‘Letting the Sick Die on the Street’
Blogger Matt Yglesias has described my CNN op-ed on health care as follows:
Meanwhile, in Harvard economist and Cato Institute senior fellow Jeffrey Miron’s dystopia, if your parents wind up with no money through bad luck or poor decision-making and then you get sick you’ll just die on the street for lack of money.
Did I really say such an outrageous thing? Well, I did not use exactly those words (as Matt makes clear), but yes, that is the logical implication of my position.
And I stand by it. Here’s why.
First, my assessment is that even with no government health insurance, hardly anyone would die on the street for lack of health care. The poor would use their income transfers to buy some health care or insurance. The poor would receive private charity. And health care would be far less expensive due to elimination of the distortions caused by government health insurance.
Second, my position is that government provision of health insurance is enormously inefficient: it means worse health care for everyone, and it wastes resources that can be put to other uses. So the negative of having a few people suffer without government health insurance must be balanced against the good of having better medical care for all and against the good that can be accomplished with those saved resources.
That good might be lower taxes for everyone, or more government spending on education, or greater public health spending to combat HIV in poor countries. Whatever the alternate uses turn out to be, one cannot escape the fact that a tradeoff exists between protecting the poor and other goals.
C/P Libertarianism, from A to Z
The New Republic and Guilt by Association
I watched with interest the J Street debate between Matt Yglesias and The New Republic’s Jonathan Chait over the question “what it means to be pro-Israel.” Matt’s a very efficient thinker, and Chait’s a particularly sharp debater. I witnessed him slug it out at length in a debate with David Boaz a while back, not something I’d like to do.
Chait made a straightforward argument: to be pro-Israel, someone has to accept two premises. First, one has to believe that historically, Israel is the more sympathetic party in the Middle East. Second, one has to believe that the U.S. should not be even-handed in the Middle East, but rather should be on Israel’s side.
But what was most interesting about his argument was his accusation of guilt by association against J Street. It was a problem, Chait argued, that J Street had been embraced by people who did not meet his definition of pro-Israel. Chait rang the alarum that “The American Conservative magazine, which was founded by Pat Buchanan, …has been saying nice things about J Street.” In addition, “the famous Walt and Mearsheimer have been saying extremely nice things about J Street — embracing J Street.”
Filed under: Foreign Policy and National Security; Government and Politics; Political Philosophy
Putting Private Insurance Out of Business
Over at Think Progress, Matt Yglesias takes me to task for saying that the so-called public option in the House’s health care bill “would all but eliminate private insurance and force millions of Americans into a government-run system.”
Yglesias apparently still buys into the myth that the public option is, well, an option.
For people who receive health insurance through their employers, which is to say the vast majority of the Americans who currently have health insurance, the House bill would change very little. Or, rather, the biggest change would simply be the confidence that if, in the future, you cease to get health insurance from your employer (maybe you’ll lose your job or want to change jobs) that you’ll still be able to get health care. What’s more, of the minority of Americans who would be getting health care through the new “exchange,” the majority will probably sign up for private health insurance and everyone will have the option of doing so. If the government-run public plan is, for whatever reason, vastly more appealing than the private options then it will dominate. But if you believe the government can’t run health care well, there’s no reason to think that will happen. Whatever you think of that, though, the basic fact is that even if the public option does dominate the exchange most people will still have private employer-provided insurance.
That might be true if the new government-run program were going to compete on anything close to a level playing field. But, because the public option is ultimately supported by the taxpayers, the playing field can never be level. True, the bill does say that the new program is supposed to be self-sustaining, covering administrative and benefit costs entirely out of premium revenues. But remember that Medicare Part B was originally supposed to support 50 percent of its costs through premiums. That has shrunk to the point where premiums pay for less than 25 percent of the program’s cost.
And the government has a myriad of ways to prevent the true cost of the program from showing up in premium prices. For example, the government-run plan will not have to pay state or federal taxes, and unlike private insurance plans, who can be sued in state courts, the government-run plan could only be sued in federal court.
At the very least, the program carries with it an implicit guarantee against future losses. Suppose the public option prices its products too low and loses money. Can you imagine that Congress is simply going to let it go bankrupt, go out of business? Would a Congress that has bailed out banks and automobile companies because they are “too big to fail” resist subsidizing the government’s insurance plan if it began to lose money? Even without the actual bailout, such an implicit guarantee has a value. For example, the implicit guarantees behind Fannie Mae and Freddie Mac were estimated to have saved those institutions $6 billion per year.
