Politics & Policy

The GOP Needs a Populist Reset

President Trump speaks on infrastructure improvements at the Department of Transportation, June 2017. (Reuters photo: Jonathan Ernst)
Areas ripe for politically popular reform are infrastructure, health care, guest-worker programs, and finance.

In 2017, Republicans used the following combination for domestic governance: Try to pass entirely conventional Republican legislation, such as the tax reform passed in December, while President Trump stoked cultural feuds (with Democrats, the media, the NFL, etc.) and issued executive orders. Based on the approval ratings of both the president and Congress, and given Congress’s failure to pass any major legislation other than tax reform, this strategy has not been a resounding success. Donald Trump’s victory in the primary was an omen that conventional Republican legislation might need reforming, and the Alabama Senate debacle in particular has shown that cultural grievance taken to an eleven is not a guaranteed winner.

If Republicans want to turn their dismal polling numbers around, they might consider trying an inverse of 2017’s strategy: Trump might cultivate a more conventionally presidential persona, while Republican legislative efforts could become slightly less conventional. A conservative-populist reset would be more populist in substance and less wrathful in style.

On the topic of a populist reset, infrastructure has generated the most headlines. But other areas — including health care, guest-worker programs, student loans, and financial reform — might also help reset the agenda. Policy changes in these arenas could appeal to demographic groups that have soured on Republicans, such as women and younger people. With the right kind of policy agenda, Republicans could give Senate Democrats the following choice: Work with us to pass popular legislation, or have your obstruction on these issues be used against you on the campaign trail. Important Senate seats in Missouri, Montana, Indiana, Pennsylvania, and elsewhere will not be decided by Beltway think-tank boards or the acolytes of Ayn Rand. Working- and middle-class voters of all stripes will determine those races, so the GOP might be sensible to foreground their concerns.

Republicans will have a harder time adopting this legislative agenda if the president’s approval ratings remain mired in the 30s. If the president is a toxic persona, Democrats will have every reason to avoid working with him, and he risks poisoning any subject he touches. If the president can get back up into the 40s, however, Republicans will have more power.

The president’s approval numbers are so low partly because of the unpopularity of the policies pushed by Republicans. According to the RealClearPolitics average, three of the four sharpest drops in the president’s approval ratings overlap with policy efforts: mid March (when congressional Republicans debated their much maligned American Health Care Act), early May (when the House passed health-care reform), and early December (when the House passed tax reform).

But the president’s cultural feuds have helped pull down his numbers, too. After all, the fourth sharp drop came in late September, right after the president began his war with NFL players over kneeling during the National Anthem. (The May drop in Trump’s approval also coincides with his firing of James Comey, so that fall might have been about both policy and the administration’s behavior.) In the last weeks of December, the president’s approval ratings ticked up. That might be a sign that Republicans have made some headway in the messaging war about tax reform (and it might also reflect the real policy differences between the House bill and the final version). This improvement could also be tied to the possibility that the holiday season made some Americans pay less attention to current media controversies.

As mentioned, infrastructure has received the most headlines as a place for a populist pivot. President Trump ran on this issue, many congressional Democrats want an infrastructure plan, and infrastructure spending is popular with voters across the board. It seems like it should be an easy lay-up. But there could be problems.

Decisions that Republicans made in 2017 could now obstruct an infrastructure push. The president could have tried to get infrastructure done early in 2017, when his approval rating was higher. Instead, Trump went along with congressional Republicans’ effort to do health-care reform on a party-line basis. This attempt at health-care reform hurt the approval numbers of Congress and the White House, and it also helped solidify congressional Democratic resistance to the president. After the 2016 election, many top Democrats made noises about being willing to work with Trump on issues such as infrastructure, but now, infrastructure will be a harder political lift.

It will also be a harder financial lift. Rather than spend them on infrastructure, Republicans chose to use the hundreds of billions dollars raised by repatriation to compensate for new tax cuts. (In an alternative universe, Trump could have tied building part of the wall to infrastructure, but now it seems less likely that the GOP could raise enough financial or political capital to push the wall as part of infrastructure.) Democrats will almost certainly rebuff any effort to pay for infrastructure by spending substantially less in other government agencies, and they have raised some doubts about using private-public partnerships as the prime vehicle for an infrastructure program. Meanwhile, many Republicans might be skeptical about adding hundreds of billions of dollars to the national debt in order to pay for a big infrastructure program.

Infrasructure proponents might have to find a ‘Goldilocks’ scenario of spending enough to keep Democrats on board while not spending so much that they drive away spending-resistant Republicans.

Infrastructure could still have a chance, but it will take a political nimbleness that has been in short supply in the Beltway recently. The Trump administration will have to get real Democratic buy-in, and proponents of an infrastructure program might have to find a “Goldilocks” scenario of spending enough to keep Democrats on board while not spending so much that they drive away spending-resistant Republicans.

Beyond infrastructure, however, other policy efforts could advance populist concerns while also embodying conservative principles. Some of these policies might be small-ball, but, as the later part of Bill Clinton’s presidency showed, small-ball can be one way of making sustained political advancements. In most of these areas, the GOP could hope to win some Democratic support (which is a feature, not a bug).


Expand Health Care

Compared with the health-care systems of most other wealthy nations, America’s system is rather expensive. For example, a recent study found that the U.S. spent almost 2.5 times as much per person on health care as Japan does (and Japan has a higher life expectancy than the U.S.). Cutting-edge medical research can drive up our health-care costs, but there are also elements of the American health-care system that restrict the market and increase prices.

In 2017, Republicans wrong-footed health care by leading with cuts to federal health-care subsidies for the poor and working class. In 2018, they might focus instead on cutting costs by expanding and diversifying the options for medical care. Cutting medical costs would be a huge boon to many working-class families and, over the long term, would help the federal balance sheet; health-care entitlements are major components of federal spending, so reducing the costs of medical care would in turn help federal finances.

There is a space here for even modest efforts. For instance, the federal government funds only a certain number of medical residencies every year, which acts as a de facto cap on how many students can enter medical school each year. Republicans could support a measure to increase the number of medical residencies, and they could use a bill co-sponsored by none other than Chuck Schumer as a building block: the Resident Physician Shortage Reduction Act of 2017. Republicans could expand programs to train physicians for underserved areas and in fields where there is a shortage of medical practitioners. These measures could kick off a broader effort to expand and diversify medical training.

There are many anti-market incentives built into the current health-care system, and Republicans could advance conservative (and not only conservative) principles by trying to undo some of them. As the Business Insider’s Josh Barro has noted, many pro-market, cost-cutting measures are available: ending certificate-of-need laws, making more medical supplies and treatments available over the counter, eliminating cartel-like behavior in the medical world, and so forth. Moreover, the GOP right now has a pretty big carrot to get medical-industry insiders to sign off on market-oriented reforms: the Alexander-Murray ACA stabilization bill, which would continue many subsidies. Many big medical players want this bill to pass, so Obamacare stabilization and market-oriented reforms could be a political package deal.


Cut Guest-Worker Programs

Guest-worker programs are an affront to both populist and conservative principles. Congress could cut the H-1B and H-2B visa programs in half, from 65,000 and 66,000 to 32,500 and 33,000, respectively. It could also place new wage requirements on the holders of these visas to help keep these foreign workers from undercutting the wages of Americans.

The immigration system should prioritize making recent immigrants an integral part of American society, but guest-worker programs create a class of second-class residents. Cutting these programs could encourage corporate America to support a shift to a skills-based immigration system. An ambitious version of guest-worker reform could swap out the diversity-visa lottery for skills-based visas in order to compensate for the slashed guest-worker programs. A potential DACA deal might be a vehicle for even more ambitious reforms to the legal-immigration system and for more enforcement provisions, both of which could advance conservative-populist aims.


Let People Declare Bankruptcy on their Student Loans

Debt politics and populist politics often intersect. Increasing student-loan debt burdens many young people, and the federal government is in part responsible for that. Congress has made it almost impossible to discharge student loans in bankruptcy: It made public student loans essentially non-dischargeable in bankruptcy in 1998 (it did the same to private student loans in 2005). While the government did not force students to take out a loan, it did put conditions on those loans that are not attached to most forms of debt. Eighteen-year-olds can’t buy a six-pack of beer, but they can saddle themselves with tens of thousands of dollars of debt that, unlike most debt, can almost never be discharged in bankruptcy.

Making student loans dischargeable in bankruptcy is not necessarily a bailout. It means treating student-loan debt like other kinds of debt.

In order to remedy this situation, Republicans could support making student loans dischargeable in bankruptcy after seven years (which used to be the benchmark for discharging student loans in bankruptcy). Making student loans dischargeable in bankruptcy is not necessarily a bailout. It means treating student-loan debt like other kinds of debt. There are substantial costs to declaring bankruptcy, which is why most people try to avoid it.

It would be relatively straightforward to make new private and public student loans dischargeable in bankruptcy. What to do about existing student-loan debt? According to the New York Fed, there is almost $1.4 trillion in existing student loans, and about 11 percent of existing student loans are more than 90 days delinquent. Unwinding this would be trickier, as lenders have made a commitment to lend with the presumption that these debts were not dischargeable. Fortunately (or not), a growing portion of student-loan debt is held directly by the federal government. After the passage of Obamacare, the federal government became the direct lender of many public student loans (prior to that, private banks often originated these loans, but the federal government guaranteed them). Also, the private holders of public student loans could sell their loans to the government, if the government wanted to make existing loans dischargeable.

In terms of private student loan debt: One study estimated that existing private student loan debt was $102 billion in 2016. If the federal government wanted to retroactively make student loan debt dischargeable in bankruptcy, it could create a stabilization fund to reimburse private lenders for preexisting loans that former students declare bankruptcy on. Those funds could reimburse lenders for past loans — not for future ones. (Yes, this stabilization fund might be a bailout, but it would be one that would correct earlier market distortions caused by the federal government.)


Diversify the Financial Sector, Trim the Megabanks

Disgust over the 2008 financial crisis was an inspiration to populist forces on both the right and the left — to both the Tea Party and the Bernie Sanders–loving progressives. Republicans could address this disgust, which points to real problems in the nation’s financial system, by championing reforms that would help deconsolidate the nation’s financial sector. Populists might cheer the sight of megabanks being cut down to size, but conservatives would have their own reasons to support this: “Too big to fail” will remain as implicit government policy as long as the nation’s financial institutions are extremely consolidated. No political party will allow a bank to fail if that failure means the collapse of the nation’s financial system. One of the preconditions for a market-based financial sector is ensuring that every financial player is small enough to fail.

It would be incredibly complicated to break apart the megabanks, and it would require input from a wide range of people. Top Trump economic officials, including Gary Cohn and Steve Mnuchin, have called for a “21st-century Glass-Steagall.” (Glass-Steagall was a 1930s law that separated investment from retail banks.) Elizabeth Warren and other Senate Democrats have raised similar points. What an updated Glass-Steagall might mean would surely be up for debate, but both sides might be politically motivated to make reforms that would diversify the financial sector.

In all these areas, a conservative-populist reset could be a difficult task, and it would be far from a cure-all for Republican political woes. But it could help change the political narrative heading into the 2018 midterms and could help the president deliver on some of his 2016 campaign promises. Moreover, policy rethinking could prompt a sclerotic Beltway to respond to challenges that it has ignored for too long.

Fred Bauer is a writer in New England.


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