human being is being put on crutches and shorn of independence, the more likely that the individual human being is to act in an autonomous and self-fulfilling manner. We should seek not to constantly remind individuals of the way they are dependent on the government, but to rather emphasize the ways that they could be more autonomous and more in control of their own destinies, and way to do so does not start with hectoring them about what kind of government politicies benefit them. It’s a kind of placebo effect, but it is a worthy one.

7

JRoth 07.25.11 at 5:19 pm

Andrew F. @ 1

I don’t think that Mettler is arguing – or needs to argue – that tax expenditures should be banished. They are probably appropriate responses to certain policy problems. But they should be deprecated as a tool for distributing benefits, precisely because they are intended to be hidden. How does the polity benefit from the status quo, in which the vast majority of Americans simultaneously benefit massively from government policy while believing that they derive no financial benefits whatsoever from government policy?

At any rate, it sounds to me like Henry has already anticipated your reaction, when he noted that “democratically inclined libertarians [might be] in favor of a de-obscuring of the operations of government, both because it is appropriate in its own right, and because they are willing to make the opposite bet.”

It’s conceivable that, in some alternative America, we’ve all agreed that taxes should be around the OECD average, and then the debate becomes about the best way to manage those revenues, and optimised technocratic policies like hidden tax expenditures would be preferable. But in this America, “government spending” means “MY taxes being wasted on THOSE people,” and tax expenditures do nothing but perpetuate that destructive fallacy.

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temp 07.25.11 at 5:22 pm

I consider myself a left-neoliberal precisely because I favor welfare policies which are transparent and direct, so that their recipients understand how they benefit from government. If it is too difficult for someone to understand how EITC is a government program, I’m not sure how you’re going to convince them that it is in their interest to enrich public sector unions, or how precisely they will benefit from protectionism or labor market regulations. The purest neoliberal welfare program is direct wealth transfer, which is as transparent as it gets.

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JRoth 07.25.11 at 5:28 pm

the notion that people would prefer a specific kind of politics more only if they knew more about it (it certainly smells like “only if the Tsar knew!”) is, to me, pretty daft.

Maybe I’m too focused on the analogy, but I think you’ve got it precisely wrong: the fallacy of “if only the Tsar knew!” is that the Tsar, in fact, knew; but the premise here is that tax expenditures (and the like) are specifically designed to obscure policy, and so the people do not, in fact, know. You’ve surely seen the chart in which 90% of people who get gov’t $$ for college say that they don’t, and 80% of people who get gov’t $$ for their mortgages say that they don’t, etc.

It’s entirely possible that libertarians are right that people would oppose programs that benefit them if only they were more aware of them (speaking of daft), but A. democratic principles say that an informed populace is more important anyway, and B. Social Security and Medicare sure seem to indicate otherwise. Would farmers be more in favor of crop subsidies if they were somehow hidden on the 1040?

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JRoth 07.25.11 at 5:30 pm

temp – I think we’re getting into definitions here. You (and others) may favor direct wealth transfers, but the actual, self-described technocratic neoliberals who help run our government view direct transfer programs with horror. Cass Sunstein is probably the clearest example, but he’s hardly an outlier. Yglesias, near as I can tell, favors direct transfers, but I don’t think I’ve ever seen DeLong promote them; which of those 2 is more representative of the technocratic neoliberal class?

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Netbrian 07.25.11 at 5:51 pm

This is a very good post, and the point about the submerged state is excellent. However, I don’t think it quite hits the target of neoliberals specifically, at least with regard to tax credits versus direct transfers.

In particular, most of the more or less neoliberalish arguments I’ve seen are generally against this sort of implicit subsidy — a very common argument (and one I don’t necessarily disagree with is something like this) –

a) Sales taxes exclude food, because poor people need to buy food.
b) This is inefficient because much of the benefit goes to non-poor people.
c) To make things cleaner and more efficient, we should broaden the sales tax to include food.
d) We can compensate the poor with a means-tested direct transfer.

Now, the glaring problem is that the American political system never gets around to d. Moreover, even if they do, the constituency of the direct benefit is poor people, rather than everyone. However, I’ve always seen neoliberals recognize the distortion itself as a problem.

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hartal 07.25.11 at 5:59 pm

One powerful example of what Henry is talking about is how the Commodities Futures Modernization Act eventually created a powerful group of speculators who have since had a dominating position in politics. UCLA Law Prof Lynn Stout explains how it happened:

“This didn’t mean derivatives couldn’t be used to speculate. But the rule against difference contracts [one of the parties actually has to own the underlying asset] forced speculators to think about how to make sure their fellow gamblers paid their bets. The answer was for the speculators to set up private exchanges, like the Chicago Mercantile, with membership requirements, margin requirements, netting requirements, and a host of other rules designed to make sure that, despite the legal invalidity of speculative contracts, speculating traders would make good on their contract promises.
In the process, the private exchanges kept derivatives speculation within reasonable limits and under controlled conditions. This did not stop the government from eventually creating agencies like the Commodities Futures Trading Com- mission and the Securities and Exchange Commission to regulate trading on particular exchanges. But off the exchanges, the old common-law rule against difference contracts served as the primary check against speculation in “over the counter” (otc) derivatives.
At least, it kept otc speculation in check until the rule was dismantled. The dismantling began when the UK passed its Financial Services Act of 1986, “modernizing” its finan- cial laws by making all financial derivatives, whether used for hedging or for speculation, legally enforceable. U.S. reg- ulators, worried that Wall Street banks might lose out on a lucrative new market, followed suit in the 1990s by creating ad hoc regulatory exemptions for particular types of finan- cial derivatives like currency forward contracts and interest rate swaps. The legalization of otc interest rate swaps was promptly followed by the swaps-fueled bankruptcies of Orange County, Calif., in 1994, Barings Bank in 1995, and hedge fund Long Term Capital Management (ltcm) in 1999. Nevertheless, despite these object lessons, the U.S. Congress embraced wholesale legalization of otc finan- cial derivatives in 2000 with the Commodities Futures Mod- ernization Act.
The 2000 act declared financial derivatives exempt from cftc or sec oversight. But it also declared all financial deriv- atives legally enforceable. The act thus eliminated, in one fell swoop, a legal hurdle to otc derivatives speculation that dated back not just decades but centuries. It was this change in the law — not some flash of genius on Wall Street — that created today’s $600 trillion derivatives market.”

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hartal 07.25.11 at 6:05 pm

I meant the above as an example of what Henry describes this way: “Even restricting oneself to effects of the policy process (rather than the broader politics of group formation etc), one might alternatively look at the circumstances under which (as Paul Pierson describes it), “effect becomes cause,” that is, under which policies generate constituencies that can create feedback loops in which the new constituencies demand more policies. Such loops might have beneficial or pernicious consequences, depending on specific circumstances.”

