Matt Yglesias

Michigan Dems Hoping for a Populist Revival

Via Suzy Khimm it looks like ailing Michigan Democrats are eying a set of sharply populist ballot initiatives as a way to bring their supporters out to the polls in 2010. Measures on the table include:

— Increasing the minimum wage to $10 an hour for all workers.
— Imposing a blanket moratorium on home foreclosures for 12 months.
— Cutting utility bills by 20 percent across the board.
— Requiring all employers to providehealth care to employees and their dependents.
— Increasing by $100 a week — and extending for six months — unemployment benefits, while expanding eligibility.

The unemployment thing is fine but where’s the money coming from? I’ll admit to not understanding how the utility bill idea would work or what the implications would be, but you can imagine this working in a sharply deflationary situation. But by the same token, with the Michigan unemployment rate at 15.4 percent and rising wages need to go down rather than up if people are going to find work and existing capital get profitably employed:

Employer mandates for health insurance are a frustrating perennial of the American political scene. If you want to do this, the right way to do it is to have a payroll tax and use the revenue to finance broad public provision of health insurance. But decades of successful conservative anti-tax rhetoric have created strong incentives to uncover ways of doing things that can be plausibly described as not a tax. Nevertheless, the fact remains that mandates of this sort are not going to increase the overall share of the economic pie going to compensation (this fluctuates within a very narrow range), it’ll just shift it around. But by doing it this way the incidence of the new tax will vary across firms for basically arbitrary reasons (which I suppose is part of the appeal as some firms will be able to disadvantage their competitors) and private health insurance companies will get an extra piece of the action.

That said, it’ll be interesting to see how well this works, politically. Pretty well would be my guess.

Welcome to Government Motors

Considering the various other moves that have been made since last October, what the government is planning to do with General Motors seems like a reasonable choice out of the set of viable options. That said, I’ve been uncomfortable with this policy trajectory from the beginning precisely because this outcome seemed like a best-case scenario for an auto bailout endgame and it’s not a very good endgame. Recall that as of November, in theory government assistance was just a “bridge loan” that was going to be repaid and all was going to be well. Now the government’s going to own a large dysfunctional auto company.

I mostly share Kevin Drum’s concerns about this. But to put the problem more broadly, the issue is simply that the government, in its capacity as GM owner, has too many divided loyalties. It would be nice to think that Government Motors will protect the environment, protect the financial interests of taxpayers, protect the interests of GM’s workforce, and protect the interests of GM’s business partners all simultaneously but in the real world these objectives are clearly in tension. Trying to resolve these questions is going to be a mess.

I think it’s entirely appropriate to be spending money to help people working in the auto industry and, more generally, people living in the “Greater Michigan” zone where the decline of auto manufacturing jobs is causing huge problems. But there’s little reason to believe that propping up GM in this manner is the best way of getting assistance bang for the taxpayer buck.

Carl Levin Open to “Guantanamo North” in Michigan

The right-wing’s bizarre NIMBY-based attack on the idea of closing Guantanamo Bay has gotten a surprising amount of support. But some legislators may actually want some new prisoners. Take Senator Carl Levin (D-MI) for example:

Most lawmakers view the prospect of moving prisoners from Guantánamo Bay, Cuba, to their districts as a negative proposition. But at least one Democratic senator is open to the idea as a potential economic boost to his struggling state.

Carl Levin , chairman of the Armed Services Committee, said that construction and staffing at a new maximum-security prison in Michigan could help his cash-starved state. [. . .] Former Michigan Gov. John Engler, a Republican, suggested this month that creating a “Guantánamo North” in the Upper Peninsula could net the state upward of $1 billion per year, according to reports.

Now back to basics. As Undersecretary of Defense for Policy Michèle Flournoy said yesterday, it would be nice if lawmakers could take a “more strategic” view of this issue. Closing the facility is important to rebuilding America’s international relationships. And given that the country already has a large number of highly secure detention facilities, there’s no compelling reason to build a new one in the Upper Peninsula. But by the same token if for some reason that’s what it takes, then that’s what it takes.

