An ongoing review of politics and culture

Of CEOs, Private Equity Titans and presidents

Jim Manzi has had an excellent discussion on the relation between Mitt Romney’s professional background and what he might be like as a president. Megan McArdle has also been discussing this at length.

I’ve made no secret that I think Mitt Romney should not get the GOP nomination, as now looks inevitable, and should not be the next President, as looks likely if the economy does not improve over the next year (but, on this score, I’ll probably be lucky).

I believe that the fundamental and egregious dishonesty that has characterized every step of his political career to date ought to disqualify him from city dogcatcher, let alone wielding the launch codes.

All that said, I think the background of a Harvard JD/MBA, private equity investor and occasional turnaround CEO is great for running the executive branch.

The job of a President is basically two-fold: getting his agenda through the legislative branch, and running the executive branch. The former mostly requires political skill.

As to the latter, which is incredibly important in our era of the Imperial Presidency, a widely spread idea is that in the private sector you learn “management skills” and how to “get things done”. That’s the President-as-Jack-Welch meme. I think that’s largely an illusion for three reasons:

• The public sector works very differently from the private sector;
• The Federal government of the United States is immensely more complex than any private sector business;
• Most “management skills”, at least as taught in business schools, are largely a crock.

CEOs actually have much more leeway in terms of management than do presidents. Amazon CEO Jeff Bezos famously spends a few weeks each year working in Amazon warehouses to get a better understanding of that side of the business and improve it. President Romney isn’t going to intern in the Patent Office for two weeks to see how applications could be streamlined. A CEO can decide to spin off, merge, or shut down departments. If President Romney (or Perry) wants to shut down the Commerce Department, he’s going to need an Act of Congress.

99% of the work the President does as manager of the executive work is the following: – Setting priorities – Hiring and firing

The other 1% are the Big Decisions, that are the least frequent but also the most important. It’s the part that can’t be taught and where the background is irrelevant.

In other words, the President behaves much more like an “executive chairman” of a company who has a hand over major strategic decisions than a CEO who runs it day to day.

This is also very similar to what a private equity investor does in a buyout: analyze the business, decide on a strategy and hire, retain (and fire) managers. He should have a “nuts and bolts” understanding of the business, but he’s not going to go into the factory to make widgets or tell the factory manager how to make widgets.

In other words, to reprise Ronald Reagan’s excellent phrase, to be a good manager of the executive branch, a President should know who to trust, and how to verify. These are also the skills a (good) private equity investor has in spades. Mitt Romney has decades of experience analyzing stuff and then hiring, holding to account and firing people.

Of course, when someone who is also a fundamentally dishonest liar with obvious contempt for his fellow citizens has these excellent skills, it’s an additional argument AGAINST nominating them to the position where they would have the power to detain fellow citizens indefinitely, appoint judges to the federal bench, and start wars.

But the question of whether Mitt Romney would make a good president is distinct from the question of whether a co-founder of a successful private equity firm, as such, would be suited to managing the executive branch.

Romney & Bain: Intention versus Method

Yuval, Avik Roy, Ramesh, Michael Walsh and Jonathan Last at The Weekly Standard, among many others, have all written perceptively about the relationship between Mitt Romney’s work at Bain Capital and our political economy.

I think that this paragraph from Jonathan Last gets to the nub of the issue:

Romney’s work at Bain differs in some important ways from how he has characterized it thus far. When Romney says that his goal at Bain was to “create jobs,” that’s not entirely true. As a private equity firm, Bain’s goal was to maximize return on investment (ROI) for a small group of high net worth investors. Sometimes that meant giving seed money to a promising start-up. Sometimes it meant rescuing a company and turning it around. Sometimes it meant finding revenue streams a company hadn’t realized—including government bailouts. Sometimes it meant off-shoring a company’s jobs. And sometimes it meant finding a company whose component parts were worth more than the whole—and dismantling it.

Without respect to the electoral politics and messaging for a moment, the predominant form of “bad” capitalism in contemporary America is created by the joining of a capitalist enterprise with the coercive power of the state, not by the impurity of the motivations of the capitalist. This distinction is crucial for defenders of free enterprise.

This perversion of capitalism normally arises in one of two ways: (1) the crony capitalism of state-backed enterprises, or (2) the implicit violence of lawbreaking by dishonest capitalists. The root problems that need to be addressed in finance in the U.S. are things like Fannie / Freddie, too-big-to-fail, government bailouts of specific companies and so forth, on one side, and Madoff-type scandals, on the other. No real political economy is ever textbook-pure, so there will always be some of both of these, but they ought to be reduced from their current levels.

But requiring that businesspeople make decisions based on some putative idea of altruism, even if such a stricture could be defined and enforced, would be a terrible idea. Capitalists should not be restricted as to intention, but as to method. As a rough-and-ready rule, they should be forbidden from using force. The government may also choose to place additional regulations on them (weights and measures rules, minimum wage laws, non-discrimination laws, etc.). While any given regulation is debatable, some formal regulation is required for real markets, and capitalists should have to obey the law. Further, real markets depend to some extent on informal norms – e.g., general commercial honesty, an ethic of a “deal’s a deal,” and so on. This last point can obviously get somewhat fuzzy, but is still important.

