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The Long Game

Mon, 04/25/2016 - 07:30

By James Kwak

Charles Koch recently made headlines by saying that it is “possible another Clinton could be better than another Republican” in this year’s presidential race. Some people find this surprising: how could the Koch brothers sit by and let another Democrat be elected to the White House? But that’s a reflection less of the Kochs’ political acumen than of our collective quadrennial fixation on the presidential election.

I find it unlikely that the Kochs would actually support Hillary Clinton—it’s more likely Charles was taking the occasion to signal his displeasure with both Donald Trump and Ted Cruz—but it’s quite possible that they will simply sit out the battle for the White House. Unlike, oh, just about everyone in the Democratic Party, the Kochs have never panicked at the thought of losing any particular election. Instead, as Jacob Hacker and Paul Pierson put it:

When conservative business leaders such as Charles and David Koch invested in Cato, Heritage, the American Enterprise Institute, and all the other intellectual weapons of the right, they were playing the long game. When Republican political leaders like Newt Gingrich and Mitch McConnell developed new strategies for tearing down American government to build up GOP power, they were playing the long game.

That’s from the conclusion of their new book, American Amnesia (p. 369).

Since the 1980s, if not earlier, the story of the Democratic Party has been a reasonably successful attempt to take or maintain control over the presidency at any costs—combined with a complete failure to articulate a compelling, long-term vision, or to build lasting networks and institutions that provide the infrastructure for political change. We bet everything on the political skills of Bill Clinton or Barack Obama, and then we act surprised when they end up following moderate Republican policies—in part because they are blocked in by Republicans in Congress, in state houses, and in the federal judiciary. (And for those who think this is hyperbole, it was Bill Clinton himself who said, “I hope you’re all aware we’re all Eisenhower Republicans. . . . We stand for lower deficits and free trade and the bond market. Isn’t that great?” (Hacker and Pierson, p. 163).)

The story of the conservative movement, on the other hand, is the opposite: serial failure to come up with a compelling presidential candidate—since 1988, no Republican nominee has won a plurality of the popular vote, except W. when running as an incumbent after “winning” a war—combined with a consistent vision, a massive advantage in fundraising not dependent on a unique individual (like Obama or Bernie Sanders), repeated victories in state legislative and gubernatorial elections, successful gerrymandering in multiple states, a structural lock on the House of Representatives, and consolidation of the small-state bias in the Senate. Sure, things haven’t been all rosy for libertarian conservatives like the Kochs—there was the huge expansion of government under W., and now Obamacare. But they’ve reduced the chances of higher taxes to nil, they’ve blocked any action on climate change, they have Barack Obama reduced to trying to pass a “free trade” agreement (because he can’t pass anything else), and they’re just one presidential election—now, or 2020, or 2024—from a massive restructuring of the tax code and all social insurance programs.

American Amnesia is a great read, for several reasons. It’s a passionate and fact-based argument for what Hacker and Pierson call the “mixed economy” (what that David Kotz calls “regulated capitalism” in The Rise and Fall of Neoliberal Capitalism), one in which government plays an active role in structuring and supplementing markets. It’s long on American history going back to the Founding Fathers. Not only does it emphasize the importance of everyone’s current favorite founder, Alexander Hamilton, who favored a strong (for his day) federal government; it also shows James Madison to be a proponent of a strong central government, and even describes Thomas Jefferson’s reconciliation to Hamiltonian economic policies. And it’s deep on details of everything that’s wrong with American politics and economic policy today.

I think the best part of the book, however, is its emphasis on the interest groups and ideologues who brought about the current state of affairs. The title of the book refers to the fact that Americans no longer remember that it was the mixed economy that made the United States the most powerful country in the world. But the word “amnesia” is slightly misleading, because it connotes passive forgetting. It’s more accurate to say that the idea of the mixed economy was actively pushed aside by the ideology of all-powerful and universally benevolent competitive markets—what I call economism because of its exaggerated dependence on Economics 101 models, and Hacker and Pierson call Randianism after Ayn Rand.

Like Kotz, and like Cohen and DeLong in Concrete Economics, Hacker and Pierson discuss how something went wrong beginning in the 1970s and especially from the 1980s. (That’s also the inflection point in 13 Bankers, but we were focusing just on the financial sector.) The second part of American Amnesia focuses on several of the actors behind that historical shift. There is future Supreme Court Justice Lewis Powell encouraging American business to become a force for deregulation and small government. There is Newt Gingrich, who hit on the brilliant idea of destroying the reputation of the very institution he inhabited. And, of course, there are the Koch brothers, with that same Charles Koch saying (p. 232):

 The most important strategic consideration to keep in mind is that any program adopted should be highly leveraged so that we reach those whose influence on others produces a multiplier effect. That is why educational programs are superior to political action, and support of talented free-market scholars is preferable to mass advertising.

The Friedrich Hayek of “The Intellectuals and Socialism” could not have wished for a better student.

Through it all, the key is that these men were playing the long game—not the short game of trying to win the next election. And they are still playing it. In the long run, what matter are ideas, institutions, and money—not the millions of $25 donations that can make the difference in a presidential primary, but the million-dollar checks that build up think tanks, academic institutes, Astroturf organizations, 501(c)(4)s and super PACs, training courses for activists and local candidates, and all the other infrastructure necessary to build a long-term political movement.

They have it. We don’t. Hacker and Pierson write, “Those like us who believe we can and must build a mixed economy for the twenty-first century—they need to play the long game, too” (p. 369). The more I have studied the development of modern American conservatism, the more I agree. Unfortunately, that’s not how Democrats roll—at least not so far.

Cultural Capture in Black and White

Fri, 04/22/2016 - 07:31

By James Kwak

A few years back I wrote a paper on “cultural capture” in financial regulation. The basic idea is that the industry can achieve the practical result of regulatory capture—industry-friendly policies—not just by bribing regulators (legally or illegally) and not just by providing useful “information” to agencies, but by cultivating other types of influence such as social relationships status advantages. The response was decidedly mixed. Some people said, “Yes, that’s exactly right!” while others said, “Nice idea but how can you prove that it actually happens?”

I completely concede the identification problem. Regulatory decisions are always overdetermined, and it’s hard to find data on, say, how many regulators’ kids go to school with lobbyists’ kids. But sometimes it just hits you between the eyes.

Yesterday the invaluable Jesse Eisinger published the backstory of the SEC’s ABACUS investigation (which will always have a special place in my heart, since the complaint was filed shortly after the publication of 13 Bankers, getting Simon and me a full-hour interview on Bill Moyers and boosting the book up the charts). Eisinger’s story is based on information provided by James Kidney, a veteran SEC lawyer who thought the agency should pursue Goldman senior executives on a broader theory of liability—but was opposed by other insiders and, ultimately, Enforcement Director Robert Khuzami.

