America’s Right (part 3)

October 25, 2013

Previous | Next

Robert B. Horwitz analyzes the Tea Party as the latest expression of anti-establishment conservatism, a political force that has been around for a long time but has gained support since the decline of the postwar liberal consensus in recent decades. Two particular movements discussed in the previous post–the new religious right and neoconservatism–had largely taken control of the Republican Party by 2000, and their ideas were especially influential in the George W. Bush administration. However, “the Bush presidency…left the country with two long-running, unfinished wars on its hands, a colossal rise in the federal debt, and the worst economic crisis since the Great Depression.” In 2008, the election of Barack Obama gave control of the White House and both houses of Congress (briefly) to the Democrats. The Tea Party emerged in 2009 as an outraged response on the part of extreme conservatives to this sudden change of fortune.

The Tea Party reacted especially strongly to several of the new administration’s policies that they saw as “socialist”: the Troubled Asset Relief Program that lent money to shaky financial institutions (actually initiated under the previous administration), the American Recovery and Reinvestment Act that spent $787 billion to create jobs and stimulate the economy, and the Patient Protection and Affordable Care Act to subsidize health insurance for uninsured Americans. The Tea Party was successful in electing more Republicans in the 2010 midterm election, many of whom openly identified with Tea Party positions.

Demographically, Tea Party supporters are more likely than most voters to be white, male, over 45, evangelical Protestant, Southern or Western, and either Republican or independent. Many have been small business owners. Ideologically, they seem to draw primarily on the libertarian strain in conservative thinking, strongly critical of taxation and business regulation. Tea Party candidates “advocated the continuation of the Bush tax cuts, the repeal of the estate tax, and the replacement of the progressive income tax with a flat tax or national sales tax.” (The “Tea” in Tea Party is also an acronym for “Taxed Enough Already.”) Sometimes they question the very legitimacy of taxation, suggesting that taxing personal income for anything but the most basic government functions amounts to criminal theft. Sometimes they reject modern government agencies–such as the Federal Reserve Board and the Environmental Protection Agency–as unconstitutional, since the Constitution doesn’t specifically authorize them.

Horwitz warns against focusing on Tea Party libertarianism to the point of missing the religious element in the movement. “Accompanying the Tea Party plea to restore genuine capitalism is also a call to restore genuine Christianity.” Tea Partyers are attracted to the writings of W. Cleon Skousen, popularized by Fox News host Glenn Beck. Skousen claims that the inspiration for American principles of limited government came primarily from the Bible, not from the European Enlightenment, with the implication that the modern expansion of government is a deviation from the divinely ordained social order. Senate candidate Sharron Angle said, “Entitlement programs…make government our God.” (She lost, suggesting that associating Social Security with sin is a little much for most voters.) A more popular moral argument against Big Government is that dependency on government undermines personal responsibility.

Although the Tea Party does fuse libertarianism and moral traditionalism to a degree, the movement has not shown much support for the neoconservative moral crusade to bring democracy to other countries. “Neoconservatives are largely in eclipse in the current Tea Party movement,” which is mainly focused on domestic issues.

Horwitz’s analysis and critique of the Tea Party draws on the earlier work of Richard Hofstadter, who described a “paranoid style in American politics” in his effort to understand the popularity of Joe McCarthy and Barry Goldwater. Hofstadter suggested that their supporters were suffering not from real economic deprivation but from “status anxiety,” described in Horwitz’s words as “the psychological sense of loss of rank and place, of an intense feeling of victimhood, and the need to find and punish those responsible for this.” Hofstadter saw the roots of that status anxiety in a transformation of the American liberal tradition:

The New Deal…marked a striking departure from the Populist-Progressive heritage, in Hofstadter’s view. If the old liberalism had been Protestant and ideological, rooted in a backward agrarian ideal, the new liberalism was urban, ethnic, hospitable to non-Protestants, forward-looking, and results-oriented.

The status anxiety experienced by many rural Protestants was often accompanied by anti-intellectualism. Modernization meant new ideas, and new ideas called into question the authority of rural tradition, especially religious tradition. This current of anti-intellectualism surfaces today in the rejection of scientific views on evolution and climate change, and in the moralistic rejection of healthcare reform without regard to its actual consequences. Any number of recent social movements and trends could generate status anxiety in a typical Tea Partyer, such as an older, white, Southern, male, evangelical Protestant small business owner. How about the election of a younger, half-black, northern, liberal Protestant lawyer and community organizer?