Within these constraints, we should generally want capitalists to pursue their self-interest in business dealings. This is not some falling short of humanity, but the way we grow the material wealth of the society as a whole over time. This is the meaning of Adam Smith’s famous aphorism that:

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own neccessities but of their advantages.

The valid criticism of Romney as a capitalist would be that he worked government angles to seek advantage for himself, or broke laws or crucial norms. Seeking to make more money within the rules is a good thing, not a bad thing, for a capitalist to do. That is, Romney’s immediate goal was almost certainly to make money, not to “create jobs.” But the effect of Romney’s actions was to do this – though most of these jobs were created indirectly. This is Adam Smith’s famous “invisible hand.”

Romney was working to “create jobs” only in the sense that if you believe in this, you can have confidence that you are doing your part to increase overall material well-being of society by acting as a self-interested capitalist. More precisely, if all capitalists act this way, then over time, society will advance materially. Tracking your indivudal contribution, or even knowing if it was positive or negative, is a fool’s errand. This is why the very act of trying to count the jobs created at Staples, assessing how many would have been created had Mitt Romney not agreed to take the job running Bain Capital instead of somebody else, estimating how many of these Staples jobs need to be netted against other jobs that therefore were not created at other business supply stores, and so forth is so self-defeating. If we could accurately calculate things like that, we would have much less need for markets in the first place.

The key argument made by critics of “financial capitalism” that can be construed as consistent with all of this relates to the idea of informal norms. In simplified and illustrative terms, this argument would be that by doing something like breaking a norm against laying people off after age 50, these firms create value for themselves, but at the expense of the long-term degradation of society, and therefore the transfer of wealth from almost everyone else to themselves. This is a huge subject that will not be resolved in a blog post, but the key problems that critics of leveraged buyouts seem to point to are layoffs and moving production offshore. Restraining business from doing either of these things is a terrible idea for long-run wealth (and job) creation, and goes to the heart of the creative destruction inherent to real free enterprise.

Obviously there are shades of gray, and as I said all markets require regulation, but we need to be grown-ups about the choices we face. Enjoying the growing wealth created by free markets without the pain, uncertainty and risk that they involve is a fairy tale for an advanced economy.

To end with a word on the politics, I agree with Yuval that this implies that Romney’s work at Bain is only a partial preparation for high political office. On one hand, it would presumably help him to see the economy in a more practical light; but on the other, participating in a capitalist economy is a very different task than regulating it. I have no idea how the politics of this will play out, what is the best way for a Romney campaign to communicate these ideas, or even if they should be communicated at all. But I am convinced that “de-politicizing” our now much politicized economy is very important for America’s future growth and prosperity.

(Cross-posted to The Corner)

Win, Place, and Show

Apropos of a couple of pieces linked to by Andrew Sullivan about the future of GOP Presidential politics beyond this year, let me just say this: the race for second place matters, empirically, quite a bit. And the best evidence is this election season.

The GOP has a strong penchant for nominating whoever has next “earned their turn.” And very frequently, the way they tell who earned it is by looking at who came in second last time around.

In 1976, Ronald Reagan gave President Gerald Ford a run for his money. In 1980, he was the nominee.

In 1980, George H. W. Bush won the Iowa caucuses, and came in second to Ronald Reagan in the primary contests. He was selected as Reagan’s VP, became his heir apparent, and got the nomination for President in 1988.

In 1988, Bob Dole, who had been Ford’s VP nominee in 1976, won the Iowa caucuses, and looked like a formidable contender for the nomination. After losing New Hampshire, he faded, but he still came in second to Bush. In 1996, he became the nominee.

The 2000 election was something of an exception to the above rule. George W. Bush had never come in second running for President before. Second place in 1996 went to Pat Buchanan; third place to Steve Forbes. Buchanan was unacceptable to a broad spectrum of Republican leaders, and was effectively drummed out of the party after 1996; he wound up running an independent campaign in 2000. Forbes would have been acceptable ideologically but was obviously absurd as a candidate. So the field was genuinely open – there was nobody who was obviously “next.” George W. Bush didn’t so much earn the blessing of the establishment as inherit it; it was his “turn” on the basis of primogeniture. It didn’t hurt him that the other major candidate, John McCain, ran against the establishment when he was unable to lock up its support.

But, interestingly enough, that opposition to the establishment in 2000, and his flirtation with the Democrats out of pique in the wake of the 2000 election, were not enough to prevent McCain, who came in second in 2000, from winning the nomination in 2008.