And here’s the smoking gun, in an email by Reid Muoio, then head of the team investigating complex mortgage securities (that is, most of the financial crisis):

 

Let’s leave aside the illogical conclusion: of all the people at Goldman, Tourre most closely fits the description, “good people who have done one bad thing.” His higher-ups, the ones who designed and supervised the whole operation, are the serial wrongdoers. And forget for the moment the obvious contrast with how the justice system treats minor drug offenders.

Muoio’s charging decision is based on sympathy with the entire category of securities law defendants. They’re good people. They’re like us, but for one little mistake. So let’s go easy on them.

Kidney knew what was going on. This is what he wrote in one email: “We must be on guard against any risk that we adopt the thinking of those sponsoring these structures and join the Wall Street Elders, if you will.” The problem is that his colleagues seem to have wanted to be part of the Wall Street Elders—not that they necessarily wanted jobs on Wall Street, but that they wanted to feel like part of the sophisticated club, the people who designed the most complicated financial products ever.

There’s an argument to be made that the SEC couldn’t have won the broader case that Kidney wanted to bring; I can’t judge that from what I can see. But the key thing is, that wasn’t the only factor behind the SEC’s decision to go easy on Goldman.

Kidney explains why he came forward on his blog here. It’s a great read, full of passages like this:

Yessir, according to the Obama administration, Goldman Sachs, JP Morgan, Bank of America, Citibank and other institutions made their contributions to tearing down the economy, but no one was responsible.  They are ghost companies.

Enjoy.

Profits in Finance

Wed, 04/20/2016 - 11:20

By James Kwak

Noah Smith on one reason why financial sector profits have remained high as the industry has grown:

Why haven’t asset-management charges gone down amid competition? In a recent post, I suggested one answer: people might just be ignoring them. Percentage fees sound tiny — 1 percent or 2 percent a year. But because that slice is taken off every year, it adds up to truly astronomical amounts. … If many investors pay no attention to what they’re being charged, more competition can’t push down those fees.

I think that’s basically right, but there’s a smidgeon more to it. Expense ratios on actively managed mutual funds have remained stubbornly high. Even though more people switch into index funds every year, their overall market share is still low—about $2 trillion out of a total of $18 trillion in U.S. mutual funds and ETFs. Actively managed stock mutual funds still have a weighted-average expense ratio of 86 basis points.

Why do people pay 86 basis points for a product that is likely to trail the market, when they could pay 5 basis points for one that will track the market (with a $10,000 minimum investment)? It’s probably because they think the more expensive fund is better. This is a natural thing to believe. In most sectors of the economy, price does correlate with quality, albeit imperfectly. It’s also natural to believe that some people are just better than others at picking stocks, just like Stephen Curry is better than other people at playing basketball. Finance and economics professors can talk all they like about nearly-efficient markets, the difficulty of identifying the people who can generate positive alpha, and the fact that you have to pay through the nose to invest your money with those people (like James Simons), but ordinary investors just don’t buy it. And this is one area where I think marketing does have a major impact, both in the form of ordinary advertising and in the form of the propaganda you get with your 401(k) plan.

So while some people are no doubt ignoring the fees, others are probably saying, “Sure the expense ratio is 100 basis points, but look at the past performance!” (Anyone who makes decisions based on past performance—that is, most people—is taking fees into account to some extent, since published mutual fund returns are almost always net of fees.) So the persistence of high fees is partly due to the difficulty of convincing people that markets are nearly efficient and that most benchmark-beating returns are some product of (a) taking on more risk than the benchmark, (b) survivor bias, and (c) dumb luck.

The Root of All Our Problems?

Mon, 04/18/2016 - 09:04

By James Kwak

A friend pointed me toward an op-ed in The Guardian by George Monbiot titled “Neoliberalism—The Ideology at the Root of All Our Problems.” The basic argument is that there is an ideology that has had a pervasive influence on the shaping of the contemporary world. Its policy program includes “massive tax cuts for the rich, the crushing of trade unions, deregulation, privatisation, outsourcing and competition in public services.” Monbiot calls this cocktail “neoliberalism” (more on the name later).

There’s a lot in the article that I agree with. The political and economic takeover of the Western world by the super-wealthy was not accomplished by force, nor by rich people simply demanding a larger slice of the proverbial pie. Instead, it happened because many people—particularly in the media, the think tank intelligentsia, and the political community—internalized the idea that competitive markets provided the solution to all problems. (The idea that unfettered capital markets and financial innovation would be good for everyone, which helped produce the financial crisis, is only a special case of this larger phenomenon.)

I like Monbiot’s framing of how this works:

So pervasive has neoliberalism become that we seldom even recognise it as an ideology. We appear to accept the proposition that this utopian, millenarian faith describes a neutral force; a kind of biological law, like Darwin’s theory of evolution.

Sometimes it does seem like evolutionary biology and the simply model of supply and demand are the two most common models that people turn to when trying to explain things they don’t really understand.

The effect is to naturalize and even celebrate the inequality that results from a blind reliance on supposedly competitive markets: “Inequality is recast as virtuous: a reward for utility and a generator of wealth, which trickles down to enrich everyone.”

Monbiot also points out that “neoliberals” have the field largely to themselves, since the “left” has not come up with an alternative since Keynesianism. I think this is one reason why the policy center of gravity has shifted steadily rightward since the 1970s, even though public opinion on basic questions such as the role of government has scarcely budgeted. Conservatives have an economic program; liberals (what we now call “progressives” in the United States) have a bunch of complaints about that economic program.

One thing I’m not entirely on board with is the particular bundle of policies that Monbiot ties together, or the label “neoliberalism” that he applies. This is a complicated conceptual space that, portions of which have been labeled liberalism (that’s the word Hayek used in The Road to Serfdom, neoliberalism, libertarianism, Randianism (used by Hacker and Pierson in American Amnesia), or simply conservatism. After all, there isn’t much in the ideology that Monbiot identifies that every Republican presidential nominee since Reagan wouldn’t agree with. “Neoliberalism” also suffers from the problem that it means very different things to Anglo-Americans and to Latin Americans, many of whom see it through the lens of the Pinochet regime and the U.S./IMF’s imposition of the Washington Consensus. Various people, particularly Frank Pasquale, have pointed out to me that there are thoughtful, coherent conceptions of neoliberalism—see Grewal, Purdy and others here, or Mirowski here. But I worry that popular usage of the term has run away from any clean definition. This is particularly so because no one actually claims to be a neoliberal anymore, so the term is mainly used by its purported opponents.

