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September 9, 2012
David Warsh, Proprietor


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Looking Ahead

Barack Obama’s convention speech last week was pronounced flat. Bill Clinton had upstaged him. Michelle Obama was more inspiring. Joe Biden more persuasive, it was said. John Kerry gave the finest speech of his career. Supporters described the president’s address as effective and serene. But about the best that anyone in the commentariat had to say was that it was workmanlike, a credible performance of a tough job that needed to be done.

Never mind that the president almost certainly knew beforehand that the next day’s August payroll numbers would undercut any high-flying rhetoric from the night before. as the Financial Times later noted.

Even more to the point, such analyses overlooked the probability that Obama will win the election. In that event, the poisonous climate he faced during his first four years won’t have gone away, but it will have altered. He will have been right to have kept his powder dry, having saved the big speeches for November, January and February.

And say what?  Probably a decisive return to the deficit-reduction proposals that were developed by the bi-partisan Simpson-Bowles Commission. The underappreciated columnist Jonathan Rauch suggested something like this earlier summer (when it would have been wildly premature).

The president appointed the panel in 2010, after the Senate failed to enshrine, as a matter of law, an up-or-down vote on the recommendation the panel was to prepare. After Congress again failed to act on the commission’s recommendations, Obama deferred further action on grounds that the economy was still too weak for aggressive tightening.

If he wins the November election, though, Obama would likely study the composition of the next Congress and prepare a set of bills designed to address America’s long-term fiscal imbalances. As Rauch noted, a bill is a president’s strongest statement that he desires action. If the Simpson-Bowles base-closing commission method didn’t work, then taking ownership of their plan as the basis of a much-mooted “grand bargain” just might. (The commission approach sometimes defeats intense lobbying on behalf of individual interests by means of a single up-or-down vote on the measure as a whole.)

Such a package might include considerable tax simplification, spending cuts, a fair amount of revenue enhancement, a rebalancing of Social Security entitlements,  a two-year debt-limit extension, and, probably, another round of compensatory spending on infrastructure, designed to kindle expansion. (Here’s a good analysis, by John Aloysius Farrell and Nancy Cook, of the National Journal, of the basic blueprint and the varied opposition that it faces.)

Then, against the background of the expiration of the Bush tax cuts, would begin the posturing and log-rolling between the current lame-duck Congress and the next, all of it conducted with the 2014 midterm elections in mind.  The details of all the kabuki drama that would ensue aren’t worth guessing about.

What does seem clear is that, if Obama wins, one set of fiscal imbalances will have been resolved by the 2014 election.  By then, attention will have swung back to health care.  And by 2016, the GOP will be a badly riven party, divided between its Tea Party faction and a more pragmatic core hoping to return to governing.

In some ways, therefore, the most interesting single element in the president’s speech last week was the mild assertion that climate change was a problem worth preparing for.  The week before Mitt Romney had mocked Obama for his promise “to begin to slow the rise of the oceans and heal the planet.”

[Y]es,” replied Obama, “my plan will continue to reduce the carbon pollution that is heating our planet – because climate change is not a hoax. More droughts and floods and wildfires are not a joke. They are a threat to our children’s future.”

It is important to remember that the background to climate-change skepticism is to be found in the 1970s.  Then, a vocal minority of analysts and activists – the Club of Rome, Jay Forrester, Dennis and Donella Meadows, Lester Thurow, Paul Erlich, Barry Commoner – seized upon a series of unanticipated shifts in population dynamics and the global division of labor to argue that the world was running out of oil; that inflation could no longer be controlled; that economic growth was at an end; and that “lifeboat ethics” soon would prevail.

Those views were a fad, penetrating a community of experts not much deeper than the front pages of newspapers and magazines. Yet the prominence they were given was sufficient to replenish the mistrust of a generation. These born-again populists soon transferred their doubts to government, to science, to authority in general.

The debate over climate change, while deeply influenced by expert opinion, seems unlikely to be resolved by it. Believing, as I do, that the scientists are right, that the temperature of the earth is warming, perhaps dangerously, I expect public opinion to be swayed mainly by experience. As disasters become more frequent, even though many of them fall within the realm of statistical variance, positions will change. (For an especially vivid evocation of another possibility, see the film Take Shelter.)

Powerful trends can reverse for years, even decades – unsuspected perturbations in the orbits of the moons of Jupiter and all that.  Still, I won’t be surprised if climate change is a more pressing issue in the next presidential election than in this one.

.                                      xxx

The Nobel Symposium on Growth and Development in Stockholm last week produced no great surprises. The conveners sought to stimulate conversation among participants in three or four different areas, macro and micro, in which significant developments had occurred during the past twenty-five years. These included:

Growth theory (Paul Romer, of New York University, and Robert Barro, of Harvard, led the program, discussed by Peter Howitt, of Brown and Philippe Aghion, of Harvard; by Robert Lucas, of the University of Chicago; and by Sendil Mullainithan, of Harvard);

Development economics (Mark Rosenzweig, of Yale, spoke first, followed by Robert Townsend, of the Massachusetts Institute of Technology, and Angus Deaton, of Princeton);

Policy evaluation (Michael Kremer, of Harvard, and Esther Duflo, of MIT, discussed by Nancy Stokey, of the University of Chicago, and Guido Tabellini, of Bocconi University);

And the new institutional economics (Daron Acemoglu, of MIT, discussed by Andrei Shleifer, of Harvard).

The presenters’ slides are here. The proceedings themselves are scheduled to be broadcast on Swedish television in October. The rest is up to the people who called the meeting.

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2 Comments

  1. Oh dear, Dave, I think you have really misrepresented some things. I see nearly zero link between the Limits to Growth book and its followers and the current, mostly politically driven, global warming skepticism. LtG had obvious problems up front, notably its way over-aggregation above where markets operate (noted at the time by Solow and Stiglitz separately, along with others), along with an unfortunate ignorance of the meaning of “measured reserves” of natural resources. However, its publication was followed shortly by the World Food Crisis (remember that one?) during which indeed food prices globally soared for about two years (72-74) in an unpleasantly Malthusian-like manner, with the first oil price shock hitting at the end of 1973. It was not completely ridiculous to take LtG seriously at the time, even if its main problems were already being pointed out.

    LtG did not address climate, and at the time the concern about climate was evenly split between those forecasting global warming from CO2 and those forecasting a continuation of the then-ongoing global cooling due to SO2 and aerosols. The latter got under control due to environmental regs, and CO2 escalated, and within just a few years recalculations had put the vast majority of climatologists on the side of global warming, even prior to the clear emergence of it in the data, which would come. Many of those now holding up the rearguard action against this consensus are remnants of that old global cooling group, only now enhanced by a bunch of politicians.

    LtG was scientific, but did not do a good job of it. It is now discredited. But the followers of it still around, such as those in the Systems Dynamics Society (still-living Jay Forrester, the founder of SDS, was also the father of the LtG group and authors) are firmly in the pro-global warming camp. So, I think you have really misrepresented what went on with this thoroughly. The appeal of the LtG group was never based on some mistrust of government or statistics or science, it was more a misuse of them.

    Monday, September 10, 2012 at 4:36 pm | Permalink

  2. Tom Fitzpatrick wrote:

    Ahem. It is not accurate to say ” Congress again failed to act on the commission’s recommendations” because the Catfood Commish failed to make any!

    Tuesday, September 11, 2012 at 4:35 am | Permalink

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  1. Links for 09-10-2012 | FavStocks on Monday, September 10, 2012 at 8:19 am

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