Sunday, September 9, 2012

Mark Thoma and the hothouse flowers of the right

In a post worth revisiting, Mark Thoma's head finally explodes at the sight of one-too-many delicate Republicans:
But really, what is it with Republicans and their hurt feelings? They tell us that the CEOs of major corporations stopped investing, stopped maximizing profit for their investors because the president hasn't honored them enough. They'll show him! -- all the while losing money for their investors? Republicans complain endlessly about the debt, it was a theme of their convention, but given a chance to do something about it they walk away because the president didn't treat them exactly as they expected and demanded? Apparently, their feelings got in the way. They show no respect to the president whatsoever -- quite the opposite -- and then break off negotiations they believe are crucial to the future of the country because he didn't show them the respect they think they deserve? Cry me a river (well, everyone but Boehner).
I'm surprised it took him this long. I lost it back in February when Amity Shales wrote this:
Obama wants to reward companies that create jobs here in the United States. One of the carrots is a tax credit for companies that move operations back here. Another would double tax breaks for high-tech factories making products here.

These are juicy carrots. But the sticks put forward by Obama are hefty. The president wants to eliminate a tax break for moving expenses when a company ships operations overseas. He also wants to close a tax loophole that allows companies to move some types of profits to overseas tax shelters.

The president figures that businesses will tolerate the pain of the sticks for the reward of the carrots. He thinks if he pokes the stick in one corner, they'll hop over to the corner where the carrots are.

But the trouble with this argument is that the U.S. economy is not a rabbit cage. And business people -- entrepreneurs especially -- don't respond well to prods from a stick. Any stick. If they get a glimpse of the rod, they'll leap away for sure -- but it might just be to somewhere outside the United States. Our cage. And the carrots of cheaper labor there overseas might even be tastier.

Maybe the president is forgetting the goal, which is making the economy grow faster. Enough carrots, and businesses will grow. And they'll create jobs. But pick up even just a few sticks, and you won't get recovery. Instead, we'll all be looking at an empty cage and asking: Where are the rabbits?
Here was my reaction at the time:
Putting aside the argument that eliminating "a tax break for moving expenses when a company ships operations overseas" will encourage companies to ship operations overseas (is there a paragraph missing somewhere?), what caught my eye was the way Shales tortures this poor metaphor.

It doesn't help that the proverbial carrots and sticks were used to motivate proverbial mules and other large and stubborn beasts of burden. As an old country boy, I can tell you that getting big animals to go where they don't want to go is a challenge. I haven't had that much experience with bunnies, but I have to think it's a bit less daunting. I don't even believe I'd need a stick.

But Shales' odd allegorical choice is in keeping with the even odder dichotomy in the way conservative rhetoric has come to treat entrepreneurs and business leaders. Half the time they're bold and decisive figures, the spiritual descendants of our frontier forefathers; the rest of the time they are as delicate as a hothouse flower and as timid as a woodland creature (like, for example, a rabbit).

Shales has entrepreneurs leaping away at just "a glimpse" of a rod (and given that she describes closing a couple of tax loopholes as "hefty" penalty, it's fair to say that she really does mean it when she says any stick). Other conservative commentators have speculated that business leaders are slow to invest because they can't deal with the uncertainty caused by a possible return to Clinton era tax rates. We've even heard some argue that the recovery was slowed because the president keeps saying hurtful things about bankers and CEOs.

It's a bit like Dr. Jekyll and Mr. Hyde but with John Galt and Elmo.
Snark aside, what's troubling here is both the persistence and influence of the poor-little-Randian argument. High-ranking politicians and respected journalists continue to use it to support policies with the potential to do huge damage to the economy while the rest of us continue to listen to them as if they were saying something sensible.


  1. I thought defenders of free enterprise thought that economic agents react rationally to incentives. The Shlaes version is that they are rebellious and petulant brats who won't do their chores in an environment that contains firm expectations and punishments for bad behavior.

    Anyway, if it is true that business people are collectively holding their breaths until they turn blue and staging a capital strike, then we need to break the strike and not opt for even more indulgence and permissiveness.

  2. I think the Randisn fantasy of "if the gifted people just stop working then everything will fall apart and they will beg for us back" of Atlas Shrugged is responsible for a lot of bad arguments. In reality, the pool of talent is deep enough that they would just be replaced by equally capable people.

    1. I think we're again hitting the fundamental contradiction of Shrugged. It glamorizes strength but it is, at heart, the ultimate passive-aggressive fantasy -- "someday I'll run away and then you'll be sorry."

    2. I find the who existence of adjunct professors and of unpaid interns as interesting comments on just how many talented people are out there willing to step into jobs. The idea of an overclass of people is a deeply attractive mythology to those on top (divine right of kings) but weakly supported by the available evidence.

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