And, finally, Mitt Romney, who is overwhelmingly likely to be the nominee this year, has earned that position primarily by coming in second in the 2008 primary contest. I don’t think anybody is deluded into thinking he is a particularly strong candidate. But he ran last time, came in second (in total votes and states won, that is; Huckabee actually came in second in the delegate count), and his full-time job since then has been lobbying for establishment support. That’s how he earned the nomination.

If Romney gets the nomination and loses, whoever hangs in and fights him for the nomination over the long haul, assuming they aren’t wildly unacceptable to the party establishment, will automatically be in contention for 2016. Ron Paul is wildly unacceptable to the party establishment; Gingrich, for different reasons, probably is, too. But Huntsman, Santorum and Perry aren’t. No one should assume that if they lose this time around, they are gone. That’s not the way the GOP works.

Of course, a historical trend is just that – a trend; it doesn’t guarantee anything at all. But Republican Party history suggests that the race to be the “not-Romney” is far from irrelevant, even if Romney winds up as the nominee.

90% Of Life Is Not Dropping Out

So the winner of the “Not Romney” caucus turns out to be a pro-life, hawkish, Midwestern, blue-collar, has-been politician in a non-threatening sweater vest who was polling in the single digits – not just nationally but in Iowa – until mid-December. If Tim Pawlenty isn’t on suicide watch yet, he should be.

Seriously, though, and I’m not a Pawlenty nostalgist – I’m overwhelmingly likely to be supporting President Obama in November, and no Republican actually running was likely to change my mind about that – but let’s look at the handful of things Santorum has going for him that the other “Not Romneys” didn’t. Everybody in the party doesn’t hate him, the way they hate Gingrich. He’s capable of at least remembering his own talking points, unlike Rick Perry, apparently. He’s not an obvious amateur, like Herman Cain, or an obvious crazy person, like Michele Bachmann. He’s not challenging core GOP positions, like Ron Paul is (on foreign policy, the drug war, civil liberties, etc.). His blue collar roots lend credibility to his economic message, whatever it is. He’s a Midwesterner, not a Southerner or a Texan. Every one of these attributes applies to Tim Pawlenty as well.

And his negatives? He has no money to compete nationally, no organization, no support from the party leadership (even Pawlenty wasn’t quite as bad off). He’s an exceptionally annoying person to listen to (call this one a tie). He lost his Senate reelection bid by 18 points (Pawlenty won his, narrowly). And he’s transparently an extremist on both foreign policy and social issues, and even if some GOP voters are thrilled to have a “full-spectrum” conservative to support, transparent extremism isn’t usually considered an asset in a general election. Call Pawlenty what you like, “transparent extremist” isn’t what you’d call him.

All of which goes to prove simply that winners don’t quit, and quitters don’t win. Pawlenty was a pretty uninspiring candidate. But with the exception of Ron Paul, who inspires a relatively narrow slice of the electorate but inspires it a great deal, nobody running is particularly inspiring. Heck, most of the folks running inspire some combination of dread and disgust. Rick Santorum would be a terrible general election candidate. Worse, even, than Mitt Romney. But he earned his hour to strut and fret upon the stage, by refusing to leave it.

Re: Gene to Phene

John, good to see you posting too, and Merry Christmas!

You say this:

Surely it will not be “the fact of our ignorance in this area” that “is likely to be very important to thinking about public policy in the upcoming decades”: rather it will be our increasing understanding in this area. The fact of our ignorance was, after all, around from the beginning of time up to 1953.

Our understanding of both genetics and the biological basis of behavior is proceeding rapidly, and I assume will continue to do so for some time. This has led to many extravagant claims for knowledge that we do not have, i.e., a “gene for depression.” Such claims have obvious policy relevance, and I think that subjecting such claims to rigorous scrutiny will become increasingly important in future decades, because there will likely be many more of them.

Then you ask the following:

And what does this mean: “We do not have the practical ability to understand why person X has normal psychological make-up Y based on analysis of his or her genome”? Do you mean to say this is a thing we metaphysically cannot understand? What is the evidence for that? The name Auguste Comte mean anything?

I know of no metaphysical reason (that I am certain is true) for why we could not ultimately understand this scientifically. We don’t understand it yet, though.

Comte is a great illustration of several kinds of errors, many of which center on unfounded claims to knowledge. You link to one example of this: his claim that we could never know the chemical composition of stars. But Comte is usually thought of as the founder of sociology: a discipline that he saw as scientifically modeling human social organization based on mathematical laws (per a recent set of Corner exchanges, Hari Seldon anyone?). He and Saint-Simon were called out by Hayek as key intellectual figures in building belief in the current (not possible at some future date) capacity to predict and therefore plan society. A key intellectual task of Hayek, Popper and the other mid-20th century libertarian thinkers was to point out the pseudo-scientific nature of these claims.

It may be that someday we will be able to use knowledge of the genome to predict human social behavior sufficiently to rationally plan our political economy, but we are not there yet. We should rigorously scrutinize claims of the reduction of non-pathological human mental states to scientific phenomena, in part because of the potentially profound political implications of such findings. More precisely, all scientific claims should be subjected to rigorous scrutiny, but we should challenge the sloppy popularization of such claims unless and until they are really scientifically validated, because any such popularization may tend to create an unfounded intellectual climate hospitable to the erosion of political and economic freedom.

