May I take a break from my usual despair-inducing reportage to offer a few words of guarded optimism, and a little bit of qualified praise for John Boehner and the Republican congressional leadership?

Speaker Boehner does not excite many budget hawks, and there are good reasons to be skeptical of the Republican leadership in toto. But give him this: His insistence that serious entitlement reform be included in any grand bargain is exactly the right position. Entitlement deficits may not be the largest driver of our overall deficits right at this moment, but they are the biggest long-term threat to our national fiscal solvency. As I wrote early about Gov. Rick Perry’s fiscal plan: If you can get the entitlements right, you deserve a medal. What we do about entitlement spending will determine whether we squeak by or plow straight into Fiscal Armageddon.

The Democrats desperately want a tax increase — and not just because they want to spend the money. (Though, boy, do they ever want to spend the money.) Tax increases are for the Democrats what closing down the National Endowment for the Arts is to Republicans: a visceral cultural issue. The difference, of course, is that Democrats seriously intend to raise taxes. (If Republicans were going to close down the NEA, they would have done it by now.) That’s a real problem for Democrats and for the country. Because taxes are a culture-war issue for the Democrats, they keep proposing the wrong kind of tax increases, with the wrong kind of structure and the wrong goals. I do not think it is likely that Republicans are just going to roll  over for a significant increase in the tax rates for upper-income Americans, in the tax rates for investment income, or other similar rate increases. Republicans probably can (and, in my view, probably should) support a deal that trades the elimination of exemptions and exclusions (both for individual taxpayers and for businesses) for lower rates. If the Democrats were smart, they would accept that deal, structured in a way that produces a net tax increase. Instead, they’re giving every indication that they intend to make notional tax rates on high earners their hill to die on.

Boehner may not pull it off, but he is setting the stage for a double win: real entitlement reform plus some useful tax-code reform. He may not give conservatives the kind of thrill that Newt Gingrich’s bold talk used to give us, but the odds are pretty good that we’re going to get the right outcome here — not the best imaginable outcome, but the best outcome out of the plausible outcomes before us.

Even the presidential candidates largely are talking sense. Both Governor Perry and Mitt Romney have some good ideas about entitlement reform: raising the eligibility age, changing the indexing protocol, etc. Romney even supports a form of means testing — specifically, reducing the rate of growth in benefit payments for future high-income recipients. Means testing would be a key fiscal and political victory: It saves money, and it also necessitates that we stop pretending that Social Security is a national pension plan and start treating it like the straight-up welfare check it is.

John Boehner is not going to deliver one big victory that puts our fiscal affairs back on track — and that is not what we should be looking for. Single-shot, big-fix proposals are terribly attractive: 9-9-9, the Fair Tax, closing down this cabinet agency or that cabinet agency, reinstituting the gold standard, the balanced-budget amendment, etc. None of those is a likely solution, and none of those is a substitute for having leadership in Congress that will deal, day by day, session by session, and year by year with the entitlement system, discretionary spending, and the tax code. I wish that military spending were a bigger part of the conversation on the right.  Even more than that, I wish that serious regulatory reform and a state-by-state tort reform campaign were under way — both of which probably are necessary steps toward achieving stronger long-term economic growth. I am not an optimist about growth, and I think that there is a lot more keeping our growth down than public policy. But there is a great deal that we can do to get politics out of the way and let prosperity emerge.

Budget hawks must of course remain vigilant: Republicans are 100 percent capable of selling us out or cutting a stupid deal. Republicans are also susceptible to being hypnotized by the promise of tax cuts and will tell themselves fairy tales about historically unprecedented rates of growth that will solve all our problems with no hard choices needed. Caveat, caveat, caveat, etc. But given the Republicans’ position — controlling one-half of one-third of the federal government, with no lock on taking control of any of the rest in 2012 — Boehner’s stand is looking pretty good right now. It’s not morning in America, but it’s not two minutes to midnight, either.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, published by Regnery. You can buy an autographed copy through National Review Online here.

A challenge to the Class of 2010:

The Brits cut spending.

The Romanians cut spending.

Spain cut spending.

The Czechs cut spending.

The Irish cut spending.

South Africa is cutting its deficit.

Even the French are cutting some spending.

Who’s not cutting the deficit?