There is a central strain in Monbiot’s conceptual cocktail that I think is coherent, and that is overreliance on the competitive market model taught in Economics 101. Although this isn’t the same as Economics 101, as various people have pointed out, it tends to be the single most important lesson of introductory economics. As Paul Samuelson wrote in the first edition of his 1948 textbook, this model—and the result that competitive markets maximize social welfare—is “all that some of our leading citizens remember, 30 years later, of their college course in economics.” The assumption that the competitive market model accurately describes the real world is, I think, one of the major reasons why conservative economic policies have been so persuasive—and why, for example, our pre-Bernie Sanders health care debate was divided between leaving markets alone and fixing markets to make them more competitive (Obamacare). The belief that public policy could be based directly on theoretical principles is also a reasons for the turn away from practical economic management discussed by Cohen and DeLong in Concrete Economics.

This pervasive assumption also does not have an accepted name, but I call it “economism,” since it constitutes a worldview (not quite an ideology) based on economic theory.* (Noah Smith calls it, or something similar, “101ism.”) I don’t claim that economism is a better category than neoliberalism, or historically  more important, but I do think that it is more easily isolated in both history and public policy. And it certainly has done its share of damage in justifying deregulatory policies and rationalizing the rise in inequality that followed.

* To be precise, this is one meaning of economism, which already has several—none of which is particularly well known except in certain obscure academic circles.

Hamilton Everywhere, All the Time

Wed, 04/13/2016 - 13:35

By James Kwak

Alexander Hamilton is a big deal these days. Apparently there’s a musical about him—something I only found about when I saw Lin-Manuel Miranda’s Rose Garden video on Twitter (which tells you something about my relationship to popular culture). In their new book (on which more later), Jacob Hacker and Paul Pierson invoke Hamilton to defend their vision of an interventionist government and a mixed economy.  And Stephen Cohen and Brad DeLong have titled their new book Concrete Economics: The Hamilton Approach to Economic Growth and Policy.

I like to think that Simon and I were on the leading edge of this mini-trend when we featured Hamilton in our 2011 Vanity Fair article and in White House Burning. But it’s no surprise that people turn to Hamilton today, when what used to be known as the Tea Party (now simply the Republican Party) dreams of recreating a libertarian founding moment that never existed. Hamilton stood for a (relatively) strong central government, deficit spending, and what would now be called industrial policy, all with the intent of fostering economic growth.

Concrete Economics is less about Hamilton’s particularly approach to economic policy than about an overall attitude of which Hamilton cited as an exemplar: in short, a pragmatic rather than ideological approach to policymaking, one which used government resources and power to pursue specific goals. The best contrast is between the Republican Party c. 1955—which used state power to suburbanize the country, build up the military, and spin off the technologies that turbocharged productivity growth—and the Republican Party of the past 35 years, which (along with a considerable amount of Democratic abetting), which slashed government spending and deregulated the financial sector for ideological reasons (free flow of capital, free markets, blah, blah, blah).

If Cohen and DeLong are right about the broad course of American economic history, then the big question is why the we had this major transformation in overall attitudes toward policymaking. There are two major ways to think about this historical shift. One is to look at the ideas involved: maybe what happened is that people suddenly started believing “neoclassical” economic theories about the benefits of free markets (particularly for capital) and small government, and then acted on those beliefs. The other is to look at the who benefited: financial institutions, financial professionals, corporate executives, and rich people generally all stood to gain from lower taxes, smaller government, and financial deregulation. Superstructure, base.

The truth, I think, is that both stories are true. We have had a major ideological shift since the 1950s, from the idea that the government can play a positive role in influencing economic development, to the idea that government is either evil and incompetent and free markets can solve all problems. As Dick Armey (remember him?) said, “The market is rational and the government is dumb.” This naive belief that the simple results people remember from Economics 101—supply and demand interact to maximize social welfare—actually apply in the real world has produced decades of bad policies, and continues to be spouted by the Paul Ryan wing of the Republican Party. But the rise of that ideology did not happen by itself; it was organized and funded by wealthy businessmen, large corporations, and conservative foundations, as amply documented by historians such as Kim Phillips-Fein, Gareth Stedman Jones, Elizabeth Fones-Wolf, and many others.

To turn the tide, it won’t be enough simply to tell people that they should be more practical and less ideological. Powerful interest groups have to decide that they would be better served by different policies based on different ideas. There are glimmers of hope that that might happen in particular areas; for example, the corporate sector may be very slowing coming around to the idea that destroying the planet may not be so good for future profits. But on the whole, the very wealthy—who basically control the American political system—seem to be happy with the way things are. Which is one indication that things are unlikely to change anytime soon.

“Economics” as Push Poll

Tue, 03/29/2016 - 16:15

By James Kwak

Matthew Klein of Alphaville called out the “Council of Economic Education” for a supposed “economic literacy” quiz that wrapped up free market ideology in the trappings of universal economic truth. The quiz is full of questions like this one:

If you know a little bit of economics, and you know how to answer multiple-choice tests, it’s clear that you’re supposed to choose “C”—the point being that trade helps consumers, and limits on trade help domestic competitors. But, as Klein shows, these types of simple, first-order answers may or may not apply to the real world. For question 7, for example, you would have to know why the United States stopped importing automobiles from Country X.

What the Council of Economic Education really came up with here is a push poll: a set of questions intended to convey a certain message. The message is that complicated policy issues can be reduced to multiple choice questions which, in turn, can be answered using a handful of simple models from an Economics 101 class. But you can only answer the questions “correctly” if you assume that those models accurately depict the behavior of individuals and firms in the real world. Then everything becomes easy: trade is always good for all parties, taxes and regulations (like rent ceilings) are always bad, and competition is always good for consumers.

This idea that all questions can be answered using a few diagrams from introductory economics has been pushed by business organizations since World War II. That was the principle behind the Foundation for Economic Education, which helped sponsor Ludwig von Mises and Friedrich Hayek; behind 1950s’ economic education programs in the sponsored by the National Association of Manufacturers and large corporations (often to captive audiences of employees); and behind business-sponsored teaching kits distributed to thousands of schools. (For the full story, see Selling Free Enterprise, by Elizabeth Fones-Wolf.) In each case, the motivation was the same: teach people a streamlined, fact-free version of the competitive market model, and they will understand why free markets are always good and government intervention is always bad.

The problem, of course, is that the real world is rarely so simple. But if you can get lots of people to learn a little bit of economics, you can convince them that trade agreements are always good (comparative advantage!) and that the minimum wage is always bad (price floor!). I’m all in favor of education—I’m in the business, after all. A lot of what the Council for Economic Education does may be valuable. But multiple choice is not the right answer to real problems.

