by Richard A. Epstein
Our
political and financial realities will force both Democrats and Republicans to
work toward smaller government.
My
last Defining Ideas column on the Libertarian’s
Dilemma started with the simple but critical observation that voting for any
candidate is like buying a bundle of goods. To get the goods (or policy issues)
you want, you have to accept the goods you don’t. So, the winning candidate may
receive at most minority support for many of the most controversial items in
their bundle of policies. We know that Obama won the 2012 election because voters, by a margin of
81 to 18, think that he “cares for people like me.” But that warm and fuzzy
feeling will soon give way to the issue-by-issue trench warfare
Of Labor
and Business
The power
of this simple proposition is made apparent whenever particular issues are put
on the ballot as separate initiatives, subject to an up or down vote. Two weeks
ago, I wrote about the misguided Proposal
2 in Michigan, which sought to entrench—by constitutional
amendment—collective bargaining in the state to the extent that it was not
inconsistent with federal law. That initiative was beaten by
a 58-42 margin in a state that President Obama carried comfortably and which also
reelected the pro-labor Democratic Senator Debbie Stabenow.
Why the
discrepancy? Because in voting for a president or senator, labor relations are
only one issue among many. For most voters, the presidential election was
dominated by a variety of social issues. But Proposal 2 came unbundled from
those issues when it was put to an up or down vote. Once it became clear that
it would upend many established Michigan laws and practices, the public quickly
switched sides.
This
unbundling effect also explains why corporate giving in the last presidential
campaign did not affect its outcome. For good reasons, most corporations just
don’t want to play in presidential elections. Corporations are complex
entities, which are burdened with lots of internal conflicts, and which sell a
bewildering array of goods and services in many different consumer markets.
In most
instances, corporations will be cautious about supporting candidates, because,
as national and multinational businesses, they have diverse financial and
business interests. It is unlikely, therefore, that the views of any one
candidate line up perfectly with the corporation’s. Hence, the political
contribution that buys support on some issues necessarily subsidizes the
opposition on other issues. Donating to campaigns exposes a corporation to
political risk. It also exposes it to financial risk, if customers who are
unhappy with the firm’s political choices decide to boycott it or to launch a
public relations campaign against it. So why should the corporation waste its
money on politics?
Except in
extraordinary circumstances, the smart corporation lays low in general
elections, and devotes its scarce resources to particular issues that come
before Congress or the president. Individuals working through PACs or SuperPacs
are less conflicted, and less hostage to public opinion. They can make large
bets in political elections, most of which tend not to pay off. But even here,
this market is one in which people of all views can enter, so that many
contributions made to one party will be offset by those made to another.
Ironically,
the incentives for political participation in general elections are more potent
for the labor unions. Unlike corporations, unions do not have to worry about
the loss of business that could result from their aggressive actions. Nor do
they have to worry about taking a stand on a broad array of inconsistent issues
that routinely face corporations contemplating political action. The set of
issues before Congress and state legislatures that affect union outcomes is not
confined to collective bargaining matters, or even employment relations more
broadly conceived.
Unions
hold strong positions on such key issues as pensions, land use control,
international trade, and environmental protection. These issues are, moreover,
sufficiently uniform to allow unions to form strong coalitions that can move on
multiple fronts simultaneously.
The
AFL-CIO is a lot more cohesive than the Chamber of Commerce, many of whose
members can be at odds with each other on key issues. This is not the case with
unions, who know their natural political allies. Unions contributed
mightily to the Obama campaign, in both money and services, knowing full well
that they could cash in their political chips down the road.
The point
is ironic because the great outcry over Citizens United v. FEC, which knocked
down limitations on political speech by corporations, turns out to be wholly
misplaced. The rules apply evenhandedly to both corporations and unions, but
the balance of advantage from the extended First Amendment protection goes to
unions, who have a great deal more to lose from shutting down their political
activities.
A Thorny
Maze of Political Issues
The next
issue that arises is the negotiations that will have to take place between
Democrats and Republicans over a dizzying array of issues. The one immediate
social issue on the agenda involves the contraception mandate in Obama’s
Patient Protection and Affordable Care Act, which right now is subject to
extensive litigation that could remove it from the political arena.