(Cross-posted to The Corner)

What a Ron Paul Victory Would Mean

He hasn’t won yet, of course, and if he does we won’t get a terribly accurate picture from his supporters of why they gravitated toward him. But in my own wildly speculative view:

- Contra David Frum, Ron Paul is not the candidate of “indifference” to the economic situation. Indeed, I strongly suspect that the main substantive reason why Paul is getting more traction this time than last time around is precisely the economic crisis, and popular fury about it. Paul’s policy prescriptions are, in my view and in Frum’s (and in Andrew Sullivan’s, for that matter), insanely wrong – certain to badly exacerbate our plight, not to ameliorate it. They are reactionary, anti-modern, rooted in ignorance not knowledge. But they are an authentic response. Paul is not saying everything was fine in 2007. His is a deep and radical critique of business as usual. But a vote for him will not mean “I don’t care about the economic crisis.” It’ll mean, “I am convinced that Washington has no idea how to resolve the economic crisis, and, as a consequence, I am open to extremely radical and dangerous alternatives to the status quo.”

- I also don’t think Paul is getting much support because of his radical opposition to the foreign policy consensus. But I agree with Daniel Larison that if Paul wins, the fact that he will have won in spite of flouting that consensus is significant. Andrew Sullivan says his priority is “remaking” the GOP on foreign policy by opening up debate. Paul himself cannot make that debate happen – because he’s a rigid ideologue and his opponents are mostly behaving like thugs and hysterics. A debate of that sort isn’t really a debate at all. But if Paul wins Iowa, and does well in New Hampshire, he’ll have established that, in a post-9-11 world, there is room not to toe the line on foreign policy questions, room for someone with pragmatic views more like Dick Lugar’s (or Mitch Daniels’s) to run and not do what Romney and Huntsman have been doing. To a much lesser extent, I think the same thing can be said of civil liberties concerns.

- But it probably won’t mean anything at all. Mike Huckabee won in 2008. I haven’t noticed that the GOP field this year has been tripping over itself to win Huckabee’s support. Pat Buchanan nearly tied Bob Dole in 1996, but after that the party moved away from him, not towards him, on basically all his issues. Pat Robertson’s constituency has only gotten more important since 1988, but he himself probably reached the peak of his influence that year, and his constituency has remained important in part because it has proven to be domesticable – they have not demanded a radical change in much of anything in exchange for their votes. If Paul’s voters turn out to be similarly domesticable, one can debate how important they will turn out to have been. If not, I find it doubtful that the GOP will consider changing much to win them over.

Speaking Truth to Power

I see, via Daniel Larison that Bret Stephens has been unsurprisingly busy making the opposite argument to the one I just made:

A proper attitude [toward tyrrany] may not have required physical belligerency, [Havel] believed, and it could easily incorporate diplomacy. But it did require a constant posture of spiritual belligerency—a refusal to accept that a regime like Saddam’s or Kim’s was just a normal fact of life, beyond the reach of moral examination. In the context of Cold War Czechoslovakia, Havel called it a matter of “living in truth.” In the context of countries like North Korea, Russia or Iran, Havel told me it was also a matter of truth-telling. “We can talk to every ruler,” he said, “but first of all it is necessary to tell the truth.”

There’s a very important insight there, an insight Larison should acknowledge even though Stephens does his best to bury it. The insight is that truth, because it cannot be answered honestly and directly, has a corrosive effect on a structure that depends on lies to survive. Speaking truth to power can frustrate and even defeat power. Not always, of course. But sometimes, and to a surprising degree.

But the Iraq War was not “speaking truth” – because it wasn’t “speaking” at all: it was action. Without even going into the issue of the distortions – and self-deceptions – involved in building the case for war (in both of which I participated in my own small way, I should readily admit), action is not speech. Action cannot be truth; action creates truth, in the sense of facts, through the exercise of power.

The article that Vaclav Havel signed in support of the Iraq War was not an instance of speaking truth to power. It was an instance of speaking for power. The principal argument in the article is that unity is strength; that is to say, inasmuch as we want strength – power – it is more important to agree than to debate the truth. A secondary argument is that credibility is strength; that is to say, inasmuch as we want strength – power – it is more important to mean what we say than to debate the truth.

These are not specious arguments. They are entirely legitimate arguments – sometimes, they are persuasive ones. Once you have power, you have to consider these kinds of arguments. And it is juvenile to reject power as such – power is a fact of life, neither to be abjured nor idolized, but to be dealt with like other facts. I’m just pointing out that they are arguments about the accumulation, exercise and preservation of power – not about truth, and certainly not about speaking truth to power.

