Big Change
Here’s an interesting tidbit from Ruy Teixeira:
Poll after poll shows that the public has very positive feelings toward President Barack Obama and his plans for the country. And that includes the major new programs that he is proposing to bring change to a country that badly needs it. A stunning 71 percent of respondents in the most recent ABC News/Washington Post poll, for example, said that Obama has a mandate to “work for major new economic and social programs” rather than for small policy changes.
I have mixed feelings about reporting on these kind of findings. On the one hand, I don’t actually think that elected officials’ future has very much to do with the public’s opinion, such as it is, on this kind of question. I think, for example, that Obama’s re-election prospects will be based much more on whether or not living standards are increasing in 2012 than on whether or not the policies he pursued in 2009 matched up with at-the-time public opinion. So the politically smart thing to do is more-or-less ignore year-one opinion and just do things that you think will work out in the medium-term (of course the wise and moral thing to do is to also think about the long term) irregardless of the polls. But on the other hand, there’s lots of reason to believe that people’s beliefs about short-term public opinion do influence how they act so it’s important to spread the information around when it points in the right direction.
43 Responses to “Big Change”
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January 26th, 2009 at 4:30 pm
71%?!?
What kind of a center-right country are you running here, CAP?
January 26th, 2009 at 4:32 pm
“irregardless” ?!?
I do not think that word means anything you think it means.
January 26th, 2009 at 4:48 pm
“Irregardless” doesn’t mean anything, it’s not a word.
I really want to believe Yglesias is taunting us this time.
January 26th, 2009 at 4:53 pm
If the economy continues to tank, but universal health insurance is in effect by the time of the 2012 election, Obama might do quite well.
I agree that Obama has to produce, but to a degree (no one can possibly know how large a degree) people understand that the economy is in a big hole that it will take time to get out of. If he produces some of those major social and economic programs that make a difference to people’s lives, they may accept a lack of improvement in income.
Surely, Franklin Roosevelt’s landslide in the 1936 election was out of all proportion to the degree of economic improvement he delivered. It was those social and economic reforms, and the accompanying sense that the president was on your side.
January 26th, 2009 at 4:54 pm
History will be supplying the mandate. We and Obama are just along for the ride. I suppose it has to be allowed that America can grab histories reigns again but that isn’t the best bet.
January 26th, 2009 at 5:29 pm
Matt, if you have the effrontery to use a solecism like “irregardless” then please at least have the common decency to mispell it. We expect nothing less than this of you.
January 26th, 2009 at 5:29 pm
Irregardless notwithstanding, what does this poll have to do with electability? It’s evidence of political capital — I wish it had state-by-state breakdown so that the Obama team could remind certain Senators & Reps in key states that it’s in their own best interests to support his agenda.
January 26th, 2009 at 5:35 pm
True, reelection prospects are going to be a function of performance record in a couple of years. However, public opinion today is still quite relevant. The current public consensus that Obama got a mandate for big changes provides legitimacy for his actions today. There’s not going to be an early public backlash that Obama is making a power grab or deviating from expectations people had when they voted in November, reinforced by their watching his transition performance. Even a goodly number who didn’t vote for him seem to accept that he currently has a mandate for big things.
So that means the GOP has to pitch its current objections at the substance of Obama’s proposals, not simply against the fact that he’s undertaking big things. And it also has an impact on how the media frames the debates if they think the public expects Obama to deliver on his big change commitments. So it effects the political dynamics today.
What’s frustrating is the media acceptance of GOP objections as if these policy approaches weren’t debated ad nauseum for the entire campaign. It shouldn’t take Obama himself to have to remind Congresscritters (and indirectly the media) that the major outlines of his proposals, and his arguments against trickle-down economics, were condemned as “socialism” and explicitly debated with McCain, and yet Obama won. The American electorate surely knew in broad terms what they were voting for or against.
January 26th, 2009 at 6:31 pm
“On the one hand, I don’t actually think that elected officials’ future has very much to do with the public’s opinion, such as it is, on this kind of question. I think, for example, that Obama’s re-election prospects will be based much more on whether or not living standards are increasing in 2012 than on whether or not the policies he pursued in 2009 matched up with at-the-time public opinion.”
I think, however, that Matthew needs to consider what the implications of that statement might be. First, we note that public opinion probably isn’t specific enough for Obama to act upon – the public wants a big stimulus, but they don’t know exactly how that stimulus should be constituted or executed.
Second, if public opinion isn’t really enough guide for public policy, then public elections become more dubious – if the public isn’t smart enough to judge very complex policy proposals, how can they be smart enough to judge their effects? Just having several years for the policy to work may not be enough.
January 26th, 2009 at 6:49 pm
This will all work fine until foreigners stop buying our debt. Everyone seems to think there’s no bottom to that hole, but I’m pretty sure there is. I’m not at all sure I know where that bottom is, but at some point in the Bush/Obama “spend til we drop” plan, that bottom will be reached. At that point, there’s no tax rate that will pay for the level of debt we’ll have accumulated, which will leave us two ugly options:
– inflating our way out of debt
– defaulting on our debt
Either one will result in a much, much lower standard of living for everyone.
