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Posted at 3:28 PM ET, 11/19/2010

The filibuster and the deficit

By Ezra Klein

I was at a dinner last night where everyone in the room had to name a few policies that they thought would increase economic growth in the coming decades. Increasing the number of visas we give to high-skill immigrants got the most votes, followed closely by loosening intellectual property laws. I favor both.

My big item, however, is eliminating the filibuster. Most people don't think of this as a deficit-reduction measure, but they should. Deficit reduction is difficult. For all that Washington would like to see a consensus-driven, heavily bipartisan deficit reduction effort that ends with Mitch McConnell tearfully embracing Harry Reid and promising to write him letters even when they're retired and far away from each other, I don't think there's much chance of it. So making it harder to get the votes is the same thing as making it less likely. And making it less likely isn't a very good idea.

Some deficit reduction can be done through the budget reconciliation process, of course. But there are enough constraints and procedural oddities to that route that it's better to avoid it if possible. The more difficult you make deficit reduction, the more you raise the cost of even trying. After all, if there's one thing less popular than passing budget cuts, it's proposing budget cuts and then failing to pass them. Then you can't even run on a reduced deficit. So the harder we make this, the more likely both parties are to shy away from it. And if no one does anything, we're hurtling toward a fiscal crisis -- and those are really bad for growth.

By Ezra Klein  | November 19, 2010; 3:28 PM ET
Categories:  Senate  
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Comments

"I was at a dinner last night where everyone in the room had to name a few policies that they thought would increase economic growth in the coming decades."

Man, your parties ROCK!

Posted by: RichardHSerlin | November 19, 2010 3:30 PM | Report abuse

Reading on, seriously though, you make a fantastic important point. And it extends to other things.

What's the single best thing you can do for global warming? End the filibuster -- This makes a strong global warming bill far more likely to pass, and once it does, try-and-see will decimate the Republican lies and propaganda. People will see it wasn't the death of freedom and it didn't bankrupt them. It actually cost very little; it greatly advanced the country, and it drove down gas prices making us a lot stronger and some of the worse terrorist sponsoring and authoritarian regimes in the world a lot weaker, and with a lot bigger incentives to change.

Posted by: RichardHSerlin | November 19, 2010 3:40 PM | Report abuse

Worst. Dinner party. Ever.

Posted by: mslavick | November 19, 2010 3:43 PM | Report abuse

But what about when the filibuster helps the deficit? Like when the parties can't agree on which irresponsible tax cuts to extend, thus allowing them all to expire. There're the Bush tax cuts, the estate tax cuts (and elimination); any others?

Posted by: bsimon1 | November 19, 2010 4:11 PM | Report abuse

richard wrote:

Normally you're a very interesting commentator, though we disagree. However almost nothing you wrote is true this time. Here's what I wrote on this morning's wonkbook in response to the linked article about Britain's commitment to biofuels actually increasing climate problems:

The above headline is why you should begin to accumulate agricultural commodities, especially soy beans and corn on the dips. If you hadn't heard, China has instituted price controls on food stuffs, (for which it is the world's biggest importer) and it's actually not a currency problem. It's an ENERGY problem.

So much of the world's current and potential farmland has been taken out of food production and into biofuels production that shortages will only increase over the next five years.

Even in places that you would never dream of such as Indonesia, biofuels production have taken over. Indonesia is the world's largest producer of crude palm oil for biofuel export. As the world marches off a cliff in legally mandating alternative energy production, food shortages will grow more acute and prices exceed the pace of inflation.

You can't stop it, but you can profit from it. Buy some of the AG ETF's as a hedge and profit machine. Right now they are still too high, even though they have come down. On any significant drop however slowly buy your way in. These increases are virtually built in because the agricultural cycle cannot be simply changed over in a month or two. Your talking about six months to a year before the problem even hits the public consciousness, let alone action being taken.

As for driving down gas prices, it's our currency that is causing the rise. The world is literally awash in oil right now, with average supply more than 10% over normal 5 year averages for this time of year. However with oil priced around the world in dollars, and the Fed inflating the currency, about 30-40% of the current price of oil is currency speculation. The worldwide average is of course a hard thing to estimate, but estimates are that actual production cost of a barrel of oil is no more than $50 or so.

One final note. We get very little of our oil from the Middle East if that is what you're referring to, about 20% of our total imports. The "terrorist sponsoring regime" that would be hurt the worst by a drop in oil imports is Canada from which we get 40% of our imprted oil.