All of this means that the government-run plan would be significantly cheaper than private insurance, not because it would out-compete private insurance or because it was more efficient, but because it had unfair advantages. The lower cost means that businesses, in particular, would have every incentive to dump workers from their current health insurance plan into the government plan. And, if other provisions of the bill make insurance more expensive, as is likely, the incentive for employers to shift workers to the government plan would be even greater. Estimates suggest that nearly 90 million workers could eventually be forced into the government plan.
As Robert Samuelson, dean of economic columnists, writes in the Washington Post, “a favored public plan would probably doom today’s private insurance.”
Samuelson is right. There is nothing “optional” about a public option. And that is just the way the Left wants it.
Neoconservatism and Militarism
Matt Yglesias identifies a puzzle, comparing Cold War/Irving Kristol neoconservatism to today’s Weekly Standard Wilsonianism:
[E]ven though the high-level theoretical content of the realpolitiker 70s version of neoconservatism and the Wilsonian 2000s version of neoconservatism seem very different, the operational content is extremely similar. You have support for higher defense budgets, a tendency toward threat-inflation and hysteria, a belief in an aggressive military posture and extensive saber-rattling, hostility to negotiations, and hostility to international law both in theory and in practice. This was initially presented to the world as a “realistic” alternative to lefty critiques of US support for anti-communist dictators and more recently appeared as an “idealistic” critique of lefty reluctance to launch wars, but the continuity between the views is enormous.
What Matt doesn’t say is why the policy outcomes stayed largely the same despite shifting theoretical sands. I think this piece by Brian Schmidt and Michael Williams can help shed some light on the problem.
Filed under: Foreign Policy and National Security; Government and Politics
Are Living Standards Higher in Denmark or the United States?
The left loves Scandinavia, but for the wrong reason. Nations such as Denmark and Sweden have much to admire, particularly their open markets, low levels of regulation, sound money, and honest governments. Indeed, if fiscal policy is removed from the equation, both Denmark and Sweden are more laissez-faire than the United States according to Economic Freedom of the World (as I noted in this recent video).
But fiscal policy is where the Scandinavians have serious problems. Taxes are confiscatory, punishing people who work, save, and invest. High levels of government spending, meanwhile, reduce economic growth by diverting resources from the productive sector of the economy and funneling them into the stifling welfare state.
Not surprisingly, this is the reason why statists admire Scandinavian nations. Matthew Yglesias, for instance, recently expressed his great admiration for Denmark. And I suppose I would agree with him if asked to pick the world’s best welfare state. I’ve been to the country several times and there is no question that laissez-faire policies in areas other than fiscal policy have helped the nation remain relatively prosperous.
But Yglesias is a bit lovestruck about the Danes (an understandable impulse for non-economic reasons), and it leads him to make some rather strange assertion — presumably because he wants us to believe that Denmark’s good points are because of (rather than in spite of) an onerous fiscal burden. What jumped out at me was his claim that Danes enjoy a “higher average material standard of living” than Americans. I’m not sure where he gets that, since the World Bank, CIA, United Nations, and IMF all show that the United States has more per-capita economic output.
To be fair, measures of per-capita gross domestic product are not a perfect measure, even if they are adjusted for purchasing power parity. So let’s take a look at other statistics that try to compare living standards. The two that I found (perhaps Yglesias found others, in which case I look forward to his identifying the source) are from the Organization for Economic Cooperation and Development and, coincidentally, the Danish Finance Ministry.
The OECD, many of you already know, is not my favorite organization. The bureaucracy’s anti-tax competition campaign is a reprehensible attempt to hinder the flow of jobs and capital from high-tax nations to low-tax jurisdictions. So surely nobody will claim that the OECD is a collection of market fundamentalists trying to manipulate statistics to make high-tax nations look bad. So let’s now look at this chart, which is based on the OECD’s calculations of average individual consumption per capita, pegged against an average for member nations of 100. It certainly appears that living standards in the United States are much higher.
Filed under: International Economics and Development; Tax and Budget Policy
Why Is For-Profit Education So Difficult in the U.S.?
Matt Yglesias has a post up looking at the PISA scores, and he seems to imply that for-profit schooling has been tried and found wanting in Sweden and the U.S.:
The big difference is that many Swedish charters are run by for-profit firms. We’ve had some experiments with that in the U.S. and it hasn’t worked very well. Nobody’s really found a great way of making consistent profits running K-12 schools in America.
Of course even he notes that Sweden’s schools are highly regulated by the state.
