This is a binding decision, until it isn’t

March 16, 2012

Under many plausible scenarios for American politics circa 2013, the sequestration provided for in the Budget Control Act will not come to pass, nor will the required cuts. That’s just sort of how things work, and you can kinda see it coming  in the way people are talking. For example, this.

BREAKING: It’s really hard to pass and  implement policies with long-term benefits but short-term costs.

I’m not a fan of people who talk about how America’s fiscal problems are a “failure of the political class.”  You hear this all the time among the pundit class, David Brooks writes some variation of it every other week in the back of the New York Times, and half of the Washington journalistic corp not only buys into the idea, but all of them seem to think they invented the concept because they were the last ones to write about it. It’s complete nonsense. Whatever shortcomings you might ascribe to American democracy, that the Members of Congress are ignoring a massive pubic outcry is not one of them. As if somehow the problem is that all the people want nice balanced budgets and a reduced public debt, it’s just that the politicians won’t deliver it to them. Please.

The real problem is that fiscal policy in an indebted democracy resides on a J-Cuvre. Which is nothing more than to say that the only way to achieve long-term positive results is to incur short-term negative pain. Thus the “J” in the curve. It’s just another way of explaining one of the fundamental problems democratic systems face: they are not good at long-term planning. But it’s particularly problematic when the long-term planning requires short-term pain. In many ways, the J-Cuvre is just a longitudinal collective action problem (long-term good vs. short-term good), as opposed to the cross-sectional version (common good vs. individual good)  that one might be more familiar with. It’s not crazy to say that these two problems are the heart of the institutional dilemma for any democracy.

The classic example is moving the former Soviet bloc economies in eastern Europe to capitalism. There was no doubt that capitalistic economics would produce much better long-term growth, but the only way to get there was to set the markets free, which caused all shorts of short-term pain at the bottom of the curve. Which led many voters to reject the ruling parties and reverse the liberalization. That’s a problem. In Washington (and other stable democracies) it translates to the classic political axiom: don’t produce policies that have short-term costs and long-term benefits. In fact, tend to do the opposite. So there you go.

But back to America’s political class. You constantly hear people bemoan the state of affairs that “no one in Washington will talk about raising taxes” or “no one in Washington will talk about cutting entitlements.” This is partly true, but it’s not for the reason people think, some “failure” of the political class. It is because to talk about those things, in many cases, is to not find yourself in Washington the following Congress. It’s basic natural selection. And it’s roots are with the voters, not the politicians. No one calls tax cuts without spending cuts a “failure of the political class,” and no one calls new unfunded entitlements a “failure of the political class.” More often we celebrate those things. But somehow their sum becomes a failure of the political class. In reality,  it’s all just the political class reflecting the (short-term) interests of their constituencies.

The trick, of course, in any J-curve situation is to find a way to get past the bottom of the curve without the democratic electorate either (a) punishing the long-term looking politicians and/or (b) electing new politicians to reverse the policies and/or (c) both. You need to both convince the existing political class that they will not be punished, and then have it actually turn out that they are not punished.  This, as you might surmise, is why autocratic states do not face significant J-curve problems the way democracies do; when there is no mechanism for reversing short-term public pain, it’s quite simple to ride out the curve until you get to the high side. You just do it.

In democracies, its’s a lot trickier. Some clever mechanism have been produced in the past: establishment of things like the federal reserve to set interest rates in an environment insulated from popular election and public sentiment; placing implementation of decisions in the hands of elected officials with longer time-horizions (like the President) or no time horizon (think Supreme Court settlement of the territorial question in the 1850′s or the segregation question in the 1950′s). But for most economic issues, Congress just has to deal with it. And it’s very, very hard to deal with an economic J-Curve when you have a 2-year term.

And this often leads to attempts by Congress to bind itself to a long-term policy, or more precisely, to bind a future Congress to a current policy. Everyone knows that’s really tough, and we all have a basic answer for why: a future Congress will just undo it. But that answer sort of begs the question. Why is it tough? And that’s  what really interests me: the micro-level reasons that this is so difficult for a legislature. I see five dimensions to this:

1. Legislatures can only make one type of law. This consistently bedevils legislators and staffers who would like to constrain future statutory action via … statute! But it simply can’t be done; any law that attempt to constrain what a future law can do is immediately rendered moot by any future law. You can constrain a lot of governmental actions with federal law, just not future federal laws. A classic example of this is the Commemorative Works Act, which requires that memorials in certain parts of DC be authorized by law (fine; that prevents non-statutes from authorizing the memorials), but then goes on to circumscribe what Congress can or cannot authorize in those laws. Useless!

