I’ve completed your assignment, Professor Reich.   I’m not a “Republican running for office next November” and regarding “thinking hard about things”, well, unless I’m missing something, I just don’t see where this is so hard.   Perhaps I need some after-class help.

Robert Reich

I read and re-read this part of the assignment:  “You don’t have to be an orthodox Keynesian to understand that as long as the private sector is deleveraging the public sector has to borrow and spend in order to keep the economy moving forward.”

You seem to share Paul Krugman’s never-ending chorus that government must step in and make up the difference when private sector spending undergoes a contraction.   Here’s a good example of that.

I also caught your appearance on CNBC with Larry Kudlow and the Cato Institute’s Dan Mitchell on January 26th as well, where you said:

“At a time when the private sector, consumers and businesses, are massively deleveraging, government has got to come in there to fill the gap.  I mean, I don’t care whether you are a Keynesian, or a Neo-Keynesian, or a Neo-Conservative, or a Neo-Classical economist you’ve got to understand that there is not enough demand in the economy to keep the economy going when the private sector is deleveraging and pulling back.  And therefore, there’s got to be a government spending, regardless of your ideology.”

I admire your consistency.   And you said that on live TV, to boot!

Keynesian Tool?

I suspect that you have fond memories of your time on the playground, creating wonderful towers of sand with a sand digger,  standing back and announcing “Look, everyone, at what I’ve made!   Isn’t it grand?”   But I also suspect that you ignored all of the cries of the other kids in the sandbox:  “Hey, Bobby’s taking all the sand again!  Jimmy just broke his ankle in a hole that Bobby made!  Bobby’s hitting dirt and wrecking all the sand!”    How did you get all this past the playgound aides?

I’ll stay after class for extra help if you can provide an explanation of how increasing government spending, massive deficit spending no-less, which must be funded with the resources taken from the private sector, ultimately helps the private sector.   I mean, on one hand, there seems to be nearly uniform agreement that we want the private sector to create jobs.  But on the other hand, aren’t you advocating taking the resources with which, at the margin, the private sector will create those jobs?

I’ve heard something about a “Keynesian Multiplier”, but what about what I’ll call a “Government Subtractor”?   (and can I get extra credit for that term?)  It seems to me that if the federal government decides to spend a bunch of money, it needs to first spend some of that money deciding how it’s going to be spent, and then if it passes it on to the states, the state governments are going to do the same.  Maybe even a local government will get involved, too.   So how much of each original dollar, taken from the private sector in the first place, actually returns to some recipient in the private sector?   In addition to that, how do you feel about everyone arguing via politics on how to spend all that money?    Are the playground aides still involved here somewhere?

For another twist on that theme, you must be familiar with organizations like Charity Navigator that rate various charities at their efficiency.   No one likes to give to a charity that wastes tons of money on administrative overhead.   I suspect the government would not rate very highly if judged this way.

Again, I’m no Keynesian, but if we just did an across the board tax cut, one that could be largely achieved just by changing a few variables in some software here and there (I learned that in my programming class), wouldn’t that basically pin the charity evaluator’s efficiency meter?   It would put more money in everyone’s pockets overnight, where they could do whatever they thought was best with it.   Yes, admittedly, it might not make for many great photo ops, like you sitting on the digger next to your nifty sand castle.

But what really has me stumped is how you are smart enough to decide that the private sector is not spending enough, and can decide (even approximately) how much the government should spend instead.   In other words, you not only feel confident in identifying a gap between the actual and the ideal, you’re prepared to use the force of government to do something about it.  It must be the leverage of that sand digger you that remember.  The power in those two handles really is pretty cool, I confess.

Also after class, perhaps you can explain this chart to me:

I know that a lot of people used to bemoan the United States’ very low saving rate.   But it sure seems to me that they got the message recently!  Looks like they’re saving again!   Have you decided that this huge collective behavior of our society is actually wrong? Are you pitting your singular professorial prowess against the collective brainpower of all of these new-found savers?  It seems to me that the only way you’d feel comfortable saying that the government should spend more is if you believe that the government will spend the money more effectively.  I thought we were in Econ 101 here… is this some preview of a graduate-level course or something?   Do you teach that course, too?

I will hand it to you though, all these different spending programs over the years have certainly created a very impressive tower of laws and regulations, along with an army of individuals trying to figure them all out.   It seems a lot of politicians loved their sand diggers, too.   But they must have mixed mortar into the sand they used for those towers, because no matter how hard people jump up and down on them, they never seem to collapse.

