James Pethokoukis

Politics and policy from inside Washington

5+ questions for … Sen. John Thune

Mar 3, 2011 20:52 UTC

Sen. John Thune isn’t running for president (at least this time around), choosing instead to fight big, wasteful government from his outpost on Capitol Hill.

He’s just reintroduced a sweeping budget reform bill that would make it easier to cut discretionary spending and bring some honest accounting for so-called entitlements. I chatted with the South Dakota Republican earlier today about his bill and the current budget debate. Some excerpts:

First, will the Senate come close to matching the 2011 budget cuts passed by the House?

I hope we can, but it’s really hard to handicap that one because the Democrats haven’t put anything out yet and the president has gone radio silent. I think what Democrats may do is come up with something along the lines of the president’s [discretionary spending] freeze proposal and maybe start there. But I think the Republican House level was reasonable and something we should try to get to in the Senate.

How about raising the debt ceiling?

To attract any Republican votes to a debt ceiling increase, you’re going to have to come up with some serious spending reductions and some budget process reforms. There is going to have to be a significant incentive.

How would the budget process be different under your proposal? Would it have affected the passage of healthcare reform?

It would make it more difficult to abuse the emergency designation which is how a lot of spending has been put through the last couple years. They just waive pay-go and declare an emergency. There’s a lot of abuse of the rules we have today. Clearly what we’ve been doing doesn’t work. We’ve only had four years in the past 34 when all the appropriations bills have been passed on time.

[Regarding healthcare], what we do is prevent the double counting of trust fund revenues, which is how they were able to fund [the plan]. [Democrats] were able to say they were extending the lifespan of Medicare at the same time they were using Medicare payroll tax increases and spending reductions to finance their new entitlement program. So it would have dramatically changed that debate and forced them to come up with real revenue sources instead of the phony revenue sources they used.

Reuters has lots of readers outside the country who must look at this process and think it insane.

The budget process really is a national embarrassment. I was a staffer out here back in the mid-1980s and even at that time I looked at [the budget process] and thought it made no sense whatsoever. You can get through an entire year with a $3.7 trillion enterprise called the federal government and not pass a budget. And there is a pileup with trying to get through 12 appropriations bills every single year. You don’t have any oversight to make sure the money is spent wisely and well. So going to a two-year, biennial budget would help address that.

And right now the budget process actually makes it easier to spend more than to spend less, right?

There is a forward momentum to spend more. When we passed this two-week [continuing resolution] to cut spending by $4 billion, it may be the first time we actually cut spending. [My proposal] requires every budget cycle that Congress actually ratchet spending down. For the first time, [the budget process] would put a straightjacket on Congress and force it to make some of these decisions.

5+ questions for Matt Ridley, author of ‘The Rational Optimist: How Prosperity Evolves’

May 25, 2010 17:08 UTC

Matt Ridley’s new book, “The Rational Optimist: How Prosperity Evolves,” notices that, yes, things are getting better. And they will continue to do so as long as humans innovate.

1. People might be gloomy right now about the prospects for economic growth, but do you sense much appetite for green efforts to persuade people to accept a frozen or declining standard of living for the sake of the environment?

I sense very little appetite for green efforts to persuade people to accept frozen or declining standard of living for the sake of the environment. Recessions remind us that economic retreat or stagnation is painful, whatever the goal. When Maurice Strong says that ‘the only hope is that the industrialized civilisations collapse’ or John Holdren demands a campaign to ‘de-develop’ the United States, they mean entering permanent and worsening recession: consuming fewer goods, accessing fewer services, inventing fewer novelties, traveling less far. People will not accept less prosperity as a price for saving the world. Nor need they. My argument is that the more we intensify farming the less land we need and the more we save the rainforests. The more we access natural gas reserves, the less we will have to despoil landscapes with wind farms or biofuel plantations. The more we improve our cars, the less pollution we will emit (emissions from cars have fallen 98% since 1970). In the same way economic growth will give us the innovations to continue de-carbonising our economy: we already use half as much carbon per unit of energy as we did in the 1800s, and by mid century we may burn very little carbon. Going ‘back to nature’ would put a terrible burden on nature.

