I moderated a panel on infrastructure and jobs at the Bipartisan Policy Center this morning, and one of the topics that came up was an infrastructure bank. Asked about it, one of the panelists said "what I'd like is to make all the members of Congress write a 100 word essay on what an infrastructure bank is." It was a good line, and the audience laughed because it hints at something all too true when it comes to discussing policy: there are a lot of ferocious advocates of policies they can't explain.
I have read or heard some variant on this
a hundred times or more since the financial crisis:
When the financial industry came to the brink of collapse because of the reckless behavior of these "too big to fail" corporations, we saw an amazing ability for our government to come together to bail them out. In return, they've repaid the favor by working night and day to lift the already watered-down provisions of the Dodd-Frank reforms so they can continue with their same insanity, and to basically act like spoiled, entitled brats towards those of us who saved their butts in the first place.
Contrast this with any legislation in Congress that might actually help out rank-and-file Americans, and suddenly everything becomes gridlocked and impossible to achieve. From out here, it appears that when you have a lobby on your side, government works, and if you don't, well tough luck.
We march for three simple things: tighter regulation of the financial industry (a return to Glass-Steagall would be a big step)
The passion is certainly real, and understandable. But the attachment to Glass-Steagall is not. Of the hundreds of times I've seen this, in all but two or three cases it's been absolutely clear that the person advocating this could not describe the content of Glass-Steagall (presumably the one passed in 1933
), nor the multi-decade unraveling of its major provisions. If anyone makes any of the obvious criticisms--"Really? You want to bring back Regulation Q
?"--they're not even particularly sheepish about admitting that well, of course, they're not exactly familiar with the whole thing, but . . .
What follows is usually a defense of the one provision they are familiar with: the enforced separation of commercial banking and investment banking activities. But when asked how this would have helped, when it was the pure play investment banks created by Glass-Steagall that had the most trouble, I've never seen any of Glass-Steagall's fans provide a convincing explanation; indeed, it's often been quite clear that they weren't aware of this fairly well-known fact.
So how did they fixate on Glass-Steagall? As best I can tell, aside from the IMHO erroneous belief that Glass-Steagall would have somehow prevented the TBTF problem, there's a sort of folk legend that it was done in the thirties to curb the excesses of the 1920s banking system, and that since the banking system was rather placid after it passed, it must have worked splendidly right up until the point where vile legislators repealed it at the behest of their banking buddies . And so of course, it seems like the most natural thing to restore it. It seems to be further recommended by the fact that it would cost a bunch of banks quite a bit of money, which they don't like.
But this is not much better as a policy argument than suggesting that all banks should be forced to construct imposing edifices in the neoclassical style, in which they must house all their operations. At least if we did that, we'd dress up Main Street a little. And I can't wait to see what the drive-thru ATM looks like.
Similarly, a libertarian of my acquaintance recently found himself cornered at an event by a fellow complaining that government spending was far too high and needed to be cut, a proposition for which he offered in support . . . the work of Art Laffer.
"But didn't Art Laffer say that cutting tax rates would raise the amount of revenue that the government collects?"
"Well, sure," said the Lafferite.
"But then wouldn't government spending go up?"
The Lafferite, never having actually connected these two things in his head, fell mute. Laffer was just a sort of generic support for lower taxes, not evidence for anything actually specific, like what would happen to government spending if you cut taxes. Art Laffer could have claimed that lower taxes cured gout, and presumably the chap at the party would have been just as enthusiastic.
Then there are the tax nuts, which is nearly everyone. I have seen reporters, wonks, and innumerable blog readers repeat the administration's claim that oil companies were getting unconscionable tax breaks which need to be reformed to pay for urgent policy priorities. I have yet to encounter one who could describe any of these tax breaks; even if they knew the words "percentage depletion allowance" or "intangible drilling costs", they can't describe what those things are. Nor are they aware that many of these allowances are already disallowed for the large oil firms, who effectively almost have their own special tax code.
Don't get me wrong: I'm hardly a tax expert. And there are some wonks, readers and journalists who really are. These people frequently offer interesting takes on these issues, of which I am an avid consumer.
But the number of people who are outraged by these tax deductions, and think they should end, is in my experience clearly much larger than the number of people who have even the most minimal grasp of principles of tax accounting, or a theory of when and how the code should recognize a taxable event, much less a glancing familiarity with the provisions of the tax code to which they are quite indignantly opposed.
Myself, I don't have a very strong opinion about things like the optimal depreciation period for corporate jets, drilling costs, or resource deposits; whether oil companies count as manufacturers for the purposes of receiving a rather stupid tax subsidy that shouldn't exist for anyone; or whether income taxes levied on oil companies in foreign countries should actually count as royalties for the purposes of assessing their US income tax. These issues seem complicated to me, value judgements with no obvious answer.
And with a few notable exceptions, this is true of most of the people I know who write or think about these sorts of tax questions: there's a healthy recognition that a whole lot of tax law is struggling with boundary cases, and that there is no possible configuration of the tax code which will make all those boundary cases go away. They may suggest that a 12 year depreciation schedule would be a more appropriate choice for corporate-owned airplanes, but they rarely suggest that a 7-year schedule represents an egregious and unforgiveable giveaway to the President's rich friends--or that anyone who supports any corporate income tax at all is the ideological next-door-neighbor to Pol Pot.
Why, then, are the ignorant not merely so much more passionate, but so much more certain? It is a great mystery. But I think we could vastly improve the policy discussion by requiring everyone to write 100-word essays on what their preferred policy actually is, before they are allowed to talk about it.
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is a columnist at Bloomberg View
and a former senior editor at The Atlantic.
Her new book is The Up Side of Down