And in the U.S., the difficulty of succeeding in for-profit education just might have something to do with that government monopoly on k-12 education and the $560 billion or so in tax revenues that fund it. Maybe.
Pervasive Illiteracy in the Afghan National Army
Matt Yglesias has a lot of smart things to say about the pervasive illiteracy plaguing the Afghan National Army. Upwards of 75 to 90 percent (according to varying estimates) of the ANA is illiterate.
As Ted Galen Carpenter and I argue in our recent Cato white paper Escaping the Graveyard of Empires: A Strategy to Exit Afghanistan, this lack of basic education prevents many officers from filling out arrest reports, equipment and supply requests, and arguing before a judge or prosecutor. And as Marine 1st Lt. Justin Greico argues, “Paperwork, evidence, processing—they don’t know how to do it…You can’t get a policeman to take a statement if he can’t read and write.”
Yglesias notes:
This strikes me as an object lesson in the importance of realistic goal-setting. The Afghan National Army is largely illiterate because Afghanistan is largely illiterate…we just need an ANA that’s not likely to be overrun by its adversaries. But if we have the more ambitious goal of created [sic] an effectively administered centralized state, then the lack of literacy becomes a huge problem. And a problem without an obvious solution on a realistic time frame [emphasis mine].
Such high levels of illiteracy serves to highlight the absurd idea that the United States has the resources (and the legitimacy) to “change entire societies,” in the words of retired U.S. Army lieutenant colonel John Nagl. Eight years ago, Max Boot, fellow for National Security Studies at the Council on Foreign Relations, likened the Afghan mission to British colonial rule:
Afghanistan and other troubled lands today cry out for the sort of enlightened foreign administration once provided by self-confident Englishmen in jodhpurs and pith helmets…This was supposed to be ‘for the good of the natives,’ a phrase that once made progressives snort in derision, but may be taken more seriously after the left’s conversion (or, rather, reversion) in the 1990s to the cause of ‘humanitarian’ interventions. [emphasis mine]
But as I highlighted yesterday at the Cato event “Should the United States Withdraw from Afghanistan?” (which you can view in its entirety here), policymakers must start narrowing their objectives in Afghanistan, a point Yglesias stresses above. Heck, as I argued yesterday, rational people in the United States are having difficulty convincing delusional types here in America that Barack Obama is their legitimate president. I am baffled by people who think that we have the power to increase the legitimacy of the Afghan government. It’s also ironic that many conservatives (possibly brainwashed by neo-con ideology) who oppose government intervention at home believe the U.S. government can bring about liberty and peace worldwide. These self-identified “conservatives” essentially have a faith in government planning.
Yet these conservatives share a view common among the political and military elite, which is that if America pours enough time and resources—possibly hundreds of thousands of troops for another 12 to 14 years—Washington could really turn Afghanistan around.
However, there is a reason why the war in Afghanistan ranks at or near the bottom of polls tracking issues important to the American public, and why most Americans who do have an opinion about the war oppose it (57 percent in the latest CNN poll released on Sept. 1) and oppose sending more combat troops (56 percent in the McClatchy-Ipsos survey, also released on Sept. 1). It’s because Americans understand intuitively that the question about Afghanistan is not about whether it is winnable, but whether it constitutes a vital national security interest. An essential national debate about whether we really want to double down in Afghanistan has yet take place. America still does not have a clearly articulated goal. This is why the conventional wisdom surrounding the war—about whether we can build key institutions and create a legitimate political system—is not so much misguided as it is misplaced.
The issue is not about whether we can rebuild Afghanistan but whether we should. On both accounts the mission looks troubling, but this distinction is often times overlooked.
Obama to Seek Cap on Federal Pay Raises
USA Today reports that President Obama is seeking a cap on federal pay raises:
President Obama urged Congress Monday to limit cost-of-living pay raises to 2% for 1.3 million federal employees in 2010, extending an income squeeze that has hit private workers and threatens Social Security recipients and even 401(k) investors.
…The president’s action comes when consumer prices have fallen 2.1% in the 12 months ending in July, because of a massive drop in energy prices. The recession has taken an even tougher toll on private-sector wages, which rose only 1.5% for the year ended in June — the lowest increase since the government started keeping track in 1980. Private-sector workers also have been subject to widespread layoffs and furloughs.
Last week, economist Chris Edwards discussed data from the Bureau of Economic research that revealed the large gap between the average pay of federal employees and private workers. His call to freeze federal pay “for a year or two” received attention and criticism, (FedSmith, GovExec, Federal Times, Matt Yglesias, Conor Clarke) to which he has responded.