There’s no telling what legislative debacles await our country over the next year, until the new class of 2010 is sworn in and Obama’s ability to implement his remake of America comes to a screeching halt.   In the meantime, we can suggest a few resolutions for Congress and our President, or at least aspiring candidates, to consider:

We will not give away that which we do not own. As we come out of the Christmas season, we must realize that while Congress loves its adopted role of Santa Claus, it is not a role that is found in the Constitution.    Adopting this resolution would nearly single-handedly restore the government to its original limited purposes, as prior to “giving” something to anyone, Congress must first take it from someone else.   And in one fell swoop, government would become dramatically cheaper as well.

Alas, there are not nearly enough elves in Washington or anywhere else to create all of the “toys” that society has lobbied for.  But even if somehow there were, why have we tolerated a bunch of politicians and bureaucrats determining who is naughty and nice, delivering stimuli, redistribution and favors to the latter, and coal (not even “clean coal” at that) into the stockings of the former?

We will not “triangulate” our national security. Ah, imagine the calculus that screamed in the backroom meetings about Afghanistan…. How many votes do we lose if we stay? Who do we gain if we appear tough?   How blatantly can I ignore my field generals?  Osama bin Laden is on record that 10 million dead infidels, which includes both conservatives and liberals — the enemy does not care — would be an acceptable goal for their cause.  Meanwhile, we offer full Constitutional courtroom rights to self-admitted wartime terrorists.   Just what are we thinking?

We will make the “death tax” permanent. Could there be a more blatant act of class warfare and demonstration of the Politics Of Envy?   Wealth accumulated through a lifetime of work and saving, wealth on which taxes have already been paid, is taxed again because supposedly the government can redistribute the wealth more efficiently that those that created it.   How is it that we tolerate the transfer of wealth from those with the best track record of creating it, to the entity with the best track record of squandering it?

We will repeal Obamacare. Or whatever it’s ultimately called.    In a spectacularly stupid tactical maneuver, the Democrats have both a) followed a path of ramming through legislation that no poll can describe as being wanted by the American people, and b) structured the financial pain of the plan to come before the supposed gain.   This sets up a massive opportunity for those running in the 2010 elections (and probably 2012 as well) to run on a campaign cleanly targeted against the Democrats and tapping into the public’s disgust for government waste and overspending by selling the repeal of Obamacare as a cost-cutting measure.

Furthermore, if they have the spine not displayed for the last several elections, they’ll aggressively market a health insurance reform plan centered around Health Savings Accounts, true nationwide competition between insurance companies, malpractice reform, and directly addressing the uninsured.  In other words, a plan that will cost a tiny fraction of Obamacare, but more importantly, will actually be successful in driving down the rate of inflation in medical spending.     Why?  Because where HSA’s are being adopted, that’s exactly what’s happening.

The bottom line on Obamacare is that it simply can not work, because there are no elements in the plan that give any incentives to individuals to seek less medical services.  Indeed to the contrary, it will dramatically increase those demanding medical care without correspondingly increasing the supply of service providers.    The existing on-the-road-to-bankruptcy plan that is Medicare is being held up as a model to emulate, which would simply be laughable if it weren’t so outright dangerous.    But hey, this is consistent with the rest of the Obama administration’s thinking:  Identify the cause of a major sociological problem and then do more of it.

We will not sit idly by as a politically active minority transforms the character of our country. In other words, the giant that is a nation that still leans conservative will not stay asleep any longer.   It is obvious what happens when that takes place:  It sets up the stage for a demagogue like Obama to tap into a fawning national press corps and sweet-talk himself into office, promising the world (or “change”) to any and all supporters/worshipers along the way.

Instead, we will vote in record numbers and shut down the attempts to overturn the defining characteristics of our society, namely, limited government centered around freedom in all forms.    We will no longer watch the irony of formerly communist countries like Estonia racing towards freedom while we race away from it.   We will return to our global role as a country that leads by example, one that recognizes God-given liberty as the most effective way to improve the condition of mankind.

Lastly, we will actively encourage and support politicians who support the above. We will donate our time and resources to ensure that they are elected to office and hold them accountable for promoting true change in the form of reducing the size and role of government in our lives.    Likewise, we will have the courage to tell those who promote the opposite, in no uncertain terms:  You are wrong.

