In a January 2009 article – “The Big Fix” – in the New York Times Magazine, David Leonhardt introduced a frequently-employed political strategy into popular political culture by identifying it with the new President’s Chief of Staff, Rahm Emanuel:
Two weeks after the election, Rahm Emanuel, Obama’s chief of staff, appeared before an audience of business executives and laid out an idea that Lawrence H. Summers, Obama’s top economic adviser, later described to me as Rahm’s Doctrine. “You never want a serious crisis to go to waste,” Emanuel said. “What I mean by that is that it’s an opportunity to do things you could not do before.” … That’s the crux of the doctrine.
Exploiting a Crisis
Stated less sympathetically, perhaps, the argument seems to be that sensible political strategy calls for exploiting the existence of a crisis by using it as an opportunity (excuse) to pursue policies you want, whether or not they are the best responses to the specific crisis. The crisis in this case was the worst recession since the Great Depression, and the “opportunities” on the new President’s mind were ambitious policies for health care costs and coverage, energy and climate change, and taxes.
Killing Two Birds with One Stone: Fixing the Economy and the Environment
At about the same time that Leonhardt’s article appeared in the New York Times Magazine, Elizabeth Kolbert’s profile of green jobs activist Van Jones, “Greening the Ghetto: Can a Remedy Serve for Both Global Warming and Poverty,” was published in The New Yorker. Kolbert included the following passage:
When I presented Jones’s arguments to Robert Stavins, a professor of business and government at Harvard who studies the economics of environmental regulation, he offered the following analogy: “Let’s say I want to have a dinner party. It’s important that I cook dinner, and I’d also like to take a shower before the guests arrive. You might think, Well, it would be really efficient for me to cook dinner in the shower. But it turns out that if I try that I’m not going to get very clean and it’s not going to be a very good dinner. And that is an illustration of the fact that it is not always best to try to address two challenges with what in the policy world we call a single policy instrument.”
I elaborated on that analogy and explained my concerns about the “greening of the economic stimulus package” (one element of the White House attempt “not to let a serious crisis go to waste”) in my essay on “Green Jobs” at this blog in March, 2009.
Two activities — each with a sensible purpose — can be very effective if done separately, but sometimes combining them means that one does a poor job with one, the other, or even both. In the policy world, such dual-purpose policy instruments are sometimes a good, even great idea, but other times, they are not. Whether trying to kill two birds with one stone makes sense depends upon the proximity of the birds, the weapon being used, and the accuracy of the stoner. In the real world of important policy challenges — such as environmental degradation and economic recession — these are empirical questions and need to be examined case by case.
In this case, it was (and is) important to separate the two issues: (1) environmental degradation (which in economic terms calls for pricing the externality, i.e. getting relative prices right); and (2) the economic downturn (which calls for increasing and maintaining aggregate demand in the economy). Environmental regulations address the first issue, while broad-based fiscal and/or monetary policies address the second. So, in economic terms, the imperative is to get relative prices right (internalize externalities), and avoid tilting an economic stimulus package toward any particular type of activity (such as “green jobs”).
I argued in my March, 2009 essay (and argue now) that addressing the worst economic recession in generations called for the most effective economic stimulus package that could be devised, not a stimulus package that was diminished in effectiveness through excessive bells and whistles meant to address a myriad of other (legitimate) social concerns. (And, likewise, getting serious about global climate change would require the enactment and implementation of meaningful, dedicated climate policies.)
By the way, I do not wish to add any fuel to the current political fire raging over the bankruptcy of Solyndra, the solar power manufacturer supported by a $500 million Federal loan guarantee under the stimulus package. The failure of Solyndra was largely due to the collapse of silicon prices and the consequent increased competitiveness of conventional solar cell technologies. I will leave it to others to debate whether the government should have seen this coming.
My point rather is that there is a strong counterargument to Rahm’s Doctrine, and that counterargument is – in the words again of David Leonhardt – “hardly trivial — namely, that the financial crisis is so serious that the administration shouldn’t distract itself with other matters. That is a risk, as is the additional piling on of debt for investments that might not bear fruit for a long while.”
That’s the Goose – What About the Gander?
Do not think for a moment that only Democrats are quick to subscribe to and employ Rahm’s Doctrine. On the contrary, Republicans – particularly the ultra-conservative ones that are coming to dominate the Party – have recently embraced it with breathtaking enthusiasm by exploiting national concerns about the sluggish economy and stubbornly high levels of unemployment in order to pursue their anti-regulatory agenda and focused attack on the U.S. Environmental Protection Agency.
As I have also written at this blog (“Good News from the Regulatory Front,” April 25, 2011), the blanket characterization of environmental regulations as “job killers” is simply inconsistent with decades of economic research. In the short term, new environmental regulations can have either positive or negative effects on employment in particular sectors, but in the long term, their employment impacts are trivial when compared with those of the overall set of factors that affect national employment levels. Attacking EPA “to save jobs” is a shameful attempt to exploit economic fears in pursuit of an ideological agenda (whether or not that agenda has social merit).
So, as is so often the case, this economist (like many – maybe most – others) disagrees with the economic arguments put forward by both sides in the political world. Talking about “job-killing environmental regulations” is dishonest, and no more than another cynical application of Rahm’s Doctrine. But the same must be said about the “greening of the stimulus,” and the ongoing, bloated claims about “clean energy jobs.” As usual, those of us in the moderate middle are left to echo Mercutio’s censure: “A plague o’ both your houses!”