China Is Not Ten Feet Tall
How Alarmism Undermines American Strategy
Room to Grow: Conservative Reforms for a Limited Government and a Thriving Middle Class. BY THE YG NETWORK. YG Network, 2014, 121 pp. Free online.
This past January, Republicans in the U.S. House of Representatives held their annual winter retreat at a waterfront resort in Cambridge, Maryland. Their aim was to debate the party’s 2014 agenda among themselves before committing publicly to any big-ticket proposals. The meeting featured panels on health care, immigration, jobs, taxes, and more -- capped with an appearance by the former Notre Dame football coach Lou Holtz, whose rousing speech party leaders hoped would encourage a spirit of team play.
Yet the most striking part of the gathering was a presentation given by Eric Cantor, the House majority leader, who would lose his seat six months later in a stunning GOP primary upset. Cantor’s talk was about connecting with the middle class, and his message should have been obvious: most Americans don’t own their own businesses; instead, they depend on someone else for a paycheck.
This seemed to come as news, however, to the lawmakers in the audience who had swooned over Mitt Romney’s celebration of entrepreneurs during the 2012 presidential election. Many of them still subscribed to the assertion of his running mate, Paul Ryan, that the world was divided into entrepreneurial “makers” and government-dependent “takers.” Cantor told the group, however, that the majority of Americans do not even aspire to start their own businesses; instead, they dream of “a good job with an income that will allow them to support their family.” Cantor went on to chide Republicans for failing to reach out to the vast and troubled middle class, a great number of whom had ended up voting to reelect President Barack Obama in 2012. “We shouldn’t miss the chance to talk to these people,” he said.
The very fact that Cantor felt it necessary to explain such an elementary truth of modern American politics speaks volumes about the present state of the Republican Party. Although the GOP has been successful at the congressional level, its candidates for president have lost the popular vote in five of the last six elections, in large part because they failed to attract many of the millions of voters who are not entrepreneurs. Unless things change, the landscape could look just as bleak in 2016.
Not all Republicans, however, have failed to appreciate the concerns of middle-class Americans. A loose confederation of conservative thinkers and politicians is now developing a new approach based on policies designed to help the GOP reach such voters. These reformers could well save the Republican Party -- but first, they need to win over their fellow conservatives.
In May, they released a manifesto of sorts called Room to Grow, under the auspices of the YG (“Young Guns”) Network, a group founded in 2011 by Cantor, Ryan, and Kevin McCarthy, who recently took over as House majority leader. The book is a collection of policy proposals by conservative wonks on ten issues: health care, taxes, K–12 education, college, entitlements, jobs, energy, regulation, labor, and the family. That’s a lot of ground to cover, but the fundamental thrust of the book could be summarized in a single proposition: Ronald Reagan is gone. The last truly successful Republican president left office a quarter of a century ago, and yet many GOP politicians have steadfastly clung to not only his legacy but his policies as well. “Conditions have changed, often dramatically, and conservatives haven’t changed sufficiently with them,” writes Peter Wehner, a former speechwriter for President George W. Bush, in the introductory essay. “Conservatives need to set aside their habit of speaking as if the very same solutions we offered a generation ago would work equally well today.”
Wehner’s contribution is a brief, poll-based assessment of the realities of today’s economy. Two out of three Americans, he reports, believe they have fewer opportunities to advance than their parents had. Most -- 59 percent -- worry about falling out of their current economic class. And an overwhelming majority believe it is harder to keep up today than it was ten years ago. Yet in response to this challenge, nearly every Republican presidential candidate in 2012 seemed to have the same answer: more Reagan, in the form of lower taxes and less government. The reformers agree that such an approach made sense in the 1980s. But they argue that, some three decades later, it’s high time conservatives offered something new.
Tax policy stands at the center of the reformers’ effort to move beyond Reaganism. It’s the issue that conservatives most closely associate with the Reagan legacy and the one they are wariest of waffling on. After all, the typical Republican still favors tax cuts as a solution to nearly every public policy dilemma.
In Room to Grow, Robert Stein, who served in the Treasury Department during the George W. Bush administration, argues that cutting marginal tax rates was the right policy in 1981. At that time, the top rate was 70 percent, a level that stifled initiative, discouraged work, and created strong incentives for elaborate tax-avoidance schemes. But that was then. Now, the top marginal rate is 40 percent, and much of the middle class pays little, if any, federal income tax. Although the wealthy naturally want the government to lower their taxes, doing so is not, Stein notes, “an effective tool for delivering tax relief to the middle class. It does very little to lower their tax bills or improve their work incentives.” He adds, “Having substantially cut top rates in the 1980s, our potential gains from fighting on the tax rate battlefield are now diminished.”
