Gag Deals

Tyler Cowen in today’s NYT:

One disturbing portent came over the summer when it was reported that the Obama administration had promised deals to doctors and to pharmaceutical companies under the condition that they publicly support health care reform. That’s another example of creating favored beneficiaries through politics. …

Even worse, these political deals threaten open discourse. The dealmaking may be inhibiting some people in health care from speaking out in opposition to the administration’s proposals. Robert Reich, who served as secretary of labor in the Clinton administration, deserves credit for complaining about this arrangement, but not enough people are asking where such dealmaking might stop.

The banking sector has been facing similar constraints; if bankers criticize the Treasury or the Fed, they risk losing their gilded cages and could get a bad deal when the next bailout comes. When major economic sectors can be influenced in this way, are we really very far from the nightmare depicted by Ayn Rand in “Atlas Shrugged”?

This identifies an important conflict in democracy.  On the one hand, deals help democracies get things done.  More bills get passed with deals like “If you support my bill, I’ll support yours.”  If different groups couldn’t get together to to negotiate deals, but instead could only propose bills and lobby for the bills they liked, it would be harder to find solutions that many groups prefer to the status quo.

On the other hand, democracies require citizens to get info on which proposed bills are in their interest.  To evaluate a politician, voters may evaluate bills that politician has supported or opposed, and to evaluate bills voters may depend on hearing support or opposition from known interest groups.  But this interest group signal can be muddled if groups make deals to support or oppose bills in ways contrary to voter expectations.

Part of the problem may be voter naivete about interest groups.  If docs or pharma firms support a med reform bill, that may be because they have been paid off financially, not because the bill helps docs help patients, or improves drug development.  Futarchy would help with this, as speculators should be much less naive.

It seems especially problematic for the president to make gag deals, as the president has unusual power to use administrative discretion to punish those who speak against him.  But is it the discretion or the gagging that is the real problem here?

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  • Michael Turner

    “… if bankers criticize the Treasury or the Fed, they risk losing their gilded cages and could get a bad deal when the next bailout comes.”

    Gee, I seem to remember that Wells Fargo and some others DID criticize Treasury for offering them bailout money they didn’t need. And they still got the money anyway, just like everybody else. (The point of that uniform involuntary policy being: “We don’t care if you *say* you don’t need it, because you might be lying, who knows? Or blustering and bluffing, while actually uncertain, or kidding yourselves, like Dick Fuld. This way, *all of you*, honest or not, are spared the risk of a run that could ruin you in this panicky market. And that spares the financial system as a whole. A system which, whether we like it or not these days (clue: we don’t), we nevertheless need. Capiche?”

    Pick a better analogy next time, Tyler. And maybe a more credible novelist while you’re at it. Hey, I loved Atlas Shrugged. But we’re obviously nowhere near that scenario, and anyone with a half a brain can see it.

    • Aurini

      Meanwhile, up in Soviet Canuckistan…

      [Aurini is a Canuckistani, and entitled to make these references – seriously, look at our broken HealthCare system.]

  • Robin,
    Wouldn’t it make sense for President Obama to make a deal with medical insurance companies rather than with doctors and pharmaceutical companies? As I understand a hierarchy of the medical sector, doctors are pawns and insurance companies are queens.
    Anyways, lobbying and log-rolling are standard attributes for democracy. Does it really matter who lobbies whom?

    • Floccina

      But doctors talk to patients and so can influence the vote more.

  • Autumnal Harvest

    What is the nightmare depicted by Ayn Rand in “Atlas Shrugged”? Is it a nightmare world in which everyone gets reduced to a zero-dimensional caricature—either a good, productive, rational, uber-capitalist, or a evil, irrational, whiner?

    Robin, I think your first two links don’t go where you meant them to go?

    • Aurini

      Atlas Shrugged is just as awful and cartoony as 1984. Sure, we have television cameras on every single corner, Drunk Driving checkstops that are about charging citizens with minor infractions rather than preventing dangerous drivers, and our civil rights aren’t what they used to be – but they don’t care about who I fuck, so obviously it isn’t complete mind control…

  • Mike Huben and I got into a discussion at Jeffrey Miron’s involving the relevance of logrolling for public choice theory. I didn’t think about how it can make voters’ task more difficult.

  • Autumnal Harvest

    I just followed the “diturbing portent” and “complaining about this arrangement” links in Tyler Cowen’s article, and have been unable to find any claims (let alone evidence) whatsoever that the White House is engaged in “Gag Deals,” or that “[Obama] promised deals to . . . pharmaceutrical companies under the condition that they publicly support health care reform.” Both links seem to simply point to articles that describe how the Obama administration has been modifying it’s health care plan in a way that will make it more attractive to doctors and pharmaceuticals, which in turn leads those parties to publicly support it. This run-of-the-mill log-rolling may indeed be “an important conflict in democracy,” but I don’t see how the articles support the claims that Cowen makes, or how these practices can be charactrized as a “gag deal.” I see no implication that specific parties have been threatened with consequences for opposing Obama’s plans, other than the consequence that if the plan fails, they won’t get the goodies that were packaged into the plan.

    If those articles are actually relevant to Cowen’s claims, could someone explain how? I don’t see how Cowen could honestly believe that those links supported his claims.

    • Michael Turner

      It’s quite possible to “honestly believe” that a source says something that it doesn’t, just as it’s possible to “honestly believe” that ObamaCare somehow puts us a hairs-breadth away from total industrial-society breakdown.

      Not long ago, over at some Austrian blog, a huge chorus of commenters agreed with the blogger’s assertion that Paul Krugman, over a period of mere weeks, had written (1) that he wasn’t saying the government should prevent anybody from eating what they wanted to, then (2) had turned 180 degrees, and written the opposite, and (3) without even acknowledging his former position.

      That seemed distinctly out of character for Krugman. So I went and looked at the supposed doublethink reversal, and all I saw was him saying the government should encourage people to eat healthier. Notice the obvious difference in meaning? That blogger, and those commenters, didn’t.

      People tend to believe what they want to believe, and to some extent, that means they read unsupportable interpretations into sources. I do this. Everybody does, at one time or another. The more amazing thing, to me, is that you can stick the contradictions right under some people’s noses, pointing to them repeatedlly, and they’ll still refuse to acknowledge them.