Anyone needing proof that at least one U.S. Senator exists who truly “gets it” with regard to the government’s role in creating our recent financial debacle should devote 10 minutes to watching this video.     This was South Carolina Senator Jim DeMint’s allocated time in questioning Federal Reserve chairman Ben Bernanke during the latter’s December 3rd renomination hearings in the Senate Finance Committee.  It’s great theater, Bernanke’s I’d-rather-be-having-a-root-canal demeanor notwithstanding.

It’s hard provide better verbiage on what DeMint describes, both in the setup of the importance of the issue and the implications of not getting our hands around the true causes of our recent crisis.   Any informed voter needs to be aware of this perspective, and of the presence of elected officials who are willing to buck the populism that keeps it from getting the attention it warrants.   So with that disclaimer, I’m quoting large portions of DeMint’s comments:

Sen. Jim DeMint

“When Congress created the Federal Reserve, they created arguably the most powerful institution in the whole world.  Our whole economy, all our prosperity, wealth, rests on the soundness of the dollar, as does much of the economic systems all around the world.  So as we consider your renomination it’s important that we ask some difficult questions, not just of you, but to ourselves, because no one can say that there haven’t been major failures and I think a lot of us have to admit that the Federal Government, the Federal Reserve let down the American people and a lot, a lot of people have been hurt.

I will take exception to one of the arguments that I’ve heard today and I’ve heard often about what we heard last October and what actually happened.    We were told that if we did not appropriate nearly a trillion dollars to buy toxic assets that the whole worldwide economy or economic system was likely to collapse.  We appropriated nearly a trillion dollars and we never bought one toxic asset and the world economic system did not collapse.   Now we can make a case and debate about all we want about whether or not twisting banks’ arms and forcing more money into the banking system actually helped us.  We could talk about that all day.   But the premise that we used, to create this TARP program, was never followed through on, and it’s difficult for me to find credibility in the arguments that we saved our economy.”

The bait-and-switch performed last fall under the financial doomsday scenario scare tactics described above is nothing short of criminal.   Recent reports of TARP’s supposed effectiveness miss DeMint’s crucial point:   The unprecedented program was passed using scare tactics for an implementation plan that was quickly  abandoned following its passage. Yet in “fool-’em-once-fool-’em-again” fashion, President Obama has the audacity to now want to take $200 billion of these TARP funds and throw it at other sectors and politically expedient portions of our economy.   But we won’t call it a “stimulus”…

DeMint continued:

“For me perhaps the biggest failure, in the Federal Reserve, in the political side here in Washington, is that, amid all these failures, the politicians, the folks in the Administration and Federal Reserve, have claimed credit for saving the system, while blaming capitalism and unrestrained free markets for our problems.   That has justified the positions that are now being taken here in the Congress in many ways, to come back and even extend the control, the intrusion of the Federal Government further into the private sector.  I think you’ve been a big part of orchestrating that, and shifting the blame onto the private sector.

Fed Chairman Ben Bernanke

No one’s arguing that there’s not blame to go around everywhere.   But the biggest failure I’ve seen, is the failure for us to recognize the role that we played and the lack of our oversight of Fannie Mae, who created a lot of these toxic assets and sold them around the world, the loose monetary policy that created chronically low unemployment rates and high leverage across the economy.   By not taking some of the blame, and making the public is aware of that, we’ve undermined the system that made this country prosperous, and I think that is an egregious error.”

Although I’ve written about this before, it warrants repeating that the attempts by many to move our economy away from free markets, to any extent, truly risk killing the golden goose.  And with the government’s nearly perfect track record of never repealing any major program or initiative, the stakes for preventing such major legislative endeavors that might permanently weaken our preeminently free-market orientation have never been higher.

More from the Senator:

“To a large degree the oversight that we’re responsible for here in this Congress we did not accomplish because of assurances that we’ve  gotten over the years, from your predecessor and from yourself and by doing that I think we have egregiously failed the American system.

…

I would again, as you and I have talked personally, ask you to consider the need to make the Federal Reserve more transparent.   There’s no need that independence needs to mean secrecy.  The confidence in the Federal Reserve, the mistrust around this country, has reached new heights, and we need to do something to restore faith that the American people have in their monetary system, their financial system, and that responsibility is at the Federal Reserve as well as in the Congress.   I would encourage you again to consider what type of openness, or “audit” as you and I have talked about, would be appropriate in order to reassure the American people that we’re not looking at another Fannie Mae situation, that over years we were told “not to worry, not to worry”, that everything is OK, and now we saw what it did.   We can’t allow that to happen with the Federal Reserve.”

