David R. Henderson  

Obama's Almost Contradiction

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Here's an excerpt from Peter Baker's piece in the New York Times last week on Obama:

He realized too late that "there's no such thing as shovel-ready projects" when it comes to public works.

Now here's the start of the very next paragraph:
Most of all, he has learned that, for all his anti-Washington rhetoric, he has to play by Washington rules if he wants to win in Washington. It is not enough to be supremely sure that he is right if no one else agrees with him. "Given how much stuff was coming at us," Obama told me, "we probably spent much more time trying to get the policy right than trying to get the politics right. There is probably a perverse pride in my administration -- and I take responsibility for this; this was blowing from the top -- that we were going to do the right thing, even if short-term it was unpopular.

Notice the almost contradiction? Obama admits there's no such thing as a "shovel-ready project" even though a huge part of the argument for the 2009 increase in domestic spending was that it would go to "shovel-ready projects." And then he says that his administration "spent much more time trying to get the policy right than trying to get the politics right."

Of course, it's not literally a contradiction. He could have spent time trying to get the policy right and still not realized that there's no such thing as a shovel-ready project. But it wouldn't have been much time. He would only have had to ask people in the business of spending money on highways, etc. to know that there was no such thing. So his pride was perverse, but not in the way he means it.

What this episode illustrates, like George W. Bush's failure to do due diligence before invading Iraq, is how little information government typically gets before it makes huge decisions with huge implications. If you're looking for a great example of a negative externality, an act, remember, that comes about because the decision maker doesn't bear a large percent of the cost of his decision, look no further than Bush's Iraq invasion or Obama's "stimulus" package.


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CATEGORIES: Public Choice Theory



COMMENTS (17 to date)
Ned Baker writes:

David,

I find it a little repulsive to analogize the shortfall of shovel ready projects in a stimulus act (in the end comprised mostly of tax cuts and funding to existing programs, including state governments), to a war in which 100,000 to 1,000,000 people have died.

David R. Henderson writes:

@Ned Baker,
I'm sorry you feel that way. Economics can be used to look at a wide range of externalities, from ones where the main destruction is of wealth to ones where much of the destruction is of human lives. If you read my post again, you will see that I offered no analogy. They both illustrate, as I wrote, how little information government gets before it makes big decisions. Like you, I think Bush's decision was way worse than Obama's.

ed writes:

I agree that Bush's decision was way worse than Obama's. (And I think your point in the post is valid.)

But I get the sense that the econlog bloggers here are more upset at Obama than they are at Bush. I wonder why that is?

Hyena writes:

Prof. Henderson,

I seriously doubt personal incentives are important here. Presidents operate more like the founders of New Economy technology companies: thoroughly convinced of their vision and backed by investors who have many motivations. In that context incentives do not work well at the individual level; they show up in the aggregate as poor ideas are abandoned by investors and die for want of funds.

In that case, you really need a way to simply abandon a president. Currently, you can just elect for an alternate agenda; there's no electoral equivalent of holding cash and waiting. I'm sure that will soon produce its own horrific effects.

Last, just to pile on: you all really should be more anti-war and anti-military than you routinely seem to be. Yearly spending on the wars alone probably amounts to far more than the cost of PPACA as a budget item and is far greater if you consider how many people have been killed or maimed as a result. Likewise, there was much talk about cash-for-clunkers, but the reality is that the military spends that kind of money every few days to do little more than forcibly destroy other people's productive capital, including themselves.

Tom writes:

"But I get the sense that the econlog bloggers here are more upset at Obama than they are at Bush. I wonder why that is?"

Because the invasion of Iraq had been the making for more than a decade. There was quite a bit of information, and the mistake may have been in taking too long.

As for Obama, I can't see how he has cared at all for making anything but the 'right' political decisions.

MernaMoose writes:

But I get the sense that the econlog bloggers here are more upset at Obama than they are at Bush. I wonder why that is?

Maybe because, Bush made a mistake that can in the long run be corrected.

Obama shoved ObamaCare down our throats and it seems highly unlikely that we'll ever be able to recover from it.

Yes, Iraq was a very stupid decision with horrible consequences. But philosophically, the error in Iraq is not of the same type as the error of ObamaCare. And the carbon tax (under whatever guise) that the liberals so badly wanted to jam down our throats, was of the same type as ObamaCare.

Bush and Obama both made similar mistakes Re: "stimulus" and "save the economy" crap. It's hard to rate one of them any higher than the other on this front.

On net balance the score looks like this:

Republicans: pretty bad.
Democrats: definitely worse.

