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NRO’s domestic-policy blog, by Reihan Salam.

Room to Grow on the Right



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The conversation about Room to Grow, the new essay collection from the YG Network, where I’m an advisor, continues to spark discussion. Yuval Levin and Ramesh Ponnuru have done an able job of addressing criticisms of the collection from all comers, most recently yesterday here at National Review. Because Room to Grow has been received so warmly on the right, I’ll focus on a few of the more trenchant criticisms.

Ben Domenech seems broadly sympathetic to Room to Grow, yet he sees Robert Stein’s call for an expanded child credit as a step in the wrong direction on substantive (it is better to lower the tax burden on everyone than on a discrete group) and political grounds (delayed marriage and child-rearing suggest a revealed preference against traditional family life, and the right needs to offer something more compelling to the young, the childless, and the unmarried). Rather than create a larger child credit, Domenech calls for eliminating the Social Security payroll tax. This brings to mind a 2007 proposal from Kenneth F. Scheve and Matthew J. Slaughter to eliminate the payroll tax for all workers earning below the national median, replacing the lost revenue by raising or lifting the cap on earnings subject to the payroll tax and making it as steeply progressive as the income tax. Others have proposed eliminating the payroll tax and funding Social Security through general revenues raised by an expanded income tax. Such an approach might be compatible with transitioning Social Security to a flat universal benefit. New Zealand is one example of a market democracy that has adopted a flat, non-contributory “universal pension” to eliminate poverty among retirees, and it appears to have been a success. This universal pension would serve as a foundation for retirement income while a second, earnings-related component would do the rest. As Levin and Ponnuru make clear, the political obstacles to such a dramatic reform would be considerable. Moreover, they believe, correctly in my view, that the political advantages of the child credit are greater than Domenech allows, not least because of its salience to lower-middle-income households with children, many of whom are skeptical about conservative intentions. But I think the reform effort would be well-served if thinkers like Domenech, and lawmakers who oppose child credit expansion, were to develop and champion detailed proposals for replacing the payroll tax. The goal of Room to Grow is not so much to offer a fully-formed manifesto as it is to spark discussion of the institutional barriers to upward mobility in America and how we might address them more constructively. Domenech is engaging Room to Grow in exactly the right spirit.

Kim Strassel, meanwhile, sees Room to Grow as “a capitulation to the left’s inequality and middle-class talking points,” which is curious insofar as the contributors to Room to Grow are united by the conviction that it is a low level of absolute upward mobility for young people raised in chaotic households, and not income or wealth inequality, that is the central challenge facing American society.

It is true that the contributors are somewhat more concerned about the fate of the 85 percent of Americans who identify as middle class and, she might have added, those who identify as poor than they are about those who feel as though they’ve managed to join or remain in the ranks of the upper class in recent years, despite the housing bust, the financial panic, and an economy stymied by excessive regulation, among other maladies. This doesn’t strike me as a sign of contempt for those who’ve proven successful, but rather as a recognition that we as a society would be better off if more Americans were on their way to the economic independence that comes with wealth. We wouldn’t need to worry quite so much about reforming our institutions if more Americans felt prosperous enough to identify as members of the upper class. In Singapore, for example, 15 percent of households have $1 million or more in non-housing assets, thanks in part to policies designed to facilitate wealth accumulation. The same is true of only 4.5 percent of U.S. households. One mark of the success of the reform project would be a dramatic expansion in the share of households with such substantial holdings, and the view of Room to Grow’s contributors is that the best way to achieve this goal is to increase productivity growth by fostering a more open, competitive economy in which incumbent firms are unable to build regulatory moats to defend themselves from entrepreneurs bearing new business models. James Pethokoukis describes this vision in detail in his essay on regulatory and financial reform.

That said, it is not obvious that this mass affluent class should ever be the chief focus of policymakers, if only because they (generally) reflect the institutions in society that are working well, and not that those that are in need of reform and renewal. There is a reason why Frederick Hess chooses to focus on expanding educational choices for low- and middle-income parents, and not for students attending selective independent schools with large endowments. The parents who are sending their children to selective independent schools with large endowments by and large have the resources and the social networks to provide their children with a high-quality education, or an education that is most suitable to their needs in the broadest sense. Similarly, Andrew P. Kelly does not focus on the overhauling elite research universities. Rather, his analysis centers on how we might foster more business model innovation in post-secondary education by attacking the higher education cartel, and how we might reduce the waste of taxpayer resources by low-quality higher education institutions that fail to meet the needs of their students.

Strassel, like Domenech, centers the substance of her critique on the Stein plan, to which the Wall Street Journal editorial page has taken exception on more than one occasion. One minor point of information is that while Strassel believes that Stein is calling on Republicans to “embrace redistribution and lard the tax code with special, conservative-approved handouts for said middle class,” Stein in fact calls for eliminating a wide array of tax expenditures. That is, he explicitly calls (on page 36) for a tax overhaul that will result in a much simpler tax code. It is true that other contributors offer tax tweaks of their own, not all of which strike me as well-advised, but I think it’s unfair to overlook Stein’s explicit emphasis on simplification. Regardless, Strassel’s critique is a welcome breath of fresh air. Though she seems to have misunderstood some of the larger goals of the Room to Grow effort, she clearly read the volume carefully and she has introduced version, albeit an at times hard to recognize version, of the ideas contained within to a wide audience, for which we should all be grateful. Spirited disagreement is a good thing.

And finally, David Brooks takes Room to Grow to task for neglecting some of the more vexing questions raised by a society that is denser, more diverse, and more tightly-integrated into the global economy:

We are moving from a world dominated by big cross-class organizations, like public bureaucracies, corporations and unions, toward a world dominated by clusters of networked power. These clusters — Wall Street, Washington, big agriculture, big energy, big universities — are dominated by interlocking elites who create self-serving arrangements for themselves. Society is split between those bred into these networks and those who are not. Moreover, the U.S. economy is increasingly competing against autocratic economies, which play by their own self-serving rules.

Sometimes government is going to have to be active to disrupt local oligarchies and global autocracies by fomenting creative destruction — by insisting on dynamic immigration policies, by pumping money into research, by creating urban environments that nurture innovation, by spending money to give those outside the clusters new paths to rise.

I don’t disagree with the general thrust of Brooks’ argument, though I imagine we would disagree on the particular steps we ought to take. My recent column on energy policy reflects this broad sensibility, and I see it as fully compatible with the Room to Grow framework as articulated by Yuval Levin.



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