Defunding Obamcare Doesn’t Change Odds of Immigration Reform

August 8, 2013Danny Vinik Leave a comment

Byron York, the conservative reporter for the Washington Examiner, penned a piece on Monday about how Tea Party activists have focused more on defunding Obamacare than opposing comprehensive immigration reform during the August recess. York notes that this could be a major boon for immigration reform’s chances of passing the House:

GOP activists should also keep in mind what they can change and what they can’t. And at the moment, the thing they can change is not Obamacare but immigration reform.

If August goes quietly on the immigration front, some Republican lawmakers may return to Washington with the sense that voters back home don’t really mind that immigration reform goes forward. And then it will. If, on the other hand, lawmakers hear expressions of serious opposition at town meetings, their conclusion will be just the opposite. And reform will likely go down to defeat.

So Democrats don’t really mind if Republicans use up all their grass-roots energy railing about Obamacare. It’s already the law. What would be a problem for Democrats, and for some pro-reform Republicans, is if the GOP grassroots concentrated its fire on immigration reform. That could well mean the end of President Obama’s top legislative priority for his second term.

The Washington Post’s Greg Sargent and Washington Monthly’s Ed Kilgore picked up on this as well today, but I just can’t see any way this happens.

There are really three possible ways that immigration reform passes:

A majority of Republican House members support it so Speaker John Boehner can bring it to the floor without breaking the Hastert Rule. This would require at least 117 House Republicans to support the legislation. Boehner will only have those votes if he brings a very conservative bill to the floor. But such a bill would receive no Democratic support and would also lose a number of Republicans. With only 234 House Republicans, the Speaker can only lose 16 of them or else the bill won’t pass. This puts him in a bind. Any bill that receives majority Republican support will lose too many moderate Republicans to pass.
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Boehner breaks the Hastert Rule and passes immigration reform with strong Democratic support. This would almost surely end his speakership and is thus highly unlikely to happen.
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Seventeen House Republicans agree to sign a discharge petition with all House Democrats (or a couple more House Republicans and a few less House Democrats) so that the bill is automatically brought to the floor, without support of House leadership. This would be an incredibly risky move for any Republican. It would antagonize the top Republicans and likely lead to a primary challenge. Thus, it’s also highly unlikely to happen.

Given those three possibilities, does less pressure from the base change anything? Maybe a bit. A few Congressmen may feel more willing to vote for the bill than if they faced major pressure during the recess. But let’s assume options two and three aren’t happening. That means that a lot of Republicans will have to support a moderate bill so Boehner doesn’t break the Hastert bill, but it still receives Democratic support to pass. The Tea Party hammering away at defunding Obamacare may convince a couple House Republicans that supporting moderate legislation is acceptable. But I can’t see how it will convince enough of them.

Not to mention, the reason Tea Party activists aren’t up in arms over immigration reform is that, as York writes, they think they’ve killed it already. If it comes back from the dead, they aren’t going to sit around and continue yelling about defunding Obamacare (well, they’ll still do that some surely). They’re going to scream at their representatives to oppose the bill.

How many of those House Republicans who supported the bill when they didn’t hear opposition to it during the August recess are still going to support it when that opposition does materialize? The answer: Not many.

Ignoring the Social Cost of Carbon is Anti-Capitalistic

July 24, 2013Danny Vinik 1 Comment

The House is currently taking up a bill called the Energy Consumers Relief Act, which looks to put stricter rules on the Environmental Protection Agency (EPA). The bill requires the EPA to report to Congress on any rule that has costs greater than a $1 billion. It also allows the Department of Energy to veto any rule that it believes will cause “significant adverse effects to the economy.” Of course, the vague wording gives the DOE the ability to vacate nearly any rule it wants.

But I want to focus on two similar amendments to it. The first comes from Rep. Tim Murphy (R-PA) and it would prevent the EPA from considering the social cost of carbon (SCC) when it creates rules that have costs greater than $1 billion. The second amendment, from Reps. Duncan Hunter (R-CA) and John Culberson (R-TX), would only allow the agency to take into account the SCC if it put out a separate rule finalizing what the cost would be.

Preventing the EPA to consider the SCC is absurd. Pollution is the quintessential example of a negative externality in every economics class. Basically, companies emit huge amounts of carbon and other chemicals into the air, harming the environment and hurting society, but don’t have to pay for those costs. Since no one “owns the air,” companies can offload pollutants into it without hurting their bottom line. That’s where the EPA comes in. They set regulations to limit this behavior and force companies to pay for the pollutants they emit through regulatory compliance. The SCC is a major way of doing so. It estimates the social costs to society of releasing a ton of carbon dioxide into the air. In May, the Office of Management and Budget (OMB) increased the SCC from $21/ton to $35. That’s a big change.

