Brad DeLong's Egregious Moderation

Gary Gorton: Slapped in the Face by the Invisible Hand: Banking and the Panic of 2007

Gary Gorton (2009), "Slapped in the Face by the Invisible Hand: Banking and the Panic of 2007":

The “shadow banking system,” at the heart of the current credit crisis is, in fact, a real banking system – and is vulnerable to a banking panic. Indeed, the events starting in August 2007 are a banking panic. A banking panic is a systemic event because the banking system cannot honor its obligations and is insolvent. Unlike the historical banking panics of the 19th and early 20th centuries, the current banking panic is a wholesale panic, not a retail panic. In the earlier episodes, depositors ran to their banks and demanded cash in exchange for their checking accounts. Unable to meet those demands, the banking system became insolvent. The current panic involved financial firms “running” on other financial firms by not renewing sale and repurchase agreements (repo) or increasing the repo margin (“haircut”), forcing massive deleveraging, and resulting in the banking system being insolvent. The earlier episodes have many features in common with the current crisis, and examination of history can help understand the current situation and guide thoughts about reform of bank regulation. New regulation can facilitate the functioning of the shadow banking system, making it less vulnerable to panic.

http://www.frbatlanta.org/news/CONFEREN/09fmc/gorton.pdf

Paul Krugman: Equilibrium decadence

Equilibrium decadence (wonkish) - Paul Krugman Blog - NYTimes.com: Brad DeLong is exercised about William Poole’s technological regress. I was getting at something like the same thing in my Dark Age post. Here are some further thoughts about the sad intellectual history of the past few decades.

What Brad calls technological regress and I call a Dark Age actually began with some profound and productive questioning of conventional wisdom. In the late 1960s macroeconomists began a search for microeconomic foundations — above all, an attempt to explain why nominal shocks seem to have real effects rather than merely affecting the price level. The 1970 Phelps volume, which suggested that imperfect information could explain a lot of what we see, had a huge impact on the profession. And when Lucas married this insight to rational expectations, it seemed to shake the foundations of Keynesian ideas about monetary and fiscal policy. Business cycles, Lucas suggested, last only as long as price- and wage-setters can’t disentangle nominal from real shocks — and monetary or fiscal policy can’t stabilize the economy, at most they add noise.

But it became clear after a few years that this approach wasn’t going to work: actual business cycles last too long to rely on imperfect information. And at that point the profession divided. One group went down the “new Keynesian” route, arguing that something such as small costs of changing prices must explain the rigidity we actually seem to see. This group isn’t averse to putting a lot of rationality into its models, but it’s willing to accept aspects of the world that seem clear in the data, even if it can’t (yet?) be fully explained in terms of deep foundations.

The other group decided that since they couldn’t come up with a rigorous microfoundation for price stickiness, there must not be any price stickiness: recessions are the result of adverse technological shocks, not demand shocks.

And the latter group, the equilibrium macro side, was so convinced of the logical correctness of its position that schools dominated by that view stopped teaching demand-side economics. (Schools dominated by new Keynesians, on the other hand, did teach real business cycle theory.) I haven’t been able to dig up the quote, but somewhere along the line Ed Prescott declared that his students wondered who Keynes was, because he was never mentioned in their courses.

And those trained according to this dogma were and are utterly ignorant of what Keynes, or modern Keynesians, have to say. They know that Keynesianism is stupid nonsense, because that’s what they remember having been told. But they don’t actually know why they’re supposed to believe that; the serious debates the profession had in the 70s about the microfoundations of inflation and unemployment theory are lost in the mist.

And as a result we have the spectacle of well-known economists offering what they think are profound arguments, but are actually long-refuted fallacies. Most important is the “Treasury view” that government spending can’t affect demand. But there’s also the astonishing belief that Ricardian equivalence means that consumer spending automatically falls to offset even a temporary increase in government spending, which seem to be part of that Poole quote. (New Keynesian models in which consumers fully anticipate future taxes still leave room for fiscal policy — but they don’t know that.)