For example, the law says, “A commemorative work solely commemorating a limited military engagement or a unit of an armed force may not be authorized.” But Congress can, and does, simply bypass such requirements by authorizing whatever the heck they want when they decide to authorize a new memorial. And lest you think this is only a problem for trivial issues, remember that it caught the Founders flat-footed; after they left the Northwest Ordinance out of the Constitution, they were forced to pass it as federal law in the first Congress. Subsequently, Congress routinely ignored it when organizing, dividing, and admitting new territories as states in the union. There are no “super-laws.” Next time you find yourself suggesting one — this will happen to you sooner than you think — remember that they are worthless. Period.

2. If statutory binds don’t work, you have resort to either macro or micro restraints. Given that you can’t use federal law to structure constraints on future federal laws, what can you do? Well, there are basically two options: bind from the top or bind from the bottom. Either constitutional amendment or procedural barricade in the chambers, particularly the Senate. Both of these solutions are plausibly great. A constitutional amendment adjusting the powers of Congress as a legislature will certainly accomplish your goal. And a procedural blockade in the House or Senate that prevents certain types of federal laws from getting out of the chamber is theoretically equally effective. Unfortunately, both strategies have drawbacks.

3. The macro-restraint of a Constitutional amendment just isn’t practical. It’s not for lack of trying that the Constitutional amendment route doesn’t work. Despite being the most popular proposed constitutional amendment of the last few decades, the Balanced Budget Amendment stills seems to be on the express train to nowhere-ville. Even if you set aside the many substantive concerns people have about the BBA, the process itself of producing a BBA is just a nightmare. Congress can’t do it on its own. The portion Congress can do takes a massive supermajority. And it just takes a long time even when you are successful. The latter issue is a massive problem for the BBA: supports grows for it periodically when there is a recession or an explosion of spending, but that immediate cause ceases to be a factor long before the BBA can get off the ground. And then interest has been lost. And the BBA just doesn’t seem like the type of amendment that could be passed in 100 days, 26th-amendment style.

4. And the micro restraints of procedural hurdles are often too far in the weeds. In theory, procedural restrains on the production of laws is a great solution. In the Senate, it’s (relatively) easy. You amend the rules (either the traditional way or via statutory rulemaking) creating a point of order on the floor against any legislation that you want to proscribe. Then individual Senators can block potential laws even if they have supermajority popular support in the chamber. This is more or less how non-statutory PAYGO is enforced in the Senate. In the House it’s a bit tougher, because the majority can write special rules that circumvent your point of order, but in theory you could at least make it a procedural pain in the ass to get around such a point of order (by specifying that the Rules Committee doesn’t have the power to introduce a privileged resolution that kills the point of order, the same way that the motion to recommit is protected), and it could be held together by a norm.

The problem with all of these types of procedural blockades is twofold: first, they are low on the public visibility/understanding scale. If future Members of Congress seek to reverse them, it’s so far in the weeds that it may not raise the public ire enough to dissuade such reversals. But more importantly, procedural points of order are passive restraints on congressional action; they only are enforced if someone demands they be enforced. So just as a quorum is assumed to be in the chamber unless someone suggests it is not, regardless of whether there are only a handful of Members present, so too with points of order. And that has a huge consequences: Members can bypass the points of order without a trace of evidence. There’s no record of something not being enforced on the House or Senate floor; you are looking for an absence of evidence. So not only is it not public that the point of order has been effectively rendered moot, but no individual Member is on the hook for not enforcing it.

5. Consequently, the “best” solution requires reducing legislative power. And so the most common way to bind legislative action is to remove the power altogether, and hand it to the executive branch. This is easy: write a positive law authorizing someone else to take control of a policy, preferably someone more insulated from democratic electoral politics, like the President, or an agency head, or the federal reserve. But this strategy comes with two problems. First, Members don’t love giving up power to the executive branch. And, more importantly, when Members do give up power to the executive branch, that’s an inherent loss of power for the legislature. But you already know how  I feel about that.


2 Responses to This is a binding decision, until it isn’t

  1. Tom on March 16, 2012 at 4:14 pm

    Small, teeny-tiny point on the E. Europe thing. The people who write about that are interested in what I’ve heard called the “partial reform equilibrium.” It’s not quite the same as the J curve idea. They claim that it’s not that the short term costs were so bad that citizens voted to reverse the reforms. It’s that a new class was empowered in the first part of the reform–say, the people who benefited from privatization–but used its power to prevent reform from going the whole way through to the end. So you get stuck at the bottom part of the J. So, “partial reform.”

    • Matt on March 16, 2012 at 7:15 pm

      Ugh. Thanks. I should more or less just stop using comparativist examples in everything I do.

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