The SCC increases the estimated benefits of regulation.

The way this works is that when the EPA creates a rule that will, for example, reduce carbon emissions by 100,000 tons, the social benefit of that regulation would be $3.5 million (100,000 tons*$35/ton). That would then be compared to the costs of the regulation. When the SCC is higher, the total benefits and net benefits will be higher as well. Companies want the SCC to be low – the lower it is, the less chance the EPA’s proposed rules will produce net benefits and the lower the chance the industry will have to comply with them. But economists love the SCC. It internalizes the negative externality of carbon pollution, creating more efficient, fair markets.

But Reps. Murphy, Hunter and Culberson aren’t buying it. The SCC is not an easy number to determine and the EPA and other agencies have tried to estimate it for a while. That means figuring out a final number, such as Reps. Hunter and Culberson want the agency to do, is challenging and will take a while. In the meantime, we shouldn’t just ignore the SCC because we don’t have a final answer. We should use the best numbers we have while continuing to research climate change and develop a more perfect metric. Rep. Murphy, on the other hand, doesn’t even care if the EPA comes up with a final number. He wants to ban the agency from using it altogether (for rules with costs greater than $1 billion).

The OMB’s decision to increase the SCC infuriated conservatives, but the correct response is not to prevent the EPA from using it. If it wants to develop a more accurate number, then increase the agency’s funding so that it can do more research on the social costs of carbon. But these amendments attempt to fix the problem by ignoring the SCC altogether. They do not promote free markets. In fact, they do the opposite. By preventing the EPA from internalizing the negative externality, they allow companies to pollute the environment without facing the costs.

For a party so committed to laissez-faire economics, that’s incredibly anti-capitalistic.

Libertarian Populism Can Be Popular

July 18, 2013Danny Vinik 1 Comment

There’s been some discussion in the blogosphere recently on “libertarian populism.” AEI’s Tim Carney published a list on Monday of policy solutions that libertarian populists should push towards the general public, including breaking up the big banks, ending corporate welfare, cleaning up the tax code, reducing the payroll tax and a couple other things. Carney writes that the goal is to “turn to the working class as the swing population that can deliver elections” and to do so, conservatives must “[o]ffer populist policies that mesh with free-market principles, and don’t be afraid to admit that the game is rigged in favor of the wealthy and the well-connected.”

I’m not a conservative or a libertarian so I don’t want to jump too deep into this debate which doesn’t involve me, but I’m very partial to Carney’s ideas. I would add in one other major one, that certainly falls under the libertarian mindset: reforming our intellectual property laws. All of these policies are focused on helping the working class. Shouldn’t that be a great way to garner support from them?

Ramesh Ponnuru doesn’t think so:

I’m sympathetic to most of the items on Carney’s list — and those on the list that fellow populist Conn Carroll has compiled. Taken together, though, they do not seem to amount to a winning political platform. A Republican party that took on the U.S. Export-Import Bank might improve its image a bit, but how many Americans really care enough about the issue to change their votes based on it? Nor does freeing the food trucks seem like it would win many votes, however right it might be as a policy matter.

The libertarian populists sometimes seem to make the same political mistake as left-wing populists: Assuming that because most voters distrust big business and do not believe they share its interests, they are therefore looking for the politician who will most vocally take it on.

Ponnuru is right that most voters don’t care at all about the Export-Import Bank. You can say that about most of Carney’s proposals (with the exception of the payroll tax reduction – which Ponnuru points out). But this isn’t about one specific proposal. It’s about the image of libertarian populism.

Obamacare has been the lead news story for years now, but a fifth of the country still doesn’t know about the individual mandate.. Few know about the regulations in Dodd-Frank or what was in the Stimulus. They hear about policies once in a while, but don’t follow DC closely. Ezra Klein has been preaching this for a while now. Political and policy analysts focus way too much on the political impact of certain policies or proposal. The public doesn’t follow this stuff.

What matters is the general image of the party and right now, Americans believe it caters towards the wealthy. This image won’t change over night and is going to take a concerted effort across the entire policy spectrum. Carney’s ideas are a great start. If libertarians in Congress (ahem – Rand Paul) came out with a major policy platform with these ideas and messaged it as a conservative manifesto to improve the lives of working class Americans, it would be greeted with open arms by huge swaths of people.

Most Americans are not going to hear about the details of how Paul wants to end corporate welfare or break up the big banks. But just hearing that he’s promoting such policies would prove that libertarians are looking out for the interests of main street. It can’t end there though. Libertarian populists must continue to push free-market policies in every facet of policymaking. They must stay on message that these policies are aimed at the working class. Slowly, but surely, people will begin to associate libertarianism with pro-middle class ideas. In fact, over time, libertarian populism could become popular and that would certainly be a positive development for working class Americans, the Republican party and the country as a whole.