Posted by: 54465446 | November 19, 2010 4:15 PM | Report abuse

"This makes a strong global warming bill far more likely to pass, and once it does, try-and-see will decimate the Republican lies and propaganda."

Unless the filibuster is eliminated instantaneously, I don't see how a strong global warming bill passes anytime soon.

"People will see it wasn't the death of freedom and it didn't bankrupt them. It actually cost very little"

How a strong global warming bill be effective if it cost very little? If prices at the pump go up $0.15 as a result of cap and trade, my driving behavior doesn't change. If my electrical bill goes up $5/mo, I'm not going to turn the heat down any lower.

"it greatly advanced the country, and it drove down gas prices"

The strong climate bill will be driving down gas prices? How does that reduce carbon consumption?

Posted by: justin84 | November 19, 2010 4:30 PM | Report abuse

While I'm onboard for eliminating the filibuster on good government grounds, I think we have to be realistic that this cuts both ways. While I hope that increasing numbers of people push their representatives to pass legislation that aligns with the best available science, but from time to time we're liable to get Congress' that don't want to go that route, and then we could see the repeal of, say, the Clean Air Act, or Medicare. It's good for elections to have real consequences, but we have to admit that we're not going to win 'em all, and there are going to be some pretty bad consequences of that from time to time.

Posted by: MosBen | November 19, 2010 4:50 PM | Report abuse

I thought the entire point of reconciliation was to allow deficit reduction measures with only a majority vote required? As far as an impediment to deficit reduction, I believe this one has already been fixed.

"It's limited to provisions with a direct impact on the federal budget, and a rule passed by Democrats further limits it to laws that reduce the deficit (a response to Bush using reconciliation for budget-busting tax cuts)."

http://www.washingtonpost.com/wp-dyn/content/article/2010/03/05/AR2010030502233.html

Methinks you don't like the filibuster in general and are using the deficit as an excuse to eliminate it altogether.

Posted by: jnc4p | November 19, 2010 4:50 PM | Report abuse

Reconciliation was invented in order to help balance the budget. That doesn't mean it necessarily does a good job. It takes a certain amount of procedural rigmarole to get something passed through reconciliation. And budget reconciliation was really designed for making quantitative changes to law. Many things that would help balance the budget are fairly substantial policies (for example, the examples Ezra explicitly gives in this post) which would lower the deficit by "bending the curve" or increasing economic growth rather than simply a brute reduction in the level of revenue, and those are the sorts of things worse suited to reconciliation.

Posted by: usergoogol | November 19, 2010 5:01 PM | Report abuse

The only thing that will make a difference is having a two-tiered system, whereby deficit cutting measures are easier to pass. That already exists with the reconciliation process.

Posted by: bdell555 | November 19, 2010 5:02 PM | Report abuse

"I was at a dinner last night where everyone in the room had to name a few policies that they thought would increase economic growth in the coming decades. Increasing the number of visas we give to high-skill immigrants got the most votes,"

I'm still puzzling this one. Given that we are a consumption and service economy (excluding agriculture production) and not a production economy, what exactly would they do? We already have plenty of brilliant designing engineers in multiple fields. We just don't do much on the production end. How is a highly skilled immigrant going to change labor costs and currency issues to improve our GDP?

Posted by: 54465446 | November 19, 2010 5:26 PM | Report abuse

I'm on board on the filibuster.

However: "Increasing the number of visas we give to high-skill immigrants got the most votes"

Seriously?

I work in IT. Well over 3/4 of my department is gone now to those "high-skill immigrants", who all happen to be recent college grads from India.

I'd say about 90% of those "high-skill immigrants" are less skilled than those 3/4 Americans who are now unemployed.

I don't buy it. There are millions of graduates in the US every year. And you're telling me we need to go outside of the US to find qualified candidates, while 10% of our population is "officially" unemployed, many of them with degrees & experience?

Call me ignorant, but exactly how is "Increasing the number of visas we give to high-skill immigrants" increasing GDP?

Posted by: JERiv | November 19, 2010 6:07 PM | Report abuse

--*For all that Washington would like to see a consensus-driven, heavily bipartisan deficit reduction effort*--

Feeling extra disdain for the rubes today, Klein?

I know, I know, a girl can have her dreams, but isn't it far more likely that easier-to-pass legislation would be easy-to-pass legislation that did more spending, not less? Or are you hoping that it would be easier to impose more taxes, and that with more money around, those nice Congresses wouldn't dream of tossing it and more down the same holes the country is increasingly full of?

