Virginia Political Economy

Logrolling and the Electorate: A Double-Edged Sword

For my final blog post, I finally caved and wrote a whimsical title.  That aside, my thoughts today focus on budgetary logrolling and its instrumentality as both a strategic weapon and as an electoral tool.  Congress now is engaged in two intense, simultaneous end-of-year appropriations battles.  Funding for the war presents severe logistical and partisan problems, as the President has requested approval for $196 billion dollars in short-term funding, while Democrats entered the conversation vowing to block any funding whatsoever unless accompanied by strict legislative timelines for withdrawal from the theater.  At the same time, Democrats are attempting to launch a significant increase in funding for domestic programs (initially $22 billion), which Senate Republicans have violently opposed, at the President's emphatic urging.

The Democrats face a complex negotiating position.  They require cooperation from Senate Republicans and from the President to pass their hoped-for domestic appropriations bills.  Democratic increasing acquiescence to Republican demands on the war-funding front is understandable as part of a traditional log-rolling calculus: they need to realize part of the aggressive domestic agenda on which they won their historic victories in the midterm elections in order to hope for success in the 2008 cycle.  They also cannot reasonably hold the line on their "no funding for the war" position without suffering immense electoral fallout.

The Republicans, however, face an equally complicated electoral picture, as a significant element of the Republican plan to recoup from their sweeping defeats in 2006 is to return the party to its small-government, low-spending Reaganite roots after the really incredible increase in federal spending overseen by President Bush, whose unprecedentedly low approval ratings form a constant specter in Republican planning for the 2008 election.

Neither party, in consequence, can play a traditional multi-player logrolling game, where concession can be traded for concession.  Each dollar the Democrats lose in domestic spending further belies the very ambitious public goals advertised during the 2006 midterms, and each dollar they vote to the war without demanding withdrawal timelines weakens their ability to run as the non-Iraq-war party.  Each dollar the Republicans accept in domestic spending decreases their ability to execute the reposition on the spending spectrum they hope to accomplish, and any concession made on withdrawal deadlines or decreased troop funding weakens their position as the party of victory against terrorism.

This all coheres into a grim picture of how Congress will resolve its spending problems.  It's unlikely that a "Contract with America" shutdown is in the offing, but at the very least the Hill will emerge from this contentious debate even more stratified on party lines and even less in touch with the general tenor of the electorate, the consequences of which will certainly emerge in the coming year as the presidential election picks up speed.

Knowledge or ignorance?

Are voters in the upcoming primaries ignorant or knowledgeable? Recent polls show that As N.H. Primary Nears, Clinton Clings to Narrow Lead.  Clinton is perceived as the most experienced but many Democartic voters wanta different approach to governing.  I am curious as to how many of the people polled are knowledgeable voters and how many are ignorant. While her lead has actually shrunk she still “scores better on measures of strength, experience and electability than any rival.”  Questions regarding candidates’ strengths show that people believe that she has the “best resume for the White house,” “Edwards’s top quality as a candidate is empathy,” and “Obama has the edge on honesty.”  Another edge for her is women.  Two in ten people polled said that they are more likely to vote for her since she would be the first female president.  The results to the polls question of “if the primary were being held today for whom would you vote are as follows: Clinton 35%, Obama 29%, Edwards 17% and Richardson 10%.  With the miracle of aggregation these results will probably be very close to the actual vote in January.  Also, since the elections in January are primaries, and the candidates are in the same party are voters more knowledgeable?  One cannot simply vote along party lines in a primary.  I would be interested to see if voters in the general election are more ignorant [and again maybe rationally so] than those in the primary elections.     

An Interesting Externalities Case

According to a CNN.com article, co-workers are among those highly responsible for getting individuals sick.  Apparently workers, especially in the financial industry, feel bad about taking sick days just as they do about taking vacation days.  According to a 2005 survey, 80 per cent of people go to work while sick.  This means that many sicknesses such as the flu or the common cold are transferred in the workplace.

While sick people going to work reduces the workload for everyone else in the office, it also offers the negative externality of getting others sick.  However, according to Coase, externalities are reciprocal.  This my not be the case here.  The sick people hurt the healthy workers.  Obviously, the healthy workers are harmed by the sickness that is transmitted to them by the sick workers.  But how do the healthy workers hurt the sick workers?  I really do not have an answer for that.  Maybe Coase could clear this up for us.

Ignorant irrationality

The only thing I know about Mitt Romney is that he is a Republican and a Mormon. My ignorance is rational. It would take scarce time and resources to research his stance on various issues and to vote in the primary. He might not make it to the presidential election, and even if he does, my vote won’t change the result.

If my fellow ignorant voters were to vote and use a coin flip to make their decisions, they would cancel each other out and not affect the result. The educated voters would decide Mr. Romney’s fate. However, polls suggest that a quarter of Americans have reservations about voting for a Mormon. When people make their decisions on primary candidates, there will be a systematic bias against him because of his religion. Therefore, educated voters will be joined by a bunch of Mormon-hating people, and the outcome will not be the most efficient for the country. These people are not simply ignorant but irrational, sticking to the idea that Romney’s religion would negatively affect how he ran the country.