And btw, before anybody tries going there, you'll have a really hard time convincing anyone that Obama is any better on the war front than Bush was. Because at the end of the day, Obama has taken Bush's wars and doubled down on the bets.

This Obama BS about "we're out of Iraq" is just that. We're not out of there and we're not going to be, probably until the nation really is bankrupt.

If war was Bush's biggest mistake, then Obama must be condemned for it now just as much as Bush. Obama really hasn't gotten us out of Iraq and he's wasting more and more on Afghanistan. There is no basis here for Obama to claim any kind of moral superiority.

David R. Henderson writes:

@ed,
I can't speak for the other bloggers but probably the reason you get that impression is that I do think Obama is worse than Bush. I often describe Obama as Bush squared.
Take almost any issue--domestic economics, civil liberties, or foreign policy--and Obama is worse than Bush.

Liam writes:

@Hyena,

I am very curious about your comment that David should be more anti-war and more anti-military.

1/ How can David be more Anti-War?
2/ Why should David be Anti-Military?

On the first question, I think David does a lot in terms of rally's and speaking engagements against war and I have never seen him support America's entry into any war (though he is on the fence with WWII).

And on the second question I think you make a very broad assumption that if you are Anti-War you must also be Anti-Military. I am dead set against any military conflict but I am a great supporter of the Military. I see them as a defensive deterrent. I do agree with you though about the Military Industrial Complex and the vast waste of money from the current Military. The fact that the US Military is being used as a political curmudgeon does discredit to those abusing them but not to the brave men and women who serve.

It's by promoting the decent, intelligent people in the military that will be the best way to reform it from within. Hopefully too we may get someone in the White House like Ron Paul who will actually make a serious effort to reign in the abuse.

I think the greatest injustice is a President who claims to support the military but is quick to put them in harms way without exhausting diplomatic efforts first. True, there are rah, rah Generals who can’t wait to go to war but that’s why they do not run the country and make the decisions to go to war.

Obama may have Generals telling him how it is and what to do but that the end of the day he is the one who calls the shots.

And David, I do disagree with you. I think Bush was much worse that Obama because he was uninformed and that is not acceptable when you are the President. And he started the war. And he encouraged extending loans to people who really had no business getting the loans they got.

Hyena writes:

Liam,

The feeling is that there is more discussion of the economic impacts of welfare programs than of the military. This comes, for example, on the heels of Prof. Henderson's objection to the word "contribution" in the case of Social Security, complete with mugger analogy. But the reality is that we have actual force being used right now in unambiguous ways which have few bindings to discussions about political legitimacy.

I've had this problem before, especially in discussions with Johnny-come-lately tea party types. Too often the direction of discussion amongst educated, generally middle and upper-middle class people is centered on marginal tax rates, healthcare costs and other issues which directly effect their finances. I think these issues likely pale in comparison to our criminal justice system, wars and massive military expenditures.

As to the "brave men and women" fetishism: I think we can all give that bit a rest. Beyond the National Guard and reserves, the military consists of an expeditionary force. Anyone serving in it might be convinced that they are "defending America", but that's not what they actually signed up for. They signed up to be instruments of foreign policy.

Next time you feel the need to make that sort of comment, consider first just how much our society and government has stolen from these people through mission fraud.

Ned Baker writes:

David,

I just want to commend you for participating in the comment threads here. Honest and calm debates are too rare. It's why I keep reading this blog even though I often disagree.

David R. Henderson writes:

@Ned Baker,
Thank you so much. That means a lot to me.
Best,
David

liberty writes:

"What this episode illustrates, like George W. Bush's failure to do due diligence before invading Iraq, is how little information government typically gets before it makes huge decisions with huge implications."

I wonder whether it is a matter of not having enough information or if it is some other pressure that forces the decision.

I'm going to cite another example - but, as David said above in the comments - please do not assume that I am analogizing these as if they are of a similar magnitude in terms of cost of the mistake.

I'm reading Deutscher's famous Stalin biography right now. I've read a fair bit about collectivization before, and various opinions about Stalin's motives for changing his position, and various speeches and documents from the period... I do not have a firm opinion yet about what caused his shift of opinion, but I am skeptical about simplistic ideas about his motives: that he had always wanted to push through a forced collectivization and had just been waiting until he had enough power; or he decided that his power would be better consolidated if he ramped up an extremist program; or that it was all (across the whole USSR) just an excuse to commit genocide in Ukraine, etc.