The reform conservatives still believe in tax relief, but they have to figure out how to enact cuts in an age when income taxes are no longer a pressing problem. For Stein, the answer is a new and generous tax break for parents. Reducing burdens on families would not only make life easier for the middle class; it would also end what is in effect a per-child penalty on those raising the next generation. Under existing law, taxpayers receive a credit of up to $1,000 and a $3,950 exemption for each of their kids every year. But according to government estimates, raising a child in the United States today costs around $13,600 annually (before the cost of college).
When it comes to the specifics, Stein favors a proposal put forward by Republican Senator Mike Lee, who has called for raising the credit that families receive for each child to $3,500 per year. If the write-off exceeded the amount a family paid in tax on their income, it could go toward reducing that household’s Social Security tax. Lee would pay for the plan by getting rid of all existing deductions except the ones for mortgage interest and charitable contributions.
The beauty of this proposal, Stein says, is that it would allow conservatives to offer meaningful relief to the middle class without further reducing the marginal tax rates on rich people who don’t need help -- and it would encourage family growth in the process. “Too many free-market economists still consider the economics of the family a sideshow,” he writes. “They say the tax code should be ‘neutral’ about raising children.” But as he points out, “Unwittingly, the federal government has set up programs that deter parenting.”
Particularly when it comes to taxes, not everyone is on board with such policy ideas. Soon after the release of Room to Grow, Kimberley Strassel of The Wall Street Journal pushed back hard, calling Stein’s plan an attempt “to embrace redistribution and lard the tax code with special, conservative-approved handouts.” Enacting Lee’s expanded child credit and other similar measures would create a debate that would “center solely on which party gets more money to divvy up among Solyndra, parents, welfare, farmers and so on.” The larger reform movement, Strassel continued, “is a capitulation to the left’s inequality and middle-class talking points” and an admission “that the whole free-market, supply-side, Reaganesque agenda is passé.”
Putting tax credits for parents on the same level as crony-capitalist dollars for Solyndra, the solar-panel maker that filed for bankruptcy in 2011 (two years after the Obama administration gave the company a $535 million loan guarantee), struck some reformers as a bit rough. But the larger message behind Strassel’s response was that any conservative who advocates such policies will face determined opposition.
ERRORS OF OMISSION
The good news for the reformers is that feelings are not nearly as strong when it comes to issues on which Reagan provided less guidance. Room to Grow’s chapter on health care, written by James Capretta, who served in the Office of Management and Budget during the George W. Bush administration, stays well within the bounds of right-wing orthodoxy. It closely tracks with a plan put forward in January by Republican Senators Richard Burr, Tom Coburn, and Orrin Hatch. And it builds on the recommendations of a group called the 2017 Project, which is chaired by William Kristol, the editor of The Weekly Standard, a conservative magazine.
All these proposals would repeal Obamacare, and Capretta suggests replacing much of the law with a number of simpler measures. For starters, he would correct the imbalance between the price of employer-provided insurance, which the government subsidizes, and that of plans on the open market, which it does not. (He would cap the amount of tax subsidy offered to individuals covered by their employers and use the savings to give the same benefit to those without employer-based insurance.) His scheme would also allow for some policies now associated with Obamacare to remain law. Americans who switch jobs, for example, could keep their insurance, and no one could be denied coverage for having a preexisting condition. Finally, Capretta would abandon Obamacare’s detailed requirements on what features various insurance products must offer, giving providers more flexibility to sell the less deluxe plans that some consumers want.
Republican lawmakers have been circulating competing health-care proposals of their own for a while now; Tom Price, the Republican representative from Georgia, recently floated one prominent plan. The Republican Study Committee, a conservative congressional caucus, has put forward another. But the differences among them are not fundamental. If Republicans ever agree on an alternative to Obamacare -- and so far, they have not -- it will likely look something like Capretta’s.
The Room to Grow proposal on another key Republican issue, energy, also stays close to the party line. Adam White, a Republican lawyer, argues that the shale revolution in U.S. oil and gas production is already making energy cheap, plentiful, and safe. The most important thing the government can do, then, is get out of the way, taking care not to hobble the industry with restrictive regulations. One would be hard-pressed to find a Republican who disagrees with that.