Horwitz accepts much of Hofstadter’s analysis, but finds it incomplete. Anti-establishment conservatives may indeed suffer from status anxiety, but that doesn’t entirely explain their success in creating a movement that impacts political culture and decision-making. As a sociologist, Horwitz wants to focus on social institutions, not just psychological dispositions.

A starting point for this analysis is “the structural nature of political power within a mixed capitalist economy.” American society has a real power structure that arouses legitimate populist concerns about individual liberty. Yet participants in populist movements often misunderstand that structure, for example underestimating how much business and government cooperate to maintain a particular kind of capitalism. The Tea Party blamed “socialist” government for the bailout of the banks, but were remarkably forgiving of the financial institutions for the risky policies that brought them to the brink of bankruptcy in the first place. Tea Partyers largely overlook the possibility that modern government has to be big enough to regulate capitalism and protect citizens from the misadventures of the wealthy and powerful.

The bias of the state toward capitalist institutions is both structural and a mainstay of political culture….In times of grave economic crisis, during which the state acts to protect the socio-economic order through an unusual degree of intervention on behalf of capitalist institutions, some significant portion of the American citizenry becomes unnerved about individual autonomy–even when that intervention guards against further economic instability and even depression.

Horwitz’s institutional analysis also focuses on the institutions that anti-establishment conservatives built in order to spread and implement their ideas. These include fundraising networks, conservative media such as Fox News (encouraged by the Reagan administration’s abandonment of the Fairness Doctrine), and many political organizations. Here too, the neoconservatives and religious right prepared the way, especially by recruiting corporate contributors to the cause. Horwitz regards the Tea Party as a legitimate grassroots movement–not just “astroturf”–but it is heavily bankrolled by wealthy businessmen with their own pro-business/anti-government agenda, people who stand to gain from reductions in taxes and regulation. As a result, Tea Party policies “primarily serve the interests of corporate capitalism and the very wealthy,” although they are framed as supporting traditional American individualism.

Finally, Horwitz describes the dogmatism and utopianism of anti-establishment conservatism, which he regards as troublesome for a democratic society. In their zeal to defend their religion from evil government, some religious conservatives would erase the boundary between church and state and try to establish an overtly Christian state. For Horwitz, democracy requires striking a delicate balance between the sacred and the secular:

Democracy insures that people can practice religion freely; democracy must require the separation between church and state to be a democracy. That is the balance that must be struck in a democratic system: individuals can articulate religious arguments in the informal political public sphere, but as those arguments move into the formal institutional political realm they must be translated into secular, reasoned terms, in language and epistemic structure that are in principle accessible to all citizens.

Neoconservatism has also displayed dogmatism and utopianism, especially in its advocacy of global democracy established through American militarism. “The Iraq War was nothing if not a utopian project.”

The particular political phenomenon known as the Tea Party may be a temporary burst of outrage. The greater concern is the larger anti-establishment movement from which it came, and the dogmatic style that it brings to our politics. That style is more suited to opposing government than actually governing. And that, I might add, may explain a lot about today’s Republican Party.


America’s Right (part 2)

October 24, 2013

Previous | Next

Robert Horwitz’s America’s Right describes how the power of the Tea Party in today’s Republican Party developed out of a long tradition of anti-establishment conservatism, a tradition with roots in economic objections to the New Deal and Cold War fears of communism. The social and economic problems that fractured the postwar liberal consensus in the 1960s and 70s generated two conservative movements that brought anti-establishment conservatism into the political mainstream, especially the Republican mainstream. These were the new religious right and neoconservatism.

The religious right

Sociologists have described a process of secularization whereby religion and other social institutions become increasingly distinct and independent, creating the modern “separation of church and state.” Many theorists have expected religion to decline in public importance, retreating more and more into the private sphere of life. This would mean, in the words of Hugh Heclo, that “politics should be conducted on the basis of public reason (in principle accessible to all citizens) and not on the basis of religiously revealed truths or religiously sectarian teachings.” Public policy would be based increasingly on rational arguments supported by facts rather than religious beliefs.

