If You Talk the Talk...

On Wednesday, I examined a Monday post by James Maule. See The Tax and Spending Stalemate: Can It Destroy the Nation?, MauledAgain (Nov. 7, 2011).

Maule blamed Republicans for the legislative gridlock surrounding competing infrastructure proposals. The Democrats are pushing a $60 billion spending measure, "funded" by tax surcharges on "millionaires and billionaires." The Republicans are pushing a $40 billion spending measure, "funded" by unused outlays for other programs.

Maule was nominally venting about our crumbling infrastructure and jobs crisis. In substance, he was channeling the anxiety of the political left. If Maule were serious about infrastructure spending and economic stimulus, he would have lectured the Democrats for rejecting the $40 billion measure. A compromise starts with common ground. As between $60 billion and $40 billion in spending, $40 billion is the "common ground."

I'm sure that Maule is genuinely concerned about the current unemployment crisis. As such, I'm guessing that he'll be disturbed by a recent setback to energy infrastructure development.

On Thursday, Team Obama delayed the proposed Keystone XL oil pipeline until after the 2012 election.

The proposed Keystone XL Project (click here for map) consists of a 1,700-mile crude oil pipeline and related facilities that would primarily be used to transport [oil] from an oil supply hub in Alberta, Canada to delivery points in Oklahoma and Texas. The proposed Project would also be capable of transporting U.S. crude oil to those delivery points. The proposed project could transport up to 830,000 barrels per day and is estimated to cost $7 billion.

The announcement marked a sharp reversal by Team Obama. The State Department had previously supported the pipeline on national security grounds. Obviously, importing oil from Canada reduces our dependence on Middle Eastern oil imports. The $7 billion project would upgrade the nation's energy infrastructure; a Democratic priority until yesterday. It was expected to created tens of thousands of jobs during the midst of a national unemployment crisis. And it was funded with private capital, thus avoiding Congressional gridlock entirely.

Unfortunately, the end run around Congress ran into the brick wall of regulatory delay. Environmental activists were particularly hostile to the Keystone XL project, because the pipeline would transport oil from Canadian tar sands. (Never mind that Canada could route the oil from tar sands to the Pacific coast for export to Asia.) As noted by the LA Times, the decision exposes Team Obama "to the same criticism the White House has leveled at congressional Republicans regarding deficit reduction: delaying a tough call in hopes that the politics will be better after next November's election."

The building trade unions, whose members have been disproportionately hurt by the Great Recession, condemned the decision:

Terry O'Sullivan, general president of the Laborers' International Union of North America, said the move would "inflict a potentially fatal delay to a project that is not just a pipeline, but is a lifeline for thousands of desperate working men and women. The administration chose to support environmentalists over jobs—job-killers win, American workers lose."

Mr. O'Sullivan's comments are right on the mark. The political left talks the talk about infrastructure and jobs. But they don't walk the walk, as evidenced by the flip flop on the Keystone XL project. It boils down to a question of priorities. We're in the midst of a national unemployment crisis. Do we want a government that responds flexibly to balance environmental, labor and other considerations while fostering public and private infrastructure spending? Or do we want a government that prioritizes environmental or other regulatory considerations above infrastructure upgrades and job creation?

A cynic might take a hard look at the Keystone XL decision and allege that Team Obama is trying "to do everything they can to drag down this economy." But I'll leave that commentary to Harry Reid and left-wing academics.

Whitesnake Maule's Again

I spent a couple posts last week debunking Beale's Law (see here and here). On Monday, another tax professor jumped onto the factual manipulation bandwagon. This time, left-wing blogger James Maule put himself in the spotlight. [To demonstrate the echo chamber effect, Linda Beale promptly cheered Maule's post.]

As I said last Friday:

When it comes to data manipulation for political purposes, the right and the left are engaged in a long-running tug of war. They both abuse statistics* and economic common sense to influence public opinion in the short term. It's great sport for incumbent politicians, blogging left-wing academics and Washington lobbyists. Not so great for the country in the long run.

* Okay, I should have said "facts, statistics and economic common sense."

Why am I calling out Maule for factual manipulation?

On Monday, Maule linked to this report on the latest political volley between Senate Democrats and Republicans. Maule fumed over Republican opposition to a $60 billion infrastructure proposal from Team Obama. He then scolded Republicans for a proposal to allocate $40 billion to infrastructure spending from "unspent funding for other domestic programs." In Maule's view, the Republican proposal was a non-starter because it "included provisions intended to make the nation’s air quality worse than it is, under the pretext that less regulation means better lives for, oh wait, more money for those already with plenty of it."