Instead, I am beginning to think that it was the pressures of the moment upon not just Stalin but the whole Politburo under his watch that convinced them that they *had* to push through collectivization at *that* moment, or else all their other plans would fall through. At the same time, it seems almost unbelievable that they could have failed to realize that they were not *ready* to collectivize because they did not have the machinery and materials for the collective farms yet! Yet, it seems like this "lack of information" was really real. Its easy to assume sinister motives, but it simply may have been a mistake--which, again, makes more sense if there were indeed internal pressures upon the political actors to forge ahead with collectivization for political reasons; and that these pressures were enough that they then failed to really account for all the troubles they would face.

Even with all the new revelations from the archives so far, one cannot know for sure why Stalin changed his position: whether his positions were all driven by political considerations (ousting his rivals), or whether he really changed his mind. If it is the latter, my guess is that it was due to pressures upon the political actors. Further, my guess is that all political actors face these kinds of pressures, and that this factor (pressures upon political actors) would explain why there was a rush to war in Iraq and why TARP, and perhaps the stimulus, were pushed through so quickly.

Floccina writes:

People seem to think that Government know much that it likely does. I assume that CIA employees are more like cops in Barney Miller than like the CIA in the spy shows. Some stuff I have to ask myself how could they know.

rjs writes:

not much infrastructure in here anyway:

http://projects.nytimes.com/44th_president/stimulus

Don't get too excited about "catching" Obama bemoaning the lack of shovel ready projects. The reality is that the stimulus was spent exactly as quickly as promised: over 70% by Sept 30, 2010. Here's Jared Bernstein as interveiwed by Ezra Klein:

Ezra Klein - Are there 'shovel-ready projects?' An interview with Jared Bernstein.: Ezra Klein: The president has now told at least two journalists that "there’s no such thing as shovel-ready projects.” He obviously believes it. But what, exactly, does he mean?

Jared Bernstein: The president definitely had some initial frustration that projects were taking longer to get up and running than he wanted. About 100 days into the stimulus, the president and the vice president spoke to the agencies about speeding things up and laid out ambitious targets. And ultimately, they met and exceeded every one of those targets. The fact is that there are more than 75,000 infrastructure projects up and running today and creating jobs.

EK: What were the targets? How did the White House judge whether the stimulus was working?

JB: The most salient target was to spend 70 percent by September 30th, 2010. And we hit that target. We expected to have saved or created around 3.5 million jobs by this point, and according to the estimates of outside evaluators like the Congressional Budget Office, we hit that target, too. If you want more targets, read the report from the vice president that we released last week. It lists more of the specific goals the president set at that 100-day mark, like seeing 100 airports being improved, 1,500 highways being improved, 360 military facilities being repaired, and many more, by September 2009. And the agencies met or exceeded every one of those goals.

Doug H. writes:

History will show that invading Iraq has more benefits than costs (and those costs were high. As an officer in a tank battalion in Baghdad, I saw them so please don't lecture). I am not as convinced that the benefits will come close to outweighing the costs of the $787B stimulus package.

Furthermore, I would argue that the facts that Pres. Bush was trying to verify were a tad more difficult to verify than whether or not there are shovel-ready projects. Even Saddam wanted us (and Iran, more importantly) to think that he had WMD.

Liam writes:

@Liberty,

I agree completely with your rational behind the Iraq war and Obama’s Healthcare and Stalin’s collectivism. I think that leaders under pressure from their own party and their opposition see that as enough cause to do things without the proper preparations. When they feel that they only have a limited window of time due to popular sentiment.

After 911, Bush could have annexed Canada. I’m exaggerating of course but you get my point. I firmly believe that politicians would rather do something than appear to be doing nothing. It’s easier for them to defend “I tried and failed” then “I just sat there”.

@Hyena,

If you feel there is more discussion on the impact of welfare program than of military then perhaps a little more research is in order. David once outlined in an excellent article how to cut $500 billion per year from the budget. Close all US foreign military bases.

And people joining the military to be instruments of foreign policy? Don’t you think that’s reaching a bit? People sign up as a way to pay for College, as a way to start their career, family tradition, economic hardship, escape from justice, money for their family, sense of duty, love of their country and even one guy I know who signed up as a way to lose weight, but never did I hear of someone saying, “I can’t wait to get to Yemen because it will show the Saudi’s that they will need to continue to suppress the Muslim Brotherhood”.

And also your last statement was my entire point. Government has taken everything from these people through mission fraud. And I would dare say a lot of them know it. However they continue onwards in hopes that through perseverance they will reform. And I daresay they have to a degree. Gone are the days when a rogue general is gung-ho to launch a military incursion in direct defiance of what the White House wishes like back in the 60’s.

As an aside, why do you use a pseudonym?

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