Mexico’s deficit probably will get bigger: 0.5 percent of GDP, rather than 0.3 percent. Our deficit is bigger than Mexico’s entire economy.

Greece’s deficit is getting bigger. Who wants to be Greece?

And there there is us.

Obama’s deficit panel does not seem to be packing the gear to get the job done: It has focused mostly on tax increases, in the form of eliminating tax breaks such as the mortgage-interest deduction and the use of pre-tax dollars to pay for health-insurance benefits. As Vero has argued persuasively, the problem is not really revenue, it’s spending. I’m no fan of the mortgage-interest deduction, which distorts the housing market, and there’s probably a good case to be made on the pre-tax health-insurance spending — but neither of those measures is going to do a lot of good unless it is part of an overall rationalization of the U.S. tax system, which is a national disgrace. GAO estimates of the efficiency costs of our tax code — meaning the economic loss our tax regime imposes on the economy above and beyond the revenue collected by Uncle — run as high as 5 percent of GDP, i.e., roughly the cost of all U.S. national-defense spending combined. Federal tax-compliance costs alone run 1 percent of GDP. That is insanely wasteful.

We aren’t going to close the gap by working on the unholy trinity of “waste, fraud, and abuse.” By all means, cut waste, fraud, and abuse — but that isn’t enough. NPR and foreign aid? Sure, but that’s chickenfeed. Until you start tackling the hard stuff — which means entitlements and defense spending, among other things — you aren’t getting serious.

Here are some things to do:

First, reduce the federal head-count, even if that means paying a few federal employees higher salaries than we’d like. (Yes, first.) The nasty long-term costs are in benefits and pensions: Here’s the tradeoff: We don’t cut the bureaucrats’ pay, or cut it all that much, but we have a lot fewer of them, and we don’t put as much up for health-care and pension costs. This works even better at the state and local levels, where bureaucrats’ pensions tend to be defined-benefit plans rather than defined-contribution plans.

Second, see if Sarkozy will lend Republicans the necessary gear to raise the Social Security retirement age and start means-testing all of the major entitlements. How severely should we means-test? Enough to put them on a stable financial footing without a payroll-tax hike. Enough to remind people that they are welfare programs, not a retirement plan. Enough to make replacing them with private retirement plans, private disability insurance, and the like in a decade or two more palatable. You want to head off Fiscal Armageddon, then the total government payroll, its pension obligations, and the major entitlements are the place to start.

Third, just savage the hell out of discretionary spending. That’s the fun part, and Republicans  should enjoy themselves. It’s also a chance for Republicans to reclaim their party’s reforming soul and throw some of their own favorites on the fire — farm subsidies, the scam that is the Small Business Administration, etc. I like the idea of butchering one Democratic sacred cow and one Republican sacred cow in pairs: two by two they go down — public broadcasting and farm subsidies, Amtrak and foreign-military financing.

Fourth, straighten out the tax system, preferably with a broad-based single-rate tax. The level of taxation ultimately will be set by the level of spending, but there’s plenty of room for improvement in the tax code. If Congress got really ambitious about putting a flat tax on all income — salaries, dividends, capital gains, inheritances, whatever — then there’s no reason to maintain a special carried-interest carve-out for the Wall Street weasels who funded the Obama campaign. (Hey, just sayin’.) That wouldn’t be terrible politics, and it would add tens of billions to tax revenues, too. Democrats will whine that it’s regressive. Republicans should respond that under a flat tax a guy who makes $200,000 a year pays twice as much as a guy who makes $100,000 a year, who pays twice as much as a guy who makes $50,000 a year. That’s progressive enough, and it’s a winnable debate.

And we’d save ourselves a lot of tax-compliance expenditures, lawyers’ fees, and grief by taxing all income at the same level. You know who was a fan of taxing capital gains at the same rate as ordinary income? The Reagan administration. Not a bad idea.

Fifth, develop a better plan for defense spending. Unlike practically everything else in government, fiscal considerations should take a back seat when it comes to national security — but not too far in the back. We need to fundamentally rethink our military priorities and our commitments around the world — rediscovering what is really essential to our national interest — and then redirect spending accordingly. A return to pre-2000 military spending seems to me a reasonable goal, and it is possible that further reductions are possible.

Also, a little politics: Step 1 (fewer bureaucrats) plus Step 4 (everybody pays the same tax rate) means a smaller permanent constituency for Big Government and Big Spending.

