Wednesday, November 30, 2011

The Information Cocoon of U.S. Politics

In a new opinion piece, the German newspaper Der Spiegel eviscerates the current Presidential crop, and U.S. political culture more generally. A translated excerpt and summery can be found here. What is striking to me about this sharp critique isn't exactly the fact that it comes from Europe, although that is mildly terrifying (it means word is spreading about our Republican Party). Rather, it is the fact that I find Der Speigel's appraisal of our campaign so novel at all. Political coverage in the U.S. has chugged along this cycle quite oblivious to the unprecedented changes that have occurred over the last two years. The Republican Party is radically more conservative, it's presidential contenders are plumbing new depths of  puerility, and huge swathes of the population are openly disdainful of science and rigorous thought--notably on climate change risk assessment.

Maybe it's the media's craven policy on ideological balance, or perhaps it's the entanglement of media and government by way of money and manpower. Surely journalists' desire for their work to go viral plays into politicians' calculation that any publicity is good publicity, especially for amateurs with nothing to lose and everything to gain. Whatever the cause, it seems clear that the craziness of our politics scales with the looseness of our media, creating some quite noxious incentives. It's heartening that the rest of the world does not share our political rot, and yet horrifying that our news media knows it not.

Tuesday, November 29, 2011

Let's Have a Jubilee Year for the Tax Code

The federal tax code in this country has some problems. It's inefficient. It's regressive. It reduces national competitiveness (high corporate tax rates). It's out of touch, rewarding old industries and technologies while inhibiting innovation. It punishes productive behavior (income) while rewarding less productive behavior (renting real estate) and sometimes arbitrarily shifting economic activity from one thing to the other (buying bonds over stock, or purchasing health care through employers). It's also insanely complicated. Decades of new laws granting tax credits, exemptions, or special rates have narrowed the tax base and reduced revenues. On a sort of meta-level this complexity has increased the tax code's regressivity: richer taxpayers can afford accountants that navigate the arcane landscape of loopholes and deductions, effectively lowering their tax liability.

Of course, all this is nothing new. Washington has been talking about simplifying the tax code for decades. Yet legislators continually compound the problem by passing new tax credits and exemptions for particular groups at a steady pace. If you're in Congress and want to help out a certain group (demographic population, interest group, whatever) why take the heat in next year's election for creating a new Washington spending program (with all it's bureaucratic inefficiency) when you can simply add a targeted tax credit?

It is an unavoidable pattern that over time, democracies will add more laws than they repeal. Elected officials' legacies are measured in no small part by what sorts of new institutional commitments they get passed and implemented. A good example is George W. Bush creating the Department of Homeland Security. A more mundane, yet still significant example is President Obama adding a daily economic briefing to the existing national security morning briefing. The point is that keeping the status quo tends to be easier than changing it, and even though passing laws is difficult in our political system, once a law is passed it tends to stick around. How long will it be until a President receives a daily environmental briefing on top of the other two? Jonathan Rauch, in his aptly titled book Demosclerosis, explores this phenomenon and how it has contributed to a gradual calcification of our government, especially the tax code. Each tiny little tax credit is defended vigorously by the narrow group that benefits most from its continued existence, thus nobody wants to start a fight over something so insignificant in the scheme of things.

So what can we do about this incremental malaise? Obviously, passing some good tax reform laws would help tremendously. It's probably within the realm of possibility that sometime in the near future Democrats and Republicans will come together and make the technocratic fixes we've all heard about, broadening the tax base by eliminating worthless tax credits, reducing rates and increasing revenues and all that. But no matter how good a one-off fix might be, it still fails to address the deeper structural and institutional forces that push the tax code to become increasingly sclerotic, calcified, and complicated over time. So here's my thought: why try to fix them at all?

It's pretty clear that some things in Washington just wont change, and the ratchet of inefficiency is one of them. Lawmakers will always try to get reelected, reward particular groups, and establish a legacy of accomplishments. So what we really need is some sort of reform that channels these inner demons of our democracy into something good--or at the very least manages them. So I propose applying an idea that's been around for quite some time to the problem of our tax code: the Jubilee Year.

In biblical times, the kingdoms of Israel and Judah observed a tradition whereby every fifty years, a special "Jubilee Year" compelled a universal remission of sins, debts and prison terms for households and individuals. The practice was later picked up and formalized by Christians in 1300 under Pope Boniface VIII. Since then, symbolic festivities have replaced the original economic and political basis for the cyclical tradition.

The central idea of the Jubilee Year--a periodic wiping clean of economic and political commitments--is exactly what our tax code needs. Every fifty years, the federal tax code should scrub clean and revert to some minimal and simple core, wiping away all the special deductions, credits, loopholes, and targeted rules that have accumulated. After each Jubilee Year, legislators can get right back on with their business of rewarding interest groups and establishing a legacy, now with the added comfort of knowing that their policies aren't contributing to the long-term problem of bureaucratic inefficiency and loss of government dynamism. With good implementation and a little bit of luck, a Jubilee Year for the tax code might just stave of institutional senility for years to come.

Sunday, November 13, 2011

A Better Kind of Pundit

Ezra Klein of the Washington Post is one of the best political journalists and bloggers currently operating, mostly because he injects wisdom from political science into his commentary and analysis. Most political journalism is terrible because it makes no attempt to separate important details from unimportant ones. Nowhere is this more apparent than with presidential politics. For many reasons--not least it's easier to report and explain--journalists obsess over things like leadership, campaign minutiae, personalities, style, etc. Unfortunately, that stuff just doesn't matter very much when compared to deeper structural and institutional forces like Congress, the fed, macroeconomic trends, or voting systems.

In a recent debate with columnist Matt Miller over the prospect of third-party candidates, Klein articulates his position:
But I want to be really clear here. My answer is super unsatisfying. It is horrible. It is depressing. It makes you think nothing will happen for a long time. But that’s because that’s true. I mean, when you say what’s your answer, I don’t have an inspiring answer. I don’t have a something easy to get up and give a beautiful speech on. I’ve heard politicians give beautiful speeches. And I am sure — I’ve now looked at the literature to back this up — I am sure that those speeches are not going to bring change. Not the sort of change that you want, not the sort of change that I want. I am sure that if your guy got elected, he or she would come in and go to Congress and say, I want $50 billion for universal pre-K, and I want a transaction tax for the financial industry, and I want to make our health care system more like Singapore’s, and I want an energy tax that moves the corporate and payroll taxes over to carbon. And Congress would laugh at them, and that would be that. Because the president is not a king and he’s not a dictator.
And so my answer is that unfortunately, we have to do this hard, unpleasant, incremental work of making things better piece by piece, 5 percent, 10 percent of the time. And you know what? If that’s not equal to the scale of our challenges, well, the reality is that our institutions are unequal to the scale of our challenges. And that’s a hard thing to explain. But that’s why I spend so much time trying to explain it, and why I fight efforts to tell people that a third-party president can sweep in and solve our problems.
Reinforcing his point, Klein's fantastic review of Ron Suskind's Confidence Men is definitely worth checking out, as is this super-long breakdown of the economy since Obama took office. The blog post, 'Shrinking the Presidency Back Down To Size' also offers a nice summary of Klein's hobby horse.