And the sad thing is that all of this matters. Our ability as a nation to respond to the current economic crisis is being seriously hampered by the gratuitous ignorance of many of our economists.

John Cole on Jonathan Chait on Jeffrey Rosen on Sonia Sotomayor: The Worst Defense Since the 81 Colts

Balloon Juice: The Worst Defense Since the 81 Colts: A really embarrassing effort from Jonathan Chait:

Somewhat belatedly, I’ve noticed that numerous commentators have decided to label Jeffrey Rosen’s online article about Sonia Sotomayor from a few weeks ago as “gossip.” The description has been employed by left-wing or liberalcommentators like Glenn Greenwald of Salon, Adam Serwer of the American Prospect, and Matthew Yglesias of the Center for American Progress Action Fund. Today it’s repeated by right-wing columnist Charles Krauthammer. “Gossip” is an effective label for those who wish to denigrate Rosen’s reporting or the reputation of TNR, but it’s an inaccurate one. Gossip is unverified information. Gossip is something you hear all the time—say, Senator X mistreats his staff. No serious publication can pass off gossip as reporting. However, if you actually speak with the principles first-hand—you interview staffers for Senator X who report that he mistreats them—then what you have is reporting. That’s what Jeff did. He spoke first-hand with several of Sotomayor’s former clerks, who provided a mixed picture. Unsurprisingly, they declined to put their names on the record, but that’s utterly standard for people who are speaking in unflattering terms about people they worked with or for.

It ends with a nice flourish: “You may not think the issue ought to disqualify Sotomayor—I don’t, and Jeff doesn’t either—but to call it “gossip” is grossly unfair.” This post is a real embarassment for a number of reasons. First, there was a marked difference between the initial Rosen piece and the New York Times piece. From the comments section at the TNR, a rundown of the “sources” for Rosen’s piece:

one former clerk... her former clerks... some of her Second Circuit colleagues... range of people... former law clerks... one former Second Circuit clerk... former prosecutors... former clerks for other judges... one former clerk for another judge

But, mind you, their deep thoughts about Sotomayor’s temperament or abilities, completely off the record, free from any responsibility or allegiance to the truth, just can’t be called gossip. Why, Rosen assured us they are all well-meaning. But since we don’t know who they are, how can we accurately judge their assessments? Wendy Long, who spent the last week trashing Sotomayor as a radical activist, was also a clerk on the 2nd Circuit. Was she there during Sotomayor’s tenure? If so, was she one of Rosen’s sources? Wouldn’t it make you view some of the remarks in Rosen’s piece differently if she was one of his sources? Are you starting to understand yet why printing gossip from unnamed clerks is problematic? By way of comparison, here are the sources in the NY Times piece:

said Douglas Kmiec, a law professor at Pepperdine University... said H. Raymond Fasano, a Republican immigration lawyer... said Sheema Chaudhry, who appeared before Judge Sotomayor in an asylum case last year... Gerald Lefcourt, a New York defense lawyer... Judge Guido Calabresi, a former dean of Yale Law School who taught Ms. Sotomayor... said Judge Jon O. Newman... Judge Richard C. Wesley, another colleague

Does anyone notice a difference in the sourcing of Rosen’s piece and the NYT piece that Chait would have you believe is the same exact thing? Because I see a stark difference. Rather than having to rest on Rosen’s vague assurances that the sources are altruistic and earnest liberals who only want the best for the Obama administration, when I read the NY Times piece, I know who has said what, what their relationship to Sotomayor is, and how it is germane to the discussion.

The second reason that Chait’s work here was an embarrassment is that one of the people he called out was Glenn Greenwald. In fact, the title of Chait’s post is “Is the New York Times Printing Gossip?” (an excellent use of the Cavuto, btw). Now, I’m no journalist, but if I was going to address my critics in such a manner, I would check to see what they had to say on the issue. I suppose the first way I would do that is to check their websites.