I’m not married to any of this. Got a better idea? Let me know in the comments.

Over at Ricochet, David Limbaugh has a wise response to my post yesterday on Grover Norquist, VATs, Mitch Daniels, etc.

While I am a supply sider I agree that we should not allow our exuberance for pro-growth tax policies to intoxicate us into believing that spending doesn’t matter. While some starry-eyed supply-siders might have been irresponsibly negligent in their inattention to the spending side of the equation, it’s not fair or accurate to place all supply-siders in that quasi-utopian category. It’s a false choice. That is, there is nothing inconsistent between supply-side advocacy and relative spending austerity. That’s the best of both worlds. But an insidious VAT tax might be the worst of all worlds.

Praise to David Limbaugh for striking the right balance on the supply-side question: growth matters, spending matters. For the record, I do not think all supply-siders are crazy utopians: not Laffer, not Reagan, not Kemp. That is why I use the term “naïve supply siders” to distinguish those dealing in unreality.

I myself am more of a flat-income-tax guy than a VAT guy, though Andrew Stuttaford argues that we’d have to make the flat rate so high to make the numbers work out, even with some pretty ambitious spending cuts, that it would not fly. (He also thinks that consumption should carry some of the load.) I’m going to do the arithmetic on it here in a bit and see what it adds up to. I doubt very much that anything will cause me to conclude that the current system is defensible, wise, just, or the best way to fund the level of government spending that Americans seem (inexplicably!) to want.

So it turns out that the cure for “epistemic closure” is great quantities of crystal meth. The things you learn from Grover Norquist.

In case you missed it, Norquist came down like a runaway gravel truck on Indiana governor Mitch Daniels, a favorite around these parts. Governor Daniels’s offense was declaring himself open to the possibility that a value-added tax might be an acceptable part of a wide-ranging reform of the federal tax system. Norquist replied, in a Politico interview:

“This is outside the bounds of acceptable modern Republican thought, and it is only the zone of extremely left-wing Democrats who publicly talk about those things because all Democrats pretending to be moderates wouldn’t touch it with a 10-foot poll. Absent some explanation, such as large quantities of crystal meth, this is disqualifying. This is beyond the pale.”

Here’s the problem: The deficit is, by my always-suspect English-major math, about 36.3 percent of federal spending ($1.29 trillion deficit out of $3.55 trillion spending). For comparison: Defense accounts for about 18 percent of federal spending. So you could cut out the entire national-security budget, and another Pentagon-sized chunk of non-military spending, and not quite close that deficit. You could cut the Pentagon to $0.00 and eliminate Social Security entirely and just barely get there.

Even great heaping quantities of crystal meth would not be enough to convince me that is going to happen.

Don’t get me wrong: In a perfect world, Exchequer would love to see the budget balanced and some tax cuts enabled through spending reductions alone. Exchequer would also like to be dating Marisa Miller, driving a Morgan Aero, and running a four-minute mile,  developments that are about as plausible as Congress’s cutting 36.3 percent of federal spending. Not going to happen.

So, our choices are this: 1. Hold out for the best-case scenario, in which a newly elected Speaker Boehner gives President Obama the complete works of Milton Friedman and everybody agrees to cutting federal spending by more than a third. 2. Keep running deficits and piling up debt. 3. Raise taxes. My preferences, in order, go: 1,  3, 2. And No. 2 is not really acceptable.

Like it or not, taxes are going up: If not today, then in the near future. Even once the deficit is under control, that debt is still going to have to be paid down, lest debt service alone overwhelm the federal budget, necessitating even more tax hikes. If Grover Norquist thinks there’s a tax-free way out of this mess that is both politically and economically realistic, he is living in a fantasy. There’s an old joke that goes: Neurotics build castles in the sky; psychotics live in them. And Grover Norquist seeks tax protection for them.

Norquist’s outfit, Americans for Tax Reform, does a lot of good things. (And so has Grover Norquist, over the years.) But here’s how it describes itself:

Americans for Tax Reform (ATR) opposes all tax increases as a matter of principle.

That’s not a campaign against Big Government — it’s a campaign against math. As ye spend, so shall ye tax. Denying that is not a principle — it’s a tantrum. ATR’s pledge reads:

“I _____ pledge to the taxpayers of the __________ district, of the state of __________, and to all the people of this state, that I will oppose and vote against any and all efforts to increase taxes.”