Go on, Klein, pull the other one.

Posted by: msoja | November 19, 2010 8:00 PM | Report abuse

--*Seriously?*--

It was party where Klein was a guest. It's the sort of set that marries its intellectual brothers and sisters.

Posted by: msoja | November 19, 2010 8:05 PM | Report abuse

Let me guess, not one person suggested abolishing the Department of Education, or Labor, or Agriculture, or HHS, or the IRS, or Medicare/Medicaid, or the FDA, FTC, FCC, Commerce, etc.

No, we need to find a way to get that camel moving with a heap more stuff on it.

Maybe tase the thing.

Or bills only need four votes to pass, and we replace the eagle with a giant banana.

Posted by: msoja | November 19, 2010 8:11 PM | Report abuse

Whatever filibusters might mean in the long run, for the 2010 thru 2013 budgets the filibuster means deficit reduction.

The Republicans probably can't get a tax cut that they like through Congress and past a president who doesn't like them, so revenue cuts before 2013 aren't likely, and just fourteen business days stand between Congress and a half trillion dollar revenue bump when all the Bush tax cuts run out. Since every budget proposed will get shaved, not augmented Obama can propose reasonable budgets and get insufficient budgets in return, and in general deficits will also go down. Filibusters can't get the Republicans what they want, they can only keep the democrats from getting what THEY want.

So until another election, the filibuster is the Democrats enemy, but the budgets friend.

And in two years there won't be any salient gain from obstructionism that the republicans can proudly raise as one of their accomplishments, so it isn't Republican friendly either.

Posted by: ceflynline | November 19, 2010 8:50 PM | Report abuse

In reply to 54465446 and justin84:

Let me clarify: Cap and Trade will cause an initial moderate increase in the costs of carbon producing activities. So, say, gas goes up by 30 cents per gallon. This will result in an increase in demand for fuel economy in cars (as well as mass transportation, living closer to work, etc.), this will result in more hybrids, less horsepower, more of a cars prestige coming from its efficiency, less coming from its horsepower, etc. The resulting decrease in demand for oil will cause a drop in the market price of oil – maybe gaining back 15 of those 30 cents, maybe more – a free lunch for us because OPEC, Russia, etc. pay the price.

Now, the 30 cents in tax money, and all other proceeds from cap and trade, could be mandated in the legislation to go towards alternative energy R&D and infrastructure. This could be hundreds of billions, eventually over a trillion per decade, going towards this. Now, to compare scale, today total government spending on basic scientific and medical research is approximately $34 billion per year. That includes all of the government spending on basic scientific and medical research on curing cancer, arthritis, backaches, headaches, obesity, robots building robots, solar power, everything. Total R&D from all sources combined, government, business, and non-profit is $308 billion per year – and a big chunk of that is billions to make razors supposedly better, and transmissions more "silky smooth", things of relatively little intrinsic value, but high positional/context/prestige externality [Numbers from National Science Foundation data. See: http://richardhserlin.blogspot.com/2010/09/optimal-level-of-governemnt-investment.html].

This gigantic increase in alternative energy R&D will greatly increase mileage, as well the performance of electric cars, and their usefulness (network of charging stations and sites, etc.).

So, as a result of all of this, that 30 cents per gallon increase will result, for most people, in little or no increase in total transportation costs – or an actual decrease, perhaps a big one.

Then the next phase of cap and trade starts, and you get another 30 cent increase, and the above happens again, and again most people have little increase in their expenses – or a decrease, or a big decrease.

And so on with each round.

For more on this, please see the abovementioned link, and this one:

http://richardhserlin.blogspot.com/2010/08/positionalcontextprestige-externalities.html

Both were in Mark Thoma's links. They're good.

With regard to 54465446's (do you ever feel like a number?) mention of biofuels, those don't sound good to me either. I'd rather see money going to solar, nuclear, batteries, conservation, and others. And with regard to the price of oil, I'm talking about the real price of oil, not the nominal one. Oil is fungible, if you decrease global demand, it doesn't matter who supplies your oil, the real (inflation adjusted) price will drop globally.

Posted by: RichardHSerlin | November 19, 2010 10:14 PM | Report abuse

If you buy less Canadian oil, then Canada will have more left over to sell on the global market, driving global prices down.