2. Is there really much of anything government can do to encourage innovation beyond the basics of enforcing contracts and maintaining order? Investment in basic research? Lower taxes on capital formation? Anything?

Government can encourage innovation, but mainly by doing less, not doing more. Of course, government money does support innovation, but that money ‘crowds out resources that could be alternatively used by the private sector, including private R&D.’ – according to the OECD. There is no evidence that government, by funding blue-sky science or in any other way, is specially good at making innovation happen. Most innovation happens through the tinkering of technologists, not the thinking of scientists. And government is poor at picking winners, great at picking losers. While it was obsessing about strategies to encourage memory chips, private individuals were inventing search engines. Even some unprofitable things like space exploration would probably have been taken up by private funders by now – just as the arts attracts private patrons. So the main thing government can do to raise innovation rates is to enforce contracts and maintain order. But if it is going to spend, then better it spend on science than on some other things.

3. How important is it to future global prosperity that globalization has allowed so much additional human capital to come online? The global brain is getting bigger, right?

Yes. In the middle ages it took decades for technologies like paper or gunpowder to reach Europe from China. Once there, they combined with other technologies like book making and iron smelting to produce new technologies like printing and cannons. That’s a typical pattern – innovation comes about by the cumulative combination of other innovations – by ideas having sex, as I put it. Nowadays, ideas can meet and mate very much faster than before, and the internet is only accelerating this process. So innovation is bound to accelerate.

4. A McKinsey consultant once told me that countries need to be subject to “maximum competitive intensity” to reach their maximum economic potential. But do you worry things are going in the other direction, toward insularity and protectionism?

Many times in history, promising bursts of openness, trade, innovation and growth have been snuffed out by the erection of barriers to the free flow of things and thoughts. It happened to Phoenician Tyre, classical Greece, Mauryan India, Ming China, Abbasid Arabia, imperial Rome, golden-age Holland. It happened to America in the 1930s, to Latin America and India after the second world war, to China after the communist take-over. Protectionism, tariffs, piracy, war, or imperial plunder – they all have the same impoverishing effect if they interrupt trade. Liberalization, by contrast, dramatically raised the standard of living of Hong Kong, China after 1980, India after 1990, South Korea versus North Korea and so on. And there are always short-term incentives pushing people to recommend protectionist or plundering measures. So yes, it remains a risk. Now that the world is globalized, the risk of somebody shutting down the whole globe is greater than it was. In the past there was always somewhere to keep the flame burning. Italy and the Mahgreb, for example, kept the flame or trade burning at a time when Arabia, France and China all turned inward in the 1100s.

5. You have five minutes with President Obama. What point would you want to get across to him as it relates to your book?

That it is precisely because there is still so much wrong with the world that it is vital to understand how powerful the engine of prosperity can be – the process of specialization and exchange through which we all work for each other. Thus the best way to improve the world is not to expect catastrophe but to have the ambition to reach for growing prosperity, that the twenty-first century will be a time of ecological restoration, not managed ecological retreat, and that the free flow of ideas, goods, services and innovations is what causes prosperity.

6. What interesting question didn’t I ask that I should have? And please answer it!

You did not ask me why intellectuals are all such pessimists. And my answer is that pessimism gets attention – from funders, from the media, from governments. Also, for reasons I do not fully understand, it sounds wiser than optimism.


Those interested in Ridley’s very good book might wish to know about my own book, THE CASE FOR RATIONAL OPTIMISM (Transaction Books, Rutgers University, 2009), which makes quite similar points and arguments, but develops the case for optimism over a broader range of subject areas. See http://www.fsrcoin.com/k.htm

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