And here is how it should read:

“I _____ pledge to the taxpayers of the __________ district, of the state of __________, and to all the people of this state, that I will oppose and vote against any and all efforts to increase spending.”

Spending is the issue, not taxes. Spending is the virus, taxes are the symptom. Norquistism, by focusing on the taxing side of the ledger rather than on the spending side, has for decades enabled Republican spending shenanigans of the sort that helped put the party in the minority and ruined its reputation for fiscal sobriety; it is of a piece with naïve supply-siderism. The Bush-era deficits, and the subsequent discrediting of Republicans’ fiscal conservatism, are the product.

Give me the grown-up despair of Mitch Daniels any day over the happy-talk daydream that says we’re getting out of this mess without  paying for it.

But before I go: This important, Earth-shaking news just hit my desk, courtesy of Virginia governor Bob McDonnell. For reasons known only to God, the farm lobby (a.k.a Big Elmer), and Governor McDonnell, setting up Web sites to sell apples and the “Beautiful Gardens Plant Breeders Workshop” are pressing public priorities in the Old Dominion, requiring taxpayer subsidies. You Virginians need the government to help you build a Web site? What, they don’t have seventh-graders in Virginia?

Couldn’t Republican officeholders at least pretend to be ashamed of this stuff?

RICHMOND — Virginia Governor Bob McDonnell announced funding today for eighteen agriculture-related projects which will promote and enhance the competitiveness of Virginia’s specialty crops.  The projects resulted from the competitive grant process established by the Virginia Department of Agriculture and Consumer Services (VDACS) for the United States Department of Agriculture (USDA) Agricultural Marketing Service Specialty Crop Block Grant funds. 

Commenting on the grants, Governor McDonnell said, “These grants represent a half-million dollar investment in Virginia’s economy that will boost economic development and create jobs in agriculture, Virginia’s largest industry.  This is a diverse group of very innovative projects that include marketing, development, research and engineering projects, all of which are designed to increase the competitiveness of specialty agricultural crops in Virginia.  I congratulate these individuals, educational institutions, and organizations for advancing ideas that will help growers add value and enhance market and job creation opportunities across Virginia.”

The Specialty Crops Competitiveness Act of 2004 authorized the USDA to provide funds to the states to promote specialty crops including fruits, vegetables, tree nuts, dried fruits and nursery crops. When considering grants for the USDA Specialty Crop Program, VDACS gave priority to projects that included the following activities:  assisting farmers in transitioning into specialty, high value agricultural initiatives that address the eligible specialty crops; increasing net farm income through high-value or value-added enterprises; finding new ways to market or to add value to specialty agricultural products; and developing pilot and demonstration programs in specialty agriculture that have the potential for transferability within rural Virginia.

VDACS is awarding grants totaling $513,226.81, the largest amount ever for the block grant program, for the following projects:

Specialty Crops Cooling and Packing, Kevin Semones, Southwest Virginia Farmers Market, Hillsville 

Handling and Use of Poultry Litter Incineration Ash Byproducts as Organic Fertilizer in Fresh Market Tomato Production, Jane Corson-Lassiter, Eastern Shore Resource Conservation and Development Council, Accomac 

Performance of a Novel Solar Greenhouse Prototype, Naraine Persaud, Virginia Tech, Blacksburg  

Marketing Expansion Initiative Promoting Virginia Grown Christmas Trees, Jeff Miller, Virginia Christmas Tree Growers Association, Christiansburg 

Increasing the Competitiveness of Virginia Specialty Crop and Disadvantaged Farmers through a Statewide Situational Assessment of the VA Farm-to-School Program, Matt Benson, Virginia Tech, Blacksburg 

Educational Opportunities for Farm Direct Marketers and Farmers’ Markets, Cathy Belcher, Farmers Direct Marketing Association, Richmond 

Increasing the Competitiveness of Virginia Grown Strawberries , Gail Moody Milteer, Virginia Department of Agriculture and Consumer Services, Franklin  

Beautiful Gardens Plant Breeder Workshop, Alexander Niemiera, Virginia Tech, Blacksburg 