For a quick-but-serious overview of the real issues at stake here, as opposed to the political hype, I would recommend my colleague Ken Gude’s Closing Guantanamo 101 issue brief.

Michigan No More

This is yesterday’s news, but I have to say that I was so surprised by the announcement that the McCain campaign is abandoning Michigan that I was initially inclined to believe it was some kind of fake-out. But it seems to be real enough. As a strategy, though, it’s a bit odd in my opinion. It’s true, of course, that currently McCain’s odds in Michigan are pretty long. But that reflects his currently poor national performance. Unless he does better overall, shifting resources around can’t save him. You have to ask about which states would be competitive if the national popular vote was about even and Michigan is a solid enough candidate. What’s more, it’s a state (unlike Colorado or Virginia or the 2nd Congressional District of Maine) with a history of tensions between a big city African-American political machine and the surrounding white majority — the sort of thing the McCain campaign could put to good use.

At any rate, Nate Silver has the provocative suggestion that McCain’s real problem is with his intertemporal resource allocation:

McCain’s problems ultimately stem back to the early summer, when his campaign decided to throw a ton of money into negative advertising rather than to build a robust field operation. That decision might have “worked” in the near term, as McCain chipped Obama’s lead down from about 5 points in mid-June to a virtual tie heading into the conventions. But, as with many McCain campaign decisions, it may have been one more engineered to win the battle rather than the war, as Obama’s position has bounced back with surprising vigor in the past two weeks, and the Britney Spears ads now seem like a distant and irrelevant memory.

Ultimately I don’t see much logic at all in investing heavily in early paid media. Until the conventions, gyrations in public opinion are basically meaningless and you might as well focus your time and energy on acquiring money and volunteers and building out your staff and field operations. The candidates can’t really control whether or not events in the real world set the stage for a close campaign in the fall, but they can control how well-prepared they are to win in the fall if the election turns out to be close.

The Political Economy of Bailout Nation

One consequence of handing out a $700 billion bailout, with the number $700 billion determined by the fact that “We just wanted to choose a really large number” is that it creates a new political and psychological anchor for all kinds of other special pleading. Take, for example, this tale of the looming auto industry bailout:

With Congress preoccupied with the massive, $700 billion bailout plan for the financial industry, General Motors, Ford, and Chrysler have finally secured Part One of their own federal rescue plan. A bill set to be passed by Congress and signed by President Bush as early as this weekend—separate from the controversial Wall Street bailout plan—includes $25 billion in loans for the beleaguered Detroit automakers and several of their suppliers. “It seemed like a lot when we first started pushing this,” says Democratic Sen. Debbie Stabenow of Michigan, one of the bill’s sponsors. “Suddenly, it seems so small.”

And how did they come up with $25 billion? Well:

Earlier this year, the automakers sought a first installment of loans totaling about $6 billion. But the nationwide credit crunch severely crimped their ability to borrow, and besides, next to bailouts like $200 billion for Fannie Mae and Freddie Mac, a mere $6 billion started to seem unduly modest. So Detroit raised the ante to $25 billion, the most allowed under current law.

You can hardly blame the grasping hands from just trying to get as much cash as possible, but you can see here that the auto makers don’t have any real plan beyond getting as much bailout as they can and then hoping for the best. As a policy matter, it would almost certainly make more sense to bail out people — spend money on helping individuals adversely effected by economy trends to start their own businesses, relocate to places where their skills are in demand, gain new skills, or even just make ends meet during a difficult transition phase. Spending money to prop up failing firms prevents their considerable assets from being redeployed in productive ways. But as the article indicates, once you start handing out giant bailouts it becomes increasingly difficult to say “no” to the next politically powerful constituency that wants some bailing out.