And lo and behold, using the mystical powers of the internet, I have found my way to Glenn Greenwald’ site, and what do I discover? Why, a long piece discussing the very NYT piece that so interests Chait, and Greenwald’s lengthy explanation of the difference between what Liptak and company have done and what Rosen did with his drive-by smearing of Sotomayor. And it was all there for hours before Chait threw up his weak defense of Rosen. I’ll quote some of it here, since it is apparently so hard to find:

The excuse journalists typically give for indiscriminately granting anonymity—we have no choice because it’s the only way people will speak, and anonymous quotes are better than none—does not, even if factually true, justify anonymity, since anonymous attacks are often worse than nothing: they’re inherently unreliable because they’re made without accountability. But as the above passages demonstrate, the excuse is often factually false, as was obviously true when offered by Jeffrey Rosen. Journalists use anonymity not because they can’t get anyone to speak on the record, but because, like Rosen, they’re too slothful to do the work to find on-the-record sources and they crave the sort of sensationalism that is possible only when someone is allowed to spout inflammatory garbage without having their names attached. You’ll notice that the NY Times piece doesn’t have any anonymous people calling her a bully or questioning her intellect. Funny, that.

Finally, this piece just smacks of institutional ass-covering. As Chait notes, no serious publication can pass off gossip as reporting, which is precisely the problem here. That is what Rosen did, and when you place his piece next to the NYT piece, it is glaringly obvious. How Chait thinks a side-by-side comparison of the two pieces makes the case for Rosen is beyond me (and I bet Rosen is thrilled- his handiwork is finally being overshadowed by the hysterical reactions from Newt, Rush, Tancredo, et. al, and Chait comes along and stirs things up again).

But here is what is even more depressing, and Chait simply doesn’t get it. I’m not a lawyer, and I’d wager that neither are the majority of my readers or the majority of the TNR’s subscribers. In order for us to be able to make sense of the Sotomayor confirmation, we need to rely on people who are lawyers and who do understand the arcane procedures, the mountains of precedent and case law, etc. I don’t want a radical with a poor mind on the court, and I don’t intend to support Sotomayor just because she has a (D) after her name. I’d like to know why she did or did not make the right decision in certain cases, but the only way I am going to be able to learn that is from folks like Mr. Rosen. Jeffrey Rosen has not only legal training, but he is a skilled educator and he has a platform at TNR from which to educate a large number of people about Sotomayor. He is the kind of person who should play a vital role in informing the American people.

And what does he do? Instead of using his years of experience, his expertise on the subject matter, and his megaphone to inform us, he passes off gossip from anonymous clerks, admits he hasn’t read enough of Sotomayor’s decisions to have a real opinion, and then acts surprised...

Matthew Yglesias: Comparative Think Tankery

Matthew Yglesias: Comparative Think Tankery: Interesting observation from Tim Fernholtz about the right’s two big think tanks:

CAP’s events are generally policy-focused and also forward-thinking: “Todd Stern on China and the Global Climate Challenge,” a discussion with a White House official, “Web 2.0 and the Federal Government,” “Building a National Strategy for Global Development.” Heritage’s events, on the other hand, are sort of kooky: “And These Storms: Lessons From Winston Churchill’s Thoughts and Adventures,” “Reagan’s Secret War: The Untold Story of His Fight to Save the World From Nuclear Disaster,” “A Conversation with Dr. Wang Dan: Student Leader, Tiananmen Square, 1989.” AEI’s events are much better (perhaps reflecting the center’s new leadership): “Addressing Systemic Risk, with a Keynote Presentation by Alan Greenspan,” “Election Demographics: What We Learned in 2008, What It Means for 2010 and 2012,” “The Five (Not So) Easy Pieces of Health Reform.”

Actually, this strikes me as not-so-kooky by Heritage standards. That kind of hero worship is nothing compared to research products like “Pentagon Should Battle Pirates and Terrorists with Laser Technology”. By contrast, though AEI certainly has its wingnutty side I’ve been to some very useful events there (I remember in particular a Eugene Volokh talk about the logic of “slippery slope” arguments). And most important of all, AEI offers the best think tank lunch in town, which is the sort of thing that matters a lot when you’re trying to make it on a Writing Fellow salary at The American Prospect.

