Wonkbook: How Keynes would explain Iowa

at 07:47 AM ET, 01/03/2012


Supporters of Republican presidential candidate Mitt Romney visit a campaign stop. (Eric Gay - AP)
John Maynard Keynes famously likened playing the stock market to judging a beauty contest where, rather than choosing the most beautiful girl, you had to choose the girl you thought everyone else would choose as most beautiful. "We devote our intelligences to anticipating what average opinion expects the average opinion to be," wrote Keynes. This is, with some minor modifications, true for judging the results in Iowa, too.

Consider a question that doesn't get asked enough: Why does it matter who wins Iowa?

In theory, the answer should be: "because whoever wins Iowa gets Iowa's delegates." But it isn't. The Iowa caucuses award about one percent of the nation's delegates. That's not nothing, but it's not much.

The real answer is both widely known and difficult to discuss. Winning Iowa matters because the outcome in Iowa governs the subsequent actions of the political media and party elites. And it matters for them because, as Jonathan Bernstein puts it, "What Iowa does is it produces information" -- information that allows them to plan their next moves, and information that thus changes the outcome of subsequent primaries.

The media doesn't like to discuss this too forthrightly because it makes our role as a political actor -- rather than a simple observer -- uncomfortably explicit. As Dartmouth political scientist Brendan Nyhan writes at CJR, there is "a refraction effect" in which "journalists help make Iowa influential and then report on its 'effects' without acknowledging their role in the process or the often arbitrary nature of the distinctions that are made among the candidates."

Party elites don't like to discuss it because their role in the presidential nomination process can seem undemocratic. But the process is undemocratic. A democratic process would be one in which the whole nation votes today; not one in which .04 percent of the nation caucuses today. The reason the two political parties keep the staged primary process around is that it works for them. And one way in which it works for them is that it allows them to watch the candidates campaign and compete while there's still time to do something about the outcome.

What makes matters more complicated is that neither the media nor party elites respond to Iowa in an easily predictable fashion. There's no simple convergence around the winner. Sometimes, as with Sen. Tom Harkin's 1992 win in Iowa, no one cares about Iowa whatsoever. In that case, the win didn't count as Harkin was from Iowa. Sometimes, a win in Iowa counts as an impressive victory, but not one with obviously national implications -- that's essentially how Mike Huckabee's 2008 win was greeted. Sometimes, a win in Iowa vaults a candidate directly to frontrunner status, as happened to then-Sen. Barack Obama in 2008. Sometimes, it persuades the party to coalesce against a threat, as happened with Pat Robertson's second-place finish in 1988.

So the question isn't as simple as who will win the Iowa caucuses. It's what will it mean if they do?

If all this sounds a bit elite-driven and undemocratic, well, it is. But it's not determinative. Voters sometimes buck the media attention and party signals coming out of Iowa. After placing third in the caucuses in 2008 and being largely written off for the nomination, Hillary Clinton came back to win New Hampshire and forced Obama into a long and contested primary. It's not clear that any of the candidates have the resources to do that to Romney, but perhaps someone like Gingrich could benefit down the road from voter frustration with a coronation.

But, for now, what matters in Iowa today isn't anything so simple as who wins the caucuses. It's what two distinct and diffuse groups of political elites think about who wins the caucuses, and how those results are spun.

Top stories


1) The GOP candidates are all trying to beat expectations in Iowa, reports Nate Silver:“Predicting the outcome of the Iowa caucuses is challenging enough. Six different Republican candidates — Michele Bachmann, Herman Cain, Newt Gingrich, Ron Paul, Rick Perry and Mitt Romney — have led at least one poll of the state at some point in this cycle. A seventh, Rick Santorum, is closing fast in the polls and has a realistic chance to win on Tuesday night. What may be even more challenging is predicting how the results of the caucuses will reverberate throughout New Hampshire and the other states. As the political scientist Jonathan Bernstein notes ,, and as my research has found , performance relative to expectations can matter almost as much as the order of finish. The Iowa caucuses are a two-step process: first comes the voting, then comes the spinning.”


@drgrist
: Does anyone think what's going on in Iowa bears any resemblance to a functioning 21st century democracy?

"From dollars spent to pizzas purchased, Iowa by the numbers:" http://politi.co/rUdm9o


2) Panetta to reveal defense cuts strategy, report Elisabeth Bumiller and Thom Shanker: " Defense Secretary Leon E. Panetta is set this week to reveal his strategy that will guide the Pentagon in cutting hundreds of billions of dollars from its budget, and with it the Obama administration’s vision of the military that the United States needs to meet 21st-century threats, according to senior officials. In a shift of doctrine driven by fiscal reality and a deal last summer that kept the United States from defaulting on its debts, Mr. Panetta is expected to outline plans for carefully shrinking the military — and in so doing make it clear that the Pentagon will not maintain the ability to fight two sustained ground wars at once. Instead, he will say that the military will be large enough to fight and win one major conflict, while also being able to “spoil” a second adversary’s ambitions in another part of the world while conducting a number of other smaller operations, like providing disaster relief or enforcing a no-flight zone."


