Bryan Caplan  

Four Year From Now Plans

Using the Minimum Wage to Hamp... This Should be Good...
In the thirties, governments had Four Year Plans.  Today, they have Four Year from Now Plans - big policies that basically don't kick in until the next election.  Waxman-Markey lets emissions grow normally until 2012.  When I criticized the House's health care plan, several defenders quickly pointed out that its payroll tax doesn't kick in until 2013.

Why would politicians push Four Year From Now Plans, instead of "immediate action"?  At first glance, retrospective voting provides a good explanation.  In the retrospective voter model, citizens vote on the basis of recent economic performance.  In this framework, it seems natural for politicians to delay costs until the next election. 

But that's not quite right.  At least in the standard version of retrospective voting, benefits and costs are symmetric.  So politicians who delay get neither credit nor blame for their actions.  This might make sense if a politician favors a policy that costs more than its worth - and is willing to spend his valuable time pushing legislation with no electoral benefit. 

Maybe that's what's going on, but I think I've got a better story: Voters give politicians immediate credit for "doing something" about a problem, but only get upset about negative side effects when they actually happen.  (Added bonus: The longer you wait, the less likely voters are to realize that "doing something" had negative side effects).  In this setting, politicians want to delay whether or not a policy costs more than its worth.  It's a nice way to get the political gravy without the political grief - or at least delay the grief until it's too late for electoral punishment.

You might call this a "voter ignorance" story, but as usual, I call it full-blown irrationality.   If you're going to do retrospective voting, it's crazy to support politicians who willfully increase the lag between action and consequence.  When your agent blatantly tries to game your rules to win your favor, the rational response is to punish him for his opportunism, not reward him for his "statesmanship."

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COMMENTS (10 to date)
8 writes:

I have this really great plan for X, but I won't let it happen until after the next election. This first election was just a taste where I show you what I will do, if you elect me again. For now I'm doing nothing.

You think the opposition party won't have fun with that set-up?

Troy Camplin writes:

Isn't the delay a tacit admission by the politicians that their policies absolutely will have negative effects? Seems like some wily politicians should point this out and use it to their advantage.

Marc writes:

The thing is, both issues are so important, they require immediate legislation with no debate.

Steve Miller writes:

Ignorance and irrationality are soulmates. Ignorance minimizes the cognitive dissonance people experience when their biases are embraced.

Kenny Evitt writes:

But like steroid-use in professional sports, is it really cheating if they all do it? How can voters punish every politician?

Marcus writes:

My guess is if they get the policies in place now then by the time the costs start to kick in there will be people who are dependent upon those policies. Then they'll have success stories to tell and they'll be able to portray the dependent people as victims if anyone tries to scale the policies back.

informed cynic writes:

I'm afraid the delay is often just a parlimentary trick to get around CBO scoring. CBO "costs" and PAYGO are often scored over a 10-year horizon. By pushing the costs back even a few years a bill's official cost can be cut dramatically. Note the healthcare proposal CBO scored at ~1.1T 10-year cost is closer to 1.6T if the 10-year window starts in 2013 after all costs are in place.

If I pass a law requiring every family to burn $1,000 of real assets a year starting now the CBO will score it as $10,000 per family. A "fiscally conservative" pol can look out for American working families by altering the bill to require the destruction of $1,200/yr starting in 5 years. The CBO will say the new bill is 28% "cheaper" using the 10-year window.

Unit writes:

Promises of large cash hand-outs four years from now give political leverage to the leadership in power. Example: they can now go to their constituencies and say "if you don't support health-care reform the stimulus money that is coming your way could be endangered".

Kurbla writes:

Maybe I miss something, but isn't it possible that application is delayed to give some time to your industry to prepare?

Adam writes:

I'll go with the irrational model. I haven't found the median voter, but everyone with whom I've spoken--outside of specialized academics--hasn't even heard of Waxman's Cap and Trade bill. I've tested out explanations on some, but my listener's eyes glaze over faster than the Bering Sea in a January storm.

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