Archive | Institutions

Blame Avoidance and Budget Politics

Yesterday’s House approval of a line-item veto bill (HR 3521) continues our national reprise of the budget politics of the 1990s—complete with Newt Gingrich, but probably without the rather important denouement of ultimate compromise and budget surplus.

It is worth thinking about the structure and likely outcome of line-item veto proposals. Given the importance of the veto power to interbranch relations, why would Congress expand its scope, encouraging presidential encroachment on the power of the purse?

The short answer is that item vetoes may be less about a balanced budget than about shifting blame for the failure to achieve one.

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Congress, the Fed, and the FOMC

Wednesday was a big day for the Federal Reserve and its chair, Ben Bernanke, as the Fed took new steps to better communicate its thinking about the future path of monetary policy.  While most analysts are focused appropriately on the implications of communications as a policy tool for the Fed, I’m more interested in its implications for Congress’s relationship with the Federal Reserve.  From this vantage point, Bernanke’s most important accomplishment this week is likely to be the Fed’s adoption of a formal long-run inflation target of two percent.  Given that the Fed has a statutory “dual mandate” from Congress to achieve full employment in the context of price stability, the adoption of an explicit inflation target will no doubt pique the interest of lawmakers.  The parties, not surprisingly, tend to have different views about the dual mandate.  Many Republicans, seeking to limit the Fed’s policy discretion, favor limiting the Fed to a single mandate of price stability; the Fed’s unilateral move this week to designate an explicit inflation target might be welcomed by the GOP.  Democrats, however, will likely be wary of any signals from the Fed that it prioritizes fighting inflation over reducing unemployment—even if Bernanke went to lengths yesterday to argue that the Fed remains committed to securing both the employment and inflation sides of its dual mandate.

I’ll return to this issue in a later post.  For now, I want to highlight a smaller tool in the Fed’s new bag of transparency tricks.   As shown above, the Fed’s innovations this week include the release of (anonymous) interest rate projections by the seventeen members of the Fed’s open market committee (FOMC).  (“Transparency” only goes so far amongst central bankers.)   The projections indicate FOMC members’ views of the appropriate timing of “policy firming”—that is, how long its members think that the Fed’s lending rate should be kept near zero.   FOMC hawks, who fear a takeoff in inflation and thus favor an early increase in the federal funds rate, appear on the left; FOMC doves, who want to give the economy more time to recover and thus prefer to delay the increase in interest rates, appear on the right.

The Fed’s decision to reveal the rate projections of both the voting and non-voting members of the FOMC is novel.  In the past, the public had to rely on the language in the policy statement issued after each FOMC meeting, a statement that reflects only the views of the voting members of the FOMC (which by statute excludes a rotating set of the twelve reserve bank presidents).  Remarkably, in comparison to the Fed’s last meeting statement, yesterday’s statement was decidedly dovish: Approved by a vote of 9-1, the committee’s statement extended its commitment to keeping the federal funds rate near zero through “at least late 2014,” eighteen months longer than last year’s projection.  Meanwhile, the rate projections themselves suggest a more diverse set of views across the FOMC membership: eleven doves prefer to stall tightening until 2014 or later while six hawks want to tighten before 2014.   The dovish voting members are unrepresentative of the broader array of views across the FOMC.

Yesterday’s events suggest that the voting rules of the FOMC may be consequential for the shape of monetary policy.  Those voting rules of course are set by Congress, which created the FOMC in 1933 and has subsequently amended its governance on a handful of occasions.  Legislators continue to express frustration with the FOMC.  Some House Republicans favor broadening the voting rights of the committee, allowing all of the bank presidents to vote at each meeting.  (Bank presidents are said to be more hawkish than governors, though the evidence is mixed.)  Had each of the FOMC members been eligible to vote this week, it would have been tougher for Bernanke to secure agreement on such a dovish policy outlook.  No doubt, congressional Republicans will continue to push for the expansion of voting rights on the FOMC.  In contrast, House liberals prefer stripping the bank presidents of their voting rights altogether.  The array of rate projections amongst the members of the FOMC, however, should signal to liberals that the power of the doves can be augmented considerably by retaining voting rights for a rotating group of bank presidents.  Granted, voting rotation will not always favor easing, as it does this year.  Next year, the three FOMC uber-hawk bank presidents from Philadelphia, Dallas, and Minneapolis will rotate back into voting seats, no doubt pushing for earlier tightening of lending rates.

All that said, the current split party control of Congress and divided control of the branches limit the chances that Congress and the president will agree to any revisions to the Federal Reserve Act.  Should Republicans win the White House and both chambers in November, however, the internal governance of the Fed—as well as its statutory mandate—might come into focus more sharply in Congress’s crosshairs.