Increasing GAP Certification Readiness among Organic and Conventional Growers and Nutrition Knowledge and Consumption of Specialty Crops among Children and Adults in Southwest Virginia, Kathlyn Terry, Appalachian Sustainable Development, Abingdon 

Developing, Teaching and Promoting Sustainable and Organic Growing Practices at Maple Hill Educational Farm, Marisa Vrooman, Local Food Hub Inc., Scottsville

High Resolution Vineyard Site Suitability Mapping, Peter Sforza, Virginia Vineyards Association, Clifford 

Organic Management of Pest Predation in Commercial Production of Summer Squash, Kevin Damian, Virginia Association for Biological Farmers, Louisa 

Working Capital Grant to Develop a Broad Based Website for the Promotion of Virginia Apples, Diane Kearns, Virginia Apple Growers Association, Charlottesville

Connecting Southwest Virginia Farmers to Institutional Buyers through Local Food Processing and Preservation, Michal Burton, Sustain Floyd, Floyd 

Expanding Markets for Virginia’s Specialty Crops, Butch Nottingham, Virginia Department of Agriculture and Consumer Services, Onley 

Improved Management of Harlequin Bug in Cole Crops, Thomas P. Kuhar, Virginia Tech, Painter 

Stink Bug Populations, Injury and Control on Primocane-bearing Caneberries, Douglas G. Pfeiffer, Virginia Tech, Blacksburg 

Production and Marketing of High Tunnel Grown Ginger Roots In Virginia, Reza Rafie, Virginia State University, Petersburg

I have to admit that I am scratching my bald noggin over the fact that a fair number of my fellow right-wingers are dismissing “The Pledge” as pusillanimous, lacking sufficient specificity, etc. I do not get it.

I don’t think you can get to the militant side of me when it comes to debt and spending, and my distrust for Republicans — especially congressional Republicans — is longstanding and well-documented. That being written, if a new Republican majority can, in fact, pare back spending to 2008 levels (even if it is only non-defense discretionary spending, a small part of the overall budget nightmare) and enact caps, that will be an enormous victory, a hugely significant step in the right direction. If the Class of 2010 can get that done, they will have accomplished something worthwhile — even if they do not achieve a single thing beyond that.

On Fannie and Freddie, especially, the Pledge has been criticized for a lack of clarity. I think it’s suffering more from a lack of good writing: I take “shrink their portfolio” and “end their government bailout” to mean forcing the GSEs to offload a bunch of assets as a prelude to breaking them up and fully privatizing them, withdrawing both the federal line of credit and the federal guarantee backing them. I don’t know what else those words could mean, and the Republicans I have talked to suggest that is what they have in mind.

I agree that they could have been more robust on the entitlements and that defense spending will have to be addressed. As a matter of politics, entitlement reform is going to be a long and complex fight, and difficult to summarize in a short campaign document. (And, yes, I know, call it cowardice or call it the political survival instinct, nobody is eager to grab that third rail at this moment.) As for defense spending, I think we spending hawks can, at the risk of waking the ghost of Murray Rothbard, count on the Left to make that an issue before the Republicans do. There’s a lot of room to cut at in the kingdom of Pentagonia; I suspect that the Republicans, if they are smart (I know! I know! Caveat!) will allow the Democrats to propose those and will agree to some of them as a compromise.

And the budget-process reforms look pretty smart to me.

Also: Repealing Obamacare, enacting national medical liability reform, opening up a nationwide insurance market to replace the fragmented, oligopolistic state-by-state market, better HSAs — what’s not to like?

Cutting and capping domestic spending: You guys do appreciate that this would be more than President Reagan managed on the spending front, right?

And getting that done would do a lot to repair the Republicans’ reputation on fiscal prudence, laying the groundwork for the bigger and more difficult fight over entitlements. And there is no point in passing a bold entitlement-reform bill in the next year, anyway — it would be vetoed by President Obama, and it is extremely unlikely that such a bill would command anything like a veto-proof majority.

The Obama-Reid-Pelosi gang got into trouble for doing too much too quickly: stimulus (and stimulus, and stimulus), health care, attempting cap and trade, etc. The Class of 2010 is not going to: 1. Reduce and cap non-defense discretionary spending; 2. repeal Obamacare; 3. enact free-market health-care reform; 4. fix Social Security; 5. fix Medicare; 6. fix Medicaid; 7. reform national-defense policy and, consequently, national-defense spending; 8. reform the tax code — all at once. If they manage to do 1-3 in a single Congress, conservatives should take up a collection to build a statue of John Boehner — on horseback.

