The Comeback Strategy
The GOP will broaden its base by promoting likable candidates and greater economic opportunity.


Mario Loyola

The beneficiaries of these cartels are always said to be the “little guys,” but their benefits come at the expense of really “little” guys — namely, everyone who does not belong to a special-interest group. The average family farm in Wisconsin or Iowa is capitalized at well over $1 million. Even if agricultural price-controls were justifiable during the Great Depression of the 1930s (and they weren’t), it’s hard to understand why poor people across the nation in the 21st century need to keep paying artificially high food prices to sustain the family farms of millionaires. Those Republicans senators who are stalwarts of special supports for agriculture must be enlisted in a plan to end them. Killing such supports piecemeal is politically difficult because Republican senators from farm states will balk. The solution is for the party to embrace an ironclad principle of opposition to government-sponsored cartels and subsidies of all kinds — and to make that a selling point for the hundreds of millions of Americans who hardly realize the many ways in which they are paying for those special-interest benefits.

On the fiscal front, Democrats and Republicans alike have created the conditions for a harrowing crisis. Proposals for piecemeal reforms and spending cuts are easy for Democrats to demagogue as attacks on the special benefits that different groups rely on — the poor, the elderly, women, and so on. Rather than insist on draconian spending cuts, the GOP should condition moderate spending on Democrats’ agreeing to regulatory and tax reform: Dramatically streamline and reduce government burdens on business and give the private sector the widest possible space to innovate its way to prosperity. The GOP can lose its “pro-corporate” stigma if it embraces a pro-competition stance. That means blocking corporate welfare at every turn. Major regulatory and tax reform would lead to a huge economic boom — and it would legitimize the policies that led to the boom.

Spending will be much easier to address once we are at high levels of GDP growth again. The federal deficits are a much bigger problem now than tax rates. The GOP should be flexible on personal-income-tax rates in exchange for sweeping simplification of the tax code, including the elimination of double taxation.

Double taxation is especially insidious. During the campaign, Romney was attacked for paying only a 13 percent rate on his income from dividends and capital gains. But his real income tax is much higher than that. Remember that business income is already being taxed to the corporation — at the world’s highest corporate tax rates. In fact, Romney’s real income-tax rate was much higher than 13 percent.

Double taxation confuses the public and allows the federal government to obscure how much of our money it’s actually taking. And taxing income to the corporation is among the most foolish taxes that can be imposed: It is nothing more than a massive penalty on commercial activity. If you want to tax the rich, tax their personal income — don’t tax their businesses, because that activity is making money for everyone.

As for entitlement reform, states should be given the lead role. Most social programs should be returned to the states, which can then decide when and how to change them. Trying to fix entitlements at the federal level has the same weakness as Obamacare: A one-size-fits-all approach guarantees that half the people will hate it, and that they will be deprived of the benefits of their own state-based innovations. The block-grant approach that Romney-Ryan proposed for Medicaid should be applied to most entitlement programs, and the grants should afford states maximum flexibility to structure services and benefits as they see fit.

Empowering the states to solve their own problems should become a mantra for Republicans. Although Romney embraced this idea, he did not make it a major theme of his campaign. That was a mistake. The federal government should completely divest itself of everything that states can do better.

Moreover, it is increasingly clear that “cooperative federalism” is doing real damage to our Constitution. Conditional federal grants such as Medicaid and No Child Left Behind have led to a disastrous intermingling of federal and state finances. The result has been ballooning federal deficits and cyclical state fiscal crises caused by the very “help” the feds are offering.

What is even worse — and harder to see — is that the federal government is essentially bribing states to ignore their own constituents and accept federal preferences on a whole range of things that are quintessentially matters of self-government at the state and local level, such as health and education. Federal money now accounts for 40 percent of state budgets. On the regulatory front, the federal government has been equally effective in deputizing state officials into the implementation of federal policies. These “cooperative federalism” programs have turned the Constitution upside down, and have led both to runaway spending and massive overregulation.