And Paul Krugman adds:

But no sharks!: Yglesias, discussing the woes of right-wing think tanks, alerts us to quality Heritage research: “Pentagon Should Battle Pirates and Terrorists with Laser Technology”. But the research is sorely lacking — not a mention of putting the lasers on sharks.

You know, I have one simple request. And that is to have sharks with [bleep] laser beams attached to their heads! Now evidently my cycloptic colleague informs me that that cannot be done. Ah, would you remind me what I pay you people for, honestly? Throw me a bone here! What do we have?

Robert Waldmann: SCOTUSBLOG vs. the Journamalists

Robert's Stochastic thoughts: From Scotusblog via Hilzoy:

In Pappas v. Giuliani, 290 F.3d 143 (2002), [judge Sotomayor] dissented from the majority's holding that the NYPD could fire a white employee for distributing racist materials.

OK so the reverse racist Latina wasn't quite so intollerant of white racism as the majority of the appeals court or Rudolf Giuliani. Of course it is well known that Giuliani hated the NYPD and was always trying to get them.

Why is it that the person to actually look at Sotomayor's opinions is not a print journalist but rather blogger Tom Goldstein ?

Michael Tomasky: The GOP "rupture"

Michael Tomasky: The GOP "rupture": Republican fault lines came a little more out into the open over the weekend as Colin Powell and Tom Ridge (George Bush's first homeland security secretary) went on the Sunday shows and whacked their party for its intolerance and so forth. Ridge, when asked if he agreed with Dick Cheney that Obama had made the US less safe, said he did not agree.

So today come articles like this one that trumpet the growing GOP rupture. I of course would like to think this is the case, but I'm not so sure.

A prerequisite for a "rupture" is that there are two competing sides capable of rupturing. But that really isn't the case in Washington. There aren't enough GOP moderates in Washington to constitute a side. It'll take more than Powell and Ridge to create any kind of schism.

What will it take? Current office-holders and potential presidential candidates will have to say let's quit worrying so much about what Rush Limbaugh thinks and start worrying about what the American people think. That person will be attacked, of course, but his or her numbers will shoot up pretty immediately, and if he or she stands tough, conservatives will start to rethink things, maybe.

John McCain? They already don't like him, but he still has cred with the mainstream, so he could start this ball rolling. Maybe Mitt Romney. He could position himself as your classic business/country-club Republican. But of course he's Mormon so he could be written off too on that basis.

I'm not one of these people who feels a civic need to pay lip service to the idea of two broad-based parties competing in the marketplace of ideas etc etc. I say, let 'em stew in their Cheney juices for a few years while the rest of us pass healthcare reform and climate-change legislation and so on and so forth. But obviously all this is worth keeping an eye on to see who, if anyone, speaks up next.

Scott Lemieux: Republicans in Libertarian Clothing

Lawyers, Guns and Money: Republicatarian: Eugene Volokh expresses concern about the consequences of having an actual liberal on the Supreme Court:

And she might move that seat further to the left, if she proves to be a solid liberal, like Justices Brennan and Marshall, as opposed to a moderate liberal, like Justice Souter and the most recent Democratic appointees, Justice Ginsburg and Justice Breyer. That’s obviously important for a wide range of issues on which the liberal position would trouble not just conservatives, but also libertarians and moderates: the individual right to keep and bear arms, the right of Asians and whites to equal treatment under the Constitution’s racial equality provisions and federal equal rights statutes, the constitutionality of even-handed school choice programs that include religious schools on equal terms with secular ones, the right of people and organizations to participate effectively in political campaigns, and more.