– Kevin D. Williamson is deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, to be published in January.

The “Young Guns” — Paul Ryan, Eric Cantor, and Kevin McCarthy — paid National Review a visit today, and they give every sign of being serious about the deficit: no nonsense about relying on cutting earmarks, waste, or redundancy to get the deficit down and the budget under control. I put the two questions to them that normally trip up alleged budget hawks: Entitlement reform? Yes, absolutely, they are serious about entitlement reform. Take a look at defense spending? Yes, everything is on the table.

Ryan, who has been one of the few sane voices on the debt for some time now, says he expects the new crop of Republicans expected to be sworn in come January to be a rowdy bunch, with little respect for the seniority system or traditional congressional politics. Cantor, too, made it clear that he knows they are in for a long-term fight — no magic-bullet solutions were under consideration. McCarthy was the surprise for me, though — I did not know much about him and was impressed by his command of the data, relating both to politics and policy.

I have been, and remain, skeptical of congressional Republicans’ ability to head off Fiscal Armageddon; the political incentives are all wrong, and it probably will take a major economic crisis to realign those incentives. But I am a little less skeptical today than I was yesterday — maybe 5 percent less. I think there is a non-trivial chance that non-entitlement spending could be scaled back to 2008 levels — not exactly raging austerity, but a start; combined with sane entitlement reform and tax reform, that could get us several steps back from the ledge we’re on. Something good seems to be afoot among Republicans.

Here’s what to worry about: Chances are, the economy is still going to stink in January 2011. It may be worse then than it is today — and it is possible that it will be significantly worse. Ryan is worried about the dollar, and he is right to be. If things get really hideous economically, then there is going to be tremendous political pressure on the GOP to do the dumb thing that Republicans always do: cut the taxes and let the spending grow. That could happen. We can’t let it.

And young guns eventually become old bulls — restoring fiscal sanity in our country is going to be a decade(s?)-long project, and one fresh class of hotheaded congressmen, welcome as it would be, is not going to do it alone.

Dino LaVerghetta, a 28-year-old New Yorker, does not outwardly seem to be the least bit retro, but he might be a generation or two out of place, with one of those stories that you sometimes forget are still happening every day: He’s the child of Italian immigrants, and his father ran a pizzeria — “total Italian stereotype,” he grins — before getting into real estate. LaVerghetta married his high-school sweetheart, and, just as the children of immigrants have for generations, advanced through higher education and a profession: Today, he’s a securities lawyer at a prominent international firm. He probably wouldn’t call it a white-shoe firm, but it’s a white-shoe firm.

LaVerghetta is a throwback in another way, too: He’s an Upper East Side Republican, an increasingly rare urban species whose habitat has been decimated — the formerly Republican-dominated expanse of middle Manhattan populated by financial professionals has largely abandoned the GOP — and whose political leadership is endangered, if not quite extinct. LaVerghetta has his eyes on New York City’s 14th Congressional District, which encompasses eastern Manhattan, Roosevelt Island, and part of Queens, a seat that has been occupied by Democratic incumbent Carolyn Maloney for 16 years. From the pizzeria to Congress in one generation: It won’t surprise you to learn that LaVerghetta talks about the classic American values of free enterprise, limited government under the Constitution, and fiscal responsibility. 

What might surprise you is his take on the Glass-Steagall Act. The 1999 repeal of Glass-Steagall, the Depression-era law that had prohibited the combination of regular deposit-taking banks with investment banks, insurance companies, or other kinds of financial operations, has long been cited by the Left as the root of all bankster evil. Democrats have framed it as another case of deregulation-mad Republicans acting as the running dogs of their corporate masters to the general detriment of the Republic. The real story is, of course, more complicated than that: The repeal of Glass-Steagall was signed into law by a Democrat, Pres. Bill Clinton, after every Democrat in the Senate voted for it, along with 155 Democrats in the House — three-quarters of the Democratic caucus at the time. One of the Democrats who voted for the repeal of Glass-Steagall was Carolyn Maloney, and LaVerghetta intends to remind voters of that fact, often.