14

Steve LaBonne 07.25.11 at 6:07 pm

Netbrian- notice the close structural resemblance of a-d, including the actual political outcome of never getting around to d, to the standard arguments for free trade.

15

hhoran 07.25.11 at 6:08 pm

This “neoliberal” discussion is critical, and perhaps needs a dedicated website. But I think you’ve massively overstated the importance of the Mettler thesis–“tax expenditures” are certainly an poorly understood policy issue, but it is incorrect to argue that “submerged state” subsidies are a major reason for the utter collapse of liberal/progressive political power or for the general crisis of US government finances.
At the center of the larger issues is the problem of marrying ideals and policy objectives to raw political power in a way that would support sustainable national coalitions. Semi-coherent policies preclude meaningful political power. Viewed “rationally”, neither the New Deal/Great Society or today’s Megacorporate/Christianist coalitions made/make any sense. Pursuing beneficial policies without pursuing electoral power is intellectual masturbation. But given human nature, you can’t balance these things—those pursuing raw power will always overwhelm those worried about the “public interest” Narrow groups protecting their power base undermined the New Deal/Great Society coalition; corporatists obviously get 98% of the benefit within today’s GOP. You can’t discuss tax (or any other) policy without coming back to the political power dynamics, and that means focusing on the most powerful, best-organized economic interests.
Mettler’s problem is that she frames tax policy in a simplistic “conservatives who think government is bad versus liberals who think government is useful and honorable” frame and then proposes a purely technocratic solution (more transparency), which brings us back to the historical “neoliberal” problem. Early conservative thinkers (Kirk, Buckley, Friedman, et al) weren’t on a “government is evil” crusade, but wanted to shift the balance to favor market (over bureaucratic) power in purely economic spheres and to limit the scope of government action (in favor of individual freedom) in purely personal spheres. People like Andrew Sullivan still reflect this non-rabid approach to conservatism. “Neo-liberalism” was originally the “Democratic” wing of the 70s/80s “law and economics” movement and married liberal objectives with a recognition that market economics were much more important than 1960s conventional left-wing wisdom allowed and the pragmatic view that many New Deal-era economic structures (urban machines, regulatory agencies, big unions) has ossified and become unpopular. Airline Deregulation was driven by Democrats like Fred Kahn, Steve Breyer and Ted Kennedy, marrying popular outcome (massive consumer benefits) with a “public interest” view of dynamic market competition. People like Paul Krugman still reflect this progressive approach to economic policy.
What happened of course, is that real-world politics were completely captured by economic interests who had focused on the raw power dynamics. Democrats are controlled by latter-day “neo-liberals” who are totally comfortable in the Goldman Sachs board room, totally focused on rigging markets to support rent-extraction, and couldn’t give a rat’s ass about real competition or consumer welfare, much less safety nets. Republicans are of course controlled by interests even more radically opposed to free markets or personal liberty. Mettler’s article (and much of the internet “neo-liberal” discussion) overemphasizes the 70s/80s intellectual shift and largely ignores the raw interest/power shifts of the 90s/00s. We now have two political parties dedicated to undermining both markets and laws in order to further the interests of a narrow group of rent-extracting industries and very rich individuals, and both parties want to massively reduce benefits available to the other 95% of the population in order to sustain rent-extraction and low taxes on the rich. All US political debate is between the Republican view that the only way to prevent the 95% from rebelling is to completely crush them politically, and destroy all electoral/judicial avenues for redress, and the Democratic view that rebellion is best forestalled by actively maintaining a Potemkin Village appearance that traditional social programs and electoral/judicial processes are still in place.
Quoting Wendy Brown (Peter Frase’s recommended source on neoliberalism), “the significant features of constitutional and representative democracy have been gutted, jettisoned, or end-run, even as they continue to be promulgated ideologically, serving as a foil and a shield for their undoing (and for the doing of death) elsewhere”. Unfortunately Brown’s paper also completely misses the real history of the shifts that created this situation, and thus her specific critique of “neo-liberalism” is seriously flawed. But given this reality, Mettler’s proposal for greater transparency about the motives of tax policy is clearly just pissing into the wind.

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shah8 07.25.11 at 6:14 pm

1) Yglesias has been pounding that drum for sometime, at least roughly since before ACA controversy. It would be a more useful discussion, if we were to focus on a member of the juicebox mafia, if we used Ezra Klein as the cutout.

2) A central driver of conservative politics has been about reducing transparency, especially of programs that transfer direct benefits. Since roughly about 1800, race politics were the key means of preventing social investment, whether that be material, like bridges and buildings, social, like good public schools, or cultural, like free presses. They are very, very, good at it. They have to be, because otherwise tax money that doesn’t go to their friends, goes to wildly popular public programs, which entrenches their political enemies. Racebaiting is the original, the classic, the only “nudge politics” that means anything in the US.

3) In such an environment, with no Fairness Doctrine, the chances of liberal/progressive/neoliberals being able to enact completely transparent plans like Single Payer is nil. If you want Single Payer or nothing, be my guess, as I wait patiently for 2014.

4) This critique also matters defensively, as non-transparent transfers has always been the MO of conservatives, since they like to have things that wouldn’t have broad public support. In that sense, some leftish politicians, whether you call them neoliberal or not, are pretty aggressive about publicizing some of the worst of these. I also think that if you drift too far left (and not the sort of back-stabbing left like Bernie Sanders), a plane accident will be waiting for you. There is just a great deal of subterranean elite politics that goes on outside of the public’s eye (without giving credulence to such things as the Bilderberg confrences being secrit conspiracies).

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Matthew Yglesias 07.25.11 at 6:28 pm

This is a very interesting point and one that I agree with (see, e.g., my posts on Mettler) but I question how tightly this tracks divides between neoliberals and people with more leftwing views. If anything the paradigmatic neoliberal proposal is “how about instead of doing that, we do an explicit tax-and-transfer scheme” as against various ideas to try to establish covert transfers via labor market regulation.

18

Freddie 07.25.11 at 6:53 pm

Speaking personally, the interesting question is not so much whether we do direct wealth transfers as how prominent/dominant those wealth transfers are as a part of a generally progressive scheme of wealth redistribution. And, you know, without riding my usual hobby horse, if we could guarantee that the political process would ensure adequate transfers are made to assure a certain level of material well being for all people, I wouldn’t have much to complain about. It’s a big if.

19

Freddie 07.25.11 at 7:03 pm

One thing that concerns me a little bit about the discussion is that talk of unions seems to focus purely on their political value in defending a left-wing policy regime. Obviously, that’s a big part of the appeal, and a necessary one, as even a truly robust system of private unions can’t do enough to remove the necessity for a social welfare state. However, it’s imperative to point out that unions also directly provide for working class standards of living by using labor organization to secure higher wages, safer and cleaner working conditions, and the other working conditions we generally associate with a quality workplace.

