Because I agree with every word of Ramesh Ponnuru’s new New York Times op-ed, I’m reduced to quibbling with the title, which I’m guessing was not Ramesh’s doing. Frequent invocations of Ronald Reagan, for all his many virtues, make conservatives seem more nostalgic than forward-looking.
But on substance, Ramesh is dead on. Ronald Reagan’s economic prescriptions for 1980 reflected the economic conditions that prevailed in 1980, e.g., a federal income tax that proved burdensome for middle-income households, a top marginal tax rate of 70 percent, persistent high inflation, and price controls that dampened competition and innovation. Now, in contrast, it is the payroll tax that is the biggest burden for middle-income households, the top marginal tax rate is high but no so high that cutting it would guarantee a sharp increase in labor supply, onerous intellectual property rules threaten to cause economic “gridlock,” and the Fed has failed to keep nominal spending growing at a steady rate.
The conservative economic agenda I’d like to see would revolve around a few ideas, several of which Ramesh invokes in his article: (a) parents are investors in America’s future workforce, and they ought to be treated as such; (b) the main driver of sector-wide productivity growth is the constant churn of firms (the entry of innovative new firms, the exit of failing old firms) and the diffusion of ideas that accompany it, so reducing barriers to entry, including onerous intellectual property rules, should be a high priority; and (c) we need an economic environment that is conducive to “empowering” innovations, and not just “efficiency” innovations.