According to Maule:

[1] Team Obama's infrastructure proposal ($60 billion) kills two birds with one stone. It begins to address our massive deficit in infrastructure spending. And it pumps needed federal outlays into the economy, where they will support construction jobs.

[2] Republicans oppose the $60 billion spending measure for several reasons. First, it is "funded" with a surcharge on millionaires. ("Boo hoo for the wealthy," says Maule.) Second, it is too large of a government commitment. Senate Republicans have given us a middle finger, telling us that we don't deserve quality highways and bridges. (Probably a fat middle finger, swaddled in expensive rings.)

[3] Harry Reid correctly identified that the Republicans intend "to do everything they can to drag down this economy."

[4] Democrats properly rejected the $40 billion spending measure, because Republicans were just using it as a vehicle to further undermine our nation's impossibly toxic air quality. (I know that I cannot run outside on the trails of northern California without several gas masks and tanks of oxygen.)

[5] Republican partisan politics, as obvious from the above reprimand, are reprehensible. Democratic partisan politics, as obvious from the Harry Reid quote, are a necessary counterweight against those damned partisan Republicans.

Let's review how Maule's key points hold up against a dash of facts and a pinch of logic.

[1] Maule is correct that we need more long-term investment in public infrastructure. However, as I've previously discussed, infrastructure is not a holy grail of short-term job creation. Meaningful infrastructure projects require several years of development. Neither the Democratic proposal ($60 billion) nor the Republican proposal ($40 billion) would have an immediate stimulative impact on the construction industry.

The Department of Transportation has a $70 billion annual budget (rough numbers). States and municipalities spend many billions more on transport infrastructure annually. Public utilities spend many billions more on energy infrastructure annually. We don't need to spend money on infrastructure just for the sake of spending money. We should be focused on developing high-quality infrastructure using the slack in the labor market to get the highest "bang for the buck" on construction expenditures.

[2] Maule wants to increase taxes on the "wealthy," so no surprise that he favors the Democratic proposal ($60 billion in spending "funded" by a surcharge on millionaires). However, if we're going to increase taxes on the wealthy, why not use those revenues to address the existing budget deficit? The Republican proposal was also "funded" by "unused" outlays to other programs. Both sides are engaging, to some extent, in accounting gimmicks. But the Republican proposal is more fiscally responsible (although gimmicky).

Maule accuses the Republicans of espousing that we "don't deserve quality highways and bridges." He completely ignores the $40 billion Republican proposal. Or perhaps Maule believes the $20 billion difference between two measures would provide us with "quality highways and bridges."

[3] Maule criticizes Republican allegations that Democrats were pursuing a tactical agenda focused on 2012 elections. He praises Harry Reid for comments that Republicans are attempting to damage the economy.

How much more biased can someone possibly get? Let me be clear. The political left and the political right are both playing this game with an eye towards 2012. If the Democrats were serious about infrastructure spending, they could have worked with Republicans on the $40 billion measure.

[4] In point [1], Maule argues that the $60 billion Democratic proposal could address our under-investment in infrastructure and provide stimulus the construction industry. He criticizes Republicans for arguing that $60 billion is "too big" a number. Then he criticizes Republicans for a $40 billion spending measure (presumably "too small" for Maule).

But if infrastructure spending is good for the economy, shouldn't the Democrats be working with the Republicans on a bipartisan $40 billion package? Why should they resist all spending just because they want to spend a higher number? Maule reminds me of schoolkids on the playground. Apparently, if the Democrats don't get their way, they should pack up their toys and go home.

Maule gripes about the regulatory conditions affixed to the Republican bill. I'm highly confident that he hasn't perused the actual bill (S.1786). The Republicans were mainly trying to streamline the regulatory process applicable to the very same infrastructure projects that are funded by the bill.

[5] Yes, partisan politics are obnoxious. As a political independent, nothing is more frustrating than empty posturing over budgetary gimmicks and class warfare tax policies. However, the political left has no monopoly on virtue. When you start quoting Harry Reid, you confirm that you are a card-carrying cheerleader for Team Obama.

What's with the title of this post? I realized that I've spent the past several posts debunking Linda Beale and James Maule. My friends on the political left are probably thinking, "here he goes again." So I dedicate this one to you:

Here I go again on my own
Going down the only road I've ever known
Like a drifter, I was born to walk alone
And I've made up my mind
I ain't wasting no more time

Reid Reminder: Electoral Paradox

Last week, Senator Harry Reid (D-Nevada) reminded us why we need to "throw the bums out." During a debate over the teacher/first responder bill (S. 1723), Reid observed:

It's very clear that private-sector jobs have been doing just fine; it's the public-sector jobs where we've lost huge numbers, and that's what this legislation is all about.