As explained on CNN earlier this year, the pay gap between federal and private workers has been widening for some time now:
Filed under: Government and Politics; Tax and Budget Policy
I Would Rather You Just Said “Thank You, Private Schools,” and Went on Your Way…
Some well-known bloggers are being terrible bullies, beating up on private schools.
Felix Salmon kicks things off by hoping the government tightens the definition of a “charitable” organization and begins taxing private schools who don’t “do a bit more to earn it.” Matt Yglesias agrees that private schools are mooching deadbeats and ups the ante, calling them actively harmful as well. Finally, Conor Clarke at The Atlantic agrees, but makes the other two look like panty-waists by proposing the government radically narrow what is considered a charity in the first place.
Yglesias even has the temerity to indict private schools for the failure of NYC public schools:
And as best one can tell, their main impact on the common weal is negative, drawing parents with resources and social capital out of the public school system and contributing to its neglect. You’d have to believe that New York City’s public schools would be both better funded and free of this kind of nonsense if a larger portion of the city’s elite were sending their kids to them.
Really? Would we have to believe what Yglesias says? No, it’s not “the best one can tell.” According to the evidence, Yglesias’ breezy, offhand accusation is demonstrably wrong. Increased competition from private schools actually improves public school performance.
And the more kids who leave public to go private, the more money the schools have for the kids who remain.
What ingrates. They complain about the lost tax revenue while dismissing out of hand the billions of dollars that parents and donors spend every year to educate children outside the government system. They dismiss the fact that these parents and donors are saving taxpayers in the neighborhood of $60 Billion a year based on current-dollar public school spending and the number of kids in private schools.
Finally, if this is all about rich people getting a free ride, why aren’t these guys screaming about means-testing public schools? Why shouldn’t we charge rich parents tuition to attend public schools? If a charitable deduction for private schools is so bad, why isn’t a free public education even worse?
Yglesias on the Topsy-turvy US-Af-Pak Meeting
Matt Yglesias nails it:
I don’t know exactly what the issue is, but it doesn’t make sense for the American government to be acting as if this is a bigger deal for us than it is for the Pakistanis.
Washington’s excessive fear of the Taliban threat may be warranted, but the disproportionate response is literally “perverse.”
Matt Yglesias on School Choice in Sweden
Following up on Dana Goldstein’s American Prospect blog post, Matt Yglesias calls the Swedish system and U.S. charter schools better education policy models than education tax credits.
He doesn’t say why, and I’d be interested to hear his reasoning. As I documented on Cato-at-Liberty in response to Goldstein, the econometric evidence shows that the greatest margin of superiority over state-run schooling is enjoyed by truly market-like education systems. By that I mean systems that are minimally regulated with respect to content, staffing, prices, etc., and which are funded at least in part directly by the families they serve.
Yglesias also claims that choice supporters want to “eliminate public education.” On the contrary, choice supporters are fundamentally more committed to public education than anyone who refuses to consider the market alternative.
“Public Education” is a set of ideals. It is not a particular institution. It is the ideal that all children should have access to a good education, regardless of family income; that schools should prepare students not just for success in private life but for participation in public life; and that our schools should foster harmonious relations among the various groups making up our pluralistic society — or at the very least not create unnecessary tensions among them.
School choice advocates are more committed to those ideals than is anyone wedded to the current district-based school system, because that system is inferior in all of the above respects to a universally accessible education marketplace. This is documented in the literature review linked-to above, in my book Market Education: The Unknown History, and in the work of James Tooley, E.G. West, my Cato colleagues, and many others.
The education tax credit programs my colleagues and I have proposed would ensure universal access to the education marketplace, while leaving essentially intact the freedoms and incentives responsible for the market’s success. I know of no other policy capable of achieving this. Certainly charter schools and the Swedish system fail to do it.
Work, Social Production, and Inequality
Matt Yglesias links to an interesting discussion about the growth of activities that raise our standard of living without being captured in economic statistics. Wikipedia is a great example of this: it’s tremendously valuable to hundreds of millions of Internet users, but because it’s given away for free that value is not reflected in our economic statistics.
I think this general insight is right, but I don’t agree with John Quiggin’s conclusions about the social implications. In particular, Quiggin writes:
It seems unlikely that large inequalities in income are beneficial to anyone except the recipients of high incomes.
