ZERO PLUS ZERO = THE THIRD WAY:

The Zero-Sum Politics of a Slow Growth Era (Noah Millman, 3/01/11, American Scene)

The big Obama Administration initiative that the GOP governors are so unified in opposing is the health-care law. You can make an argument that this law – if it works – is a pro-growth initiative. That by planting the seeds of a real individual insurance market, it begins the process of decoupling health insurance from employment, increasing labor market flexibility and making it possible for more people to commit to an entrepreneurial career path. That by providing health insurance to more of the uninsured, it will reduce the drag that ill health poses on their productivity. That, by restraining spending over time on some of the least “productive” kinds of health expenditures, it will free up resources both for more productive uses, whether in health care or in other sectors. And so forth.

That’s if it works – and if its reforms are extended by further reform. And that’s a big “if.” What it does immediately, of course, is transfer resources from the “haves” to the “have-nots.” It takes resources from the elderly and gives them to the young, from the rich to the poor, from those with “Cadillac” health benefits to the uninsured. All of those transfers are, of course, defensible on moral and practical grounds – but it’s not surprising to see the “haves” fight back.

The big state-level initiative of the GOP governors that the national Democrats are trying to blunt is the effort to kill, or at least maim, public sector unions. The states in aggregate are in terrible fiscal shape, and unless we enter a period of rapid economic growth they will remain in lousy shape indefinitely. Somebody is going to have to lose in the huge budgetary battles in statehouses around the country. GOP governors want that “somebody” to be public sector workers who, in many cases, have seen their position improve relative to their private-sector equivalents (which, I think, is the important comparison – not whether they are over- or under-paid in an absolute sense, but whether one group of workers has been gaining or losing ground relative to the other).

This effort could also be pro-growth – if it was part of a larger effort to restructure the public sector to make it more productive.

Note that both productive alternatives involve making public goods and services more market responsive.

Posted by Orrin Judd at March 6, 2011 9:18 AM