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Ash(es) to Ashes: Reorganizing the Executive Branch

Roy Ash, an important figure in the “battles of the budget” in the 1970s as director of OMB under Presidents Nixon and Ford, died this week.  (His obituary is here.)

Given President Obama’s proposal today on government reorganization—he hopes to merge six agencies dealing with business and trade into one—it is timely to note the history of such efforts and the lessons Roy Ash might teach us on that front.

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The President Needs Help: Happy Birthday, Brownlow Report!

Yes, I know today is devoted to New Hampshire (live free or die…), but the departure of William Daley as White House chief of staff gives me  the excuse to trumpet the 75th anniversary of the Brownlow Committee report to President Franklin Roosevelt—released this week in 1937.  After all, without the Brownlow report, there would be no staff to be chief of.

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Agency Spending and Partisan Politics

In 2007, a White House political affairs official made a presentation to political appointees in the General Services Administration, asking them to prioritize spending in 55 congressional districts that the Republican Party was either targeting or trying to defend. As this new article (paywalled – can’t find a non-paywalled version) by Sanford Gordon in the American Political Science Review points out, this provides a very nice quasi-experiment. Most political scientists, if they were obliged to guess, would think that officials will direct spending for partisan purposes when they think they can get away with it. However, it is more difficult than you might think to prove this. In the absence of direct evidence on officials’ plans (which is usually hard to come by), there are not any very good proxies which would allow us to measure the effects of partisan motivations. But when we have (as we have here) a copy of the PowerPoint directing officials’ attention towards a particular subset of districts, and data on GSA spending, we can start to do stuff, as Gordon shows. And the results are unambiguous.

Turning to the building contracts, more pronounced and significant effects appear for defense districts. Vendors in Republican districts labeled vulnerable experienced contracts an estimated 272% larger than those in their unmentioned counterparts. … To get a sense of the substantive magnitude of these effects, consider that the median Republican defense district had payments under public buildings contracts not requiring congressional review worth about $53,000 in the 59-day period following the Political Affairs briefing. The counterfactual level of expenditures in that district in the absence of a briefing is just $14,000. Across all defense districts, the PBS made almost $18.7 million in contract obligations in the postbriefing period. The model anticipates that in the absence of a briefing, these districts would have received $5.0 million. The roughly $14 million difference represents 8.4% of total PBS payments for the period. … Next, I consider how, and to what extent, coverage of the scandal beginning with the Washington Post story of March 26 altered GSA contracting decisions … consider the effect of the story on buildings contracts for districts labeled “defense” or “priority defense.” The estimates suggest that vulnerable Republican districts experienced a 72% decline in building contracts compared to unmentioned districts following the story’s release, relative to the period between the briefing and the Post story.

In absolute terms, these are not enormous sums (although they account for a quite significant share of the relevant budget lines over a period which was rapidly truncated due to public revelation of the scandal). However, it is at least possible, as Gordon argues, that they are the tip of a rather larger iceberg.

A question related to the issue of political benefit concerns whether the GSA scandal was an isolated incident or part of a more general pattern of executive influence. To the extent that the threat of bad publicity might mute incentives to politicize, we should expect systematic evidence of it to be the exception rather than the rule. In January 2011, however, the Office of Special Counsel issued a report listing 75 separate briefings by personnel at the White House Office of Political Affairs from 2001 to 2007 to political appointees in different agencies. This report lends support to the contention that the GSA briefing was representative of a broader phenomenon (at least within the most recent past administration); moreover, it suggests an avenue for future research, in which the effects of these briefings can be compared across different agencies rather than simply between two parts of the same agency.
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On Rick Perry’s Proposal to Cut the Pay of Members of Congress

The pay of members of the House of Representatives, in constant 1913 dollars.

This comes from Matt Glassman.  More is here.

The broader problem with Perry’s proposal, as Kevin Collins noted, is that “de-professionalizing” the legislature by cutting pay and the like would actually make Congress less responsive to voters.  He cites this paper (pdf) by Jeffrey Lax and Justin Phillips.  In it, they find that the congruence between state policy and voters’ opinions is stronger in states with professionalized legislatures—where professionalism is captured by legislators’ salaries, the number of days the legislature is in session, and the number of staff assigned to legislators.

In short, if you want public policy to reflect popular will, don’t stock the legislature with amateurs.