Yes, he really said that. Reid went on the record and stated that the pace of job creation in the private sector is "just fine."

The last time I checked, we had a 9% headline unemployment rate, and a 16-20% effective unemployment rate. The 16-20% effective unemployment rate is an unofficial number which includes people who are too discouraged to continue seeking work. For Harry Reid, 9% headline unemployment and 16-20% effective unemployment is "just fine."

Reid's comments aren't particularly shocking. He makes airhead comments all the time. But that's no excuse. Why do we have such diminished expectations for our political leaders? We should not have to tolerate a Senate majority leader who projects such an air of incompetence. His own party should have demonstrated some common sense years ago and delegated Reid to the back benches. Let's prioritize leadership over seniority until we emerge from this period of economic malaise.

Reid apologists will argue that I'm taking his comments out of context. He was contrasting recent employment data in the private sector against similar data regarding state and local government employees. He was tilting at "obstructionist" Republicans who oppose more federal spending on state and local services. Blah blah blah. It was an airhead comment, and it projects an air of incompetence, regardless of political motivation.

I'm not just picking on the invertebrate* Harry Reid. Harry Reid is symbolic of a problem that has been festering on Capitol Hill for decades. It's not a problem with the Republican party or Democrat party; both parties share the blame for bad policies and incompetent leadership over the years. It's a structural problem baked into the U.S. electoral system itself. (*Credit to tax fashionista Lee Sheppard)

The problem is that our members of Congress are, for the most part, unaccountable for their actions as legislators. I won't digress far into PolySci 101. Suffice it to say that the deck is stacked in favor of incumbent legislators. Critically, incumbents can control or influence federal spending in their districts. Federal spending sometimes translates into permanent jobs (think military bases). Local constituents can sense where their bread is buttered, even if a given legislator is failing the country as a whole. Special interests trade campaign donations and elector muscle for direct or indirect legislative perks. Legislative districts are gerrymandered to maximize political support for one party or the other. The list goes on.

Because the deck is stacked in favor of incumbents, we get an Electoral Paradox. Depending on the poll, roughly 80 to 90 percent of Americans disapprove of Congress. Nearly 80 percent of the country believes that we're on the "wrong track." But paradoxically, local constituents continue to re-elect their incumbent members of Congress, cycle after cycle after cycle. Even in 2010, when the Tea Party energized a backlash against political incumbents from both parties, incumbents prevailed in an large majority of electoral contests. The American public is enormously disgruntled on a macro level, but doesn't hold incumbent legislators responsible on a micro level.

As a result of the Electoral Paradox, our nominal democracy has become a political oligarchy. We have a cadre of career politicians; men and women who are focused primarily on their individual re-election campaigns. Their secondary focus involves jockeying to create internal and external alliances and other legislative accoutrements (committee appointments, etc.) that support their primary focus on re-election. They are effectively neglecting the long-term interests of the country to pursue short-term agendas that "refresh" every two to six years.

We're emerging from a financial crisis that prompted the worst economic downturn since the Great Depression. The political class has attempted to pin the sole responsibility for the financial crisis on Wall Street. (To be fair, politicians on the left are more vocal advocates of this view. They also blame "de-regulation," despite the fact that the banking industry was highly regulated. But sheer volume of regulation is not the same as prudent and effective regulation.)

In reality, the financial crisis originated when the U.S. real estate bubble popped. The real estate bubble was fueled by government policies that distorted traditional lending practices. That problem was compounded by lax regulation of mortgage origination practices and feeble regulation of banks and other financial institutions. On both counts, legislators share culpability with Wall Street financial engineers. Politicians took the credit for a bubbly economy driven by the housing bubble. They scattered like cockroaches when the bubble popped and a vicious de-leveraging cycle ensued.

Congress has a responsibility to pilot the U.S. economy around financial crises. Individually and collectively, members of Congress failed to live up to that obligation. Political incumbents should acknowledge that they contributed to the financial crisis, accept responsibility, and pass the political reins to a new class of legislators. Instead, a majority of the political oligarchs have clung to power. Chuck Rangel, Henry Waxman, Barney Frank, and their senior colleagues on the political right, should not be able to look themselves in the mirror. The fact that they continue to influence legislation -- despite their abject failure as trustees of the American economy -- should make us all shudder. With some exceptions (e.g., Chris Dodd), these men and women have chosen to ride out their political careers in disgrace.