Why I’m Voting for Bernie Sanders on Tuesday

Mon, 02/29/2016 - 07:50

By James Kwak

I’ve written various generally supportive things about Bernie Sanders, but I hadn’t actually decided whether I preferred him or Hillary Clinton as the Democratic nominee. I’ve been concerned about the electability thing, as well as the effectiveness thing. (I haven’t given money to either candidate because of a promise I made when neither lifted a finger to help Larry Lessig get into the debates.) But I’m voting for Sanders.

Obviously, I prefer Sanders’s positions on the big issues. Government-funded health care for everyone, universal pre-K education, affordable higher education for everyone, mandatory family and medical leave, a higher minimum wage, higher taxes on people like me—what’s not to like? I have concerns about some things around the edges, like ripping up existing trade agreements (I won’t call them free trade agreements, because they are often far from it), but there has not been a serious candidate in my lifetime with such a bold and progressive vision for America.

Clinton, by contrast, stands for . . . what again? She is running as the pragmatic defender of the Clinton-Obama status quo—which is to say, slightly to the right of the Nelson Rockefeller wing of the Republican Party. Her message is basically this: I’m the only serious person in this race; it’s me, or the sack of Rome by the barbarians and one thousand years of darkness. And so, the Clinton side’s case boils down to saying, sure, we want the same things Sanders wants (lower inequality, higher wages for working people, affordable health care for everyone), but Sanders’s ideas are naïve, or impractical, or arithmetically challenged, or, worst of all, not acceptable to Paul Ryan.

So let me say a few words about that.

Do you remember Ronald Reagan? (OK, many of you don’t, but bear with me.) He ran for president in 1976 and 1980 promising lots of unrealistic-sounding things. In 1980, he said he was going to increase military spending, make government smaller, cut taxes, and balance the budget. I was eleven years old and I knew that didn’t add up. The Republican Establishment, which was still pretty strong in those days (not the punch line it is today), poked fun at him from every direction. George H. W. Bush called Reagan’s proposals “voodoo economics.” And it was nonsense: you can’t increase spending, cut taxes, and reduce deficits.

But Reagan won, and won, and won again. And even though his numbers didn’t add up, and even though he never had a majority in the House, he made huge gains for his cause. He passed one of the largest tax cuts in history and eventually reduced the top tax rate from 70% to 28%. He accelerated the deregulation movement begun under President Carter and began limiting non-defense discretionary spending; ever since then, increasing spending on domestic priorities has been an uphill struggle. He increased the size of the military. He never balanced the budget, but that was a feature, not a bug: the deficits he created only helped conservatives in the long term by creating additional pressure to limit and cut entitlement spending.

Reagan was also good for the Republican Party and for the conservative movement. He gave the party an identity it had been lacking since the Eisenhower years, one that appealed to the broad set of constituencies that has given the GOP a majority in the each house of Congress for most of the past twenty-two years. Since Reagan, every Republican presidential candidate (until Trump, perhaps) has had to pledge to continue the Reagan Revolution. No one did a better job (although many conservatives are mad about it) than George W. Bush, who slashed taxes, invaded the Middle East, and ran up deficits even further, creating the increasingly bipartisan clamor to cut Social Security and Medicare.

Now, I’m not predicting that Bernie Sanders will be as successful as Ronald Reagan. My point is just this: it’s the vision that matters, not the fine details of the campaign proposals. I have no problem with “left-leaning economists” or whoever pointing out flaws in Sanders’s proposals. By all means, let’s try to make them better. But if we want to move our party and our country in a certain direction, we have to start off by aiming in that direction.

Real change will take more than one or two presidential terms. Counting from Reagan’s first run, it’s taken the conservatives more than forty years, and they still have a long way to go. And even if Sanders turns out to be Reagan in 1976 rather than Reagan in 1980, it’s still the long-term direction of change that matters.

Disclaimer that now seems to be required: I have no interest in a job in Washington, in a Sanders or any other administration. I’m happy living in Amherst, too.

Also posted at Medium.

Just Saying We’re Great Doesn’t Make It So

Thu, 02/18/2016 - 14:29

By James Kwak

David Brooks has competition for the title of most inane New York Times columnist. I generally never read anything by Thomas Friedman—I gave up less than one hundred pages of The World Is Flat because of his blissfully uninformed discussion of workflow software—but I made an exception today because of this brilliant tweet by Benjamin Kunkel:

Only the genius of Thomas Friedman could capture the mystification at the heart of capitalism so perfectly. pic.twitter.com/YlZnicUayP

— Benjamin Kunkel (@das_kunk) February 18, 2016

I mean, I co-founded a company, and it’s not as if we had a secret laboratory churning out clones to work for us. One reason we founded the company when we did—2001, after the collapse of the technology bubble—was that we knew there were many talented people out there looking for a satisfying and challenging place to work. (One of the things I’m most proud of is that that, fourteen years later, my old company is still one of the best places to work in the economy.) In other words, skilled and motivated people (most of whom already have jobs) are a precondition for entrepreneurialism.

I assume Friedman’s point is that to have new jobs, you have to have people willing to take risks and start businesses. Of course, this isn’t completely accurate, since big companies often keep getting bigger and hiring new people. But I agree with the general point that entrepreneurial activity is a good thing. However, Friedman presents as undisputed fact this quotation from a report:

With enough hard work anyone can use entrepreneurship to pave their own way to prosperity and strengthen their communities by creating jobs and growing their local economy.

Does Thomas Friedman really think that literally anyone can become rich just by working hard and “using entrepreneurship”? Anyone?

Friedman’s column only compounds the vapidity in other ways. He criticizes Bernie Sanders for “bleating about breaking up the big banks.” Here is Friedman’s basis for his position:

Wall Street excesses helped tank the economy in 2008. But thanks to the Dodd-Frank Wall Street Reform and Consumer Protection Act, that can’t easily happen again.

Huh? We passed Dodd-Frank, and now everything is solved?

Friedman blames both parties for tolerating illegal immigration, or at least that’s the only way I can interpret this sentence:

It’s an outrage that we can’t control our border, but both parties have been complicit — Democrats because they saw new voters coming across and Republicans because they saw cheap labor coming across.

He thinks that Democrats welcome illegal immigrants because we want their votes? (If he’s talking about waiting for the “anchor babies” to grow up and vote, that’s more foresight than I give any party credit for.)