However, making religion irrelevant to public policy is not as easy as it may sound. At the very least, Christians have hoped that their religious values, including the value they place on religious and other forms of liberty, will provide a cultural framework within which public goals are pursued. In addition, modernist and traditionalist disagreements over how Christians should see the world have been very relevant to their attitudes toward the state. In this connection, Horwitz discusses the distinction between postmillennialist and premillennialist versions of evangelical Protestant theology. Both views looked forward to a thousand-year reign of Christ before the end of the world, although the number of years wasn’t always taken literally. Postmillennialists thought that the second coming of Christ could occur after Christians had created an era of goodness through their good works in the world. Premillennialists thought that Christ had to come before goodness could prevail. The first view supported a more optimistic, modernist approach to the world, associated with the Social Gospel movement to improve society, often through political reform. The second view supported a more pessimistic, traditionalist approach, one that encouraged withdrawal from a sinful world and reliance on God, not government. “Traditionalists viewed the Social Gospel’s emphasis on good works and serving the poor as undercutting the elemental concern for repentance from sin and the dependence on God’s grace.”

In the nineteenth century, John Nelson Darby expounded an influential version of premillennialist theology that remains popular to this day:

Darby described Christ’s second coming as at the end of an apocalyptic period of “tribulation,” a period of war, famine, and social chaos during the seven-year rule of the Antichrist. The final battle of Armageddon focuses on the Jews and takes place in the biblical land of Israel. As the “end-times” unfold, true Christian believers and innocents are pulled from earth to heaven in the “Rapture.” Following Armageddon, Christ returns to establish a kingdom in Jerusalem, where he will reign for a thousand years.

Evangelical conservatism was especially strong in the South, perhaps because abolitionism was one of those liberal social movements that appealed more to religious optimists. Southern preachers countered that with a Biblical justification of slavery. If God allows slavery, who are we to change it?

Religious conservatism can provide a rationale for disengagement from the evil world and its politics, but also at times encourage active engagement to counter perceived threats to Christian culture. After failing in the early twentieth century to stop the spread of modernism in many denominations, traditionalists left them to start their own more independent churches and schools. They also took to the airwaves, coming to dominate Christian radio and television. They became very engaged in the crusade against communism, and many of them also crusaded against civil rights legislation, which they saw as communist-inspired. In the 1960s and 70s, they reacted against the sexual revolution and the feminist movement, which they perceived as destroying the traditional Christian family. As the government increasingly declined to enforce Christian standards of behavior–by legalizing abortion, allowing pornography, and prohibiting prayer in public schools–hostility toward government grew.

Republican political operatives then saw an opportunity to recruit religious conservatives to their party. One of those operatives, Richard Viguerie, maintains that the issue that most helped him do so was the racial desegregation of private schools. Most of the private Christian schools had been created after the Supreme Court’s school desegregation decision, and in the 1970s, the IRS began denying tax exemptions to schools that still discriminated. Christian conservatives interpreted this as an assault on religious liberty.

Catholics had stronger ties to the Democratic Party than Protestants, since they were historically more urban and working-class, but they too had turned majority Republican by 1980. They shared certain moral concerns with Protestant conservatives, especially abortion, but they also responded to a second, somewhat less religious movement toward the right, which was neoconservatism.

Neoconservatism

The term “neoconservatism” is probably most associated today with the architects of the Iraq invasion within the George W. Bush administration, but it is a much broader and older movement. Horwitz distinguishes between two generations of neoconservatives. The first includes people like Irving Kristol, Norman Podhoretz, Midge Decter, Sidney Hook, Nathan Glazer and Daniel Patrick Moynihan. They had generally been supporters of liberal social reforms, but by the late 1960s they were becoming more pessimistic about government efforts like the War on Poverty. They began to emphasize the limits that the prevailing culture places on government. Moynihan, for example, argued that the matriarchal structure of the poor black family (strong mother, weak husband) was an obstacle to black advancement. [When he first made that argument he still believed that government income support could strengthen the black family, but he turned against such programs when he discovered that the support could enable some poor women to leave their husbands! Liberals wanted to keep the focus on fighting poverty, not promoting patriarchy.]