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White Knights

Overall, then, I’d say there’s evidence that a white-knight candidate can succeed in executive office if he comes either from a government-dominated business sector such as telecoms where lobbying and politics are a major part of the business, or if he has been a senior officer in the secret police. White-knight leaders’ terms, if politically successful, probably lead to tremendous increases in corruption, clientelism, and centralised executive power, and to bitter political polarisation. White-knight leaders generally end their terms refusing to relinquish power, and embroiled in legal difficulties or popular uprisings. So I’m not generally optimistic about the idea of electing non-politicians to fix the mess in Washington. How about you?

From a nice post by M.S. at The Economist.

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The Palestine UNESCO Vote

Yesterday the membership of UNESCO voted to grant Palestine full membership, triggering a U.S. decision to cut funding to the organization. The vote is important not just for the future of UNESCO but also because it reveals how states are likely to vote on the bigger issue of UN membership and Palestinian membership in other treaty organizations, such as the International Criminal Court.

The graph below (click to enlarge) shows how countries voted on the UNESCO question by their overall record on UN votes on Palestine (Security Council members are depicted by red crosses).  I explained the methodology in an earlier post but the basic idea is that the further to the right a country is on the horizontal axis, the more favorable to Israel was its voting behavior in the UN General Assembly. The model expected all countries to the right of Australia to vote no on Palestinian membership. The fact that Australia also voted no is not a big surprise as it is pretty close to the cutting line (i.e. its actual behavior is not that different from its expected behavior). Yet, there are also notable and important surprises.

The unexpected no-votes by some small island nations can perhaps be attributed to the fact that these votes are generally cheapest, although it seems like Nauru wasn’t offered the correct package. More consequential is the divided EU vote. The EU had forged a common position on UNGA votes of Palestine. I predicted earlier that this common position would not hold on the more consequential matter of Palestinian membership. There are both geo-political and domestic reasons why countries may opt in different directions. For example, France has established credentials with Arab countries due to its active role in Libya. This has been very popular domestically. A yes-vote in defiance of the U.S. further establishes these credentials. Nevertheless, it would seem that in most EU countries the domestic politics would have pointed to a yes-vote. Hypotheses are appreciated to more systematically explain why different EU countries went different ways.

Second, there is a sizeable group of countries that  abstained even though their past record would have suggested a yes-vote. It does seem like this includes fairly large numbers of countries that are small and relatively dependent on U.S. aid. That is obviously a hypothesis that could be investigated further (and I may do so if I find some time).

Third, based on this vote, the U.S. will have to utilize its veto if it came to a UN Security Council vote. Nine UNSC members voted in favor (which is what is needed). Moreover, based on this vote, it does not seem like the UK is willing to share the potential cost of utilizing the veto with the United States. On the other hand, if the US were able to persuade France to abstain on the Security Council vote, the vote would swing. Expect this to be a somewhat big issue in weeks to come

Edit: The vote tally can be found here.

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Seif Gadhafi and the International Criminal Court

Monkey Cage readers Emily Ritter of the University of Alabama and Scott Wolford of the University of Texas-Austin send along the following:

News emerged yesterday that Seif al-Islam Gadhafi has been in “indirect” contact with the International Criminal Court over the terms of a possible surrender, seeking a guarantee that he wouldn’t be sent back to Libya in the event he’s found innocent. With no independent force to arrest suspects, the ICC relies primarily on others to arrest suspects and hand them over to the court for trial—-an inefficient process at best and one that often leaves suspects at large, presumably continuing their pattern of crimes against humanity. In a paper forthcoming at the Journal of Theoretical Politics, we argue that an international criminal tribunal like the ICC could improve its ability to bring suspects to trial if it were to bargain with suspects directly rather than waiting for their capture. Though both parties—-the ICC Prosecutor and a Gadhafi intermediary—-pose this as a matter of “clarification,” we think it’s useful to think about these talks in terms of bargaining and what it can mean both for the ICC and for the crimes it proposes to deter.

We argue that courts lacking the ability to arrest suspects, like the ICC, can facilitate the surrender of their suspects by bargaining directly with them, altering charges or punishments or even the terms of surrender. In doing so, the court can bring suspects to trial without waiting for states or forces with uncertain resolve to capture and surrender them, increasing the number of cases they can try by tailoring the terms of surrender to a fugitive’s prospects for remaining at large. One could argue that, by seeking terms better than remaining at large—-which seems to involve taking shelter with a nomadic tribe, accompanying mercenaries to Zimbabwe, and running a permanent risk of violent death or capture—-the younger Gadhafi is trying to win just such an assurance from the ICC: jail time or, should he prove his innocence, a return to a country other than Libya. Of course, the ICC can be a better option for suspects than the relatively poor outcome of death under a collapsed regime, but only if the ICC represents a better prospect than any outside option, such as asylum. In this case, the effective refusals from Mali and Niger to harbor him limit his outside options, leading Gadhafi to turn to the ICC for the next best option—-a fair trial. We argue that, even with exile a possibility, as it may be here, some kind of pre-arrest bargaining can bring suspects to justice more easily. Gadhafi is attempting to offer his surrender in exchange for assurance that “he would receive a fair trial and that he could be helped to find a new country of residence if he were acquitted or after completing a prison sentence,” and the ICC is working with him to secure that surrender. Without these exchanges, the suspect would likely prefer to remain at large in the hopes of avoiding capture.