I’m sure the public is in favor of big programs – people love to raise taxes on other people in order to get goodies for themselves. I’m not sure how they’ll react once it becomes clear that we’ve spent our way into a pit.
In that sense, Obama doesn’t represent change at all – he’s just a larger volume of the same thing, with the only difference being the favored recipients.
January 26th, 2009 at 6:50 pm
People always wants “change” as long as it doesn’t upset their apple carts, holds them harmless, and costs them nothing.
January 26th, 2009 at 7:02 pm
That polling question is way too vague to be meaningful.
January 26th, 2009 at 7:19 pm
Obama’s re-election prospects will be based much more on whether or not living standards are increasing in 2012 than on whether or not the policies he pursued in 2009 matched up with at-the-time public opinion. So the politically smart thing to do is more-or-less ignore year-one opinion and just do things that you think will work out in the medium-term (of course the wise and moral thing to do is to also think about the long term) irregardless of the polls.
A good argument for the four-year Presidency, no?
January 27th, 2009 at 12:58 am
James Robertson is right.
People keep talking about how we need to direct the stimulus to the people who are the most likely to spend it and not save it, because spending is what will supposedly stimulate the economy.
When we are in as much of a debt trap as we are in, that makes no sense at all – we should be clamoring for more savings to finance our debts and for more debt retirement to allow for a return to confidence in credit. Granted, a “stimulus” based on people paying off debt is rather pointless when you consider that you would just be shifting the debt from private hands to the government, but increasing debt with the stimulus is just daft.
Unless – unless of ocurse the goal is to never pay off our debts. Perhaps the liberals want people to spend their stimulus check rather than save it or retire debt with it primarily because they see retiring debt as unnecessary – they’re hoping that the debtors all default because they hate the creditors, so they figure that helping the debtors to pay their debts is therefore counterproductive…
January 27th, 2009 at 7:46 am
James Robertson, Glaivester, and other debt gloomsters: the USA is nowhere near any limit on public indebtedness suggested by history.
1. The British national debt was 290% of GDP in 1815, and the following half-century marked the apogee of British economic power. Mind you, Lord Liverpool’s reactionary Tory government made the Bushies look like pinkos, and was quite prepared to massacre rioters to defend the rights of the propertied, but we’re not arguing about social policy. The USA would have to borrow $70 trillion to reach the Lord Liverpool limit.
2. Private savings are likely to go up sharply, in the USA and elsewhere, as banks get tougher with all their customers. There’s no crowding out problem.
3. What’s happening any different in the rest of the world that creates a risk of a run on the dollar? Everybody’s in the same mess (gee thanks GWB and Wall Street), and all have to borrow their way out of it.
January 27th, 2009 at 7:46 am
DTM – the problem is that the level of debt will be too high to escape from. What’s your plan at the point where foreign governments stop buying our bonds?
The problem is threefold:
– medicare is hitting the wall now
– social security stops funding the general fund within a decade, and hits the same wall as medicare is at now within 20 years
– state and local pension funds are seriously underfunded
The “stimulus” spending is already unaffordable; its more so when you contemplate the various obligations above (never mind all the other things the government does).
On taxes – Obama is promising years of $1T plus deficits. You might want to examine history to see what the fate of governments that did that to themselves has been. Best case, they end up utterly beholden to foreign interests.
January 27th, 2009 at 12:14 pm
James,
The US government debt levels are high, but not incredibly so: Japan has a much higher debt level, many European countries are only slightly below the current US level, and the US itself has successfully managed higher debt levels in the past (as have multiple other countries in their pasts). The US has relatively moderate tax rates and our debt is denominated in dollars, so there’s additional debt capacity, especially at the interest rates investors are currently willing to accept (the interest coverage is fairly easily there, in other words).
That’s not to say we should be blase about it (quite the contrary), but it doesn’t appear to be a front-burner issue.
January 27th, 2009 at 12:20 pm
Yes, I know demand is rising. That’s because, relatively speaking, we are perceived to suck less than other countries (in terms of investment safety).
I’m not saying that an increase in the tax rate isn’t possible – I’m saying that it couldn’t go up enough to cover the catastrophe situation where foreign investors back off. With the kinds of debts we have racked up (and the worse ones we are planning), no level of taxation would be sufficient (assuming you also planned to have a functioning society that went with it).
I’ve said that I don’t know when the perceived safety of US debt will flip. It could be next year – it could be 5 years from now, or it could be never. Based on my reading of history, I’d bet heavily against “never” though. Recall that in 2003, most analysts said that there was no danger of a housing price collapse. Likewise, there aren’t many who see US debt as a bubble – yet. IMHO, it is a bubble, and the only real question is when it’ll pop.