DeMint here is referring to S604, the Senate counterpart the Ron Paul/Alan Grayson Amendment (HR 1207), which recently passed 43-26 in the House Financial Services Committee, much to the fear of Federal Reserve itself.   DeMint’s intentions here call the bluff of many who would call upon even more regulation and oversight of all aspects of our economy:   Evidently there are still plenty of elected officials who are not comfortable with this oversight extending to certain government agencies.

Lastly, it is well worth noting that voters who agree with DeMint’s worldview can thank The Club For Growth for helping him and other liked-minded individuals get to Washington.    The Club’s legal ability to advertise itself is outrageously limited (perhaps this is Washington’s notion of limiting government).   Anyone wanting to see DeMint’s perspective advanced in Washington should encourage and support similar candidates,  and the Club’s track record in getting that done is impressive.   In the never-more-important war of ideas, having candidates who will reliably legislate from the limited-government side is correspondingly crucial.

So does the President support Read The Bill, or not?

This past Wednesday morning, Representatives John Dingell (D, Michigan) and Kevin Brady (R, Texas)  sat down for an interview with CNBC’s Becky Quick, Carl Quintanilla and John Harwood.   Discussing healthcare legislation, bipartisanship and the law-making process in general, some unintentional revelations of our completely dysfunctional Congress were laid bare and proved stunning.

A few minutes into the discussion, Becky Quick questioned whether or not a “public plan” was needed to achieve the goal of “lowering the cost curve”.   Here is Dingell’s response:

“Well, I think a public plan is an absolute necessity, and the reason is, that we have found, that the current pattern of state regulation does not work.  There’s no way, whatever, that we can control the costs and the behavior of the insurance companies.  And so we’ve got to substitute for that, competition.   And the only way we can get that competition that will work is by seeing to it that we do have a public plan.“

Nevermind that many Republicans believe that it is exactly all the state and federal regulation prohibiting competition that is a big contributor to our dramatic health care cost inflation.   What was truly remarkable was that even with the admission of a non-working public policy, there has been no call from these same people to repeal it.   Rather, a massive new program must be put in place which will correct for the failings of the first one, which will be left in place.

Dingell was also proud of the Congressional Budget Office’s estimate that through the inclusion of a public option there would be “an increase the number of persons receiving employer based health insurance by about 2 million people”.   Using his number of 46 million uninsured, that’s a little over 4%.   Enough said.

But it got better.   Minutes later, following a discussion of whether or not there was bipartisan cooperation, Rep. Dingell, elected to the House in 1955, initiated the following exchange:

Rep. Dingell: “One of the problems that exists, and this is a very real one, is that we are engaged now in the public [his emphasis] drafting of legislation.  This leads to all manner of unfortunate misunderstandings as to what it is that we are doing.”

Becky Quick:   “But you say doing this in ‘public’.  That means doing it under the light of day where people can actually see what’s happening?”

Dingell:  “Uh, you’re just seeing the unfortunate consequences of public drafting of legislation and it makes a fine mess because people don’t understand the complexities of this.”

Quick:  “So it should done behind closed doors…?”

Dingell:  “Bismark observed, ‘If you like sausage, or legislation, don’t watch either one made.’”

Carl Quintanilla:  “Right, right. We’re watching it get done this time.”

Quick: “I don’t know, I’ve always thought that the openness is something that’s a good thing though, the more people that are involved, the better.”

Rep. Brady: “It is.”

Quintanilla:  “That’s assuming that people really understand and have time to pay attention to the detail, right?”

Quick: “I guess it depends on whether you trust what’s happening behind closed doors or not though.”

Brady:  “I’ll tell you… We held over 51 Town Hall meetings, the people who came to our Town Hall meetings were knowledgeable, they’d read the bill, they knew health care issues. Their problem is too much of this has been done behind closed doors.   They want it to be open.  They want their ideas heard.  And it’s not.”

At an earlier point in the interview, John Harwood turned to Rep. Brady and said “Are you really going to stand in the way of the Congressman realizing his dream”?    Brady calmly ticked off a number of initiatives that Republicans would do instead.   But the point is that this isn’t about Dingell’s dream.   It’s about doing what will produce the best result, according to the people affected, in the most fiscally responsible manner, which just might include having the government doing a whole lot less than what’s been done thus far.