Indeed, apart from taxes, the divisions within today’s Republican Party mostly concern topics that Room to Grow avoids. The manifesto notably lacks a chapter on immigration -- a topic for which no single substantive policy proposal could possibly unite the GOP. Its business wing and its donor class, as well as the political consultants who profit off them, strongly favor comprehensive immigration reform along the lines of the bipartisan bill the Senate passed in the summer of 2013. That piece of legislation, and others like it, was based on granting quick legal status to and creating an ultimate path to citizenship for the estimated 11 million immigrants now living in the United States illegally. But unlike the lawmakers and industry leaders who have backed such bills, much of the GOPs base bitterly opposes any policy involving amnesty, and so far, there has been no way of bringing the two sides together. Room to Grow doesn’t even try.
Nor does the book weigh in on global warming. Whereas the absence of a chapter on immigration suggests that the conflict over that issue is irresolvable, the lack of a chapter on climate change is probably an indication that the reformers, in stark contrast to the liberal policy establishment, just don’t see rising temperatures as an urgent problem. The notion that the future of humankind counts as a second-order issue might drive liberals nuts, but it’s fair to say that even if many reformers believe that human activity is causing the earth to warm, they don’t believe the U.S. and global economies should be turned upside down in order to deal with it.
Just because the reformers steer clear of immigration and the environment, however, doesn’t mean their political opponents will, too. Immigration is guaranteed to be a divisive issue in the 2016 Republican presidential primaries, and climate change will surely come up in the general election. On both issues, GOP candidates will need to have clear, defensible positions. They won’t find them in Room to Grow.
The reformers face resistance not just from the corners of the conservative world that disagree with them on taxes, immigration, and other, perhaps lesser issues. They are also under attack from those in the Republican establishment who see no need to reevaluate GOP policies. According to this faction, the party doesn’t have a policy problem; it has a messaging problem.
Whether or not that’s true -- whether what’s hurting the GOP more is bad policies or poor communication -- the cure is the same: a good Republican presidential nominee. A smart, talented, and appealing candidate could convince reluctant politicians to embrace new ideas, pull big donors and grass-roots activists onto the same track, and focus the energy of the party on defeating Democrats rather than fighting among itself. It can be done; in 1992, Bill Clinton dragged a reluctant Democratic Party toward a repositioning that allowed it to win national elections again. It would take a politician of Clinton’s talents to do the same for the Republicans. Whether there is such a person in the GOP at this moment is not clear. We’ll know more in 2016.
Who might such a leader be? From the reformers’ perspective, the best prospect is probably Marco Rubio, the Republican senator from Florida, who has enthusiastically supported their positions. “Rubio is becoming the early policy leader among potential 2016 aspirants,” tweeted the National Review editor Richard Lowry in June, after the senator delivered a speech on economic reform at Hillsdale College, in Michigan. Rubio, who almost destroyed his presidential prospects by pushing immigration reform, clearly thinks he can use the cause of reform to force his way back to the front of the pack. If New Jersey Governor Chris Christie can’t recover from his current woes, and if former Florida Governor Jeb Bush stays out of the race, Rubio might pull it off. Lee also wants to move the party in a new direction but has shown no real interest in running for president, at least not in 2016. Had Cantor achieved his ambition of becoming Speaker of the House, he would have been a powerful advocate for the reformers, but now he’s out of the game. McCarthy is not known for his interest in policy matters. And it doesn’t look as if other GOP leaders will wholeheartedly, or even halfheartedly, embrace change.
Without a charismatic champion, the reform effort, like virtually every other cause in Washington, could eventually turn into just another business. Although the reformers themselves are generally serious people, with day jobs, who truly want to reinvent the GOP, they are also subject to the demands of the modern political system.
The publisher of Room to Grow, the YG Network, is a nonprofit policy center, plus a super PAC, devoted to electing Republican candidates. Like many of its peers, it spends more on fundraising, salaries, and television ads than it does on developing new ideas. In 2012, it collected over $12.7 million in contributions (it is not required to disclose its donors) and paid its top strategist, the former Cantor aide John Murray, $630,000. The group’s super PAC, the YG Action Fund, raised about $5.9 million in the 2012 election cycle, $5 million of it from the Las Vegas casino magnate Sheldon Adelson. With that kind of money available, organizations tend to focus on perpetuating themselves, even if their original goals fall by the wayside. As the old adage goes, “Every great cause begins as a movement, becomes a business, and eventually degenerates into a racket” -- a fate that could await the reformers.
Despite such obstacles, the reformers have already launched the most extensive rethinking of conservative policy in a generation. A broader effort is still badly needed, however, as Cantor’s presentation to House Republicans back in January made clear. That so many GOP leaders still fail to grasp the party’s problem with middle-class voters should worry every committed conservative -- and provide more than enough reason for the reformers to keep at it.