As a head of state, Vaclav Havel was implicated in power. Moreover, as a Czech, and not an Iraqi, he had only an indirect relationship with the sorts of truth that he might wish to speak were he not so implicated. Those aren’t cop-outs – they’re just more facts of life, things to be dealt with. It’s pleasant to imagine that the moral stature derived from one’s noble actions as a dissident is perfectly fungible, but it isn’t; it’s as context-dependent as everything else. With respect to the Iraq War, Havel wasn’t a dissident – not because he agreed with President Bush and disagreed with President Chirac (had he gone the other way, one could just as easily claim he was being a yes man and a conformist, but a conformist to European expectations rather than American), but because he was a head of state.

Stephens quotes Havel saying in a 2007 interview that “[t]he world . . . could not be indifferent forever to a murderer like Saddam Hussein.” Margaret Thatcher famously said that there is “no such thing as society” – by which she meant not that we are all atomized individuals without communal obligations but that there is no separate entity called “society” that can act. Individuals can act; they can direct institutions to act; but there is no “society” to which one can make an external appeal. Obligations imposed upon “society” turn out to be obligations imposed upon individuals. Similarly, there is no “world” to be indifferent or to take an interest in or to be indifferent to a murderer like Saddam Hussein. There are only the various governments of the various countries, and the various institutions those governments created to work within. We are not, once again, talking about speaking truth to power; we are talking about using power, and Havel was speaking as part of that power structure, not an outsider to it.

In my own view, Havel made the right call on Iraq for the right reasons. He had every reason to be grateful to the United States for its role in opposing the Soviet Union (even though we did essentially nothing to oppose the Soviet Union’s crushing of the Prague Spring – because, prudentially, there really was nothing much we could do), as well for, after the end of the Cold War, cementing Czech membership in the Western club of nations by expanding NATO to include them. He had every reason to trust the United States in its estimation of the Iraqi threat. And he had every reason to believe that the NATO Alliance and the United Nations between them held out the best hope for an international relations structured around simultaneously preserving peace and promoting freedom. One of the many negative consequences of the Iraq War is that, in its wake, people like the Czechs have every reason to feel that those feelings of gratitude and trust were exploited. But the blame for that lies with us, not with them.

Hitch, Kim and the Legacy of Eric Blair

What with Christopher Hitchens and Kim Jong Il dying so hard one upon the other, I found myself yesterday reading an essay by Hitchens from a couple of years ago about the Hermit Kingdom. The essay ends thusly:

Unlike previous racist dictatorships, the North Korean one has actually succeeded in producing a sort of new species. Starving and stunted dwarves, living in the dark, kept in perpetual ignorance and fear, brainwashed into the hatred of others, regimented and coerced and inculcated with a death cult: This horror show is in our future, and is so ghastly that our own darling leaders dare not face it and can only peep through their fingers at what is coming.

I read that last sentence over again, two or three times. It’s a well-written sentence, with a rhythm that marches you, the reader, on to its inexorable conclusion. It’s also a sentence that owes something to Hitchens’s own political and literary idol, George Orwell; I thought particularly of the ending of Homage to Catalonia, when Orwell returns to England, more specifically to

. . . the huge peaceful wilderness of outer London, the barges on the miry river, the familiar streets, the posters telling of cricket matches and Royal Weddings, the men in bowler hats, the pigeons in Trafalgar Square, the red buses, the blue policemen — all sleeping the deep, deep sleep of England, from which I sometimes fear that we shall never wake till we are jerked out of it by the roar of bombs.

A magnificent sentence, a famous (and correct) warning urged onward paradoxically by its very soothing cadence. But in the context of the book that precedes it, it’s a bit puzzling what the warning is. Homage is, after all, a book that complicates one’s relationship to the Republican cause in Spain, at least if one goes in with sympathy for it. Orwell went over to fight Fascism. He didn’t change his mind at all about Fascism, nor about the justice of the Republican cause – but he came to lose much hope of success for that cause, not only because of the inept fractiousness of the Republicans but because their own greatest ally, the Soviet Union, apparently preferred the Spanish Left to lose if the alternative was for Moscow to lose the Spanish Left. Orwell was trying to wake England up not simply from the threat of Fascism but from a kind of “it’s a pity they can’t both lose” attitude toward the struggle between Fascism and Communism, when it looked far more likely to Orwell that they would both win.

But the sentence is better remembered than the argument behind it. That is a danger of well-written sentences – a danger that Orwell himself was alive to. Indeed, well-written sentences can obviate the need for argument altogether.

Read that Hitchens sentence again. “This horror show is in our future, and is so ghastly that our own darling leaders dare not face it and can only peep through their fingers at what is coming.” Was he serious? This horror show is in our future? North Korea? A state universally acknowledged – including by its own principal ally – to be not only a terrible place but a colossal failure and a model for nobody? North Korea is a nasty and intractable problem, and could yet prove to be a serious problem, but from the perspective of Olympus it’s an oddity, a curiosity, a freak, not the future. It’s interesting to speculate what Orwell would have made of the persistence of this dystopia that he feared might cover the earth, and what he would make of our world more generally; I feel quite confident, though, that one thing he would not have treated North Korea as is a matter of urgency. But that – the posture of urgency – is all there really is in the Hitchens piece.