Under Caplan’s theory, the reason that people base their opinion of Mr. Romney on his faith is because there is a low cost. No one has to know how they voted, so no one can call them prejudiced. Each individual's vote won’t decide the election. Educated, nondiscriminatory voting is a public good, and our society produces a quantity below the optimal. In addition to this inefficiency, now Mr. Romney has to spend scarce time addressing his religious views instead of his vision for the country. Thanks to others’ demand for irrationality, it looks like I will remain ignorant.

No Break for Big Oil

    The House of Representatives passed an energy bill Thursday that would end tax breaks for big oil, increase fuel efficiency requirements for cars, and promote renewable fuels.  The bill, which was passed in large part thanks to House Speaker Nancy Pelosi, represents a major shift away from traditional US energy policies dependent on fossil fuels.  Republican leaders say that the bill will only raise energy prices and do nothing for oil or natural gas, fuels that are essential to our current economy.The bill still has to go through the Senate and the president, who could veto the bill.
    The interesting part of the bill, however, is that the five biggest US oil companies will lose their $13.5 billion in tax breaks and instead use the money for the development of renewable energy.  This goes against all my beliefs that the government is run by big oil.  It seems as if there is still hope for the US government.  The bill was passed in a democratic congress, and Republicans in the Senate, as well as the White House, would like to strip the repeal on tax breaks from it.  Republicans in the Senate actually believe the bill could pass, as long as the tax is taken out.  I suppose some senators and congressmen might lose some votes and campaign money if oil companies lose a few billion dollars.
  Bush will likely veto the bill, causing the vote of the majority to fail again.  However, if the bill is vetoed, the House is only a few votes away (it passed 235 to 181) from a 2/3rds vote needed to override the veto.  Because Democrats control the house, they have been able to manipulate the agenda and push this bill through the house, even with the controversial oil tax added on.  If this were to pass, it would mean a major step away from the US's conservative energy policy of the past.  I guess big oil companies aren't doing enough rent seeking to keep congressmen on their side.

Congress Peru-ses free trade

It looks like President Bush and the US Senate are informed enough to have avoided what Caplan describes as the anti-foreign bias as a free trade pact with Peru recently overwhelmingly passed by a 77-18 vote. As we discussed in class, Caplan identifies four biases of the irrational voter, one of which is the anti-foreign bias. According to Caplan, people underestimate the benefits of transactions with foreigners, often assuming trade is zero-sum rather than positive sum. According to the article, the pact is worth 9 billion a year. Peru’s President Garcia welcomed the Senate's vote, saying it was "good news for the increase of jobs and wages that should boost foreign investment in the country". President Bush said after the vote that he looked forward to signing the bill that would "level the playing field for American exporters and investors" and signal "our firm support for those who share our values of freedom and democracy". Similar free trade deals are pending with Panama, Columbia, and South Korea.

There might be another factor at play in this pact as well. According to the article, The American Farm Bureau Federation estimates the pact will boost US farm exports to Peru by more than 700 million a year once it is fully implemented. Clearly, the agricultural industry has a large incentive to have this pact passed, As Stigler would argue, the American Farm Bureau Federation may have actively worked to acquire this regulation, as the pact requires that tariffs and duties on US goods be gradually phased out. There may be some negative consequences of this trade agreement, however, as Oxfam has noticed that the agreement would expose Peru's small farmers to "massive dumping" of subsidized  US farm goods. 

Gwinnett is Garbage

Gwinnett County, Georgia is attempting to create a regulated monopoly for garbage pickup.  Gwinnett wants to limit the number of private trash collection companies and restrict where they can opperate.  The privat companies are furious that the local government is attempting to create a regulated monopoly in a competitive industry and ar stating that the new bill is clearly helping certain collction companies at the expense of the Gwinnett citizens.

The current system allows for any trash collection company to pick up in any area, allowing for up to 32 trucks in a single neighborhood on any day and th local government believes that a regulated monopoly would improve the community life.  The officals ar also concernd about negative enviromental effects on the county since many people do not pay for any trash collction and littering and dumping is increasing in the country.  The local government is attempting to create a regulatd monopoly so that the county will get an efficient system of trash disposal and th socially optimal level.

To lower rent seeeking costs that would arise from the garbage companies, the county will allow  companies to bid sole use of one or more of the eight zones to be created.

Do you draw the line for medical financial assistance at the border?

The University of Texas Medical Branch in Galveston is facing a tough decision in whether or not they will continue to provide financial assistance to illegal immigrants in need of cancer care. With hospitals in the area being inundated with patients, it’s not easy to turn away people in need, but at the same time by honoring these patients, others are being harmed. There are multiple ways of looking at the argument for and against the medical care, and even from the economist perspective it is impossible to accurately estimate the externalities associated with either decision.

