Friday, September 7, 2012

Thoughts on the Big Speeches, DNC Night 3

Two overarching themes that deserve more thought:

1)  "Investment" is a code word for general spending or wealth transfers in far too many places in the speeches. Most of the "hard decisions" cited in the speeches involves some kind of "investment" for a particular interest group. Giving away "free" money is NEVER a hard decision. Nor is saying taxing the rich will pay for it -- even when it won't.

2) Equal Opportunity DOES NOT IMPLY Equal Outcomes. Unequal Outcomes DO NOT IMPLY there was Unequal Opportunity. Even people with the same background can make different choices. This issue was brought up a little bit in "Toward a Moral Economy" which I blogged about here. Can you look at the final score and if one team wins by too much, declare the rules unfair? I think the answer is no.


The biggest line that people will take away from the speech is "Osama bin Laden is dead and General Motors is alive." Of course, in vintage Biden fashion, in explaining these two ideas, he exaggerated reality a bit.
     a) Biden claimed Romney would not have saved the auto industry and Obama did. This is a substantive policy difference. However, Biden exaggerated the success of it -- he seemed to claim the money was all paid back, and even claimed before it was saved the industry was on the "verge of liquidation." These statements exaggerate the truth. The government still owns GM stock; still has over $25 billion dollars outstanding. In addition, I am quite confident that if GM and Chrysler had declared bankruptcy the normal way, it would have been Chapter 11 (reorganization). Even if they both were liquidated, the resources (workers/jobs and capital) would have been mostly reallocated to better firms (Ford, Honda, etc.). Demand for cars hasn't permanently disappeared -- but there are structural problems within the firms causing perpetual problems. Because of the bailout, bad management and inefficient firms were allowed to remain in place, contract law was thrown out the window (stock holders were given priority over bond holders), and problems at the firms were not fully solved. I am scared of what this does to incentives in industry if the administration follows through on institutionalizing aggressive bailouts of failing, politically important firms.
     b) Does anyone really believe any reasonable President wouldn't have made the call to take out bin Laden when presented with the evidence the President was? Biden suggests Romney wouldn't have, but only Ron Paul in the primaries said he wouldn't have done it. This is not a policy difference between the parties. 


1) The best bit was early:
They want your vote, but they don't want you to know their plan. And that's because all they have to offer is the same prescription they've had for the last thirty years:
"Have a surplus? Try a tax cut."
"Deficit too high? Try another."
"Feel a cold coming on? Take two tax cuts, roll back some regulations, and call us in the morning!"
It is true that giving away free money in the form of tax cuts is easy to promise and popular to do.

But, this trivializes the Republican platform this year. The most interesting thing about Romney-Ryan's plan is the principle of lowering MARGINAL tax rates while maintaining revenue neutrality through eliminating deductions and subsidies (not from pretending we are on the wrong side of the Laffer curve). If they are truly committed to this idea, this would represent a very substantive reform of the tax code in a very positive fashion.

2) This framing of "we're all in this together" sounded more like, "if outcomes aren't equal, we'll make them that way." But more importantly, should someone be allowed to suffer negative consequences from choosing to fail? Or making a bad decision? Or choosing to take a risk that may not pan out? Obama seems to be saying, "no." But innovation, progress, growth, and personal responsibility demand we say "yes."

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