Hitchens professed to admire Orwell, and in large part for Orwell’s ability to combine a posture of urgency – of a call to action – with a distaste for propaganda, a commitment to clear-seeing and clear-speaking. But it is past time for us to recognize that this commitment can become a pose, and that, just as Joyce (or Stephen Daedalus, at any rate) felt that all art that moved one to action was, on some level, pornographic, so too all journalism that moves one to action is, on some level, propaganda, and is still propaganda, even if aimed at an obvious evil.

Tipping My Cap To Wyden and Ryan

Ron Wyden and Paul Ryan have teamed up to propose a Medicare reform that, in broad strokes, looks a lot like what I’ve been cheering for as the next step in healthcare reform.

Under the plan, in ten years Medicare would be “voucherized” within the framework of the ACA. However, traditional Medicare would be retained as a public option. And the entire structure would be subject to a budget cap of GDP growth + 1%.

It’s important to recognize that this budget cap is basically doing all the work of controlling costs – and also that such a cap is precisely what American Medicare doesn’t have but that foreign countries’ health care systems do, a point I’ve made repeatedly before. In the absence of such a cap, Medicare costs would continue to be a function of the coverage and reimbursement formulae of Medicare – and the incentives of private insurers would be to game the system so that Medicare costs rose as fast as possible so that they would have the lowest competitive bar to clear. How exactly the system would be gamed would depend on what the rules turn out to be – but that’s where the incentives are. If Medicare is genuinely kept on a budget, the incentives change, and private insurers would have a reason to keep the costs of their plans competitive with the public option (or they’d lose all their customers) while competing on quality. But we should all be clear that it’s the budget that keeps costs down.

That being the case, the real question is whether this plan makes it politically easier to enact and enforce such a budget than past efforts – in other words, would we be treated, in a Wyden-Ryan world, to the annual ritual of raising the Medicare ceiling instead of the annual ritual of enacting the doc fix. The optimistic case here is that interposing an unsympathetic private entity – the private insurer – makes it easier for the government to impose budget rules which, in turn, force that private entity to put the squeeze on providers, rather than having the fight be between evil government bureaucrats and noble health-care professionals. I’m not convinced I should be optimistic, but I think that’s the case.

But I’m pretty convinced that Matt Yglesias’s preference is wrong:

I wish Congress would actually separate this budget issue out from the question of Medicare structure. How large a share of America’s output do we want to allocate to health care services for the elderly is a very important question. What that spending should look like is also a very important question, but it’s a fundamentally separate one.

Yes, but the first question is a zero-sum battle that pits a whole suite of powerful, entrenched interest groups against what Yglesias (and I) see as the national interest. The second question is – at least potentially – a win-win debate that scrambles the interest group alignment. Tying the two together might – might – be a good way to get the first one done. It might not. But separating them strikes me as a sure way to avoid dealing with the first question at all.

In any event, from the right the big win here is that the door is open to “privatizing” Medicare. There’s likely some benefit to innovation from such a move; I also think it’s a small way to hedge possible bureaucratic missteps by the Medicare bureaucracy, since private health insurance bureaucracies might not make identical errors (though, in practice, there’s a huge amount of convergence here). From the left, the wins are that this reform basically can’t work without the ACA, and, moreover, post-reform it’s much easier to argue for expanding the Medicare public option to include people besides the elderly. But the real question, in my mind, is: are these wins big enough to induce left and right to agree on a serious cap in health-care costs? Because that’s the big win for the country.

Operation Victory Denial: A Modest Proposal

Propositions:

- A majority of the electorate is unhappy with the performance of President Barack Obama and would like to remove him from office. Faced with the choice between reelecting President Obama and voting for a blank-slate alternative, the electorate chooses the blank-slate alternative.

- However, a majority of the electorate is also underwhelmed by the actual alternatives to President Obama, deeming none of the Republican contenders to be worthy of their preference. Faced with the choice between reelecting President Obama and voting for any actual opponent from the opposition party, the electorate chooses to reelect the President. Indeed, the more they learn about the alternatives to President Obama, the less they like them.

- Moreover, even the Republican primary electorate cannot bring itself to choose a candidate to run against President Obama. That electorate has been resolutely unwilling to reconcile itself to Mitt Romney as the nominee. Instead, it has swooned for a parade of at-best semi-plausible alternatives – first Perry, then Cain and now Gingrich – in a desperate attempt to find someone – anyone – they might actually want to vote for.

- If the GOP primary electorate picks a “not-Romney,” they will probably be picking a candidate that will perform disastrously in a general election. If they pick Romney, they will be picking a candidate hobbled by tepid support from his own base and not demonstrably effective at winning over the electorate generally.

So: what to do? After all, you’ve got to nominate somebody. You can’t beat somebody with nobody.