If improvements in welfare are increasingly independent of the market, it would make sense to shift resources out of market production, for example by reducing working hours.
The first point ignores the fact that rich people are a crucial part of many public-spirited enterprises. Jimmy Wales was able to finance the initial development of Wikipedia (then called Nupedia) because he had previously earned profits building commercial websites. The Ubuntu project, creators of an extremely popular Linux-based operating system, is supported to the tune of millions of dollars a year by successful entrepreneur Mark Shuttleworth. Brewster Kahle used the profits from his successful Internet businesses to build the Internet Archive, a crucial repository of public domain works. John Gilmore, who made his fortune as one of Sun’s first employees, has used his wealth to promote a variety of free software projects, including GNU radio and Gnash. I could provide plenty of other examples.
The important thing to recognize is that these projects could only exist because of the combination of their founders’ expertise and their money. Without cash, these folks would have been unable to provide the support necessary to get these projects off the ground. But even more important, these projects also wouldn’t have succeeded without their deep understanding of their fields. Only someone with years of experience in the software industry would have the judgment and the relationships necessary to make a project like Ubuntu successful.
Who’s Blogging about Cato
Here’s a round-up of bloggers who are writing about Cato this week:
- Writing at the Adam Smith Institute blog, Phillip Salter discusses Patrick J. Michaels’s proposal that scientific articles should be available online for public comment.
- Penning his thoughts on Obama’s plan to raise taxes on oil and gas usage, Wintery Knight cites Jerry Taylor’s research that shows why similar price control programs didn’t work in the 1970s.
- Reihan Salam quotes William Niskanen on The Atlantic’s Washington blog in a post about the “starve the beast” theory that says lawmakers can slow government’s growth by lowering taxes and running up deficits.
- Think Progress blogger Matthew Yglesias responds to Michael Cannon’s work on health care reform in a post about Obama’s White House health care summit.
- Dr. Paul Hsieh of FIRM (Freedom and Individual Rights in Medicine) and Brian Schwartz of Patient Power cite John H. Cochrane’s Cato paper on free market solutions to health care security.
- CrimLaw started his review of Tim Lynch’s new book In the Name of Justice.
Filed under: Cato Publications; General; Government and Politics; Health, Welfare & Entitlements
Will the ‘Rise of the Counterinsurgents’ Lead to Fewer Counterinsurgency Wars?
Matt Yglesias picks up on the Bacevich review I referenced below and points to a post from counterinsurgency (COIN) scholar Andrew Exum in which Exum argues that learning to do counterinsurgency better will lead to our doing less of it:
No one who really understands COIN wants to do it. Liberal interventionalists and neo-conservatives are likely to be much more enthusiastic than the practitioners themselves. Counter-insurgents, often knowing something of what they speak through practical and hard-won experience, realize all too well just how difficult and costly big schemes drawn up in Washington become when they have to be operationalized. Counter-insurgency is hard. Best to avoid it, actually.
This doesn’t make much sense. Exum has previously excoriated COIN skeptic Gian Gentile for pursuing an “anti-COIN crusade.” But by Exum’s reasoning above, it is Exum who should be on an anti-COIN crusade. Instead, Exum thinks that DOD needs to allocate more resources to doing COIN.
Academically, Exum is interested in insurgencies. And indeed — they’re interesting. But for the COIN clique to think that their realistic appreciation of the difficulties of COIN and their private reticence to do it is going to outweigh their technocratic advice and willingness to obey orders in the minds of policymakers, I think they’re gravely mistaken. The work of the COIN crowd is going to create the impression in the minds of policymakers that the military knows how to win counterinsurgencies and therefore we don’t need an “Iraq syndrome.” But we do need an Iraq syndrome.
Take, for one example of my argument, the thinking of Bush NSC official Peter Feaver.* He thinks, as I do, that making COIN doctrine central to American foreign policy thought is going to create a future in which US foreign policy will continue to look like that of President Bush. Except for Feaver, that’s a feature, not a bug:
The problem with Chris’s post on COIN is that it takes the existing debate at face value, as if it really were a debate about the best way to do COIN or its place in American national security. I don’t think it is.
