Tuesday, January 24, 2012

Economic and Framing Comments On The 2012 SOTU

Which I watched, all the way, through! Do I hear applause?

Whether the speech deserves applause depends on what its intended audience might be. Not the so-called liberal/progressive base, in any case, though it had many good parts, sure. Still, I noticed that the president has adopted several Republican frames without perhaps noticing that he has done so. Examples:
Those are the facts. But so are these. In the last 22 months, businesses have created more than three million jobs. Last year, they created the most jobs since 2005. American manufacturers are hiring again, creating jobs for the first time since the late 1990s.
Businesses don't have magic wands which they use for creating jobs. Unless consumers are there with money to buy things with, few businesses will create jobs. Jobs are created by the whole system, not just the corporate system.

We should start with our tax code. Right now, companies get tax breaks for moving jobs and profits overseas. Meanwhile, companies that choose to stay in America get hit with one of the highest tax rates in the world. It makes no sense, and everyone knows it.
Mmm. Except that the US corporate tax rate does not reflect the taxes companies actually end up paying, what with the gigantic number of allowed deductions. The actual corporate tax payments in the US are among the lower ones inside the OECD.

Tear down regulations that prevent aspiring entrepreneurs from getting the financing to grow. Expand tax relief to small businesses that are raising wages and creating good jobs. Both parties agree on these ideas. So put them in a bill, and get it on my desk this year.
Now that one sounds like something George Walker Bush would have said! Purely Republican framing with that "tax relief" and "tear down regulations."

Of course tearing down regulations worked so wonderfully well for both the housing industry and the financial industry and is one of the reasons (perhaps the main reason) for the current global recession. But yes, sure, let's make a joke about farmers and the dangers of spilt milk as Obama did. To make regulations look even less important.

I recognize that people watching tonight have differing views about taxes and debt; energy and health care. But no matter what party they belong to, I bet most Americans are thinking the same thing right now: Nothing will get done this year, or next year, or maybe even the year after that, because Washington is broken.
That, too, is pure conservative framing. A bit odd coming from the guy who right now owns Washington.

And this is the bit of conservative framing which I want to analyze in more detail:
I’m a Democrat. But I believe what Republican Abraham Lincoln believed: That Government should do for people only what they cannot do better by themselves, and no more. That’s why my education reform offers more competition, and more control for schools and States. That’s why we’re getting rid of regulations that don’t work. That’s why our health care law relies on a reformed private market, not a Government program.
There's something very odd about those particular pairings: Competition with basic education and competition with health care. What might that oddness be?

This: When economists look at which products and services are best supplied via profit-making firms and which are not, education and health care are always presented as the ones with most problems in a market-based distribution system.

Why? Because lack of information and the imbalance of information between the buyers and sellers are the greatest in those two industries. If the buyers cannot really tell the quality of what they are purchasing (because it is embodied, dependent on cooperation between the buyer and the seller and also sometimes only verifiable years later), the price of that product becomes meaningless and the ways of cheating customers a legion. Historically, education and health care (of the institutional type) have never been offered by for-profit firms as the main organizational form.

Instead, the dominant corporate form in these industries has always been the not-for-profit firm. And there's the problem: The arguments about how efficient markets are, how low they can drive prices and so on do not necessarily apply to not-for-profit firms because they don't have the profit motive.

So the case for the markets is the weakest in education and in health care. I'm not sure why the president would pick those as his examples. But then he also said something quite muddled about markets:
Rules to prevent financial fraud, or toxic dumping, or faulty medical devices, don’t destroy the free market. They make the free market work better.
That "free markets" is another bit of conservative framing. Markets also cannot be both free AND regulated.