When it does, US federal spending (and state and local as well) will have to drop tremendously, across the board. Liberals will scream about the lost safety net, and conservatives will scream about the military cuts.
You need look no further than California to see what happens when govt spending runs past the ability to borrow. Before you say they could easily raise taxes, consider: California has been experiencing net out-migration for a few years now, and will be losing seats in the 2010 census. That gives them a lot less room for increased taxation, for fairly obvious reasons.
If we keep spending the way Bush started, and Pelosi/Reid/Obama want to, that’s where we’ll all end up
January 27th, 2009 at 2:29 pm
“You need look no further than California to see what happens when govt spending runs past the ability to borrow.”
It’s not that the California tax-base doesn’t have enough money to pay higher taxes if it had to; it’s that the Californian constitution is poorly designed such that increasing the tax rate is difficult.
“I’ve said that I don’t know when the perceived safety of US debt will flip.”
US federal government debt is denominated in US dollars, which the federal government itself can create. At the current interest rates, even creating the interest payments on the debt de novo (interest payments on 1 trillion in future federal debt created today will likely only require roughly $45 billion interest payments each year) wouldn’t create noticeable inflation. That’s a tiny percent of the current money supply.
January 27th, 2009 at 2:33 pm
Lots of governments have run on the theory that lenders have infinite patience for debt; they’ve all come to realize they were wrong. As to responder 24, that’s the theory Zimbabwe is using. Hasn’t gone so well for them.
January 27th, 2009 at 2:36 pm
“Yes, I know demand is rising. That’s because, relatively speaking, we are perceived to suck less than other countries (in terms of investment safety).”
That’s because we have lower taxes on average than most other highly developed economies, and our debt is denominated in our own currency. I.E. taxes can be higher if need be (perhaps even much higher), and in a deflationary environment, printing $45 billion new dollars will either be entirely irrelevant or help us by pushing us back into a moderate inflationary environment.
January 27th, 2009 at 2:55 pm
“As to responder 24, that’s the theory Zimbabwe is using. Hasn’t gone so well for them.”
Zimbabwe has a budget deficit (insofar as there are any believable numbers coming from Mugabe’s government) of 200+ billion Z$, and they asked South Africa for $1 billion USD in emergency relief (which they did not get). Assuming $1 billion USD is what Mugabe really needs per year, that’s at least roughly 12% of the Zimbabwe annual GDP – and there’s no reason to think that Zimbabwe’s economy will rapidly grow (or grow at all) in the future. The US would need both to have a permanent (not temporary) budget deficit in the range of 2-3 billion and have roughly the same prospects for economic growth as Zimbabwe to be in the same situation.
January 27th, 2009 at 2:58 pm
“both to have a permanent (not temporary) budget deficit in the range of 2-3 billion”
the “billion” should of course read “trillion”
January 27th, 2009 at 7:19 pm
First, it makes no sense to admit we could raise taxes to service our debt and then claim that somehow people will decide to stop lending us money anyway.
Robertson’s argument is not that higher tax rates would not raise more revenue; it is that if foreign governments stopped loaning us money, the amount of money we would need to raise would exceed the amount that we could raise by raising taxes.
Second, if for some unspecified reason we had to stop running structural deficits (the consequence of no more foreign borrowing), we could do that with increased taxation. Specifically, our structural deficit as a percentage of GDP is at most around 4-5% give or take, and adding that to our tax load would still leave us short of the Canadas of the world.
Higher taxes would limit economic growth, so taxes would likely have to go up more than a ceteris parabis analysis would suggest. The other problem is that we are increaasingly growing private as well as public sector debt, and an increase in taxes could shatter a lot of over-leveraged people unless we start to decrease our overall debt load (public and private), and people reducing their debt load seems to be something that you oppose.
January 27th, 2009 at 7:19 pm
By the way, part of the reason why Japan can run such a large deficit is because the Japanese people save a lot of money so they can finance it. Japan would be a hyperinflationary mess if not for the saving instincts of its people.
January 28th, 2009 at 4:55 pm
As usual, you apparently do not understand the nature of the current economic crisis and why it requires exceptional policies.
I suppose both of us think that the other does not understand the nature of the current crisis; you look at it with Keynesian eyes, I with Austrian.
In this case, I’d have no problem with the American people decreasing their debt load when the economy recovers.
The debt load is going to decrease. I’d just rather have it happen with debt retirement rather than debt default, whcih is what is likely to happen a lot at the individual level if people don’t get their debts under control.
Also, I should point out that your arguments about how much debt we can take on assume that the stimulus plan will get us out of the current recession. If it does not, our ability to raise revenue through tax increases will be severely reduced.
And then there is the long-term structural problem of Medicare, and of the loss of the Social Security surplus as a slush fund. We would have a difficult time dealing with that even without a large deficit. Increasing our debt load now will make the increase in debt necessary to keep funding Medicare even more difficult, or alternately force even higher tax increases.
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