Or can you?

Operation Victory Denial is a strategy designed to capitalize on the fact that President Obama is eminently beatable – just not beatable by any individual candidate willing to run against him. Therefore, to beat him, I propose that the GOP not nominate anybody. Let a thousand candidacies bloom – and let the people of the several states register the full panoply of their actual electoral preferences.

Of course, when I say “let a thousand candidacies bloom” I don’t mean let everybody do whatever he or she wants. Far from it. This is, after all, a plan – a plan to deny President Barack Obama a reelection victory. Rather, I’m suggesting the GOP field the best candidate in each state to defeat Barack Obama in that state.

Field Chris Christie in New York, New Jersey and Pennsylvania: a tough-talking no-nonsense former prosecutor who’s a moderate on social issues could make inroads deep into blue territory. Field Mitch Daniels in Indiana, Ohio and Michigan: a successful and conservative but soft-spoken midwestern Governor who favors speaking more softly internationally. Field Marco Rubio in Florida: a rising-star Senator with matinee-idol good looks and a lock on the Cuban vote. And so forth.

What’s that you say? These people aren’t even running in the primary? Of course not – would you want to be a part of that circus? And they won’t be running a national general-election campaign either. They’ll just be asking the people who know them best to choose: would they rather stick with President Obama? Or make a change for someone better – someone like a popular local Governor or Senator.

With the optimal candidate running in each state, the GOP will be free to present itself properly to each segment of the nation. Barack Obama, being only one man, will have a harder time doing this without being vulnerable to the charge of trying to be all things to all people – a charge that Newt Gingrich, who will be the GOP candidate on the ballot in Georgia, Alabama and Mississippi, and Mitt Romney, who will be the GOP candidate on the ballot in Utah, Nevada and Idaho, will be ideally positioned to level at him in massive national ads that, naturally enough, won’t mention the GOP candidates for President in swing states like Ohio or Florida who might suffer if they “went negative.”

If that’s not enough to achieve victory denial, draft Hilary Clinton to run as an Independent in key states – New York, Florida, California, Illinois – to draw support away from Barack Obama. What’s that you say? Hillary Clinton would never run? I didn’t say Hillary Clinton. I said Hilary Clinton – he’s a Republican donor from Buffalo, owns a big chain of supermarkets. Hilary’s his middle name actually – Herbert Hilary Clinton – but we’ve sounded him out and he’d be willing to switch his name around, Eisenhower-style, to help the cause. Particularly if we promised him a cozy ambassadorship after the election. (His wife is asking for Paris, but I bet she’d settle for Luxembourg.)

Having Hilary Clinton on the ballot would give Democrats and Independents the opportunity to express their opposition to Barack Obama, and their regret that they chose him last time around, an opportunity they would not otherwise have in this election. Not to include her (I mean, him) would really be a disservice to democracy, when you think about it.

Of course, after all this effort, it’s still unlikely that any Republican candidate (or Hilary Clinton) would win a majority in the Electoral College. President Obama is relatively popular in some places, after all – Oregon, Rhode Island and Hawaii are probably out of reach no matter what. And the GOP vote, by design, could be split among as many as a dozen candidates. Not only would any GOP candidate be unlikely to win a majority; they would be quite unlikely even to win a plurality.

But this is where the beauty of the Electoral College kicks in.

The strategy is called “victory denial” because that’s what the objective is: not victory for any particular Republican nominee, but denial of victory to President Obama. All we have to do is keep the President under 270 electoral votes.

Why is that? Well, as we learned in the 2000 election, the winner of the Presidential election is not the winner of the popular vote, but the winner of the vote by the electors, who are themselves chosen in state-by-state contests. But what happens if nobody earns a majority of the electors?

In that case, the House of Representatives would choose the President from the top three finishers in the Electoral College. Not on the basis of one vote per representative: on the basis of one vote per state delegation.

The GOP currently controls 33 of 50 state delegations. The Republicans might lose the House in 2012 – though, with favorite sons running in the Presidential election all over the country, down-ballot candidacies should experience an exceptional surge of support, making such a loss less-likely, and pickups in the Senate more likely than would otherwise be the case. But regardless of what happens in the Congressional elections in 2012, it is very likely that the GOP will retain a majority of state delegations. There are just so many reliable little red states.

Therefore, if Operation Victory Denial is a success, the Republican Party’s state delegations in Congress will decide who the next President is.

Now, you might say, wouldn’t they be obliged to pick the winner of the popular vote? I don’t see why they would. They didn’t in 1824. Moreover, they could argue, if President Obama could not get reelected with either a popular vote or an Electoral College majority, would it really express the will of the people to return him to the White House, just because he eked out a plurality?

Clearly, in this scenario, the people will have spoken, and they will have chosen a Republican alternative to succeed President Obama. They just can’t agree on which one.

So: let them vote Obama out. And then, after the votes have been cast, the Party can decide who they’ve elected instead.