Posted by: RichardHSerlin | November 19, 2010 10:15 PM | Report abuse

Richard:

I'm sorry that we just disagree in your gasoline theory. As I pointed out above, demand for oil is not driving the price anymore. It's now a proxy for currency. I follow the oil market closely as an investor and I don't know anyone who is predicting a drop in oil demand in the future.

The only thing that has created a drop in demand was the deep world recession we are slowly coming out of. If you anticipate a redux, we differ for now.

I buy what you're saying on research, but all the dollars spent on renewables takes away from that area. We're not going to spend billions on solar and wind only to say in 5 years "well we were only kidding, now you have to replace them with this new technology". Every dollar spent on wind and solar steals money from research on real breakthroughs.

Moving to wind and solar would be like converting our jets back to propellors, neither is a new technology in any sense.

I believe your guess on gas prices is more than just conservative. Ben Bernanke, either because he is lucky or good or both, caught a real break this week. The Chinese move to raise bank reserves and take down inflation, along with the continuing European debt crisis in the PIGS countries stabilized the dollar for him. Has these not happened you would have your .30 increase in gas by the new year.

We can talk about the virtues of the electric car and why it's foolish to move from a market dominated by about 10 countries (oil) to a market dominated by one (renewable energy) in another post.

Posted by: 54465446 | November 19, 2010 10:43 PM | Report abuse

--*a big chunk of that is billions to make razors supposedly better, and transmissions more "silky smooth", things of relatively little intrinsic value*--

I love how at root you disdain what other people value. All your ifs and thens are predicated on imposing your values onto what happens with the stolen loot. In practice, though, those stolen dollars are munched and crunched through the political horse, and what comes out the other end isn't nearly as pretty as your adorable little hypothetical.

Meanwhile, real people are actually poorer (which is why you're hoping they'll be looking for smaller, lighter cars), and thereby not as able to pursue *their* druthers.

You should go mind your own business, maybe, purchase the car you want everyone else to drive, and send the money you save off to the research institute of your choice.

Posted by: msoja | November 20, 2010 11:13 AM | Report abuse

Mosja,

When people pollute and risk planetary devastation they're minding my business. It's called externalities, google it (as well as free rider problems), it's been a cornerstone of economics for a long time. And one of the biggest externalities is position/context/prestige externalities which can result in tremendous spending on things of little or no (even negative) intrinsic value, as can another long established concept in economics, asymmetric information. These are big reasons why government action can make the vast majority of people's lives far better and greatly increase growth in wealth, science, and medicine.

Posted by: RichardHSerlin | November 20, 2010 7:57 PM | Report abuse

"a girl can have her dreams"

Manly man and internet fraud smoja protests too much.

Go and play in your kiddie-boat, smoj.

Posted by: pseudonymousinnc | November 20, 2010 9:05 PM | Report abuse

--*planetary devastation*--

Ooo. Maybe the government shouldn't have used its stolen goods to build the Interstate highway system, after all.

Guess what? Taxing the plook out of people and pretending to invest the gains in green technologies isn't going to save you. Either the crisis is a farce, or the strategy to deal with the crisis is a farce, and if it isn't the latter, then it isn't the former, either, because the strategy is a joke, i.e., no one who really thought we had to take immediate, vital steps to avoid doom would come up with such schmaltz.

Even worst case alleged scenario, there is not going to be "planetary devastation". That's chicken little-ism with a touch of hyperbole. There might be some challenges, but guess what? There isn't a species on the planet that didn't get where it is without adapting to challenges. Life is flux. Challenges do occur. Challenges will always occur. In some cases, people and other animals or plants will suffer. Others will thrive. The best course of action for a human individual is to acquire as much information as possible and exercise freedom within one's capabilities as much as one can.

Forcing one's fellows to one's own apoplectic vision really isn't in the best spirit of things. Especially when one might be a dummy.

You don't believe the commie rhetoric about reaching the promised utopia and forever surmounting planetary challenges, do you?

Posted by: msoja | November 21, 2010 12:34 AM | Report abuse

--*Go and play in your kiddie-boat, smoj.*--

You mean my kayak?

???

It's a green machine, you little fascist.

I get four miles to the cheeseburger in that thing.

Posted by: msoja | November 21, 2010 12:42 AM | Report abuse

richardserlin:

I'm disappointed you didn't address my latest to you. No thoughts at all?

Posted by: 54465446 | November 21, 2010 10:28 AM | Report abuse

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