On one of these cases (Heller) I actually agree with Volokh; on the others, I'm less sympathetic. But the first thing I notice about these cases is that nothing would change if you substituted zombie William O. Douglas for one of the Court's moderates. All four of the Court's current moderate liberals dissented in Heller. It was Breyer who wrote the major dissent (joined by Souter as well as Stevens and Ginsburg) in Parents Involved, and Stevens who (correctly in my view) compared the Roberts/Volokh position that racial classifications used to promote integration are indistinguishable from racial classifications used to uphold a caste system to Anatole France's mock observation that "The majestic equality of the law, forbids rich and poor alike to sleep under bridges, to beg in the streets, and to steal their bread." Souter himself wrote the brilliant dissent in Zelman (again, joined by the other three more liberal justices) noting that the voucher program in question was anything but "even-handed" between religious and secular programs, given that its construction guaranteed that virtually all of the money had to go to parochial schools. Leaving aside the fact that ifthe goal is the "effective" participation in political campaigns the desirability of First Amendment absolutism on campaign finance is far from self-evident, again Souter and Breyer have consistently voted against the Court's conservatives in these cases. So for every one of the areas Volokh mentions, whether Souter is replaced by another moderate or another Brennan will make no difference whatsoever.

The other thing you notice about the cases Volokh cites, of course, is that they're all absolutely standard-issue Republican obsessions, with no particular libertarian content at all -- Pat Buchanan would presumably agree with Volokh on all points. Conversely, criminal procedure cases are an area in which replacing a Souter or Breyer with a Douglas or Marhsall really would make a difference, and moreover would make a difference in a way that you'd think an actual libertarian would approve of. But Volokh has nothing to say about them.

Why, it's enough to make me wonder in what sense Volokh is a "libertarian," as opposed to an ordinary conservative, at all. (Or, as Henley said long ago, "[t]he further you get from standard Republican issues like guns and university speech codes, the more likely he is to arrive, with exquisite regret, at the conclusion that the State, particularly when helmed by George W. Bush, must have its way.")

Dahlia Remler and Elda Pema: Why do Institutions of Higher Education Reward Research While Selling Education?

Why do Institutions of Higher Education Reward Research While Selling Education?: Higher education institutions and disciplines that traditionally did little research now reward faculty largely based on research, both funded and unfunded. Some worry that faculty devoting more time to research harms teaching and thus harms students' human capital accumulation. The economics literature has largely ignored the reasons for and desirability of this trend. We summarize, review, and extend existing economic theories of higher education to explain why incentives for unfunded research have increased. One theory is that researchers more effectively teach higher order skills and therefore increase student human capital more than non-researchers. In contrast, according to signaling theory, education is not intrinsically productive but only a signal that separates high- and low-ability workers. We extend this theory by hypothesizing that researchers make higher education more costly for low-ability students than do non-research faculty, achieving the separation more efficiently. We describe other theories, including research quality as a proxy for hard-to-measure teaching quality and barriers to entry. Virtually no evidence exists to test these theories or establish their relative magnitudes. Research is needed, particularly to address what employers seek from higher education graduates and to assess the validity of current measures of teaching quality.

David Nather: GOP Explores Ways to Repitch the ‘Big Tent’

CQ Politics: As John McCain ’s top domestic and economic policy adviser during last year’s presidential campaign, Douglas Holtz-Eakin got a firsthand look at the broad problems the Republican Party now faces: a shrinking base, a narrowing appeal among different demographic groups and an inability — in his view — to generate fresh ideas or effectively sell the ones it has.

In the wake of another chastening set of GOP defeats at the polls, Holtz-Eakin is now setting out to address those problems head-on. He’s developing a proposal for a new think tank that he describes as a “Center for American Progress for the right” — a reference to the liberal think tank that has supplied staff and policy proposals to the Obama administration and developed new ways to market its ideas.

“I think there is now pretty widespread recognition that the Republican Party needs to become demographically broader, more welcoming of different ideas,” said Holtz-Eakin, who ran the Congressional Budget Office from 2003 to 2005. “And it’s time to think strategically about how to appeal more broadly outside the South.”

Other GOP outreach efforts also have taken shape in recent months — notably the National Council for a New America, the group spearheaded by House Minority Whip Eric Cantor of Virginia that is planning a series of listening sessions and policy forums. But “what’s not happening,” Holtz-Eakin said, “is to start rethinking the basic ideas of the party.”

The irony, of course, is that the Center for American Progress itself was developed as a liberal answer to the Heritage Foundation, the conservative think tank that has been a source of Republican policy ideas for decades. But Holtz-Eakin says established think tanks of the right, like Heritage and the American Enterprise Institute, were “not helpful” during the McCain campaign because they weren’t politically engaged or innovative in their media strategies.

That’s why Holtz-Eakin says he now looks to the Center for American Progress as a model. The center, headed by former Clinton White House Chief of Staff John D. Podesta, combined a battery of domestic and foreign policy proposals with outreach innovations, such as hosting film screenings around the country and collecting e-mail addresses of people who sign up for the screenings.

Holtz-Eakin’s project — still more of a concept than a fully developed proposal — is one of a scattering of initiatives starting to take shape as practical-minded Republicans look for ways to rebuild the appeal of a party seriously damaged by its losses in the last two elections. Cantor’s effort has received the most publicity, but others, in various stages of development, are experimenting with longer-term growth strategies to broaden the party’s appeal.

Some of these efforts are clear attempts to duplicate the Democrats’ recent successes. For example, Rep. Kevin McCarthy of California, who’s in charge of recruiting Republican candidates for 2010’s House races, is talking about “broadening the playing field” — much as the Democrats did in 2006 — by looking for people with unusual and diverse backgrounds and putting less emphasis on ideology.

Likewise, Ed Gillespie, a former Republican National Committee chairman who later served as counselor to President George W. Bush , has teamed up with GOP pollster Whit Ayres to form Resurgent Republic, a new firm that tests public perceptions of Republican issues and releases its surveys to the public. It’s modeled on Democracy Corps, a firm founded by Democratic consultants Stan Greenberg and James Carville that conducts surveys about Democratic priorities and writes strategy memos based on the results. So far, Gillespie’s firm seems to be focusing on issues that can play to Republicans’ strengths; a recent survey, for example, found that most independents sided with Republicans on the need for harsh interrogation techniques.

Updating the Party Line

There are also conservative writers and think tank scholars who are trying to promote ways to modernize the Republican agenda. David Frum, a former Bush speechwriter, runs a Web site called NewMajority.com, which features blog posts by writers who explore the challenges facing the Republican Party and conservatism in general. And Yuval Levin, a fellow at the conservative Ethics and Public Policy Center, writes about ways to modernize the conservative agenda by, as he describes it, “applying conservative principles to a new set of issues that conservatives haven’t always been comfortable with,” such as environmental and health care policy.

There’s no single standout in the crowd yet, and there’s no way to know which, if any, will emerge as the most successful effort. Some involve more dissent than others. Cantor, for example, doesn’t try to suggest his National Council for a New America will lead to a major rethinking of the Republican agenda; it’s more of an effort to sell the party’s existing agenda more broadly. “It’s really a conversation” about how “common-sense conservative principles” can address different groups’ problems, Cantor said.

But Holtz-Eakin’s think tank, if it ever gets off the ground, probably will become more of a challenge to the current Republican agenda — a forum for pragmatic policy ideas rather than a keeper of the flame of pure conservatism. “I think what we’re trying to do is reclaim the center, or the center-right,” said John Feehery, who was a top aide to J. Dennis Hastert when Hastert was the Speaker of the House and is working with Holtz-Eakin to develop the think tank plan. Other prominent Republicans, such as fiscal conservative Rep. Paul D. Ryan of Wisconsin and former Bush White House Education Secretary Margaret Spellings are also watching Holtz-Eakin’s project with interest. “I do think he’s onto something,” Spellings said. “What’s missing are practical, reasonable, sensible ideas that sort of scratch the surface beyond the old dogmas.”

It’s not clear how much of an impact these efforts can have, given the scope of the GOP’s problems. A Gallup poll of 7,139 adults released last week found that the Republican Party had lost support among almost every demographic group since 2001, except for frequent churchgoers.

Ultimately, these efforts can gain traction only when there’s a ready audience, both at the Republican leadership level and among the base. Right now, the signs aren’t promising. RNC Chairman Michael Steele dismissed the idea of a deep rethinking of the GOP agenda in a speech last week, declaring, “The era of Republican navel-gazing is over.”

And former Rep. Thomas M. Davis III of Virginia doesn’t think the party’s base voters are interested in seeking a bigger tent. “I think the grass roots right now is in an ornery mood — ‘we are who we are,’” said Davis, who’s now in the Washington office of the professional services conglomerate Deloitte and is also head of the moderate Republican Main Street Partnership.

Still, the projects and conversations that are just getting started in GOP circles could lay the groundwork for the party to be better prepared when they do have a chance to return to power, just as the Democratic Leadership Council helped create a market for centrist ideas that allowed the Democrats to broaden their appeal when the Republicans stumbled.

“It’s still kind of in the shaking-out phase,” said Republican strategist Kevin Madden, a veteran of Mitt Romney’s presidential campaign. But the significance is that, after months of private griping, Madden said, the Republicans and conservative thinkers who want to rebuild “are starting to say, ‘Well, we need to stop sitting around and figure out how to do this.’”

Reclamation Projects

The way to reclaim majority status, according to the party’s pragmatists, is to apply conservative principles in innovative fashion and develop solutions on issues that haven’t been a priority for Republicans. Levin cites the Republicans’ role in pushing for the 1996 welfare overhaul, which transformed policy by putting time limits on public assistance. “Welfare was not considered a conservative issue, except in the sense that most people were against it,” said Levin. “But then people started thinking of more constructive ways we could look at it.”

Holtz-Eakin agrees and has already developed a health care overhaul proposal that illustrates the kind of ideas his think tank would encourage. It includes a call to replace the tax break for employer-sponsored health coverage with a tax credit to discourage overuse of the system. President Obama criticized a version of that approach last year when McCain proposed it, but he might be forced to reconsider in the upcoming health care overhaul debate. Holtz-Eakin also suggests adopting a go-slower policy of steadily increasing insurance and improving the quality of health care, rather than immediately trying to cover all Americans.

But he stresses that new ideas have to develop in tandem with new outreach strategies. “We’ve gone a couple of generations without explaining why people use markets to solve social problems,” he said. It’s clear Republicans are paying special attention to how to lure young voters back to the party — an urgent concern, given that Obama won 2-to-1 among voters ages 18 to 29. McCarthy thinks the key is to find candidates who can emphasize fiscally conservative issues, which are more likely to resonate with young voters than social conservatism. “They may disagree with us on social issues, but that doesn’t mean they can’t be Republicans,” McCarthy said. Davis concurs that party leaders need to look beyond traditional social-issue divides. “The cultural stuff is holding them back right now on expanding the base,” he said.

Still, the conversations are just beginning. “I think all of these voices are helpful if they united at the end of the day,” said Davis. “They’re just a hodgepodge right now. I don’t think any one of them will take off by themselves.” It might be a long road back to power, but these Republicans are doing their best to start down that road, one step at a time.

Paul Krugman: Metropolitan Macho

Metropolitan macho - Paul Krugman Blog: It occurred to me that some people might read my post about Hong Kong as yet one more case of a liberal trying to impose his aesthetic preferences on others; that’s the usual rap against “smart growth” advocates. Basically, the accusation is that anyone with a good word for urbanism must just hate the American lifestyle.

The funny thing, though, is that these days it’s mostly the other way around. As I noted a while back, a lot of anti-environmentalism in America these days is about symbolism. And I think the same thing is true about pro-sprawl commentary. Consider the case of Portland, Oregon. Conservatives really, really hate on Portland; examples here and here. Aside from the tendency to engage in factual errors, the hate seems disproportionate to the cause. But it’s an aesthetic thing: conservatives seem deeply offended by anything that challenges the image of Americans as big men driving big cars.

Me, I like dense urban areas. But I’m a pointy-headed intellectual. And bearded, too.