But the most baffling thing is Friedman’s unthinking faith in the “quality of our governing institutions.” He particularly has it in for Ted Cruz and his “trashing of Washington, D.C.,” but Sanders and Trump also make a big deal about how the political system is broken. The idea that we have the best political institutions in the world is a touching example of that curious American belief that, because we’re America, we must have the best of everything that matters.

Friedman contrasts federal government agencies with those in Russia and China. Well, OK. But what about Western Europe, Scandinavia, Australia, and Japan, among others? There are plenty of countries with democratic institutions, high standards of living, and relatively satisfied citizens. Some of them could even be characterized as social-democratic, like Denmark, #3 in the World Bank’s rankings for ease of doing business.

Looking at Washington today (or Lansing, Michigan), is it really clear that our institutions are really even average among prosperous countries? On the input side, think about the influence of money in politics; the domination of state politics by, in some cases, a single person; or, to take one example, the fact that we are actually having a fight about whether a sitting president can nominate someone to an empty Supreme Court seat. On the output side, think about the facts that we started a major war on the basis of a mountain of lies, we have the highest incarceration rates in the developed world, and we are singularly unable to do anything about climate change (even by comparison with Western Europe, which isn’t doing much).

In the long run of history, we probably have had pretty good political institutions, and that probably was a major reason for our tremendous growth in material prosperity through the nineteenth century and most of the twentieth century. But over the past forty years we have seen rising inequality, stagnant wages for the middle class, the emergence of the political superdonor, and the increasing separation of politicians’ priorities from the concerns of ordinary people (see Gilens and Page 2014). These are not trends to be proud of. As Daron Acemoglu and James Robinson have described, the monopolization of political power by a narrow elite can lead to economic stagnation.

Instead of blindly asserting that our governing institutions are the best because I Am America (And So Can You!), we need to recognize that something really is broken. Ted Cruz and I may disagree on how to fix it—I’m with Larry Lessig—but the first step in solving anything is realizing that you have a problem. Thomas Friedman doesn’t. Most Americans seem to think we do.

Quick Thought on New Hampshire

Tue, 02/09/2016 - 22:36

By James Kwak

From the Times (order of quotations reversed):

Mr. Sanders was the choice, nearly unanimously, among voters who said it was most important to have a candidate who is “honest and trustworthy.”

[Clinton] has gone so far as to promise to rethink and adjust her campaign strategy in hopes of connecting better with Democrats.

Part of the problem is that the Clintons have spent more than twenty years trying to say what their pollsters tell them people want to hear. When people no longer believe in the political class, feel (rightly or wrongly) like the government is controlled by distant socio-economic elites, and want someone “honest and trustworthy,” another round of message calibration is not going to fill the gap. If Clinton emerges from New Hampshire as the champion of the working man, it will be about as convincing as Al Gore’s desperate rebranding as a populist in late 2000.

Why Are We Beating Up on Single Payer?

Fri, 02/05/2016 - 10:01

By James Kwak

Single-payer health care has emerged as the primary symbol of the differences between Bernie Sanders and Hillary Clinton. For his supporters, Sanders’s plan is the centerpiece of his vision of a European-style, social-democratic society in which health care is a right that is fully funded by largely progressive taxes. For Clinton supporters, it is the best example of Sanders’s misguided utopianism—a naive plan that has no chance of passage and that would be less effective than incremental improvements to Obamacare.

The Clinton camp has been ecstatic about a critical analysis of Sanders’s plan by Kenneth Thorpe, a health care expert who has supported single payer in the past. Thorpe argues that the plan is underfunded by more than $1 trillion and, if fully funded, would cause most people to pay more for health care than they do today. Thorpe’s analysis was publicized by Dylan Matthews and highlighted by Paul Krugman as further evidence that all the serious people support Clinton. Clinton herself likes to say, “The numbers just don’t add up.”

I have a few points to make about Thorpe’s analysis and what we should take from it. The first, simplest, and most obvious is this: Even if Sanders’s plan has problems, if the goal is single payer, then Sanders is the only choice. We know a Clinton nomination will bring us no closer to single payer. A Sanders nomination will bring it within the spectrum of future possibilities, even if it won’t be passed in the next two years. (Remember Newt Gingrich’s crazy plan to voucherize Medicare in 1995? Well, now it’s not that far from passage.) A Sanders presidency would make it possible to develop a better, more realistic plan; that’s what advocates of single payer should be hoping for.

OK, now to the specifics. Thorpe’s most important conclusion is that Sanders’s plan will cost an average of $2.5 trillion per year, not $1.4 trillion, and that financing it will require significantly higher taxes. As a result, most Americans would end up paying more for health care (in additional taxes) than they currently do (in premiums they pay, premiums paid by their employers, and deductibles, co-payments, and coinsurance).[1]

But there’s something funny about this conclusion. We’re not talking about smart bombs and cruise missiles that will explode somewhere in the Middle East. We’re talking about health care services being provided to Americans. So if we (in the aggregate) have to pay more in taxes, we’re getting it back in the form of more health care. On its face, that’s not necessarily a bad thing.

As the country that already spends more money per person on health care than any other in the world, however, perhaps increasing spending is not a good idea. So let’s look at why total spending goes up.[2] For the total to go up, the price per unit of health care must go up, the number of units delivered must go up, or both. I’m pretty sure that Thorpe doesn’t think that the price per unit would go up under Sanders’s plan. He projects an overall payment rate of 105% of treatment costs. Medicare currently pays less, so it will pay more; but providers make up for that by overcharging private payers, and Thorpe’s model says those costs will go down by 20%. In addition, Thorpe projects 4.7% savings on administrative costs relative to the private system.

So the problem must be that the number of units is going up. And that is basically what Thorpe says. He assumes a 10% increase in utilization by people who already have insurance because the Sanders plan eliminates cost sharing, plus additional spending on people who are currently uninsured.[3] Again, this might be a good thing: not only is it good to provide coverage to the 11% of people who are still uninsured under Obamacare, but there are also plenty of insured families who are forgoing treatment because of high cost sharing.

But let’s assume for the sake of argument that higher utilization is bad. Then the obvious solution is not to toss out the baby with the bathwater, but to put some cost sharing back in. For example, we could have income-based, sliding-scale cost sharing, where the idea is that deductibles and co-payments should be roughly equally significant at different income levels. (Obamacare includes cost-sharing subsidies for low-income households.) So people on minimum wage face a $5 copayment, and people like me face a $100 copayment. I’m fine with that.

The point is, some of the projected increase in utilization is good, because it means people who currently are being underserved are getting the health care they need. And if we think some higher utilization is bad, we can limit it through smarter cost sharing.