There is
no question that this issue remains explosive, as the Democrats have been
successfully able to characterize the question as a “war on women.” But even
that position can be diffused if the Republicans are able to get across a
simple message: the question posed by the contraception mandate is not whether
women are entitled to obtain and use contraception, but whether employers, most
notably the Roman Catholic Church and other religions, are under a legal duty
to pay for it, all in violation of their religious beliefs.
The real
political challenge with respect to health care is getting it off the ground.
That task requires the creation of complex on-line exchanges, which are
supposed to be set up by state governments in accordance with general federal
mandates, most of which have yet to be articulated. Once this issue is teed up,
the lurking unpopularity of the ACA will come back to the fore, where the
question of whether or not to join its system is done on a state-by-state
basis; only 15 states have signed up to date. In this political environment,
Obama’s small majority in the electoral vote is relatively unimportant,
especially in the 24 states that voted for Romney.
Still
other provisions of Obamacare will come front and center in the Congress,
including the question of whether to repeal the senseless excise tax on medical
devices, with its potential to devastate what is, and should be, one of America’s
strongest industries. Many of the people who voted for the president and the
Democrats on social issues will turn against him on the implementation of this
silly tax.
No Mandate
on Health Care
The
president and his party run the risk of real blowback if they treat their
slight electoral victory as a political mandate for the health care program. It
is impossible to think that the president will just abandon the centerpiece of
his first administration. But in politics, discretion is often the better part
of valor, which makes it likely that the two sides will negotiate a truce that
calls, at the very least, for delayed implementation of the law.
The same
kind of drama will play out in connection with Medicaid extension that calls
for state-by-state elections on whether to participate in this program. The
math says that individual states should find it hard to turn down the 90
percent subsidies dangled before their noses. But the hidden costs and the
worrisome politics could make this a long and protracted struggle in many
states.
Another
area of potential compromise is over the “fiscal cliff” and what should be done
on taxes and spending cuts to reign in the federal debt. The ever-more
strident Paul
Krugman offers the president this sage advice: Hang tough and don’t make a
deal with the Republicans in light of an “amazing victory.” It is better,
Krugman argues, to parlay the political spoils by risking an economic breakdown
than capitulate to “intransigent” Republicans. It is hard to know what to make
of his now frequent hysterical excesses.
On the
merits, there are those of us who do believe that flatter taxes work better
than Obama’s alternative, and that neither austerity nor stimulus will solve
the problem unless and until key structural reforms are made in labor, health
care, and real estate markets. These views are, moreover, mostly shared by many
fiscally conservative and small-government voters who could not bring
themselves to support the Republican in 2012, because they believed that
Republicans would be all too willing to let big government meddle in the
private lives of its citizens.
Democrats,
too, may decouple themselves from their party in their concern over fiscal
issues. Indeed, this swing bloc could easily register its unhappiness with both
parties for taking hardline positions of the sort articulated by Krugman and
others. It is therefore no surprise that cooler heads are likely to prevail as
both Obama and House Speaker John Boehner have declared their intention to work
for a budget bargain that will avoid the type of no-win standoff that
occurred over the debt ceiling in the late summer of 2011.
A General
Lesson
A week
after the election, the parties have to get back to work to deal with a set of
problems that were pushed to the side in the heat of the campaign. These issues
will have to be resolved one at a time. One of the great tragedies of the
Romney campaign is that it failed to spell out, with sufficient concreteness,
the risks this nation faces going forward if it does not rein in the size of
government.
Intellectually,
his greatest omission in the debates was his failure to challenge the president
on the administration’s stubborn line that tax reductions and deregulation can
do nothing to improve the faltering economic position of this nation, with its
feeble growth rate and declining standard of living.
I don’t
believe that most people in this country would take so dismissive an attitude
to these fundamental reforms. Now that each issue will be unbundled from the
others, we can see whether the nation can come to its senses before four more
years pass by and the President simply repeats the dismal domestic performance
of his first term in office.
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