Obama's Debt Ceiling Presser Cont.

President Obama pleads:

So when Norah asked or somebody else asked why was I willing to go along with a deal that wasn’t optimal from my perspective, it was because even if I didn’t think the deal was perfect, at least it would show that this place is serious, that we’re willing to take on our responsibilities even when it’s tough, that we’re willing to step up even when the folks who helped get us elected may disagree. And at some point, I think if you want to be a leader, then you got to lead. (bold mine - JMG)

Quite right, if you ask me.

Evidence, Ideology and Partisanship

George Packer has written an excellent column in the New Yorker about the debt limit debate and I highly recommend to anyone interested in reading some good commentary on the general dysfunctional contours of our parties incentives. I must confess that I was nodding my head in agreement with Mr. Packer right up until the very end, when he wrote this:

More important, [President Obama] no longer uses his office’s most powerful tool, rhetorical suasion, to keep the country focussed on the continued need for government activism. His opponents’ approach to job creation is that of a cargo cult—just keep repeating “tax cuts”—even though the economic evidence of the past three decades refutes such magical thinking.

Now, on the substance of Mr. Packer's point we are very much in agreement: the endless drumbeat for tax cuts irrespective of the economic context is financially damaging to our country. Serious economists and serious people in general have a tendency to understand that fiscal policy is poorly devised if those drafting it blithely ignore circumstances such as the Federal government's receipts versus its outlays, and what the current drivers of our budget deficit really are.

That being said, commentators like Mr. Packer continue write and act under what Jamelle Boiue termed "The Green Lantern Theory of Presidential Power." Basically, if President Obama simply used his Green Lantern ring, took more time to explain why tax rates should be higher relative to current rates, that serious budget cutting would be harmful to our still fragile recovery, more average Americans would understand and demand a more progressive economic agenda.

What Mr. Packer, and other commentators like him keep eliding by, is the issue of how ideology shapes a person's conception of empirical evidence. As an economics professor once told my Economic Development class, "There is no view without a viewpoint." Partisanship is a filter that people use to categorize and interpret facts; and for better or worse, how those facts fit within their (partisan) worldview. So when Mr. Packer makes the case that President Obama simply needs to "use his office’s most powerful tool, rhetorical suasion," he is failing to account for the fact that ideology is a huge driver not only in how facts are processed, but which facts are integrated into a person's opinion. Simply put, the people who believe in their Voodoo Economics have their own graphs and their own economists telling them what they want to hear. No amount of Presidential oratory is going to change their minds.

Now, I'm open to the argument that if Obama made a more forceful case for more deficit spending, we could see some movement on the margins tilting toward a more robust Keynesian fiscal policy. But we're not in a legislative situation where some play around the margins is going to make a significant impact on how the House of Representatives will vote. The structure of government institutions has a significant and meaningful effect on the legislative process. We cannot ignore these facts simply because they are inconvenient to our preferred policy outcomes.

The Debt Limit Showdown and Party Incentives

National Journal has an interesting piece up today about how the House Republican leadership is trying to warm it's freshman members to the (hopefully) eventual debt limit increase. Specifically,

"[John] Boehner has been "aggressive," in one aide's words, in articulating the need to reach a deal."

I would argue this is a reasonably optimistic development for what has been a very worrisome episode in American democracy.

Party incentives drive policy enactments, for the most part. Up until now, it seemed like the House GOP's incentives were being solely driven by the Tea Party, the ostensible drivers of their 2010 Midterm electoral success. The interest group consistently engages in a kind of economic "earth-is-flastism" by denying that a credit national default would have adverse effects. For example, the Tea Party Patriots co-founder Jenny Beth Martin told CNN that the issue was simple to solve by litteraly using the phrase: "It's that simple." This type of oversimplification of a complex and urgent issue is worrisome to the extent of the damage that a default would have on our nascent economic recovery. This all makes sense as structurally, economic issues are hard to explain; and except in the case of the shortest of slogans, even harder to use as a tool of political motivational.

So, no one should be surprised that these type of statements play well with the median, non-engaged constituent, especially in the populist context of the Tea Party demographic.

What is surprising, is the fact that the Republican party's indulgence in this kind of rhetoric as their preferred economic policy, rather than just political sloganeering. To legitimately engage the notion of not raising the debt ceiling is to court an actual default of the US government. It's one thing for base activists to push for economic nonsense that jeopardizes our country. It's quite another thing for professional politicians and major party leadership do the same thing.

That's why this National Journal piece is significant. It's showing us that the basic framework of our incentive system hasn't been placed so out of wack the the House GOP would pursue the political advantage of a government default. The Tea Party may try an exert more pressure to prevent a debt limit increase, but they're only one pressure group out of thousands. As others make the (correct) point that a debt default would be bad both substantiatively as well as politically, Boehner, Cantor, McCarty and others in the House majority leadership begin to pressure their caucus members to step away from the brink.

Obama's Debt Ceiling Presser

Now, I understand as a young, fairly liberal economics baccalaureate, I probably represent a fairly small sliver of the potential voting population. But what I just heard from President Obama at his press conference was exactly what needed to be said, and the President continues to be exactly the person I thought I voted for.

When I get my hands on the transcript, I'll go into this with some more detail.