It would seem that the truth about the nasty rotten sausage that pass for many of our laws, and the factory conditions where they’re produced, are exactly what is getting people worked up and causing them to look more closely over the process.    Dingell’s obviously not happy with that (and we can probably count on him never signing on to H.R. 554, requiring that all non-emergency legislation and conference reports receive 72 hours of Internet exposure prior to debate).   When people see something disgusting,  a common reaction is to recoil and try to ensure that they don’t see it again.  Better yet, they act to find the cause of the disgust and fix it.

It’s safe to say that we’d all be better off by ramping down the production lines at the sausage factory that is the US Congress.

From his soapbox at the NY Times, Paul Krugman delivers a lengthy and entertaining history of the views of “saltwater” and “freshwater” economists, and laments how neither side really saw our recent financial debacles coming.  Most troubling for this writer, he describes how Keynesiansim, rightly or wrongly interpreted but in either case a theory custom-made for big government, seems to be falling back into favor, although (encouraging to this writer), he surmises that the fields surrounding behavioral economics may hold better promise.

But nowhere in the article is the school of thought that did largely see this financial tsunami coming, but whose repeated warnings were largely ignored — the entire school of Austrian economics.   It’s too bad, because we have a lot to learn from Ludwig von Mises, Frederick Hayek and others.

Krugman describes the gigantic mind struggle of the Keynesian and Monetarist camps, as he says “clad in impressive-looking mathematics”, each trying to out-gun each other with explanations of which levers in the economy the government should be pulling and pushing on to smooth out the business cycle.  Meanwhile, the Austrians make the compelling case that it is exactly the government, mostly now via the Federal Reserve’s attempts at controlling the price of money, that causes the business cycle in the first place. There are doctoral-level tombs that get into this in great detail, such as von Mises’ “Human Action”. For an entirely more accessible version, complete with its application to recent events, check out Thomas Wood’s recent bestseller, “Meltdown”.   Acknowledging the Austrian’s perspective on things would have changed the article considerably.

Years ago I spent time developing software in the fixed income departments of several major investment banks.   Occasionally, the trading floor would explode in a sudden commotion like of a bunch of panicked extras in some cheesy disaster movie, with bond traders and salespeople yelling and screaming frantically.   The Fed had unexpectedly cut the discount rate! (or had taken some equally earthquake-like action).    Like seismologists, many players in the market would try to anticipate when these events would occur, but with some regularity, “big ones” would hit with little notice.   If you happened to be positioned incorrectly, property damage (to a trader’s book) could be severe.

Since blogs are such a great place for thought experiments, why not ponder the repercussions of not having a Federal Reserve at all, as Jim Rogers, Thomas Woods and others have at one time or another?    Imagine that those bond traders, salespeople and their managers were collectively the bottom line of our interest rate structures, and that were was no big Federal daddy to run home to for whatever reason.   My guess is that they’d be at least a little (if not a lot) more careful with what price they put on capital, and the manner in which it was transacted.

Which brings me to another great omission in Professor Krugman’s article, that being the role of failure.   Continuing the same thought experiment, if every bank knew it was NOT too big to fail, that there was no backstop for their potential mismanagement and recklessness, that would necessarily introduce an additional heap of caution into their lending practices.    When your trading counterparty is deemed “too big to fail”, it sets off an entire chain of relaxation in information gathering.   The mutual knowledge of needs and equally shared costs and benefits between trading partners that is required by free trade is rendered increasingly phony and precarious.  Would some borrowers, who under the recent overly-lax regimes got loans (what the Austrians might refer to as “malinvestments”), no longer get them?   Absolutely.     But we now see that perhaps that would have been a good thing, and there is no reason to extrapolate into a scenario where lending stops entirely.    Would some customers fear doing business with a bank that could fail?   Absolutely.   Therefore, a bank would have every reason to conduct themselves in a way that would assure their customers that they could not.   This could even spawn a market for private banking insurance, the price of which would be determined by the insurance companies’ assessment of the likelihood of failure.

In 2005, WalMart scared many potential competitors and special interest groups by drafting plans to enter the banking industry.   Suffice it to say, they eventually withdrew their plans.   The point is, in a truly free market, driven by the profit motive, firms will always arise to meet the unmet wants of potential customers.    At the same time, excess profits will always be kept in check by enabling and encouraging complete competition.  “Excess profits” simply open the doors for a hungrier competitor to steal customers through better pricing.