“The 1999 repeal of the Glass-Steagall Act, which was supported by Carolyn Maloney, was a mistake,” he says. “It is no coincidence that the nation faced a near financial meltdown within ten years of its repeal. The financial system would be far better off if we tossed out the 2,300-page Dodd-Frank Act and simply put the 34-page Glass-Steagall Act back on the books.” As a securities lawyer, LaVerghetta knows a little something about financial regulation, and he’s under no delusion that Glass-Steagall would have prevented all of the financial turmoil that rocked the world following the subprime meltdown. It is difficult to say what Glass-Steagall would have changed at Bear Stearns or Lehman Bros., to say nothing of AIG.

What it would have done, LaVerghetta argues, is establish a pretty good firewall around the depository banks, the places where Americans park their paychecks and savings accounts. With those insulated from the shenanigans that the investment banks were up to, he believes, we could have avoided the bailouts. “The only way to avoid the need for future bailouts is to ensure that our depository-banking system is insulated from speculative investments,” he says.

The Democrat in the race is not exactly Larry Kudlow when it comes to understanding Wall Street. Her ideas on financial reform are utterly conventional ORPism, (Obama-Reid-Pelosi-ism), but the GOP is not girding its loins to do political battle in Manhattan. LaVerghetta knows he has a tough race ahead of him. “It’s a shame that the party of free enterprise has abandoned the center of the financial universe,” he says.

LaVerghetta’s main primary opponent is Ryan Brumberg, who advertises himself as the “true fiscal conservative” in the race and whose candidacy is supported by, among others, the libertarian investor Peter Thiel, who founded PayPal. Like LaVerghetta, Brumberg comes from an archetypal New York background, although one of a different sort: He’s a McKinsey management consultant.

Brumberg is popular with New York conservatives (both of them), and his program for financial reform — winding down Fannie and Freddie, a “pre-commitment for the government to never bail out the banks” — is orthodox Republican stuff. Asked what kind of guarantee mechanism would be necessary to make that “pre-commitment” against bailouts credible, he was unable to produce a convincing answer — which is understandable, because there is not one. The only way to head off future bailouts is to elect to Congress men who will not vote for bailouts. TARP passed the Senate 74–25 and the House 263–171. You do the math.

And it still is far from clear that our government was capable of implementing a superior plan, even if anybody had offered one.

Brumberg scoffs at the idea of reinstating Glass-Steagall. Judge Richard Posner, the eccentrically libertarian legal and economic critic, has endorsed reinstating it, for reasons similar to those articulated by LaVerghetta. As is often the case — on issues ranging from drug legalization to financial regulation to health-care reform — the real intellectual action is on the right, but the operational politics are moving things to the left. LaVerghetta is a Ron Paul guy arguing for the reinstatement of an FDR-era body of banking regulations so that the next time around the markets can destroy the investment banks but not grandma’s passbook account. Brumberg is a libertarianish conservative who will talk your ear off about capital-requirement rules and pre-packaged bankruptcy plans. Clueless Carolyn is not exactly bubbling with innovative thinking on the financial issue that matters most to her constituency.

Thirty blocks uptown, Charlie Rangel is probably taking a nap and thinking nothing of it, his slumber troubled, if at all, by financial matters touching Wall Street only incidentally.

– Kevin D. Williamson is deputy managing editor of National Review.

Noted Obama endorser Anne Applebaum on spendthrift Republicans:

Of course, parties can change, politicians can see the light, lessons can be learned—and perhaps some Republicans have learned them. But you cannot start from scratch. You cannot forget history. You cannot pretend that the Republican Party has not supported big and wasteful spending programs—energy subsidies, farm subsidies, unnecessary homeland security projects, profligate defense contracts, you name it—for the last decade. Before the Republican Party can have any credibility on any spending issues whatsoever, Republican leaders need to speak frankly about the mistakes of the past.

They also must be extremely specific about which policies and which programs they are planning to cut in the future. What will it be? Social Security or the military budget? Medicare or the TSA? Vague “anti-government” rhetoric just doesn’t cut it anymore: If you want a smaller government, you have to tell us how you will create one.

All excellent points. So, take it from an Obama endorser: Don’t fall for vague rhetoric, don’t ignore big, wasteful spending programs, and remember that, before you can have any credibility, you must speak frankly about the mistakes of the past.

Debt held by the public as a share of GDP: