Politics & Policy

The Comeback Strategy

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

The Republicans went into this week’s election laboring under two major weaknesses. The first was a deficit of personal appeal in their candidates, especially Mitt Romney. The second was more serious: The GOP coalition simply isn’t broad enough, and it is shrinking. The solution to both of these problems is to embrace new leaders and new thinking in a revival of the principles that made America great.

Governor Romney always struck me as a person of sterling character: reasonable, ethical, and surpassingly benevolent. Despite his purple Massachusetts record, I never doubted his essentially conservative outlook — the belief in limited government, economic freedom, and self-reliance. But his presence and speaking style often reminded me of leading men from the Gilded Age of Hollywood, like a star out of Turner Classic Movies.

In the end, Americans seemed to trust Romney on the issues. But he never overcame President Obama’s advantage in personal favorability. Americans felt that Obama was better able to relate to them, because, unlike Romney, Obama seemed to be one of them. Obama is more charismatic, yes, and a better speaker, yes — but the real difference is that Obama is a man of his time, of this generation, while Romney seems a man from another time, and a bygone generation.

The “fix” here will be easy enough. The GOP has a rising cadre of exceptionally talented and appealing young leaders. That bunch has several stars with the kind of personal appeal that could attract millions of independents and Democrats. The reason so many Americans flocked to Reagan was not just that they agreed with his principles but, even more, that they simply loved him and trusted him. The next leader of the GOP should be someone who can command the affection and trust of a broad majority. Therein lies hope for the kind of unifying leader who can guide America through the national crises that now loom in both domestic and foreign affairs.

But this week’s defeat was not mainly a question of personality — or even of the policy positions that Romney took. Obama ran as a gravely injured incumbent, running on the worst economic record of any president since World War II. Moreover, his penchant for insulting opponents and condescending to leaders across the aisle has alienated millions of Americans. He won 10 million fewer votes than he did in 2008. If Romney-Ryan had managed to garner as many votes as McCain-Palin, a ticket nobody really thought could win, the GOP ticket might have prevailed this time. People agreed with Romney on many issues. His likability deficit was grave, but not insurmountable, as the first presidential debate showed. That Romney and GOP Senate candidates lost in almost every swing state is clear evidence that the GOP faces grave structural problems. Those problems won’t go away with a new crop of leaders.

Here the GOP has to face existential questions about what it stands for and how it can compete with the Democrats for a broad majority. During the Bush administration, the GOP often abandoned its principles. In recent years, it has erred on the side of ideological stridency. The GOP needs to be both principled and innovative. That will require new thinking on the most contentious issues.

The GOP has taken principled, intellectually correct positions on the most serious issues: spending, entitlement reform, tax reform, and regulations. But those are frightfully easy for Democrats to demagogue. Part of the solution is federalism: When in doubt, push the issue onto the states and let them deal with it. That is the recipe for entitlement reform.

Another part of the solution is to agitate for a “big bang” in business activity through sweeping regulatory and tax reform. By standing in the way of such reforms, Democrats are keeping the nation from bouncing back to the high growth rates that are a vital part of any solution to runaway deficits. On all fronts, however, Republicans need to be flexible in pursuit of their ultimate goals.

Starting with the New Deal, the Democrats established a more or less permanent governing coalition based on the redistribution of wealth. They dramatically strengthened that position through the Great Society programs of the 1960s. Hence their uninterrupted half-century (from the 1940s until the 1990s) in control of the House of Representatives. People like free stuff, and the Democrats offer lots of it.

The GOP can’t be true to its principles of limited government, economic freedom, and self-reliance while competing with the Democrats on who can give out more free stuff for their voters. To remove the advantage that the Democrats enjoy here, the GOP has to find ways of constricting their ability to use government as a wealth-transfer scheme for the benefit of their supporters. That means going after government benefits for special interests as doggedly as conservatives have gone after earmarks. The primary targets are government-sponsored cartels and subsidies for agriculture, laws that protect labor unions from the competition of non-union labor, and Obamacare.

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.

Here, Republicans have done nearly as much damage as Democrats. They have championed programs such as No Child Left Behind, which invade the regulatory autonomy of the states and subvert it through “conditional grants.” Because the residents of the states are already paying for the programs, state governments simply cannot refuse the assistance — it’s their billions to start with. And it was Republicans who created the Environmental Protection Agency and unwittingly empowered it to deputize state agencies in sweeping regulations of society that no Congress would ever pass. Congress must reassert control over the rule-making process in executive agencies such as the EPA. And states must fight back against the Trojan horse of “cooperative federalism” programs on the fiscal and regulatory front. Regulatory reform must be a top agenda-item for Republicans in Congress. The “separation of powers” between federal and state governments should become as cardinal a principle as the separation of church and state.

The conservative tidal wave of 2010 was motivated in large measure by an enormous groundswell of support for the Constitution and its limits on federal power. Alas, Romney hardly mentioned the document. Yet the greatest danger of a second Obama term is the continued erosion of our Constitution’s limits on federal power. Reclaiming the Constitution for state and local self-government goes hand in hand with the libertarian mindset that many new members of Congress will bring with them to Capitol Hill. The GOP’s basic position should be that moral and social issues are no business of the federal government’s and should be left to states and local communities. And, by the way, that is precisely the arrangement our Constitution was designed to ensure.

President Obama is what Walter Lippmann called a “gradual collectivist.” He stands for majority rule unbridled by any constitutional limits — in other words, for the tyranny of a transient national majority. Reviving the Constitution’s protections against the tyranny of the majority should be a matter of first priority, both in legislation and in federal-court appointments. In the new Senate, the Republican staff of the Judiciary Committee should spend the first three months of 2013 producing a “State of the Constitution” report, with recommendations for fixing some of the holes that nearly 80 years of big federal programs have blown in the Constitution. Such a report could be a standard for conservatives to unite behind.

Finally, a lot has been said about the need to enlarge the Republican coalition to include non-whites, particularly Hispanics. George W. Bush won in 2004 partly by capturing about 40 percent of the Hispanic vote. Romney, by contrast, barely got 27 percent. This poor showing (the worst in decades for a Republican candidate) means that the acrimonious immigration-reform debate that began alienating Hispanics in 2006 has had structural consequences.

The solution is not amnesty. We simply cannot reward law-breaking, and illegal immigration is law-breaking. The GOP must insist on the rule of law. The lasting solution here is to eliminate the vexing issue altogether, by dramatically reducing the economic incentive to immigrate illegally in the first place. People go where they think they can find jobs. Electronic employment verification (such as E-Verify) has led millions of illegal immigrants to self-deport from states such as Arizona and Mississippi to states (such as Texas) where they know they can find work. Adopting some kind of E-Verify nationwide could stop the flow of illegal immigrants, cause millions more to self-deport back to their countries of origin, and would benefit the tens of millions of lawful Hispanic immigrants who now have to compete with illegals for work. Visa reform can then make sure that American businesses have access to the immigrant labor they need.  

Conservatives share Hispanics’ desire for a society that offers upward mobility. That promise, and a culturally more inclusive party, can attract large numbers of Hispanics (many of whom are socially conservative and believe in economic freedom) back to the GOP. Those who say that Hispanics vote Democrat because they are poorer and depend more on the social safety net, and that they will vote that way regardless of the GOP’s stance on immigration, have a point. But Republicans have succeeded in creating the impression that they don’t care about the little guy, especially if he’s Hispanic. Republicans must change that, and they can — by offering solutions to the obstacles Hispanics face. That means making education and health care more accessible and affordable through innovative market-based solutions that Democrats habitually block. And it means promoting high-growth policies and the upward mobility they will bring.   

Ultimately, the only way that Republicans can enlarge their coalition and remain true to their principles is to offer greater opportunity than the Democrats can. They should give poor and middle-class people of all colors a stake in the future, by embracing pro-growth policies that can unleash the incredible potential of our private sector. To prove that they are not “radical individualists,” Republicans should empower states and local communities to do things their way. In the end, however, the vision of limited government, economic freedom, and self-reliance must prevail. The future of the Republic depends on it.

We have mostly lost sight of the free society that the Framers sought to enshrine and protect in our brilliant Constitution. It falls to the next generation of GOP leaders to make that vision persuasive to a broad majority of Americans. And there’s no time to waste. 

— Mario Loyola is director of the Center for Tenth Amendment Studies at the Texas Public Policy Foundation.

Mario Loyola — Mr. Loyola, a former White House speechwriter and environmental adviser, is a senior fellow at the Competitive Enterprise Institute.

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