At the height of the recent banking crisis, nearly one year ago, there were cries of bank lending potentially shutting down completely.   But just because some lenders might be having trouble does not mean the need for borrowing permanently disappears.     Might the extra cross-industry diversification of a “WalMart in the banking business” have influenced “banking” for the better at the margin?   Would the Citibanks and Bank of Americas of the world have been forced to tweak their business models for the better?    We’ll never know.

In 2002, McCain/Feingold was passed with the noble-sounding goal of limiting the influence of  money on our legislative and election processes.  Less than two years later, the statute survived a challenge at the Supreme Court level, to the complete shock of anyone with a traditional definition of “free speech”.   In addition,  there is plenty of evidence that it was political speech, and in particular, the right to speak out against the policies and members of the government that The Framers sought to protect.  And in today’s day and age, “speaking out” can take many forms, including television, print, radio and the Internet.  Money, sometimes a lot of money, is required to participate in these mediums (although the Internet is changing this game entirely).   To now have strict limits on such expenditures, has the unintended (or perhaps entirely intended) consequence of limiting the amount and/or effectiveness of a single individual or organization’s ability to “speak out” and most troubling, to challenge our elected officials and their policies.

Why people would want to speak out?  In the same First Amendment, it states (in part) that “Congress shall make no law…abridging …the right… to petition the Government for a redress of grievances”  — in other words, to communicate to the government one’s thoughts or desires on how the government should or should not act.  Today, this activity is often referred to as lobbying.  As the number of issues that the government gets involved with grows, the incentive or requirement to lobby the government, to “speak out” in one way or another in an effort to affect the outcome, increases as well.

Originally, the number of issues that the government got involved with was very small, because the Constitution dictated as such.  So to petition the government, possibly spending money to do so, about an issue that the government was not going to address because it was legally bound not to would be an irrational act.  Then around the time of FDR, through a variety of new interpretations of the Constitution, suddenly many more issues were fair game for petitioning, that is, lobbying.  That trend has only accelerated to the present day.

So lobbying, therefore, is more important than ever before, and for entirely understandable reasons.  Politicians listen to the lobbying, because they feel they are in a position to do something about it, with “it” nowadays being just about anything.   With the stakes so high, the contributions to politicians’ campaigns soar proportionally.

Which brings us back to McCain/Feingold and the limiting of expenditures.  If there is greater-than-ever-before incentive to lobby, and yet the mechanisms to undertake that lobby are restricted, there is tension in the system.   Like excess pressure in any system, the pressure will seek to relieve itself any way it can, and again, government can not successfully figure out those ways in advance.   The collective will of the people is simply too complex.  Therefore, efforts to regulate or manage this pressure will certainly fail, which renders efforts to do so a waste of resources, and worse, a needless stimulation of civil discord.   With McCain/Feingold, Congress attacked the symptom and not the disease.

What would work instead?   Going back to root cause of the problem, namely, that government is now entangled with every aspect of our lives, in ways far more numerous than The Framers sought.   If we instead seek to strictly limit the role of government, we will necessarily limit the need to lobby.   The money spent doing so will drop as an uninteresting byproduct.

Elections do indeed have consequences.   The consequences of the latest U.S. Presidential election are taking the form of a titanic debate boiling down to liberty versus socialism.

Amidst this debate, there are calls for “bipartisanship”.   But why would the winner of the election, with a self-proclaimed mandate for “change” want to reach out to the other side?   On many of the issues, the Democrats simply have a different worldview than the Republicans.   Given that the Democrats won the election, and enjoy large voting majorities in the House and Senate, who needs the Republicans?  What point would it serve for the winners of an election to water down their legislative goals with the policies and perspectives of the other side — the policies and perspectives that they don’t agree with?   If they believe in their policies, and have the votes to get them done, they should just do so.

But perhaps they don’t really believe.

Perhaps by making token outreaches, and token modifications, they can give the impression of consideration and compromise, and provide political cover for themselves when things don’t work out as planned.  This, I suggest, is the likely purpose of bipartisanship.   It is rational for political purposes, but remains irrational for purposes of sound public policy.

Sound economic principles don’t need to be watered down and compromised upon with those that are less sound.   The Republicans ought to have thoroughly learned this lesson, and should greet any calls for bipartisanship by the other side with complete skepticism, and should likewise stop their own calls for bipartisanship, as they make no sense.   They had their chance and blew it big time.   The best they can do now is provide thorough and credible alternatives via a well-executed marketing war.   The American people will sort out the damage.   With protests mounting as the truth comes out about the Democrats’ plans for government, they’ve already begun to do so.