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temp 07.25.11 at 7:08 pm

JRoth-

DeLong at least favors more progressive income taxes and an expansion of the social safety net, which are both relatively direct government wealth transfers. We can distinguish ideological “left-neoliberals” who favor direct government intervention for technocratic reasons, from DLC-types who perceive “third way” polices as a useful political strategy for capturing centrist voters and obtaining corporate money. I don’t see how there’s anything particularly neoliberal about tax expenditures.

In any case, it seems to me that the solution is more neoliberalism. The social programs with the least market interference tend to be the most transparent.

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Henry 07.25.11 at 7:20 pm

Matt – I think of this as involving second bests. I am sure that many neo-liberals would prefer explicit tax and transfer schemes in a first best world. So, I think, would many (not all) lefties (so I don’t think that your proposed division maps very well onto the real world division either) – there is a perfectly reasonable left wing case to be made in principle for allowing free markets to go at it, and then to tax as necessary to redress inequalities. The problem though is that we are not in the world where tax and transfer schemes like this are likely to happen on a large scale. Cosma has just put up a post which says everything I wanted to say rather better than I myself was capable of saying it. As he puts it:

bq. “When you tell us that (1) the important thing is to maximize economic growth, and never mind the distributional consequences because (2) we can always redistribute through progressive taxation and welfare payments, you are assuming a miracle in step 2. For where is the political power to enact that taxation and redistribution, and keep it going, going to come from? A sense of noblesse oblige is too much to hope for (especially given how many of our rich people have taken lots of economics courses), and, for better or worse, voluntary concessions will no longer come from fear of revolution.

A better distinction, I think, than yours is to say that left-leaning neo-liberals are those people who go on assuming that the miracle will happen in step 2, and that they are living in the first best world where the wisdom of policies necessarily translates into their political efficacy (or if it doesn’t, it suggests that there is something wicked that has happened to to a world that ought otherwise behave just as paternalist technocrats should will it). If it weren’t that the phrase ‘underpant gnomes theories of social democracy’ had already been used up, I’d apply it here ;) Others, including the people with more leftwing views that you talk about, start thinking about how to work policies and politics together so as to achieve fairer outcomes – and this is where the whole ‘theory of politics’ thing comes in. I’d quite like to see a left neo-liberal theory of politics, if only because I’d sometimes like to live in a world where decisions were made on the basis of their policy efficacy rather than their political appeal (nb the word _sometimes_ though – I think that political contention can also have some heuristically valuable consequences, as well as the normative good stuff of creating an engaged citizenry etc). And I think that there are at least gestures that could be made in the direction of a more politically effective left neo-liberalism. But I don’t see an easy way towards a US in which explicit tax and transfer schemes to remedy structural inequality are going to be very easily achievable (at the most, we could have what Mettler would like if I read her right – a world in which the actual transfers that occur through the submerged state are less grossly inequitable than they are as they stand).

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Tim Worstall 07.25.11 at 7:28 pm

Very much so:

“But one could also imagine democratically inclined libertarians being in favor of a de-obscuring of the operations of government, both because it is appropriate in its own right, and because they are willing to make the opposite bet.”

Given that I’m the other sort of neo-liberal, the one everyone used to shout at before this new coinage of the nice, lefty type, I have been arguing for years for this “de-obscuring”.

I’m absolutely delighted that there’s a welfare state but I would like people to see what it costs. As such I’ve long argued in favour of a citizens basic income. This is what it costs for everyone to have that basic standard of living. Fine, so let’s get on with it, shall we?

Or perhaps in a more detailed manner, about “social housing” in the UK. That those who are too poor (for whatever reason) to gain decent housing get subsidised by the rest of us to have decent housing: no problem at all with that.

But I’d like the costs to be explicit. Instead of this sh** that “council housing makes a profit” a recognition of opportunity costs. Instead of building housing that permanently gains sub-market rents, a subsidy to market rents for those who cannot afford them. In the UK system, no social or council housing but housing benefit.

One major reason for wanting this is that if we actually saw the entire bill, both the cash out and the opportunity costs, then we might actually do something about the insane planning system that makes the ticket, the permission to build a house, worth £100,000 and up.

Only by making the various subsidies, the various deals and breaks, entirely visible, can we actually compare them and make decisions among them.

I’d happily abolish all “tax expenditures” tomorrow. In the US example, perhaps the mortgage interest tax break. In the UK, perhaps “red diesel”. Make all prices for everything their tax paid market prices. Then decide who you’d like to subsidise from the tax revenue.

But then I agree, I am an extremist.

23

Tom Hurka 07.25.11 at 7:32 pm

Obscuring works in both directions. In a single-payer system like Canada’s, where health care expenses are paid for from general tax revenues, individual taxpayers don’t know how much they’re in fact paying for their medical care. Since the system is strongly redistributive, most better-off taxpayers are paying considerably more than they would pay in a purely private system. But there’s no accounting that tells them that, and they therefore don’t know it.

Isn’t it well known that universal social programs are more politically sustainable than means-tested ones, because they have wider-spread support? It seems to me that much of that support depends on better-off taxpayers’ not knowing how much they’re paying for the programs and therefore seeing only the benefits and services they receive.

I don’t mind that at all; it seems a place where a little obscurity is a good thing. But it suggests that more transparency in social policy wouldn’t always have left wing consequences, and maybe that’s partly what Henry has in mind when he says some libertarians might place the opposite bet.

24

Matthew Yglesias 07.25.11 at 7:35 pm

Henry:

I’ve read a couple of times in this thread that the part where we increase transfer never happens or we’re assuming a miracle. Where’s the evidence for that contention? As best I can tell spending on transfers has steadily increased over time in the United States. Meanwhile, just last year that congress enacted a controversial bill to tax wealthy Americans and increase subsidies for low-income health insurance.

25

Henry 07.25.11 at 7:39 pm

Tom – I thought of that (not in the context of Canada; but as you suggest the point is more general) when writing the post. Perhaps the best way to think of the bet is as one over whether people are predominantly self-interested (an assumption, which as I have argued, is often an useful one), or whether they are prepared to contribute to a genuinely collective good if they see it as being collective. If the former, more information will lead to the collapse of implicitly redistributive schemes. If the latter, not so much, as long as the redistribution can be defended as being normatively fair in some publicly acceptable sense. I actually think that the Canadian case is an interesting one – from my two years living there, I got the general sense that Canadians see its collective nature as a not insignificant part of their national identity. Mind you there is some obvious selection bias – perhaps if I had been living in Calgary rather than Toronto, I’d have been exposed to different reactions.