3) The White House has avoided a fight over the debt limit, reports Brain Beutler: "Remember how the Obama administration planned to alert Congress of its intent to raise the debt limit by today? Well, that’s getting kicked back a few days. An aide to House Majority Leader Eric Cantor (R-VA) says the White House has assured Republicans they will not issue the debt limit request this week, heading off a confrontation between the administration and the GOP over Congress’ power under the debt limit law to block the increased borrowing authority. When the administration announced this week that it intended to initiate the debt ceiling increase by December 30, it stumbled into problem. Congress isn’t set to return from winter recess until January 17 — beyond the 15 day window it has under the law to weigh in on the debt limit increase…Seeking to avoid that conflict, the administration will delay the debt limit request by a few days, according to a senior administration official. "


4) Signs point to tepid consumer spending in 2012 report Motoko Rich and Stephanie Clifford: "American consumers are running out of tricks. As the weak economy has trudged on, they have leaned on credit cards to pay for holiday gifts, many bought at discounts. They are dipping into savings to cover spikes in gas, food and rent. They are substituting domestic vacations for international trips, squeezing more life out of their washing machines and refrigerators and switching to alternatives as meat prices have risen. That leaves little room for a big increase in spending in 2012, economists say, a shaky foundation for the most important pillar of the American economy."


Top op-eds

1) Fears over deficits are overblown, writes Paul Krugman: "In 2011, as in 2010, America was in a technical recovery but continued to suffer from disastrously high unemployment. And through most of 2011, as in 2010, almost all the conversation in Washington was about something else: the allegedly urgent issue of reducing the budget deficit. This misplaced focus said a lot about our political culture, in particular about how disconnected Congress is from the suffering of ordinary Americans. But it also revealed something else: when people in D.C. talk about deficits and debt, by and large they have no idea what they’re talking about — and the people who talk the most understand the least."


2) Journalists oversell the results of the Iowa caucus, writes Brendan Nyhan: "With so many journalists covering the Iowa caucuses, the media tends to invest the outcome with a great deal of importance—in particular, by creating a narrative about the “meaning” of the results for the candidates going forward. Though this interpretive process helps both voters and party leaders coordinate in supporting the most competitive candidates, it also creates important challenges for reporters here in New Hampshire and nationwide who will cover the race as it moves forward after Iowa…The result in Iowa is genuinely significant because of the weight it is given by party actors, but journalists should recognize that “momentum” is a subjective interpretation of the results that they help to create. Reporters in New Hampshire and other early states ought to think carefully about how to select and frame their post-Iowa stories rather than passively accepting the conventional wisdom about the state of the race."


3) Economic recovery is coming, and quick, writes Matthew Yglesias: "Economic forecasting is a mug’s game. There are simply too many unknowable factors that affect 'the economy' for anyone to make accurate predictions. The Fukushima earthquake and nuclear disaster, for instance, had a noticeably negative macroeconomic impact around the world, and nobody knows what lurks inside the hearts of central bankers…Still, the application of economic theory should be able to help us avoid the commonplace error of simply assuming that the future will be like the past, that after 18 months of sluggish growth we’re due for sluggish growth to continue. The conventional wisdom is that the relatively strong growth in the fourth quarter was a false dawn, and the economy is destined to stall out. This is mistaken."


4) The Washington area needs to plan for the future, writes Steven Pearlstein: "It’s been a wonderful ride, not just for the past 10 years but the past 20, and it has helped make ours one of the richest regions in the country. Which makes it all the more painful to have to inform you that it’s about to come to an end. Any reasonable scenario for the future would surely project federal spending on salaries and procurement to grow very little, if at all. Given the region’s lopsided reliance on those types of federal spending, it’s a pretty good bet that the regional Washington economy will grow slower than the rest of the country for an extended period of time."


5) The medical device tax will slow innovation, writes Ramesh Ponnuru: "A year from now, the federal government will start collecting a new tax on medical devices from tongue depressors to imaging machines, thanks to the sweeping health-care overhaul that Democrats enacted in the spring of 2010. People in the industry say it’s already having an effect. Richard S. Foster, the Medicare chief actuary, has estimated that if the tax is passed on to consumers it will raise national-health costs by $18.2 billion in 2018. Device makers complain that the tax will lead not only to higher prices and layoffs but also to reduced research and development. They also say that when combined with high U.S. corporate-tax rates, the device levy makes relocation to other countries more appealing. Ireland, for one, is actively recruiting medical- device makers to move production there."