Let’s stipulate for the sake of argument that all of the COIN critics Chris cites are sincere patriots who honestly believe what they have written and have no deeper agenda. Setting them aside, the larger debate seems driven by one of three deeper considerations. First, anti-COIN is a convenient way to argue against American military involvement in any fashion because the most urgent near-term threats requiring military operations involve COIN. So if your ideology tells you that the dominant problem in the world is American militarism; if you look at recent history and can only find cases where we did use military force and shouldn’t have and can find no cases where we did not use military force and should have; if you think that getting defeated in Iraq (or Afghanistan) would have a salutary chastening effect on American adventurism; if any or all of that applies, then it makes sense to argue against Gates’ emphasis on COIN now. If the U.S. military cannot or will not do COIN, then the U.S. military cannot and will not be operational.
Does Exum think this policymaker’s view is wrong? Aberrant? I think its descriptive content is exactly accurate and characteristic. Orienting planning and resources more toward COIN is likely to lead to more counterinsurgency wars. I’m pretty confident in this prediction. If somebody disagrees, I’d like to hear a better fleshed out argument behind the idea that telling policymakers “we now know how to do COIN pretty well” will lead to those policymakers to decide we ought to do it less.
UPDATE: Professor Feaver writes in to say that by “Let’s stipulate for the sake of argument that all of the COIN critics Chris cites are sincere patriots who honestly believe what they have written and have no deeper agenda” he meant to make the positive statement that these people are patriots with noble intentions and didn’t mean to intimate they could be insincere patriots of questionable honesty with deeper agendas. He also disputes the factual accuracy of the Times article linked above and points to this Commentary piece as the definitive account of his work at the Bush NSC.
Nostalgianomics: If the Shoe Fits…
In a recent post commenting on my new Cato paper, Matt Yglesias just doesn’t get why I would accuse Paul Krugman of peddling nostalgia for the good old days of his boyhood. Indeed, Matt says my whole argument is “kind of silly.” Here’s the gist of Matt’s critique:
In his paper, Lindsey takes the unusual-for-a-libertarian tack of agreeing with Krugman (and others) that public policy changes have played an important role [in increasing inequality]. But he argues that the changes have mostly been changes that, on net, are positive. So it’s wrong of Krugman to espouse nostalgianomics and support a return to the policies of the 1950s. Which is fine, except I read almost every Krugman column and I’ve read Conscience of a Liberal (and, indeed, other works of Krugmanania such as Pop Internationalism and Peddling Prosperity) and it’s not as if the book ends with a call for the return of comprehensive regulation of airline fares or the re-establishment of the AT&T monopoly. To observe that the growth of inequality has policy roots isn’t to say that the right response to it is to methodically reverse every policy change of the past thirty years. It’s simply to deny the previous conventional wisdom — that it would be impossible to reverse the growing inequality of our society.
I think Matt misunderstands both my argument and what Krugman has been doing. I quite agree that Krugman doesn’t want a full-scale reinstatement of the corporatist, cartelistic policies of yesteryear. I say as much in the paper. What Krugman does want, however, is to portray the economic policies of the early postwar decades as an inspiration for progressives today — an example of how activist, interventionist government can simultaneously promote growth and reduce inequality. To quote Krugman’s Conscience of a Liberal: “During the thirties and forties, liberals managed to achieve a remarkable reduction in income inequality, with almost entirely positive effects on the economy as a whole. The men and women behind that achievement offer today’s liberals an object lesson in the difference leadership can make.”
To get to that ideologically convenient punch line, Krugman is forced to systematically misrepresent the policies and culture of the early postwar decades. He has to leave out all the things he doesn’t like, all the things that virtually all his fellow economists and fellow progressives don’t like, about the supposedly good old days — for example, the widespread cartelization efforts of the thirties, farm supports, price and entry controls on large sectors of the economy, restrictions on retail competition, high trade barriers, racist immigration laws, and the sexist confinement of working women to a pink collar ghetto. All of these contributed to the compression of incomes, yet they don’t serve Krugman’s ideological purposes. So he ignores them. That’s nostalgia-mongering, plain and simple: the selective recall of the past to make it seem better than it really was.
The relevance of all this to today’s situation is both real and important. Progressives have returned to power, and because of the current economic crisis the policymaking environment is incredibly fluid. Big changes are possible, indeed almost inevitable. In particular, proposals to substitute government control for market competition on a massive scale are now on the table: large-scale industrial policy in the name of creating “green” jobs, a full-court press to restore the power of private-sector unions, a qualitative increase in government’s role in health care, and “temporary” (such a dangerous word in Washington) government control of large parts of the financial system. We run the risk right now of making disastrous mistakes that will haunt us for many years to come. And that risk is exacerbated by the nostalgic fantasy, peddled by Krugman and others, that the record of the early postwar decades shows that Big Government and Big Labor are actually good for the economy.
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