Part of the neoconservative critique of government social programs was the idea of the “New Class.” Max Schachtman had criticized the new class of self-serving bureaucrats that he believed had corrupted socialism in the Soviet Union. Neoconservatives now applied this pejorative term to the designers and implementers of federal social programs, who were allegedly doing more to create power and income for themselves than actually solve social problems. This fed the anti-establishment hostility toward the government “elite” who enrich themselves at the taxpayers’ expense, not to be confused with the hardworking business leaders who create real jobs and real economic value.

In foreign policy, neoconservatives reacted against the loss of the Vietnam War and the Democratic nomination of the peace candidate, George McGovern, in 1972. They called for strengthening the military to deal with the Soviet threat (later revealed to be greatly exaggerated), and considered the use of more aggressive tactics such as a nuclear first strike. When the Cold War ended with the unexpected collapse of the Soviet Union, “the first generation of neoconservatives…drifted back to a more reserved foreign policy realism and began to advocate a more modest American presence in the world.”

However, a second generation of neoconservatives, including such figures as Richard Perle, William Kristol, Douglas Feith, Paul Wolfowitz and Francis Fukuyama, responded to the end of the Cold War with a call for a more moralistic and idealistic foreign policy. America’s position as the sole remaining superpower was an opportunity to make the twenty-first century the “American Century,” bringing the benefits of American-style democracy to the rest of the world, by force if necessary.

In practical terms, this translated into calls for substantial increases in the military budget, support for missile defense systems, and a foreign policy dedicated to transformation, not coexistence; for “regime change,” not mere stability and containment; for an aggressive unipolar internationalism rather than a balance of power realism. The fall of the Soviet Union created the possibility of a unipolar peace, a Pax Americana. Because American interests were tied inextricably to universal liberal values, any transformation of bad political regimes was a blessing to the world as well as a benefit to the United States.

Both the religious right and neoconservatism expanded their control over the Republican Party from the 1970s to the 2000s, reaching their greatest influence to date in the presidency of George W. Bush. Views that had been anti-establishment became much more established. After the terrorist attack on the World Trade Center, Bush channeled popular anger into military actions he characterized as a war against an “axis of evil.” Horwitz points out this irony: early neoconservatives emphasized the limitations of government action to change our own society, but later neoconservatives made extravagant claims about the ability of our government to change other societies, such as Iraq. We couldn’t eliminate poverty at home, but a brief military intervention was all that was necessary for democracy to flower abroad. The results of the Iraq war were sobering in that respect.

Although neoconservatism is a much more secular movement than conservative Christianity, they do converge in certain respects:

More deeply, they share a utopian, dogmatic approach to the world: an insistence on the palpable, embodied existence of evil, a tendency to demonize Islam as an inherently violent religion, an unquestioning support of Israel, a hatred of liberals, an insistence on American exceptionalism, a conviction that American power can positively remake the Middle East, and an embrace of military force that reflects reverence for a particular version of masculinity and an impatience with ideas or positions that feel feminine. But these features are anathema to the give and take of democratic politics.

My final post on Horwitz’s book will describe the Tea Party in particular, and then discuss that last point. Anti-establishment conservatism is deeply rooted in our political and religious traditions. But how much power can it acquire before it becomes a danger to itself and to democracy?

Continued


America’s Right

October 23, 2013

Previous | Next

Robert B. Horwitz. America’s Right: Anti-Establishment Conservatism from Goldwater to the Tea Party. Malden, MA: Polity Press, 2013.

The recent federal government shutdown and threat of default has focused the country’s attention on the Tea Party faction of the Republican Party. In an effort to force Congress and the President to defund or delay the Affordable Care Act, Tea Party Republicans refused to support a continuing resolution needed to fund discretionary spending, or an increase in borrowing authority needed to meet the government’s existing fiscal obligations. The result was a partial government shutdown and an imminent danger of the first federal default in US history. In the end, the tactic not only failed, but is generally seen as having damaged the Republican Party and the Tea Party itself. What remains clear, however, is that the Tea Party wields substantial power. Over 60% of Republicans in the Republican-controlled House of Representatives voted against the deal to reopen the government, although they themselves seemed unsure of what a continued shutdown would accomplish. Even those who criticized the Tea Party privately feared for their jobs if they didn’t vote with them publicly.

If many Americans are left scratching their heads and asking, “Where did these people come from?” Robert Horwitz’s new book provides a timely answer. “This is anti-establishment conservatism, whose origin can be traced back to the right wing that battled both the reigning post-World War II liberal consensus and the moderate, establishment Republican Party.” Anti-establishment conservatism has been around for a long time, but only recently has it become “the foremost face of the Republican Party, manifest in the populist rage of the Tea Party and the stunning obduracy of Republicans in Congress.” Much of Horwitz’s book is the story of how this happened.

The anti-establishment conservatives were the people who never went along with the “liberal consensus” that developed after World War II. By the 1950s, most people–including establishment Republicans like Dwight Eisenhower–had come to accept much of the expansion of government that had occurred during the Great Depression and World War II. The prevailing Keynesian economics provided a rationale for government spending to create economic opportunity, boost consumer demand and maintain full employment. With support from federal law and the National Labor Relations Board, labor unions seemed here to stay. The recovery from the Depression and the ensuing prosperity enabled Democrats to forge a broad coalition (including most white Southerners before the race issue made them reconsider their support in the 1960s). In foreign policy, the consensus supported an interventionist but moderate and realistic policy of trying to contain communism, but not trying to overthrow entrenched communist regimes in the Soviet Union and China.

Anti-establishment conservatism is deeply rooted in classical American liberalism, which stresses individual liberty and property rights and fears the strong state.

For conservatives the experience of the twentieth century was that in the name of equality and with the professed aim of improving life for the masses, the state alarmingly accrued power and weakened property rights. In so doing, the state undermined the fundamental condition of liberty that emanates from property, undercutting freedom writ large. The old right thus called for the “rollback” of the New Deal. Its critique of the state in many respects extended to foreign policy. In the period between the two world wars, American conservatives tended toward isolationism. They counseled avoidance of entangling political commitments – especially in European affairs, which, after the experience of World War I, conservatives saw as intractable. And because spending on armies and armaments required higher taxes and thus inevitably produced inflation, the old right was convinced that a militarized foreign policy would lead inevitably to the dreaded concentration of governmental power.

As public opinion increasingly favored government intervention to improve the economy at home and defend democracy abroad, this “old right” fractured, with most Republicans becoming moderate supporters of strong government. But anti-establishment conservatism rejected both the postwar liberal consensus and the Republican establishment that made its peace with it. “Located principally in small business and its political affiliates, geographically rooted in the Midwest and West, but also scattered amongst a welter of anti-communist and political fringe groups (some of which identified as Christian religious organizations standing up for God and western civilization), anti-establishment conservatism continued the call for the rollback of the New Deal….”

Importantly, however, anti-establishment conservatism did not call for a return to isolationism. On the contrary, it became more aggressively anti-communist than the establishment, calling not just for the containment of communism but its defeat. As Horwitz sees it, this position results from the fusion of two strains in conservative thinking: libertarianism and moral traditionalism. Because American society was founded on individual liberty, strong believers in individual freedom from the state can defend it as a moral and even religious principle. The all-powerful state is a moral and religious abomination, since it undermines God-given liberty and individual moral responsibility. The struggle against both godless communism and New Deal liberalism takes on the character of a religious crusade.

Horwitz uses the term “anti-statist statism” to call attention to a great irony in conservative thinking. Although these conservatives feared the strong state, they supported the expansion of the military establishment and defense industries in order to strengthen the American state in its battle with foreign enemies. Many new conservatives in places like Orange County, California relied on defense spending for their incomes while criticizing high federal taxes as an infringement on personal property rights.

Barry Goldwater emerged as a the leader of anti-establishment conservatism in the 1960s. He succeeded in winning the Republican nomination for President, but lost badly to Lyndon Johnson. Goldwater’s “states rights” position on civil rights did fracture the Democratic coalition enough for him to win five Southern states. After 1964, his party returned to more moderate leaders such as Richard Nixon, but “the forces set in motion by his defeat laid the ideological and institutional groundwork for anti-establishment conservatism’s subsequent ascendance….It regrouped, built institutions and recruited leaders, attracted money from right-wing businessmen, mobilized conservative Christians politically, and sixteen years later, helped bring Ronald Reagan to the presidency.”

Helping this process along were a series of developments that called liberal policies into question. Keynesian economics didn’t seem to have a solution to the runaway inflation of the 1970s. The government spending that had successfully boosted employment and consumer demand could now be blamed for feeding inflation. Federal efforts at racial integration provoked resistance not only from Southern segregationists, but from other whites who feared that advances for minorities would come at their expense. Cultural revolutions affecting such areas of behavior as sexuality and gender roles generated a backlash from moral traditionalists. Foreign policy failures such as the loss of the Vietnam War and the Iranian hostage-taking aroused fears of national weakness.

Two conservative movements in particular–the new Christian right and neoconservatism–strengthened anti-establishment conservatism and prepared the way for its new dominance within the Republican party. They will be the subject of my next post.

Continued


The Price of Inequality (part 2)

December 12, 2012

Previous | Next

The previous post summarized Joseph Stiglitz’s discussion of the market inefficiencies that allow more inequality than is necessary to reward productive activity. In any free market, some will be more successful than others; the problem is that the winners can win in ways that erect barriers to the success of others, or impose costs on the rest of society, or take advantage of privileged access to information. The excessive inequality that results then undermines social mobility, aggregate demand, investment in public goods, and economic growth in general. Contrary to the view that less government is always better economics, Stiglitz sees an essential role for government in keeping markets fair and efficient, countering tendencies toward excessive inequality, and encouraging economic growth for the benefit of all.

In general, the policies that Stiglitz recommends flow naturally from his understanding of market inefficiencies and limitations. Where markets allow companies to capture private benefits while evading responsibility for social costs (such as environmental damage), government can restore the balance with taxes and regulation, and make sure that producers pay a fair price for access to public resources (such as oil on federal lands). Where markets tend to give unearned benefits to those with inside information (such as bankers who know that some of the securities they market have been designed to fail), government can insist on regulated exchanges with greater transparency. Where markets underinvest in public goods, government can specialize in the creation of public goods. Where markets leave a large segment of society too poor to afford the products that they offer, government can use progressive taxation and spending to stimulate aggregate demand. Where markets erect barriers to upward mobility, government can provide better access to education and health care, as well as “active labor market policies” to help workers transition to occupations in which their labor is needed. It can also impose estate taxes to keep the children of the rich from enjoying large unearned advantages over other children.

All of these things are easier said than done, for the simple reason that the same inequalities that distort the economy also distort the political process, undermining government’s ability to address the inequalities. Stiglitz calls this an “adverse dynamic” or “vicious circle,” a self-amplifying feedback loop perpetuating and strengthening social inequality.

As the wealthy get wealthier, they have more to lose from attempts to restrict rent seeking and redistribute income in order to create a fairer economy, and they have more resources with which to resist such attempts. It might seem
strange that as inequality has increased we have been doing less to diminish its impact, but it’s what one might have expected. It’s certainly what one sees around the world: the more egalitarian societies work harder to preserve their social cohesion; in the more unequal societies, government policies and other institutions tend to foster the persistence of inequality. This pattern has been well documented.

Economic elites use a variety of tactics to tilt the political playing field in their favor. They employ lobbyists to make their case, and gain access to politicians with large campaign contributions (minimally regulated thanks to recent Supreme Court decisions). They “use their political influence to get people appointed to the regulatory agencies who are sympathetic to their perspectives,” so-called “regulatory capture.” In the global economy, capital can flow toward countries with the most permissive tax and regulatory policies, and international bankers have enormous power over countries that rely on foreign capital. “If the country doesn’t do what the financial markets like, they threaten to downgrade the ratings, to pull out their money, to raise interest rates; the threats are usually effective.”

In a nominally democratic country like the United States, ordinary people can theoretically outvote the wealthy. Much of Stiglitz’s political discussion concerns the question of why they don’t do so more often, that is, why people frequently vote against their own economic self-interest. Here he draws heavily on behavioral economics, which tries to understand “how people actually behave–rather than how they would behave if, for instance, they had access to perfect information and made efficient use of it in their attempts to reach their goals, which they themselves understood well.” Economic elites benefit from the fact that “many, if not most, Americans possess a limited understanding of the nature of the inequality in our society: They believe that there is less inequality than there is, they underestimate its adverse economic effects, they underestimate the ability of government to do anything about it, and they overestimate the costs of taking action.” In addition, the wealthy use their economic power to market their ideas, cleverly framing policies that benefit the few to make them appear beneficial to all. Weapons programs that profit defense contractors are always described as good for the economy, while the same amount to protect the environment is just “wasteful government spending.”

The media play a crucial role here, either performing a public mission of informing the citizenry, or just presenting whatever programing brings in the most advertising revenue, including political advertising revenue. In the US, not surprisingly, the media underperform their public mission, leaving citizens at the mercy of the advertisers with the deepest pockets. Stiglitz sees this as another example of rent-seeking: The media get an unearned private benefit from free access to a public resource, then use it in a way that produces private profit at the expense of democratic discourse. “The public owns the airwaves that the TV stations use. Rather than giving these away to the TV stations without restriction–a blatant form of corporate welfare–we should sell access to them; and we could sell it with the condition that a certain amount of airtime be made available for campaign advertising.” If the public is too often misinformed, manipulated, and alienated from a political process that doesn’t represent them very well, that works to the advantage of the economically powerful: “If voters have to be induced to vote because they are disillusioned, it becomes expensive to turn out the vote; the more disillusioned they are, the more it costs. But the more money that is required, the more power that the moneyed interests wield.”

The result of this distorted democracy is that legislation to serve the public interest is extremely difficult to pass. The government is prohibited from bargaining with pharmaceutical companies over the price of prescription drugs, costing the taxpayers an estimated $50 billion a year. Banks have succeeded in blocking most regulations intended to protect student borrowers from fraudulent educational programs, as well as most state laws intended to curb predatory lending. Patent law protects the interests of large corporations and their lawyers, but allows them to “trespass on the intellectual property rights of smaller ones almost with impunity.” Corporate executives who perpetrate fraud are rarely penalized personally for doing so. The recent housing crisis revealed that the foreclosure laws make it easy for banks to foreclose without actually proving that homeowners owe the amounts claimed. And on and on.

The biggest battle over public perceptions is fought over the role of government in the economy, over the Reagan question of whether government is the solution to economic difficulties or government is the problem. Since the Reagan years, conservatives have had great success convincing politicians, the media, and much of the general public that conservative fiscal and monetary policies are good for the economy, even if they favor the wealthy and aggravate inequality. In fiscal policy, the conservative approach is to tax and spend less; this is supposed to help the economy by freeing up capital for private investment. (Conservatives often support increases in military spending, however, which in combination with tax cuts produce large deficits.) Stiglitz acknowledges that constraints on taxes and spending might make sense under some conditions: “Of course, when the economy is at full employment, more government spending won’t increase GDP. It has to crowd out other spending….But these experiences are irrelevant…when unemployment is high (and it’s likely to be high for years to come) and when the Fed has committed itself to not increasing interest rates in response.” Under these conditions, government can borrow cheaply and spend with great economic effect, increasing the size of the pie for all.

The government could borrow today to invest in its future— for example, ensuring quality education for poor and middle-class Americans and developing technologies that increase the demand for America’s skilled labor force, and
simultaneously protect the environment. These high-return investments would improve the country’s balance sheet (which looks simultaneously at assets and liabilities) and yield a return more than adequate to repay the very low interest at which the country can borrow. All good businesses borrow to finance expansion. And if they have high-return investments, and face low costs of capital— as the United States does today— they borrow liberally.

Stiglitz maintains that government spending can help the economy even if it is balanced by higher taxes to avoid increasing the deficit:

There is another strategy that can stimulate the economy, even if there is an insistence that the deficit now not increase; it is based on a long-standing principle called the balanced-budget multiplier. If the government simultaneously increases taxes and increases expenditure— so that the current deficit remains unchanged— the economy is stimulated. Of course, the taxes by themselves dampen the economy, but the expenditures stimulate it. The analysis shows unambiguously that the stimulative effect is considerably greater than the contractionary effect. If the tax and expenditure increases are chosen carefully, the increase in GDP can be two to three times the increase in spending.

That means that by insisting on low taxes for the wealthy and low spending on public goods, the economically powerful and their political allies are putting private gain before the public good. They are not only promoting social inequality, but they are impeding rather than facilitating economic growth.

Stiglitz is also a long-time critic of conventional monetary policy, as practiced by the Federal Reserve, the European Central Bank and the International Monetary Fund. He believes that the so-called “independent” central banks have been captured by the financial sector, so that they serve private rather than public interests. Their main focus has been on fighting inflation, a policy that has the greatest benefit for wealthy lenders (since they have the most to lose if loans are repaid in devalued currency). Central banks tend to raise interest rates too quickly during an economic expansion, cooling the economy and maintaining unemployment at an unnecessarily high level. On the other hand, in the Great Recession governments have relied on expansionary monetary policy, pumping more capital into the system by lending banks money at near-zero rates. This is less effective than an expansionary fiscal policy, since the problem is not so much a lack of capital as a lack of spending. But it’s a sweet deal for banks, who get money so cheaply that they can make a good profit even from very low-risk investments like treasury bonds, and are not required to invest it in productive enterprises or housing loans. Cheap capital also encourages companies to finance labor-saving equipment instead of employing more workers, contributing to a jobless recovery.

Stiglitz describes a system so tilted in favor of the rich as to leave the reader pessimistic about finding any way out of the vicious circle of economic and political inequality. In the end, he suggests two general routes to reform. One is that “the 99 percent could come to realize that they have been duped by the 1 percent: that what is in the interest of the 1 percent is not in their interests.” The other is that the 1% themselves come to see beyond their own narrow and short-term self-interest. Although the wealthy have become more and more insulated from the problems experienced by ordinary people, that insulation is not absolute. If the United States were to become as unequal as a Latin American oligarchy, there would be plenty of costs to go around as a result of underutilized human talent and social unrest. Even Brazil, one of the world’s most unequal societies, has been taking steps to alleviate inequality recently. No doubt Stiglitz hopes that books like his can sound the alarm and help change opinions at all levels of American society.


How to Call the Presidential Election

November 2, 2012

Previous | Next

On election night, the media will no doubt provide us with a blizzard of numbers and instant interpretations. What I’ll be trying to do is ignore a lot of the trivia and focus on the most significant information. If I hear that Romney has won Kentucky, I’ll pay little attention, but if I hear that Obama has won North Carolina, I’ll declare him the winner and go to bed.

Some news organizations, such as CBS News, have continued to declare the race a dead heat. And it’s true that the national polls have been very close, with some favoring Obama and some favoring Romney by small margins. But statistical analysts who incorporate more information into their models, including state polls and economic indicators, give the President a 75-85% chance of winning. I’ll be relying heavily on Nate Silver’s model as a guide to what to look for on election night, but other models are saying essentially the same thing.

Silver sees Obama with a solid core of 237 electoral votes from states that the model gives him at least a 90% chance of winning. These include several states that are sometimes mentioned as being still in play, especially Pennsylvania, Michigan and Minnesota. One very plausible path to victory is for Obama to pick up Ohio, Wisconsin and Nevada for a total of 271, one more than the 270 electoral votes needed to win. That’s not Obama’s only winning path, but I’ll use it as a baseline scenario to compare with what actually happens election night.

So here’s my strategy for keeping score: Start from 271 Obama votes. Add the votes for any of the following states that go blue: Colorado (9), Florida (29), Iowa (6), New Hampshire (4), North Carolina (15), and Virginia (13). Subtract the votes for any of the following states that go red: Nevada (6), Ohio (18), and Wisconsin (10). As long as the additions are greater than or equal to the subtractions, project Obama the winner. If the subtractions are greater than the additions, project Romney the winner. Obviously, the projection will become more realistic as more returns from these swing states come in.

If at some point, the additions are greater than the remaining possible subtractions, Obama will almost certainly have won. I say “almost” because Romney could theoretically still win by cutting into Obama’s core of 237 votes. But that’s a long shot; if Romney can’t win in the swing states listed above, he’s even less likely to win in bluer states in Obama’s core. If at some point, the subtractions are greater than the remaining possible additions, then Romney will prevail.

So have fun, impress your friends by calling the race early, and have a good night’s sleep!