In his profile of Larry Summers today -- and then again on his blog -- Noam Scheiber says that "our political system isn't ideally suited to dealing with financial and economic crises." The example he gives is the 1995 bailout of Mexico, which might not have happened had the Clinton administration not found a way to bypass Congress. But the problem with that example is that it was hard, in 1995, to convince Congress that Mexico's crisis was our crisis. As Scheiber writes in the article, the "worst case scenario" was that a Mexican default could "wind up shaving a point off U.S. GDP growth." That's a bad thing to be avoided, but I'm not sure I'd call it a crisis for us so much as for Mexico. And our political system is certainly poorly suited to solving Mexican crises. This is more widely understood as an emergency. And sure enough, Congress has been pretty pliant amidst all the rapid-fire bank bailouts and even the stimulus package. Republicans have been truculent about the stimulus, but truculence is also the luxury of the minority. If they were in the majority, they'd probably be much more constructive as they could claim credit for the recovery. Indeed, I think our political system is actually fairly well-designed for short-term crises. The problem is long-term crises like global warming or health costs. As Peter Orszag wrote back on his CBO blog, "our political system doesn’t deal well with gradual, long-term problems" that require "trading off up-front costs in exchange for long-term benefits." Few Congressmen want to raise taxes tomorrow to reduce carbon a decade from now. Lots of Congressmen don't want the economy to collapse if they have to run for reelection next year. For that reason, I'm much more confident in the system's ability to react agilely and seriously to the economic crisis than global warming. The economic crisis, after all, threatens their reelection. Incumbents often don't survive depressions. Conversely, I think conventional wisdom is that it's fixing global warming, rather than global warming itself, that poses the largest political threat to incumbent legislators.