What really matters as far as aggregate, long-term health care costs and outcomes are concerned are two things: the price per unit and the value delivered per service. And on both dimensions, we have every reason to believe that single payer will be more effective than Obamacare (and far more effective than not-Obamacare, which is all the Republicans are offering). Obamacare includes a number of tools to try to increase efficiency among providers and bend the cost curve: the Independent Payment Advisory Board, the incentives for Accountable Care Organizations, experimentation with different payment structures, tying hospital payments to readmissions, bundled payments, and so on. Do you know what all of those have in common? They’re all part of Medicare.

Even with Obamacare, the federal government’s influence over the private insurance market is limited. So in order to steer the health care sector toward more effective procedures and more accountability in payment practices, it works through Medicare and, to a lesser extent, through regulations governing the exchanges and employer-sponsored plans. The problem is that just because Medicare pioneers some value-based reimbursement practice doesn’t mean the private sector has to follow. If we really want to bend the cost curve in an intelligent way—and most Democrats do—then it would be much more straightforward under a single payer system than under Obamacare.

As I’m fond of saying, the government is just a tool that we use to arrange some of our affairs. Whether we buy our health care through private insurers or through a single payer, what matters are the outcomes we get for the money we spend. It’s OK to spend more money if we get truly universal coverage and better outcomes; the elderly get a lot more medical care today than they did before Medicare was created in 1965, and most of us don’t think that’s a bad thing. But if we think that we’re buying too much health care, or we’re getting the wrong kinds of health care, a single payer system is a more effective way of redirecting spending priorities—in a democratic manner—than the unwieldy public-private mash-up we have today. Single payer has its downsides, such as the bureaucracy (not that we don’t have one already). But whether we can afford it is not one of them.

[1] I agree with Thorpe that it makes sense to evaluate the plan on a fully financed basis. Contrast this with Republican tax cut plans, which talk about how much money people in each income quintile will save—but not how much they will lose in government transfers and services if the tax cut is fully financed by spending cuts.

[2] Technically speaking, it’s possible that total spending will not go up. As far as I can tell, Thorpe’s tables only say that most people will see an increase in total costs, assuming full financing. So maybe a minority of people will see their costs decline so much that they will balance out everyone else. That would be a good thing, both because total spending would go down and because risk-sharing would increase (basically, this would be a transfer from the healthy to the expensively sick).

[3] I still don’t quite see how total spending goes up with these assumptions. Spending on people who currently have private insurance—most of the population—clearly goes down by about 15%. (“We take private insurance and out of pocket spending … and make several adjustments to develop a single payer funding estimate. First we increase it by 10 percent to reflect the increased total health care spending that results from a reduction in out of pocket payments. Second we adjust downward by 20% to reflect the lower blended payment and finally we reduced the total by 4.7 percent to reflect potential administrative costs savings.”) Spending on the uninsured and Medicaid and Medicare beneficiaries goes up. Thorpe’s report doesn’t specifically compare spending under the Sanders plan to spending currently; the table only compare the number of households that would pay more or less under the (fully financed) Sanders plan than they do today. Matthews’s article compares Thorpe’s estimates to those of the Sanders team,[4] but also does not compare his estimates to current aggregate spending levels. But again, if total spending does not go up, then there’s no problem to begin with (see previous footnote).

[4] One quibble: Thorpe notes that Sanders assumes that the states continue spending the amount that they are currently spending on Medicaid, even though there is now way the federal government can compel them to. But if we’re going to cross out the revenue provided by state contributions, then we also have to cross out the state taxes that raise that revenue, so in aggregate its a wash (and those state taxes are often pretty regressive).

Donald Trump Is Running as a Conservative Republican

Wed, 02/03/2016 - 10:23

This guest post was written by Lawrence Glickman, Professor of History at Cornell University (and a friend from long ago when we were both graduate students at Berkeley).

As the summer of Trump turned into a phenomenon for all seasons, the Donald’s typical stump speech has grown into a bloated piece of performance art, lasting about one hour. A lot of that time is filled with bluster about how well he is doing in the polls, about how The Art of the Deal is his favorite, I mean second favorite book, after the Bible. And usually there are several more comments along the lines of, “by the way did I mention I’m doing well on the polls.”

In his speech in Des Moines on February 1, the evening of the Iowa caucus, Trump had to radically distill his campaign pitch into a two minute appeal. Presumably the pithiness forced him to highlight the most important parts of his campaign message. So what did he say? What can his candidacy be boiled down to? It turns out that for all the talk about Trump’s “populism” and his embrace of unorthodox positions, he offered talking points would have been familiar at a Rubio, Cruz, or for that matter, Jeb! rally.

Trump began by saying that “Obamacare is going to be repealed and replaced.” Then, he observed about the government that “everything that we’re doing has been wrong.” After condemning our unsustainable debt (“we owe 19 trillion dollars”) he discussed misplaced and wasteful priorities: “the budget that we just approved…funds everything that all of us in this room don’t want to see it fund.” He complained about the Iran deal and discussed the need to “build a wall” along the Mexican border.

Other than Trump’s signature claim that “Mexico is going to pay for the wall,” there was nothing outside the Republican mainstream in his litany. Compared to the other Republican candidates, who regularly spout apocalyptic rhetoric about ISIS or about dangerous trends in government overreach, his view that “we’re in trouble” seems completely in tune with the GOP chorus. Trump, being Trump, did toot his own horn, although, he assured the audience, not in a “braggadocious way” by talking about his “great, great company.” But that was only to highlight his credentials to run the country “the way it’s supposed to be run,” presumably in a business-like manner.

I recite the main points of Trump’s brief remarks to highlight the fact that on the issues he is running a remarkably mainstream campaign by the standards of the contemporary GOP. Trump is not much of a conservative apostate. To the extent that his campaign may have been weakened by his disappointing showing in Iowa, it is not because he has rejected the basic positions of the Republican Party. Indeed, his speech in Des Moines, not unlike most of his other stump speeches, was almost a comically generic species of conservative boilerplate: Condemn Obamacare; check. Denounce the dangerous direction of liberal government; yep. Caution about the dangers of the debt and the waste and misplaced priorities of the wasteful bureaucrats; done.

Let us stipulate that in his heart of hearts Trump himself may not be a true conservative. It is true that in the past (mostly pre-2000, when he was considering a Reform Party run) Trump expressed liberal positions on abortion rights, health insurance, and taxing the wealthy. The important fact is that this time around he has campaigned as a conservative, at least as the term is understood today. His deviations from party orthodoxy have been largely in the areas of tone and style rather than policy. Yes, he has demonstrated a willingness to push extreme positions to their ultimate limit (“I’ll see your anti-amnesty view and raise you by promoting the expulsion of eleven million undocumented people living in this country.”) But even this extremism has been utterly mainstreamed and embraced by the GOP’s relative moderates. Remember Mitt Romney’s call to “double Guantanamo” back in 2012, or his speech to the NRA in which he condemned the Obama administration’s “assault on our freedoms – our economic freedom, our religious freedom, and our personal freedom”? Trump may be the most effective purveyor of the stridently tough tone, but pretty much all of his fellow candidates aim for the same persona.