26

john c. halasz 07.25.11 at 7:45 pm

It’s important to recognize that the strategy of relying on tax subsidies originated deliberately with the corporate right as part of its aim to undermine the welfare state compromise. And, of course, most tax subsidies already go to the corporations and the wealthy, so to toss some spare change thusly at the hoi polloi, and thereby present them as equally benefitting in their special interests is a neat trick. That neo-liberals climb on to such a band-wagon neatly illustrates their political obtuseness.

Further, it’s important to consider more than one step in the effects of such policy subsidies. The mortgage interest deduction has the effect of bidding up housing prices for the upper-middle classes, (since lower class pay too low a tax rate for it to have much effect), which simply means that banks can lend out more collaterized principal at whatever prevailing interest rate and thus earn more profit. What seems to be a benefit to the taxpayer really largely isn’t, but, of course, tax payers will defend their “benefit” to the death, under the illusion of net worth. EITC amounts to a subsidy for low-wage, low-productivity employers, in contrast to maintaining higher minimum wage levels, (with knock-on effects on the associated wage structure), which forces more attention to organizing productivity and investing in workers, which, of course, then is expressed in higher relative prices paid by middle/upper class consumers/taxpayers rather than higher taxes. It’s hard to argue that EITC really enhances overall “efficiency” rather than re-enforcing the segmentation of labor “markets” and decreasing marginal incentives for workers at the cut-off to gain improvements in skills and income. Many other examples of the alleged efficiency and benefits of the ambiguous incidence of tax subsidies could be cited here.

But, of course, the whole thrust of the rise of “neo-liberalism”, (meaning here the successive waves of “free market” deregulation associated with the rise of Thatcher and Reagan), is to de-politicize the issues by removing them from the sphere of public-political conflict and resolving them into the “naturalness” of private, markets-based interests, (as a reaction to the contentious 1960′s). So it’s small wonder that neo-liberals in the “left” sense lack a “theory of politics”, since they’ve signed on to that basic anti-political project of aggregating private interests in opposition to contending over the public interest. And it’s perhaps a matter for larger wonder that they so utterly fail to understand their utter complicity in the rise of rent-seeking corporate interests, setting up a “toll-booth” economy, which is the opposite of actual economic efficiency or any supposed objective, collective social welfare function, but which an atomized, segmented citizenry is rendered powerless to resist.

27

Sean McCann 07.25.11 at 8:00 pm

Wouldn’t Mettler’s argument apply against Social Security and Medicare as well–whose status as part of the American welfare state some citizens have indeed been conveniently forgetful? If so, is it really an argument against neo-liberalism in particular?

28

john c. halasz 07.25.11 at 8:02 pm

Tom Hurka @23:

“Obscuring works in both directions. In a single-payer system like Canada’s, where health care expenses are paid for from general tax revenues, individual taxpayers don’t know how much they’re in fact paying for their medical care. Since the system is strongly redistributive, most better-off taxpayers are paying considerably more than they would pay in a purely private system”

I think it’s an entirely dubious claim that wealthier Canadians would be pay less for their health care ,if there weren’t a universal publicly financed system. The claim is an example of one-step thinking. Because one of the main points about universal single payer health care is that it provides for cost-containment, by restricting, if not entirely eliminating, rent-seeking interests within the system of health care production and delivery, as well as, motivating a system-wide attention to rationalizing the utilization of resources and to public health concerns.

29

SamChevre 07.25.11 at 8:07 pm

I think “collective” is a significantly underspecified term. I’m making up a terminology in the rest of this post, so if there’s an existing one I’d like to hear it.

One kind of collective goods is what I’ll call “club goods.” The group that’s “in it together” benefits collectively, and their contributions may be very different. This is currently typical of a lot of non-profit groups (symphonies, universities, churches); the average beneficiary contributes some, but a few beneficiaries contribute a lot–and it’s perceived by everyone as solidarity, not patronage. Critically, this kind of good is excludable. This used to be a common way of arranging public life; you had neighborhood parks that the neighborhood could exclude people from, libraries and schools and pools and on and on and on.

The other kind I’ll call publicly available goods. These are provided by the government, and you can’t exclude people from them. This is what has changed public spaces the last 50 years; the long war to tear down racist exclusion tore down the whole idea of club goods as part of the government’s function. So libraries and public parks have a significant number of homeless people, and there are no neighborhood parks and pools and schools, and so on.

I think a lot of the leftist project is trying to figure out how to get the collective spirit that’s associated with club goods for publicly available goods. I think more transparency will not help. (I’m definitely in the category of libertarians who would happily take the bet that transparency will not increase people’s desire for a larger government.)

30

temp 07.25.11 at 8:11 pm

Henry- I don’t understand how your post at 21 fits in with your opening post. You write:

This is a theory of politics then, under which the key problem is that Americans don’t understand the consequences of policies, and politicians and interest groups have systematic interests in obscuring them.

But if the key problem is that Americans don’t understand the effects of policies, it would seem that direct transfer policies–the effects of which are simple to understand–would be a workable solution to this problem. The foundation to a neoliberal theory of politics (compatible with Mettler’s) might be: people support policies which they perceive to be to their benefit. So if Mettler is right, why do you believe that tax and transfer is too difficult to achieve?

31

Henry 07.25.11 at 8:17 pm

Matt – point (a) – I am guessing (perhaps incorrectly -but I don’t have the reference you are using) that the figures you are presenting are not standardized for population growth. I would imagine that if one standardized this (e.g. looked instead at average spending on social protection per head of the population), the trendline would be _much_ flatter than it is in the graph that you use (which I imagine was not put together in order to show the expansion of the welfare state/social protection over time, but rather in order to illustrate gross spending, which is a quite different thing).

Point (b) – if we look at where the spending on protection is concentrated and is most difficult to uproot, it plausibly confirms rather than refutes the argument. Large scale programs such as Social Security and Medicare prosper because they are linked to large interest groups (the AARP), which organize large segments of the population against change and push for expansion when they can (and protection, or damage limitation when they can’t). Programs which do not have such organized support, whether potential or actual, do not tend to do so well.

And here, the healthcare reforms are a case in point, surely. The reform that we got was a third-best solution under the kindest possible interpretation – the most that could be salvaged from a second best solution. The first best solution – I _think_ you would agree here – would have been an effective tax-and-transfer scheme – an extended version of Medicare. It wasn’t going to happen – both because the natural constituency for it was disorganized, and because of entrenched opposition from Republicans (who feared it would create its own constituency). If we were living in the happy world where tax-and-transfer worked, I think we would have seen a _very_ different outcome than the one that we saw.

32

LFC 07.25.11 at 8:17 pm

@27 – Mettler’s argument would not apply vs. Soc Security and Medicare, as these are not ‘obscured,’ nor against (some versions of) a basic guaranteed income, which has had supporters (as Wikipedia reminds me) on both the left (e.g. McGovern ’72) and the right (e.g. M. Friedman/negative income tax).