Reelection contests are referenda on the incumbent. They have to be – that’s the only way the electoral process can hold incumbents to account. Without that check, with one party deemed the only responsible governing party, and therefore assured of reelection no matter how much they screw up, democracy would deteriorate into a corrupt tyranny. If the Republican Party can’t coalesce around a candidate that can actually beat President Obama, then Operation Victory Denial is all that will stand between America and that grim future.

Operation Victory Denial. It’d be a victory for democracy, really. When you think about it.

Invented People Are Still People

Daniel Larison has been laying into Newt Gingrich for saying the Palestinians are an “invented people” in a way that I think rather misses the most important point.

“Is this a real people?” is the kind of question that colonial powers ask all the time. The French professed that there was no such thing as an “Algerian” – there were Arabs and Berbers and French and other peoples in Algeria, but there was no historic “Algerian” identity.

Which is true as far as it goes. Algerian nationalism was born of the experience of French colonization; in the absence of that experience, it’s hard to know what kind of political entity Algeria might have become. But the salient point about the French in Algeria is that prior to independence the Algerians were not equal citizens of their own country. According to Paris, Algeria was integral part of France. But Algerians were not an integral part of the French nation.

That was the situation that had to be rectified, one way or another. Whether Algerian nationalism was the “right” solution is an unresolvable question, but it clearly wasn’t the only possible solution. The French could have granted full French citizenship to the entire population of Algeria. Algerian nationalism might still have developed – in our world, we have seen Quebecois nationalism and Flemish nationalism and Catalan nationalism and Scottish nationalism, even though citizens of Quebec, Flanders, Catalonia and Scotland are full members of the political communities of Canada, Belgium, Spain and the UK, respectively. But it might not have, or if it did, the character of that nationalism would inevitably be different.

But there was no chance that the French would grant this. And as De Gaulle recognized fairly early on, if France would not grant equality, it would inevitably have to grant independence. There was no third way.

When people say that the Palestinians “are just Arabs” they are on one level correct. In 1900, before Palestinian Arabic could have been influenced by Hebrew, the Arabic spoken by a citizen of Haifa would have been extremely similar to the Arabic spoken by a citizen of Damascus. “Palestinians are just Arabs” is as historically and ethnologically correct as “Palestine is just part of Greater Syria” – which, at various points in history, has in fact been the Syrian perspective on the matter.

And, on another level, it’s obviously incorrect. The Arabs of Palestine had the nationalizing experience of reacting to Jewish colonization of their country – country in the French sense of “native land” rather than “state”. That experience was foreign to the otherwise-similar population in Syria, and resulted in a distinct identity.

But on yet another level, what’s the point of the argument? One can imagine an alternative universe in which the Palestinian refugees of 1948 were accepted by the neighboring Arab countries, welcomed to settle permanently and become citizens. They might have continued to press claims against the State of Israel as individuals (as the Jews expelled by the Arab countries after 1948 might press their claims against those countries), but they would not be stateless. In this counterfactual world, the Palestinian refugees would be analogous to the refugees who fled India for Pakistan (and vice versa), or who fled Turkey for Greece (and vice versa).

And this is basically what happened with respect to the Palestinian Arabs who fled to Jordan, which annexed the West Bank in 1950. But in 1967, Israel conquered the West Bank from Jordan.

The Palestinian refugees living in the region but without citizenship in the state where they live are a collective problem, practical and moral. The most problematic are those who live under effective Israeli rule in the West Bank. (Yes, the Palestinian Authority has responsibility for the overwhelming majority of them, but the P.A. has neither the formal nor the de facto powers of a sovereign state; these Palestinian Arabs are still stateless, formally and substantively.) This problem can only be solved by making them citizens of a sovereign state where they live. That state could have been Jordan – if Israel had managed to achieve a land-for-peace deal with Jordan before 1988, when Jordan renounced all claims to the West Bank. It could be Israel – if Israel were willing to grant the Palestinians in the West Bank equal citizenship, which it isn’t, for entirely understandable reasons. Or it could be an independent, sovereign Palestinian state free from Israeli domination. Those are the choices.

When someone like Gingrich says that the Palestinians have “plenty of places” they could go, I have to wonder what that means. Does he mean that Lebanon is obliged to grant citizenship to the Palestinian refugees (and their descendants) who live there? Does he mean that the Israelis have the right to transfer the Arab population in some part of the territory it controls to some other place where they would rather that population lived? What exactly does he mean – if anything?

The Palestinian “question” is not one that, ultimately, turns on the “reality” of a Palestinian nation. It’s a question that turns, ultimately, on the goals of the State of Israel and of the surrounding Arab states. Neither the State of Israel nor any Arab state will volunteer to accept the Palestinian people who live in Gaza and the West Bank as full and equal citizens. Those are the salient facts. The question of whether the Palestinians are a “real” people bears mostly on the likely prospects of success of any Palestinian state that is created, not on whether such a state is practically and morally necessary.