One of the fundamental ideas at the heart of modern conservative rhetoric has been the delegitimization of both government as an institution and those elected officials and “bureaucrats” entrusted with governing. This is what Trump did in Des Moines and what he has been doing since the summer. Trump describes the US as a failed state, but so does every other Republican candidate, who also share his views that government is incompetent (Obamacare), that its leaders are derelict (Iran deal), and that they are spendthrifts who prioritize the wrong things (a budget that fund things that “all of us in the room don’t want to see it fund.”). Many commentators have assumed that his views on government are substantially different from the other Republican candidates for the presidency. But there is very little evidence to support this view; all of the other GOP candidates have offered variations on the themes of decline and incompetent government. To the extent that Trump proposes statist positions that are unconventional for the contemporary Republican party, he does so by offering a strongman, “l’état c’est moi” justification. He has not articulated a vision of government spending for the public good, but rather a more personal, maybe even braggadocious, notion that he will get things done because he uniquely good at making “deals” and managing businesses. This is why he talks about “running” the country rather than governing it. But again this does not distinguish him from a movement that has valorized tough guys who get things done.

Another sustaining idea of the modern Republican Party is tax cuts for the wealthy. Trump’s tax plan, despite his claims to the contrary (“It would cost me a fortune”) is conventional red-meat conservatism: according to the Tax Policy Center, it would “benefit the wealthiest Americans while saddling the economy with trillions of dollars in new debts.” In recommending the elimination of the estate tax, Trump even uses the term “death tax,” the favored phrase of the Norquist wing of the party.

On the minimum wage, which he does not want to raise, he has staked out a position to the right of many Republicans. In the October Republican presidential debate, Neil Cavuto, the moderator, noting the protests of the “Fight for $15” movement to roughly double the federal minimum wage from its current level of $7.25, asked the candidates whether they “were sympathetic to the protestors’ cause since a $15 wage works out to about $31,000 a year?” Trump was blunt in response. “I can’t be” sympathetic, he claimed. The problem. Trump noted, is that with “taxes too high, wages too high, we’re not going to be able to compete against the world.” Although Trump said, “I hate to say it,’ the answer to the problem of low wages was that “people have to go out, they have to work really hard and have to get into the upper stratum.” Trump rejected the use of the helping hand of government as a means of promoting upward mobility. But it should be noted that Trump’s callousness toward the plight of working people is also consistent with a political party that views everyone as a budding entrepreneur and that rewards only “job creators.” As was demonstrated by Eric Cantor’s, the former House Majority leader, classic tweet on Labor Day in 2012—“Today, we celebrate those who have taken a risk, worked hard, built a business and earned their own success”—the party has trouble recognizing that workers might be a unique category in the American economy, whose needs are not coincident with venture capitalists.

An examination of Trump’s campaign website supports this interpretation of Trump’s candidacy as fundamentally conventional. Only five positions are laid out and three of them align with conventional contemporary conservatism: “Second Amendment Rights,” “Immigration Reform,” (although he does go farther than his rivals, with his calls for deportation), and “Tax Reform” (meaning, as we have seen, hugely regressive tax cuts). The other two positions (“U.S.-China Trade Reform” and “Veterans Administration Reforms”) arguably differ in emphasis from the mainstream Republican Party view. But both reflect his contention that terrible leadership is harming the country and about the incompetence of government officials, positions both entirely in keeping with Republican rhetoric. Although many commentators note Trump’s unorthodox support for Social Security and promotion of infrastructure spending, his website says nothing about either. To be sure, Trump has highlighted the benefits of infrastructure spending in Crippled America, his campaign book, and he mentions this often in speeches. But he has personalized these issues, as he has health care, which he promises will be provided, although he has released no plan. The impression he gives is that government might do some good things under a Trump administration but only in virtue of Trump, not because government has a unique role to play in binding our political culture and economy. Rather than offering an anti-conservative vision, these uses of government seem to rely on the kind of “magic asterisks” that have allowed tax-cutting Republicans, like Paul Ryan, to claim that they support popular spending programs. And in Trump’s case it is not great programs that he endorses but his singular ability to make good on them.

Commentators have settled on “populist” as the best label to describe Trump. And there is some justification for placing him in that tradition, especially because of his racial and economic nationalism, his willingness to bash leaders not just in government but in the world of business, his expressions of righteous anger, and his diagnosis of corruption and malfeasance (not to mention “stupidity”) on the part of elites. But traditionally populists have offered a vision of government that would serve, rather than undermine the (white) working class. Trump does not emphasize a positive state as a countervailing force to corporate power. Nor does he suggest that the nation can be resurrected by new programs, a new tax code or by better laws. Instead, his is a charismatic populism in which the nation can be saved by him and only him. But this personal politics does not challenge the antistatism embedded in contemporary conservatism.

If the egotism of his vison makes him an outlier, his statements about politics, policy, and governing are utterly mainstream.  With all the ink spilled in the reporting about Trump, the fundamental unoriginality of his positions has been underemphasized. Trump is surely a unique candidate but this is a uniqueness born of his embrace of celebrity culture, not because of his disclaiming of fundamental conservative positions. This may be the most disquieting thing of all about his campaign. For if Trump is running a campaign very much in the modern conservative grain, then the candidates, like Marco Rubio, being described as “mainstream” or “establishment” are, in fact, his near ideological twins.

The Future of the Democratic Party

Tue, 01/26/2016 - 06:30

What liberals can learn from conservatives

The future of the Democratic Party is the theme of the lead article in yesterday’s New York Times. The story more or less writes itself: you have Hillary Clinton, the face of the moderate Democratic establishment (and the spouse of the man who created it), versus Bernie Sanders, a socialist, in a battle most people thought she would have wrapped up months ago.

A lot of liberals like me spend our time wondering what the conservatives have done right—and why we can’t do it ourselves. The financial crisis and Great Recession should have debunked the ideology of deregulation, reinforced growing feelings of economic insecurity, and made people recognize the importance of the social safety net. Instead, we got the Tea Party and the most conservative Congress in living memory.

