Friday, October 26, 2012

Is Robert "No Relation to Paul" Samuelson the reason we can't have any serious discussion of the functioning of government?


Would it help if "No Relation" occasionally read a book by someone peddling something other than the mindless platitudes of conventional economic wisdom? You know, I really don't think so.

by Ken

Okay, I've overdramatized. No, of course, Robert "No Relation to Paul" Samuelson isn't the reason we can't have any serious discussion of the functioning of government. He's much more a symptom than a cause of the problem(s). But if you don't think the problem is made worse by having a venue as august as the Washington Post offering license to pontificate on finance and economics to someone who knows, well, perhaps less about these subjects than anyone on the planet, then we disagree.

(It's true that the Post maintains a whole roster of people as inexpert on the subjects they're engaged to analyze. This is what I mean by "No Relation" being more a symptom than a cause of the problem. They've got a whole lot of symptons there.)

In my Wednesday post, "Step right up and vote for that 'transparent faker' Willard Inc. and the unknowable contents of his campaign Mystery Box," writing about the 13-installment symposium on the election published in the current (November 8) issue of the New York Review of Books (in that post I also included a laboriously assembled linked list of the 13 individual pieces), I ventured that "Jeffrey Sachs's piece may be the most important" of the 13 and formally reserved the right to return to it. Tonight we're returning back to it.

I characterized the subject tackled by Sachs, who's director of the Earth Institute at Columbia University (and author most recently of The Price of Civilization: Reawakening American Virtue and Prosperity), as --
the insanity, built into our political system, of operating the U.S. government, "the world’s largest enterprise, with $3.7 trillion in outlays, $2.5 trillion in revenues, and 2.1 million civilian workers," and "also the most complex, operating in every sector of the world’s largest economy, in every country of the world, and in every possible setting: markets, technology development, social programs, basic science, and much, much more" without any kind of planning beyond our day-to-day seat-of-the-pants partisan brinksmanship.

Sachs naturally explains his case way better than I can:
The US federal government is the world's largest enterprise, with $3.7 trillion in outlays, $2.5 trillion in revenues, and 2.1 million civilian workers. It is also the most complex, operating in every sector of the world's largest economy, in every country of the world, and in every possible setting: markets, technology development, social programs, basic science, and much, much more.

A behemoth of this size requires goals, plans, strategies, and budgets that look forward for years, even decades. This is especially true in our era, when unprecedented shifts in technology, demography, the world economy, and the physical environment require deep structural changes in our economic and social life. Old skills and sectors are obsolete. The energy, health, and education systems require large-scale overhauls. And yet we operate almost blindly, month by month, fiscal cliff by fiscal cliff, without any clear pathway ahead.

Imagine running the largest global Fortune 500 company, Royal Dutch Shell (at around one fifth the federal government revenues), without plans, strategies, and budgets. Some companies may try it but they don't last long. The federal government has the advantage of the Federal Reserve's printing press (which has been covering much of the deficit as the Federal Reserve buys up Treasury bills and bonds) as well as a constitutional monopoly on power. Still, these should be no excuse for running the government like a bumper-car derby, pushed and pulled by the random collisions of competing interests and factions.
To put it mildly, our system isn't set up terribly well to accomplish much of this sort of planning.
The game of politics has almost completely overshadowed the hard work of governing. Most of the time of President Obama and his congressional counterparts is taken up by campaigning and fund-raising, posturing and messaging, negotiating and horse-trading on short-term transactions, and occasionally debating real issues of importance, such as government's responsibility for supporting the poor and elderly. Yet none of this political activity substitutes for public management, which means the arduous task of defining goals, and then planning, strategizing, and budgeting toward them.

We've gotten so used to the breakdown of actual governing that the public is not aware of what's gone. The prevailing interpretation is that our government is broken because of political gridlock. There is some truth to that, of course. Yet one of the main reasons that it's gridlocked is that running the government is now viewed as nothing more than an extension of electoral politics, which in turn amounts to little more than a clash of competing interest groups that finance the politicians and try to keep their teams in power. If the government were approached differently, as a complex venture requiring serious planning, budgeting, and strategy, the process itself of governing would actually rescue the government from the current political trap that keeps it so dysfunctional.
"Some government agencies still work brilliantly," Sachs says, citing NASA and the National Institutes of Health (NIH). But they're "not the norm," he says.
The government is mostly led by appointees or elected officials with little technical knowledge, less management experience, and an expected job duration of a few years at most, often culminating in a lobbying position on K Street after leaving government. The alternation of power between the two political parties does almost nothing to compel better managerial performance.

As our problems have gotten more complex in a more global, technological, and environmentally unstable era, the two parties have adopted increasingly naive ideological positions to justify their chronic managerial failures.
"The Republicans' answer, of course, is that no management is needed: the market will do it."
Their increasingly absurd elixir of tax cuts and deregulation is supposed to solve any problem: poverty, pollution, unemployment, health care, climate change, and even national security. Fortunately, it looks like the public is not buying this nonsense.
And the Democrats?
Sadly, President Obama and the congressional Democrats have had their own mythology that the economic problems will generally sort themselves out without long-term plans and with short-term patches such as a bit more demand stimulus. Democrats rightly believe in government, but they give little evidence that they believe in public management. The stimulus legislation in 2009 was a $900 billion hodgepodge thrown together in a few weeks, on the mistaken and panicked grounds that even a few months of delay for planning would have meant a great depression. And even if fear itself could justify the rushed first stimulus package, little can justify the continuing resort to short-run measures—temporary tax cuts, temporary spending programs, repeated quantitative easing—that have done almost nothing to restructure the economy. Keynesian stimulus policies have become the substitute for strategy, planning, and implementation.
Sachs declares himself "an Obama supporter," but worries about the prospect of "four more years of improvisation." There would be, he suggests, "a narrow window in which Obama can lay out real and long-term options for the country, before those options are overwhelmed by the deepening economic, social, and environmental crises wracking the US and the world." And he asks us to "consider three pivotal issues that will likely determine our country's well-being for decades to come: energy, health care, and skills."

I'm sorry to skip over Sachs's investigation of the situation in each of these sectors. It's the heart of the matter, and you really owe it to yourself to read it for yourself. But we really can't get into that here. He proceeds to register horror at the expectations aroused by Willard Inc.'s mangling of these issues, to the extent that he even touched on them, in his campaign and in the first debate (you know, the one he "won"). But he's not all that confident that President Obama ("a very smart, honest, and ambitious leader") can be counted on to take charge in a productive way.
[S]uccess will require a very different second term. America's deepest problems are structural, not cyclical. We need to reinvigorate government for the twenty-first century, and to put away childish things, just as Obama once promised to do. Obama has faced childish opposition, it is true, but grown-up leadership that eschews gimmicks could recapture the support he needs to begin leading the nation away from its current morass.


What "No Relation" has done, besides parlaying the accident of his last name (as I've written before, I believe he'd have no career if he were forced to announce himself as Robert "No Relation to Paul" Samuelson, since I'm quite persuaded that lots of people believe, to the contrary, that he's a "chip off the old block," the legendary economist) and a bunch of mindless "conventional wisdom" economic platitudes that he hasn't either the inclination or the tools to evaluate. Like, for example, the familiar right-wing shibboleth that "government can't create jobs." In "No Relation"'s cosmos, only rich white moguls who suck the life out of the economy can create jobs.

Economist Dean Baker, co-founder (with Mark Weisbrot) of the economics think tank Center for Economic and Policy Research, took him on the other day on the CEPR website.
Robert Samuelson Takes on NYT Editorial Board: Government Does Not Create Jobs!

Thursday, 25 October 2012 15:53

Robert Samuelson was sufficiently outraged by a NYT editorial claiming that the government creates jobs that for the first time in his 35 years as a columnist he felt the need to attack a newspaper editorial. Samuelson called the NYT view "the flat earth theory of job creation" in his column's headline. Since on its face it might be a bit hard to understand -- there are lots of people who do work for the government and get paychecks -- let's look more closely at what Samuelson has to say on the topic.

Samuelson tells readers:

"It's true that, legally, government does expand employment. But economically, it doesn't — and that's what people usually mean when they say 'government doesn't create jobs.'

What the Times omits is the money to support all these government jobs. It must come from somewhere — generally, taxes or loans (bonds, bills). But if the people whose money is taken via taxation or borrowing had kept the money, they would have spent most or all of it on something — and that spending would have boosted employment."

Okay, so we can at least agree that all of those people working as teachers, firefighters, forest rangers etc. do legally have jobs. That seems like progress. But let's look at the second part of the story:

"the money to support all these government jobs. It must come from somewhere."

Yes, that part is true also. But the last time I looked, the money to pay workers at Apple, General Electric, and Goldman Sachs also came from somewhere. Where's the difference?

Samuelson tells us that if the government didn't tax or borrow or the money to pay its workers (he makes a recession exception later in the piece) people "would have spent most or all of it on something -- and that spending would have boosted employment."

Again, this is true, but how does it differ from the private sector? If the new iPhone wasn't released last month people would have spent most or all of that money on something -- and that spending would have boosted employment. Does this mean that workers at Apple don't have real jobs either?

The confusion gets even greater when we start to consider the range of services that can be provided by either the public or private sector. In Robert Samuelson's world we know that public school teachers don't have real jobs, but what about teachers at private schools? Presumably the jobs held by professors at major public universities, like Berkeley or the University of Michigan are not real, but the jobs held at for-profit universities, like Phoenix or the Washington Post's own Kaplan Inc., are real.

How about health care? Currently the vast majority of workers in the health care industry are employed by the private sector. Presumably these are real jobs according to Samuelson. Suppose that we replace our private health care system with a national health care service like the one they have in the U.K. Would the jobs in the health care no longer be real?

If our new system was as efficient as the one in the U.K. we would not even need any additional tax revenue to pay for it. According to the OECD, the whole expense of the U.K., system, $3,433 per person in 2010, is less than the $3,967 per person (in 2010) that the government already pays for health care. So by replacing a less efficient private system with a more efficient public system will the government have eliminated all the real jobs in the health care sector?

It keeps getting harder and harder to figure out what is supposed to be a real job in Robert Samuelson's world. If the government requires drivers to buy auto insurance, do the people at the auto insurance companies have real jobs? Suppose the insurance companies were run by the government? Suppose that they were private but drivers paid for most of their insurance via a tax on gasoline? (You can have differential rates so that dangerous drivers pay an additional premium.)

How about when the government finances an industry by granting it a state sanctioned monopoly as when it grants patent monopolies on prescription drugs. Do the researchers at Pfizer have real jobs even though their income is dependent on a government granted monopoly? Would they have real jobs if the government instead paid for research out of tax revenue and let drugs be sold in a free market, saving consumers $250 billion a year?

Robert Samuelson obviously thinks there is something very important about the difference between working for the government and working in the private sector. Unfortunately his column does not do a very good job of explaining why. It would probably be best if he waited another 35 years before again attacking a newspaper editorial.

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At 2:21 AM, Blogger John said...

The taboo against government "planning" has a deliciously helpful precedent in "Soviet-style communist central planning" and is another example of the projection of the radical reich: "you can't do what we do because, in fact, we can't stand competition despite what our PR firms continuously tell you?

Of course, this taboo, like "community organizing" is one of the many strategies to isolate individuals, thereby minimizing the limited power they do have under the constitution.

Persons must be rugged individuals who do not organize at the community level and who cannot demand planning from their pathetically representative government, increasingly under the control of the plutocrats who have well-funded and constantly updated PLANS to convert "history's finest experiment in self government" back to consumerist feudalism.

John Puma


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