(Notably, others have argued that international punishment can represent a post-exit fate worth clinging to office or even dying to avoid.  Our theory assumes only that the accused compares the value of his fate at the ICC’s bench (which can be light to severe, depending on the bargain) to the value of his fate at large (which can theoretically range from swimming in a pool of gold in exile or a risk of death).)

In that sense, the ICC might view this as an opportunity to raise its profile and increase its institutional stature by prosecuting a high-profile suspect and bringing an otherwise costly period of Seif al-Islam remaining a fugitive to a quicker end. However, our paper also identifies that the benefits of pre-arrest bargaining may also come at a cost: if leaders expect that they can negotiate marginally better deals for themselves prior to surrender (which, in this case, may mean living out one’s twilight years in a country where one isn’t likely to be prosecuted again or killed), then they’ll also be marginally more willing to commit war crimes or crimes against humanity in the first place.

So, as the world debates the best approach to dealing with the remnants of the Gadhafi regime, it’s important to keep this tradeoff in mind: war criminals can be enticed to surrender by making the terms of their prosecution better than remaining at large—-enabling prosecution and preventing whatever mischief Seif al-Islam might otherwise engage in as a fugitive—-but granting leniency may undermine deterrence in future cases if the ICC appears too willing to bargain with its suspects.

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Muddling Through

Jay Ulfelder has a nice critique of pieces by David Bosco and Anne-Marie Slaughter in Foreign Policy magazine’s “future is now” special report:

What Bosco and Slaughter have given us is the liberal institutionalist view of international relations in the early twenty-first century. Complex interdependence in the global political economy is creating new threats, but one person’s threats are another’s opportunities for mutual gains from cooperation. To realize those gains, however, states must create institutions that solve problems of coordination and enforcement. And so they will.

As sympathetic as I am to their hopeful visions, I’m more skeptical than Bosco and Slaughter about the prospects for deeper global governance in the near future. As observers of institutional development have repeatedly shown, the prospect of mutual gains from better governance does not lead inexorably to the development of new regimes or the strengthening of existing ones. Disagreements over exactly what the rules ought to be and how to share the costs and benefits of enforcing them have a tendency to scuttle or cripple most integrationist projects. Institutions may be useful as solutions to problems of cooperation, but demand does not lead automatically to supply.

Current happenings in the EU are a nice illustration of this point. There seems to be widespread agreement that the euro is bound to fail without some institutional solution to the problem of heterogeneous fiscal policies. Yet, there is no guarantee that such a solution will emerge. The farthest we have come is the initiative by German Chancellor Angela Merkel and French President Nicolas Sarkozy to create a “European economic government.” It turns out that the other 15 euro zone countries may actually have some ideas of their own about this. Moreover, what Merkel and Sarkozy call a “government” seems little more than a talking club of heads of governments that would meet twice a year to enforce rules that were basically already part of the 1992 Maastricht Treaty and the 1997 Stability and Growth Pact.

Many financial experts like the idea of commonly issued eurozone bonds. Yet, this essentially means that the stronger economies will have to pool risks with the struggling debtor nations. It just so happens that many of these stronger economies are going through waves of populism. The domestic politics of this just don’t add up, at least not as an initiative with the size economists think is necessary.

Another problem is that the 17 member Eurozone does not neatly overlap with the 27-member European Union. This makes it more difficult to utilize established EU institutions and thus make a new institutional solution look like an old one. The European Central Bank already has received a lot of additional authority and has become under increasing scrutiny from domestic legislatures. It can’t really sanction countries for irresponsible fiscal behavior (remember that France and Germany were among the initial offenders).

The conventional wisdom is that the eurozone will either break apart or that Europe will move to much greater centralization of fiscal policies. The political incentives, however, are to muddle through. Breaking up the eurozone is extremely risky and centralizing authority is extremely unpopular. Markets, of course, can discipline European political leaders or make it impossible for individual countries to maintain the euro. However, I wouldn’t be too surprised if a few years from now the institutional architecture of the eurozone looks remarkably similar to what it is today.

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