Seen in the broader sweep of history, conservatives have been relentlessly pushing the nation’s political agenda to the right on most issues (gay rights being almost the only exception), even as public opinion on most social and economic issues remains largely unchanged. Marco Rubio—just four years ago a darling of the Tea Party—is now the last hope of the Republican “moderate” establishment: what other proof is needed of the success of conservative ideology? Sure, extremism makes it hard for Republicans to win presidential elections. But although Democrats have won four and a half out of the past six contests, the result has been lower taxes on the wealthy, smaller government, no progress on climate change or gun control, and a solidly conservative federal judiciary.

So why can’t we do the same?

As liberals go, I spend a lot of time reading about conservatives, and particularly about the history of the modern American conservative movement. It was an important theme of 13 Bankers and a bigger theme ofWhite House Burning, and it will be an even more central theme of my next book (but that’s getting ahead of myself). There were many ingredients to the conservative ascendancy, including the wealth of conservative family foundations, the politicization of the business community, and the proliferation of right-wing think tanks. But one of the most important factors was the refusal to compromise.

Intransigence has been a core principle of the far right since the dark days of the 1950s, when activists seriously debated whether President Eisenhower was a practicing communist or merely a weakling who was soft on communism. Conservative true believers’ refusal to compromise has cost Republicans plenty of battles, from the futile quest of Barry Goldwater in 1964 to Ronald Reagan’s challenge to Gerald Ford in 1976 to the right wing’s abandonment of George H. W. Bush in 1992 (for violating the “read my lips” pledge.) But in the long run, it has enabled conservatives to take over the Republican Party, both houses of Congress, the Supreme Court, and many state governments, and has given them a plausible shot at putting Ted Cruz in the White House. And they have accomplished all this while continuing to hold positions that many of us in the reality-based community think are simply absurd (anthropogenic climate change is a fraud perpetrated by the scientific community, human beings do not evolve, and Barack Obama is a Muslim born in Indonesia).

You can see where this is going. Liberals have been compromising every four years. From Dukakis to Clinton to Gore to Kerry to Obama, the left has faithfully rallied behind the moderate with the best chance of keeping the White House out of Republican hands, because of the unspeakable evil that would result otherwise. And we have gotten pretty much what we paid for. It was an Obama administration with large majorities in both houses of Congress that did nothing about campaign finance, refused to consider a single payer health care system, and saved the Bush tax cuts for the wealthy in 2010.

In part, liberals’ willingness to fall in line is an acknowledgment of our overall weakness. With state legislatures and Congress drifting out of reach today, the struggle to hang onto the Oval Office has taken on increasingly desperate tones. In part, it reflects a lack of alternatives: Bill Bradley, John Edwards, and Hillary Clinton—to take the last three runners-up—are not exactly the second coming of Ted Kennedy, let alone Robert Kennedy.

Whatever the reason, the thing liberals have not done—and that conservatives did—is stand on principle and vote for the ideas that we believe in.

That’s the choice we face between Bernie Sanders and Hillary Clinton, more clearly than in any nominating contest in the past thirty years.

Yes, Clinton is far more electable than Sanders—even if Sanders can attract new voters to the polls, and even though anti-Clinton sentiment is probably worth at least 40% of the electorate to whoever the Republican nominee is. Sanders is a socialist, remember, and not terribly charismatic except to people who already share his ideals.

But could Sanders be our Goldwater?

Barry Goldwater’s crushing loss in 1964 led, via Lyndon Johnson’s victory and the overreaching of the Great Society, to the collapse of both the liberal agenda and the New Deal consensus. Reading historical accounts of American conservatism, it is also clear that the Goldwater campaign was a significant milestone in the unification of the movement and a formative event for many of its future leaders—most notably Ronald Reagan, who became a national figure with his “Time for Choosing” speech and soon won the California governor’s office. The Goldwater campaign demonstrated that conservatism could be a national movement with a coherent, ideologically driven platform, which only needed to attract additional supporters. It made conservatives a distinct political force that had to be reckoned with—grudgingly accepting Richard Nixon in 1968, revolting against Gerald Ford in 1976, and finally gaining control of the national party with Ronald Reagan in 1980.

A Bernie Sanders victory over Hillary Clinton increases the risk of a Republican victory in November. But it could also be a crucial step in the development of a real liberal movement—one that can consistently fight for progressive values, shift the center of gravity of political debate, and one day reverse decades of gains by conservatives. A Sanders campaign could reshape liberalism from a motley collection of well-meaning sentiments—help working people, slow down climate change, reduce gun violence, increase access to health care, and so on—into a battle-ready ideology focused on the theme of leveling the economic and political playing fields. It could make the “Elizabeth Warren wing of the Democratic Party” a real political bloc rather than a figment of our imaginations.

Unfortunately, a Sanders campaign could also lead to a Republican victory with no silver lining. A loss in November could discredit liberalism and push Democrats back into the moderate-Republican arms of the Clintons and their allies. (In November 1964, most observers thought that Goldwater’s defeat signaled the bankruptcy of the conservative movement.) Liberals lack most of the artillery necessary to fight conservatives today: funders willing to invest hundreds of millions of dollars for the long term; dozens of think tanks to incubate zealots and encourage zealotry during long years out of power; mass media organizations willing to attack the opposition without scruples or fact-checking; and activist organizations building a generation of leaders through elections to school boards and state legislatures. Without that infrastructure, a Sanders nomination could simply evaporate into the history books like the Occupy Wall Street movement.

If liberals want to emulate the success of conservatives, we need more than Bernie Sanders. Barry Goldwater’s nomination in 1964 was not the cause of Ronald Reagan’s victory in 1980; it was an effect of a historical trend that was already taking shape.

At the same time, however, the conservatives’ refusal to compromise their principles was a crucial element of their long-term success. Instead of compromising with the moderate Republican establishment on abortion, or evolution, or supply-side economics, instead of backing off of quixotic quests like illegal proxy wars in Central America or the impeachment of President Clinton, they stuck to their guns, recruited their foot soldiers, fired up their base, and waited. Eventually, the GOP came to them.

If liberals want to take over the Democratic Party, at some point we have to stop voting for Clintons and hoping for the best. We know where a Clinton nomination will lead: a decent chance of victory in November, four years of triangulation with Paul Ryan, and one or two Supreme Court seats—leaving us in more or less the same situation we’re in today. It will not fill the ideological gap that allows conservatives to reshape American politics despite losing the presidency over and over. At some point, aiming for the middle of a target that is slowly being tugged to the right becomes a losing strategy.

Voting for Hillary Clinton is doing the same thing one more time and hoping for a different outcome. Voting for Bernie Sanders is a way to show that liberals will stand up for their principles—while increasing the chances that the other side will control the White House for four years. That’s the choice we face. Conservatives in our position would go with principles. What will we do?

Also posted on Medium.