Portland punk interlude: Wild Flag play "Future Crimes" at SXSW.


Got tips, additions, or comments? E-mail me.

Still to come: Signs don’t look good for consumer spending in 2012; Indiana Republicans are pushing ‘right to work’; the payroll tax conference committee’s members are set, a court delayed a new EPA rule; and corgis get on a jet with the Queen.


Economy

The federal ethanol subsidy has expired, reports Robert Pear: "A federal tax credit for ethanol expired on Saturday, ending an era in which the federal government provided more than $20 billion in subsidies for use of the product. The tax break, created more than 30 years ago, had long seemed untouchable. But in the last year, during which Congress was preoccupied with deficits and debt, it became a symbol of corporate welfare. Fiscal conservatives joined liberal environmentalists to kill it, with help from a diverse coalition of outside groups. In the United States, most ethanol is produced from corn. The demise of the subsidy is all the more remarkable because it comes at the peak of the political season in Iowa, where corn is king."


McConnell names payroll tax committee members, reports Felicia Sonmez: "Senate Republicans to serve on the bipartisan, bicameral committee charged with working out a deal on a year-long payroll tax holiday extension and other provisions by the end of February. Republican Sens. Jon Kyl (Ariz.), Mike Crapo (Idaho) and John Barrasso (Wyo.) will serve on the panel of 20 lawmakers, McConnell’s office announced Friday afternoon. Kyl, the No. 2 Senate Republican, previously served on the debt “supercommittee” and was chosen by McConnell to represent Senate GOPers in the debt talks led by Vice President Biden during the spring. Crapo is a member of the bipartisan “Gang of Six” and also serves on the Senate Finance Committee. And Barrasso is the chairman-elect of the Republican Policy Committee, the fourth-ranking spot in Senate GOP leadership."

Economic growth isn't the only thing that matters, writes Kenneth Rogoff: "Modern macroeconomics often seems to treat rapid and stable economic growth as the be-all and end-all of policy. That message is echoed in political debates, central-bank boardrooms, and front-page headlines. But does it really make sense to take growth as the main social objective in perpetuity, as economics textbooks implicitly assume?...There might be a problem even deeper than statistical narrowness: the failure of modern growth theory to emphasize adequately that people are fundamentally social creatures. They evaluate their welfare based on what they see around them, not just on some absolute standard."


Corgis are excellent interlude: writes Laura D’Andrea Tyson: "In a surprising year-end act of bipartisanship, Representative Paul D. Ryan, Republican of Wisconsin, and Senator Ron Wyden, Democrat of Oregon, offered a proposal to reduce the growth of Medicare spending, envisioning a fundamental transformation of Medicare to a “managed competition” or “premium support” system. In their plan, the government would provide a subsidy to Medicare beneficiaries to choose among competing insurance plans, including the traditional fee-for-service Medicare program...But the markets for insurance and health services are not like most markets, and there is scant evidence to support the Ryan-Wyden assertion, as Uwe E. Reinhardt noted in Economix last week. The cost savings from managed competition are hypothetical and uncertain – in fact, there are reasons to fear that such a system could actually increase costs. "


Domestic Policy


Indiana Republicans are pushing a ‘right to work’ law, reports Steven Greenhouse: "Nearly a year after legislatures in Wisconsin and several other Republican-dominated states curbed the power of public sector unions, lawmakers are now turning their sights toward private sector unions, setting up what is sure to be another political storm. The thunderclouds are gathering first here in Indiana. The leaders of the Republican-controlled Legislature say that when the legislative session opens on Wednesday, their No. 1 priority will be to push through a business-friendly piece of legislation known as a right-to-work law."


Interspecies friendship interlude: A duck and dog are best friends.


Energy


A court has delayed EPA’s cross-state air pollution rule, reports Andrew Restuccia: "A federal appeals court ruled Friday that the Environmental Protection Agency must delay implementation of pending regulations aimed at limiting harmful power plant pollution that crosses state lines. The ruling prevents EPA from implementing the cross-state air pollution rule — which would put new limits on sulfur dioxide (SO2) and nitrogen oxide (NOx) emissions from power plant smokestacks in 27 Eastern states — on Jan. 1, as scheduled. EPA said the power plant emissions travel across state lines, threatening the health of thousands of people."


Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.

 
Read what others are saying

    Most Read: Business

    DJIA
    0.48%
    S&P 500
    0.50%
    NASDAQ
    0.43%
     Last Update: 07:51 AM 08/20/2014

    World Markets from      

     

    Other Market Data from      

     

    Key Rates from