          On one hand, hospitals are sacrificing their ability to serve citizens by providing health care to those who are not paying state and national taxes. In this sense, the immigrants are free-riding while their neighbors are paying out of pocket so that they receive fewer benefits of their own tax dollars. While we have spoken in class of how immigration should not impact the economy in a negative way as many people assumer, in this instance we see that there are definite negative externalities associated with illegal immigrants who are not paying the same taxes as citizens and are still reaping the benefits.

            Conversely, there is the argument that if Galveston is to close its cancer center to illegal immigrants, they will move to receive care from the Houstoncenter, since it is not changing its policy. In doing this the Galveston location would benefit, and the Houston local would absorb the costs despite the fact that it is already dealing with similar issues. Another side of the issue is that hospitals do require proof of residency for patients to receive financial assistance, so even if these patients aren’t paying full national taxes, they are paying taxes to the state of Texas through their rent; and the hospitals are state-funded.

         Under these circumstances it is tough to decipher what the correct action to take is, seeing as there are moral values that cannot be accounted for by the marketplace. Does the state have the right to reserve medical care to only those who can prove their citizenship? Should there be a national law requiring this so that those that do not make this choice on their own accord become overrun with illegal immigrants and since they are providing the services at a discounted rate, be forced to close due to bankruptcy? Or should every hospital be required to give care to those in need (this is true for emergency room patients now) so that all hospitals are on more equal footing, though places like Galveston and places with more illegal immigrants are going to shoulder more of the burden.

The Primacy of New Hampshire and Iowa

     The presidential nominating process often draws criticism and calls for change. One such argument revolves around the so called “rush to be first”. Adam Clymer recently wrote an interesting article about the nominating process, and amongst other issues he addressed the concern of states attempting to hold their primaries before the usual frontrunners, New Hampshire and Iowa. Many argue that winning nominee is effectively determined after the first primaries, so the first states should be those that better mirror the broad, diverse nation. Clymer admits that New Hampshire and Iowa do not have the representative appeal of say a California or a New York, but there may be a more subtle and beneficial rationale for their primacy.

     Clymer writes that, “their voters are unrepresentative of the nation in the best way: their voters follow the campaigns closely and ask candidates smart, tough questions”. Thus, even if you allow that the nomination results in these two states unduly influence the final nominee, perhaps this is desirable? Caplan points to the rationality of irrationality and the fact that most voters do not take the time to educate themselves about candidates, but vote on the basis of a utility generating ideology. These ideologies, coupled with low costs of systematically voting irrationally, can lead to potentially problematic elections.

     Thus, an appropriate policy measure would be one that either raises the costs of being ideological and irrational, or allow the election to be decided by those whose individual calculus makes them vote rationally. This may be the exact benefit derived by having the initial nominating conventions in these two seemingly random states. For whatever reasons, historical or demographic, both Iowa and New Hampshire voters have shown unusual willingness to probe candidates. Their biasing of the final candidate may be just the sort of signal that voters in bigger states need to embrace.

Prime Time Predicament

        For the fifth week in a row, television junkies across America find themselves in despair. This distress is worse than the pain felt all summer after a cliff-hanging finale episode because, unlike traditional re-run marathons, viewers do not know when this current hiatus will end. The Writers Guild of America has been on strike since November 5, demonstrating the power of collectivization and the ability to wield power as a special interest group. Unfortunately for "24" fans and 'The Office" aficionados, negotiations have yet to see significant progress.

        The Writers Guild of America has historically been a very strong union. Their collectivization results in by-products producing benefits beyond gaining political strength, as their writing provides the ability to affect political and social agendas. Essentially, these writers can set the tone for the culture and control the dialogue in society – a position of great power. Writers can effectively decide what should and should not be popular and control popularity of language, fashion, ideas and many other notions within society. In the past the networks these unions are tied to have had a monopoly on news and entertainment. However, in today’s realm of alternative media, networks are losing monopoly strength and thus these unions are also weakening as they are tied to a monopoly with abating power. Instead of arranging their whole evening around the ability to catch “Desperate Housewives” via the television airwaves, viewers can watch it over the internet whenever is convenient for them. The Writer’s Guild is thus losing bargaining power as it is no longer as simple to hold ABC, NBC, CBS and other major networks hostage because of increasing alternative mediums for entertainment.

         In this environment of declining power, leaders of the Guild have struggled to make progress on negotiations, and are now calling on companies to negotiate individually. This attempt to move negotiation forward reflects the ability of smaller groups to be more effective. In such a structure it is easier to overcome the free rider problem, and thus everyone plays a key role. Hopefully, as everyone in the Guild becomes active in discussions with their individual company, there will be gains towards an agreement. Otherwise, prime time viewing enthusiasts might get really frustrated and have to collectivize and join the lobbying. There is power in the viewer to ultimately affect the network’s willingness to agree to contracts as viewers may exercise their consumer-voter strength by voting with their remote controls.