33

Netbrian 07.25.11 at 8:27 pm

LFC — I disagree to some extent. I think there’s a crucial Mettler-esque misconception about SS and Medicare, regarding how much an individual pays into it versus what they get out of it. Witness “You can’t reform Medicare because we’ve paid into it all our lives”.

Not that this is always (or even usually) a bad thing.

34

shah8 07.25.11 at 8:37 pm

Underpants gnomes are being switched around in the shell game:

Underpants gnomes at the so-called neoliberal point wrt to redistribution?

or

Underpants gnomes at the so-called progressive point wrt to organization?

35

john c. halasz 07.25.11 at 8:46 pm

Here’s an earlier blog post that discusses the conservative origins of the tax subsidies strategy in relation to Mettler’s original article:

http://rortybomb.wordpress.com/2011/06/30/the-hidden-welfare-state-and-private-sector-spending-coalitions/

36

Henry 07.25.11 at 8:59 pm

temp – see my response to Matt in 31. John – that ‘s a fascinating piece. See more generally Jacob Hacker’s fascinating article on this set of issues.

37

Sean McCann 07.25.11 at 9:04 pm

if we look at where the spending on protection is concentrated and is most difficult to uproot, it plausibly confirms rather than refutes the argument. Large scale programs such as Social Security and Medicare prosper because they are linked to large interest groups (the AARP), which organize large segments of the population against change and push for expansion when they can (and protection, or damage limitation when they can’t). Programs which do not have such organized support, whether potential or actual, do not tend to do so well

Couldn’t that also be confirming that it’s hard to uproot spending for very popular programs–whether they’re obscured or not? I doubt the mortgage-interest deduction is going anywhere.

38

Henry 07.25.11 at 9:24 pm

Sean – it seems to me that the argument has moved from one about obscuration to a more general argument about whether or not neo-liberalism’s approach of ‘allow markets free rein and then tax to correct’ works or not. And mortgage deductions’ popularity is also plausibly a political construction. As Cosma puts it in the post I link to above:

bq. The U.S. tax deduction for mortgage interest is arguably economically inefficient, since it promotes buying housing over renting, for no very clear economic rationale. But in so doing it (along with massive government intervention in forming and sustaining the mortgage market, building roads, using zoning to limit the construction of rental property, etc.) helps create a large group of people who are, or think of themselves as, property owners, possessors of substantial capital assets and so with a stake in the system.

Which brings up two ancillary points. The first is that one of the reasons why (I surmise) neo-liberals like markets, is because they think of them as providing some reasonable index of peoples’ desires and wants. And they’re not always wrong – but they sometimes are. Many markets are in fact political constructions, and the US housing market, as it exists today, is _very much_ a political construction. Cosma’s post has prompted me finally to read a piece by David Freund on this that I’ve been threatening to read for the last year – and it’s pretty interesting.

39

Lee A. Arnold 07.25.11 at 9:25 pm

Henry: “But the turn towards submerged state measures as the “policy tool of choice” has pernicious broader consequences. It means that people fail to understand the ways in which they actually benefit from government….”

The ways in which people actually benefit from government is not a discussion in politics, it is a theory in economics. You need the correct theory of economics. It isn’t taught. You have to teach that institutions reduce costs; that this cost-reduction may not be monetized but it still improves quality of life; and that markets don’t suffice.

Showing people how they benefit from gov’t, as Mettler asks for, is going in the right direction, but it won’t do the whole trick because people can be led to believe that markets can provide it better. So then you are off into the rhetoric of market failure, on the negative side, and the rhetoric of quality of life indicators, on the positive side. These are valid, but it is a very roundabout argument.

Now the problem with the correct theory of economics is that economics to-date is a half-witted discipline — technically half-witted. They don’t teach half of their subject matter because it is not about markets. So it is going to be necessary to demonstrate how innovations and institutions are formally similar.

After that, it is clear sailing to a good theory of politics. The key is that an institution is not a legal entity, it is a little prior to that. An institution is a set of stable preferences, set-up with a two-way transaction of expectations vs. responsibilities.

So your politics is to set-up strong, stable preferences. Everything flows from that. This is why the Tea Party is spitting angry at the healthcare reform. Some of them can barely articulate it, but the essence is: it sets up the preference for universal coverage. They know that makes it inevitable.

You can think of it as feedback loops, but that displaces the primary mechanism of political change, preferences.

Republican strategists appeared (until recently) to have a slightly better understanding of this, I think: that the real game is to create and inform preferences. What your whole town believes is much more important than what a single interest group believes. The Democratic strategists on the other hand remain clueless.

Thankfully the Republicans have, however, fallen into an historical cul-de-sac, because (1) their ideology (Reaganomics) is unscientific, and so it has finally begun to contradict obvious reality; at the same time as (2) they sold it to the Tea Party, who really believe it, and are the Republicans’ most reliable voting bloc. Thus any sane politics would exploit this historical contradiction among the opponents in as many ways as possible, to hasten their doom.

Your politics should be to grasp whatever is going on in Washington right now, and argue that it ought to happen in certain ways so that at least it creates preferences and expectations for the future. This is why the Tea Party is so spitting angry against tax increases in the debt-ceiling package. It is absolutely necessary to make the case to President Obama that he stick to his guns on this. If the House and Senate both send him a bill without increases in revenue, he should veto the bill and do the 14th amendment. Let’s make them hopping mad, and let’s ride it into the next election. No time like the present, to change preferences.

40

elm 07.25.11 at 9:32 pm

Sean McCann @ 37

The mortgage interest deduction’s constituency is pretty well-organized and influential. Lenders, builders, realtors, and the very wealthy benefit from it. They’ve also convinced middle-income people that they benefit greatly from it, even though that’s not really true.

Here’s Ezra Klein praising a proposal to end it.

The obfuscation in the mortgage interest deduction is part of why it’s popular. If it was better-understood, it would be easier to eliminate.

41

Steve LaBonne 07.25.11 at 9:33 pm

Underpants gnomes at the so-called neoliberal point wrt to redistribution?

or

Underpants gnomes at the so-called progressive point wrt to organization?

Organization has happened and has had results in the past. Redistribution without powerful organized constituencies behind it has NEVER happened, and never will. “Power concedes nothing without a demand.”

42

Sean McCann 07.25.11 at 9:44 pm

I understand that the mortgage-interest deduction works through obscuration and that it has very powerful interests behind it, elm. That’s my point. It doesn’t need an AARP to be immoveable.

I raised this issue because, though I’m sympathetic to Henry’s argument, so far as I understand it, I’m not finding it that convincing. If Mettler–as I thought you described her, Henry, is right–there should be weak support for obscured benefits like social security (which I think is commonly regarded as an individual pension) and the mortgage-interest deduction, no? If on the other hand, as Cosma’s post seems to suggest, the mortgage-interest deduction is just popular because a lot of voters think it’s good for their interests, then obscuration and individualization (though bad in themselves) don’t matter to political viability? Popular programs with broad support will be popular programs with broad support.

43

TheF79 07.25.11 at 10:07 pm

Economics, and thus most neo-liberal approaches to policy, axiomatically take preferences (“this is the one we want, this is the one we don’t want”) as a given input, and then determines the least-cost way of achieving some objective. From there, one can determine who wins, who loses, and by how much per person and in the aggregate. But what economics can’t answer is: what is the benefit or cost of changing people’s preferences? As an economist, I don’t think I would have a framework for answering that question. It’s like asking “what’s the square root of red?” And it seems like the criticism of left-neoliberalism hinges a lot on the point that policy decisions do in fact change people’s preferences.

So perhaps it’s not surprising that neoliberalism lacks a “Theory of Politics” insofar as it relates to the way politics changes people’s preferences – the benefits and costs of changing preferences is simply not something that economics is equipped to measure. I’ve long been aware of this short-coming but I’m not sure others in the profession are.

44

elm 07.25.11 at 10:10 pm

Sean — Part of the issue is that people don’t consider the mortgage interest deduction to be a state benefit. Here’s Mettler on that subject — nearly 60% of its beneficiaries report that they “Have not used a government social program”.

As Henry notes up top, that makes it difficult to rally that 60% and get them to support expansion of the welfare state to other people/other areas.

Shorter: Hiding the fact that it’s a state benefit promotes IGMFY (I’ve got mine, frak you) thinking rather than we’re-all-in-this-together.

45

Andrew F. 07.25.11 at 10:13 pm

Leaving aside how doubtful Mettler’s central thesis is, as a practical matter the strategy of “surfacing the submerged state” (to complete the metaphor) is a little crazy.

You’d want the left to:

(1) End some of the most popular “government programs” we have;
(2) Promise to replace them with huge government programs to explicitly effect transfer payments.

The justification given will be to “make Americans more aware and appreciative” of government.

At least neoliberals get some of their policies enacted. If “surfacing” is the new strategy of the left, then I think they’d be better off donating their political funds to other charities. Or taking up a hobby. Or doing anything other than chopping off their legs in order to win the race.

46

JRoth 07.25.11 at 10:21 pm

Two points on the mortgage deduction:

A. As noted above, it very much has organized constituencies. The Nat’l Association of Homebuilders and the Realtors are wealthy and engaged, even if they don’t rely on large voting constituencies. But they do purport to speak for voters, and I suspect that all too many representatives believe them (similar to how AAA pushes a creepy pro-auto agenda that 95% of its members are unaware of, but of which their membership is an implied endorsement).

B. Every homeowner is aware that the deduction exists; they were surely told of it by their realtor, their lender, and, depending on SES, friends and relatives. But, as again noted above, most don’t actually benefit from it materially. This is obscured by its status as a tax expenditure. In some alternate world where May 15 is Mortgage Interest Refund Day, you’d suddenly have tens of millions of homeowners figuring out that they get bupkis out of this deduction.

So you get a sort of double-whammy: the anti-democratic implementation of the mortgage interest deduction means that it has presumed support alongside baseball and apple pie, even as most people have no idea how much, if at all, they get from it. SSI and Medicare don’t work exactly as they do in the public imagination, but the bottom line is that most people do, in fact, get their money’s worth out of the programs, and thus love and defend them.

47

JRoth 07.25.11 at 10:23 pm

Andrew F-

Tell me how Obama’s hidden tax refunds were better for liberal politics than Bush’s high profile ones were for conservative politics.

48

Henry 07.25.11 at 10:23 pm

Sean – that’s probably because I’ve unwittingly elided some of Mettler’s argument. What Mettler is interested in is better policy – but she is also willing to make a bet that better policy can generate its own support. She has an interesting survey experiment which suggests that (a) if you provide simple information about what each of three policies (the Home Mortgage Interest Deduction; the Retirement Savings Contribution Tax Credit, and the EITC) does, then support for all of them increases, but (b) if you provide information about their distributive impact, then the support for the HMID and RSCTC declines dramatically, while the support for EITC grows substantially. So she is not saying that there is weak support _tout court_ for obscured policies – rather that their levels of support do not match the levels of support that one might expect these different policies to have if their distributional impact was more widely understood. So her point is much more specific than a general claim that obscured policies are less popular, and more visible policies are more popular. It’s a claim that obscuration is politically consequential because it gives indirect policies that have perverse distributional consequences greater support than they would otherwise have.

49

shah8 07.25.11 at 10:27 pm

Steve LaBonne, your comment was actually interesting to me. Loopy, but interesting. Seriously, though, apply this sort of reasoning behind EITC or somesuch…

Again, the only times political systems *ever* bargain in good faith with non-elite constituencies is when they explicitly need them for some reason, like in a war. Otherwise, it’s usually adopted in a spirit of paternalistic energy, with an eye out for relieving business of traditional social burdens. There’s a reason Bismark created the first national welfare state (besides creating a reason for people to be loyal to the hub of a new Empire).

I still see the first challenge to creating alternatives to the current means of introducing changes to the left as being about organization. Internal political police action is pretty aggressive here, compared to other places in the West.

50

shah8 07.25.11 at 10:38 pm

JRoth, those tax cuts actually happened, first of all, and second of all, the tax cuts were of higher quality, that stimulated more economic activity than the conservative tax cuts. People feel better about the current regime, and keeps it in place (ie Obama wins reelection), which keeps in place zillions of tinier progressive things that a sane government does, as opposed to Rick Perry and his cronies who will promptly rewreck the place. Now, if you’re a Leninist, perhaps the worst is the better, but Ima gonna bet on the stupidity of the American Public–if they vote for Rick Perry, they had to have ignored a zillion flashing lights, just like they did Bush Jr. If they’ll vote for Perry, it doesn’t really matter much, because after the next iteration of Obama tries to clean up after Perry and fails, the voters will elect some new super-creep. It will go on until final disaster and imposed political settlements from the conquering Mexico City technocrats.

51

K. Williams 07.25.11 at 10:50 pm

“What Mettler is interested in is better policy – but she is also willing to make a bet that better policy can generate its own support.”

Henry, come on — you’re completely contradicting yourself here, at least insofar as you’re setting Mettler up in opposition to neoliberals. Your whole critique of neoliberalism’s theory of politics (or lack thereof, in your mind) was that neoliberals fantastically believed that good policy could earn public support because it’s good policy. Indeed, Cosma, in the post you so approvingly quote, writes that without strong collective institutions, you can’t expect good policies to be enacted, because rich people have all the real power and will not use it for noble ends. Yet here you approvingly cite Mettler to the effect that “better policy can generate its own support,” which seems very much like a concept neoliberals (at least your version of them) would support.

I’ll add also, as a corollary to this, that Cosma’s theory leaves us mystified at the fact that things like the EITC, the recent expansion of the minimum wage, and the ACA have all become law even in the absence of strong unions, etc., or that TARP (to bring up that hobbyhorse again) failed the first time around, or that Social Security remains as intact as ever while Medicare has been vastly expanded (via the prescription-drug benefit and the ACA’s closing of the doughnut hole) in the past decade. As Matt says, transfers have been rising, not falling, over the same period in which leftish collective institutions have been declining.

52

eddie 07.25.11 at 10:50 pm

Surely the real problem with tax breaks as opposed to benefits is that the less you need them (the higher your income), the more you get. It’s not about whether they’re clear or obscure, it’s that they are regressive. They are welfare for the rich.

53

JRoth 07.25.11 at 11:04 pm

shah8-

What on earth are you talking about? The vast majority of Americans believes that Obama has raised their taxes. As a result, far more were open to the arguments of the Tea Party, which has resulted in the biggest Congressional landslide in history and may result in the worst economic disaster of American history. The extent to which Obama’s hidden refunds were more efficacious than Bush’s is at the second decimal place of the multiplier of tax rebates; do you seriously claim that an extra $20B (to be extremely generous) in a multitrillion dollar economy has enough effect on peoples’ perceived wellbeing to offset a belief that their taxes have been raised in a recession?

This is a perfect crystalization of the delusions of neoliberal technocrats: an imperceptible improvement in the workings of policy does more political good than any amount of tangible benefits.

A politician knows that delivering an actual $5 chicken to every household in his ward will deliver votes on Election Day; a neoliberal technocrat wants to put an extra dollar in the voters’ paychecks every month for half a year, arguing that the 20% increase in benefits will lead to even more votes. Delusional.

54

shah8 07.25.11 at 11:08 pm

Dude, in these media times…Fox News will show that wardman as actually about break into your house and steal your shit…

It isn’t exactly a surprise when people think all sorts of erroneous things that Fox tells them.

55

Henry 07.25.11 at 11:38 pm

bq. Henry, come on—you’re completely contradicting yourself here, at least insofar as you’re setting Mettler up in opposition to neoliberals. Your whole critique of neoliberalism’s theory of politics (or lack thereof, in your mind) was that neoliberals fantastically believed that good policy could earn public support because it’s good policy.

Nope – “better” is the key word here, and its meaning is limited, as best as I understand it. Read the last few sentences of #21 again. Mettler’s argument is (as the post discusses at some length) an informational one – that if the public is provided with better information about the distributive consequences of bad policies, it will be much less supportive of them. This is not a general statement that good policy generates its own support. It’s a statement that better policy can generate its own support _if the public understands what is at stake_ (I should have reiterated this again, I suppose – but as I’ve noted, I spell out my understanding of her claims on this topic in the post, in #21 and in other comments above, including the rest of the comment that you’ve taken that sentence from). And, as I mention in the post, other lefties would plausibly argue that a greater public understanding of the issues at stake would require a much greater level of _political organization_ to inform citizens and mobilize them. She doesn’t talk to this much in the book, as I have already mentioned (there is a bit on it towards the end), but it is certainly at the least compatible with her arguments, and hence the contradiction that you see here isn’t really there. And on the ‘transfers rising, not falling,’ I’d really like to see some more evidence. As I noted above, I don’t think that Matt’s graph shows what he thinks it shows – there may be better statistics out there, but I am not aware of them and would like to see them if there are. And if there are such statistics, what I suspect we will see in broad outline is the maintenance and expansion of programs with vocal organized constituencies, and rather less activity on other programs.

56

shah8 07.25.11 at 11:44 pm

It should also be said though, that there are inefficient policies, good and bad, that the public supports. Much in the way of bad political infrastructure is as a result of deliberate inefficiencies, like the number of veto points in Congress. Therefore, it’s not purely an informational matter, but historical and moral, as well…

57

hhoran 07.25.11 at 11:51 pm

Henry @38—
Again, this extended discussion keeps getting the history and meaning of “neoliberalism” wrong. Neoliberals are not those who want to “allow markets free rein”. No major policy maker described as “neoliberal” fit that description. The original “neoliberals” of the 70s/80s wanted a much stronger mix of “market-type” solutions to policy issues, but were never extreme market fundamentalists. “Neoliberals” were not responsible for the later attempt to not only cripple every New Deal-era social program, but to undermine all the historical advantages of dynamic competitive markets for the private gain of rent-seeking industries, and to gut all of the historic regulatory/judicial/electoral protections against abuses by highly concentrated economic power. Folks like Summers and the Clintons get called “neoliberals”, and they deserve to be attacked for lots of things, but they were not the ones driving the “markets are always right and can solve every policy problem” train that Metter is trying to slow down. And it gets downright silly when the Brad deLongs of the world are lumped in as part of the “neoliberal” problem. As many have noted, purely academic/technocratic solutions that totally ignore partisan and interest group power dynamics are a waste, but Mettler is more guilty of this than deLong or Yglesias. You’ve still never properly explained exactly who the problematic “neoliberals” are, or explained why they should be blamed for gutting social welfare programs, competitive markets and legal/electoral protections instead of the rent-seeking industries and wealthy individuals who have actually been driving Washington.
Henry @48/55—
You quote Mettler’s observation that people seem to change their opinions of programs (like mortgage subsidies) once they “understand what is at stake” This ignores all the evidence suggesting that people have have long had very favorable views of mortgage subsidies because powerful, well-organized economic interests spent huge sums to create the original false views—that subsidies that actually benefit the very wealthy and narrow industry groups actually create huge benefits for the middle-class and economic growth as a whole. And it ignores that opinions only seem to change when left-leaning academics can explain “what is really at stake” in carefully controlled settings. The problem is rent-seeking industries seeking to capture billions and a political establishment that no longer serves any function except to facilitate rent-capture by these industries. The explanations of mortgage and all the other subsidies have been out there for years and are meaningless unless you have a political program that can sustainably attack the powerful interests. As Yglesias pointed out the other day, those interests spent decades tirelessly working to develop this political power, and it will likely take decades to counter them. Pushing Mettler’s naïve “lets recast all these popular programs that have powerful vested interests behind them, and do it in a way that the general public won’t like and the vested interests will immediately attack” seems to be missing the point.

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Henry 07.26.11 at 12:23 am

hhoran – you can read this in a variety of ways – my personal interpretation is that Mettler’s arguments make best sense in the context of strong social movements and/or political parties that can serve both to educate, and to organize collective action around the process of education (and contend, obviously, with other political entities with different notions of what is/should be a stake). How much of this Mettler herself would buy I don’t know (some, but perhaps not all).

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Steve LaBonne 07.26.11 at 12:55 am

There’s a reason Bismark created the first national welfare state (besides creating a reason for people to be loyal to the hub of a new Empire).

Yes indeed, but not the ridiculous “paternalistic” reason that you adduced. It was because he was worried about eh ORGANIZED Soc1alists and wanted to coopt some of their potential support. But thanks for pointing out one of the better examples of what I was talking about.

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shah8 07.26.11 at 1:10 am

Political organization was pretty weak in Imperial Germany until after the end of WWI. Socialists were never nearly as a big a factor as the Catholics in Bismark’s mind, I think. As precarious as the early assembly was, I seriously doubt Bismark had any fear of the socialists as actual organized political entities rather than simply a group that hopes to repeat 1848 and perhaps overthrow the government. Trying to drain a revolutionary swamp =/ being outvoted/national striked into progressive outcomes.

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Steve LaBonne 07.26.11 at 2:20 am

As precarious as the early assembly was, I seriously doubt Bismark had any fear of the socialists as actual organized political entities rather than simply a group that hopes to repeat 1848 and perhaps overthrow the government.

That’s quite a remarkable distinction you’re trying to make there, between being “organized” and being “a group that hopes to overthrow the government”, which, one would think, requires a certain degree of organization. Remarkable, as in remarkably incoherent. Also, yes he was also worried about Catholic support for the Center Party- another ORGANIZED group. But then, I can detect no content in any of your recent comments other than “shah8 occupies the sensible center and everybody else is wrong”, and you seem to think that this absolves you from the need to know what you’re talking about or to make any kind of sense. I can see that it would be a waste of time to respond to you in the future.

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shah8 07.26.11 at 2:58 am

Wow! You won’t respond to me in the future! That’d be awesome! First Soullite, and now you!

You know, just because authoritarian polities have internal factions and uprisings that needs appeasing does not mean said factions and uprisings are key inputs into central decision-making, and does not mean that reforms aren’t at Glorious Leader’s discretion. Bismark was not actually responding to some credible group that he couldn’t throw into jails and torture, Bismark was operating in a geopolitical soup and trying to jump from advantage to advantage. All authoritarian governments have adopted some kind of short-lived “reforms” according to their needs and opportunities. Paternalism granting of some crumbs. Worked better for Bismark than it did for Nicholas II. And both only tried to liberalize purely to the advantage of the regime. Not because the opposition had real input into the governing process. A more modern example is Iranian openness towards family planning in the 80s. Was there a bunch of agitation? Perhaps. But what mattered more was reducing the number of kids by Iranian parents, with some degree of cooperation and low amounts of hassle.

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Peter T 07.26.11 at 5:59 am

Shah 8

Bismarck – and his successors (Caprivi, Bethmann-Hollweg) were VERY conscious of the threat posed to the regime by the Socialists. Almost hysterically so. They were members of an elite (mostly landed, although part industrial) that regarded any form of urban working class politics as akin to treason, and saw themselves as isolated and under constant serious threat (the French and British having already succumbed, the Austrians being an unreliable rabble and the Slavs barbarians). The whole politics of Wilhelmine Germany revolved around finding new ways to keep the Socialists out – war being one oft-considered option. See, eg Berghahn, or most other historians of the period.

What this says about current US politics I don’t know, but it is a useful reminder that elites too can be seriously deluded.

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Harold 07.26.11 at 9:00 am

They were extremely worried about the Socialists and they were equally worried about parliamentarians, liberals, and those who questioned the military.

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Harold 07.26.11 at 9:01 am

Who questioned absolute control of the military by the Kaiser, that is.

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Barry 07.26.11 at 12:47 pm

Henry @8:

“Cosma has just put up a post which says everything I wanted to say rather better than I myself was capable of saying it. As he puts it:

“When you tell us that (1) the important thing is to maximize economic growth, …”

The first mistake that liberals make is not calling the right-wing frauds on their fraud. We’ve done lots of right-wing reforms in the past 30 years in the USA, and have nothing to show for it in terms of increased growth. It’s so bad that the right-wing frauds simply lie about it (e.g., http://krugman.blogs.nytimes.com/2009/11/05/the-lost-generation/)

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Steve LaBonne 07.26.11 at 1:27 pm

The first mistake that liberals make is not calling the right-wing frauds on their fraud.

They do, but real liberals not Serious people and their voices aren’t amplified by the MSM megaphone. Krugman is pretty much the only one whose voice gets through, which makes it easy for the Serious to treat him as a lone oddity. Most “liberal” politicians, on the other hand, are fakes who have long since been co-opted by the Serious establishment. For example look at what a complete ass Durbin, who used to be a pretty good guy, has been for quite a while now.

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shah8 07.26.11 at 2:52 pm

Peter T, yes, understood from the start.

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Andrew F. 07.26.11 at 9:22 pm

Henry @55: Mettler’s argument is…an informational one – that if the public is provided with better information about the distributive consequences of bad policies, it will be much less supportive of them.

This is an awfully expensive, roundabout way to educate voters.

And the idea that voters will be better educated about the distributive effects of explicit transfer programs than they are about tax deductions and credits doesn’t strike me as persuasive on its face.

Also… the critique of neoliberalism put forth is that neoliberals are naive about politics. They advocate policies on strong grounds, but they fail to be realistic about the political effects of those policies, and how those political effects will affect future policies.

But Mettler’s idea is, well, politically stupid. People who put her policy ideas in place have to be elected; and they’re going to care about being re-elected. I can’t think of any scenario where reducing tax deductions for popular programs – and we have to reduce the deductions for popular programs for her idea to make an impact on “the American’s” appreciation for government – and enacting a huge explicit transfer program is going to result in a political win.

Ironically, the major problem with Mettler’s proposal IS the politics.

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dictateursanguinaire 07.27.11 at 1:10 am

“Pity-charity liberalism” as someone called it has a problem with power, I think. It seems like people are prone to ignore it b/c of the association with Marxism once you stop talking about politics purely in technocratic/parliamentary process terms. But people like the elder Galbraith and Veblen (and a whole lot more people) have been non-Marxists and still understood politics as essentially a power game. I mean, grow-and-give would work if it worked. If private charity eliminated poverty, it would eliminate poverty. But it gets into begging the question. You could argue that we haven’t really tried grow-and-give. You could also argue that the wealthy are more resistant to grow-and-give b/c they’re already being hurt by labor market interference. The first answers itself – why do you think it’s never really been tried? The second is more interesting – if we, say, killed the minimum wage would capitalists who employ low-skilled labor be more sympathetic to higher taxes? My gut says “no.” Also, one other problem with direct transfers is that it can be exploited for social control and (ironically for the more libertarian-oriented crowd) places a lot of faith in government, e.g. how welfare recipients are subjected to various tests/carrot-and-stick policies.

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