The Crisis of Fiscal Leadership

The prospects for serious fiscal reform in Washington look dire indeed, at least for the immediate future. Speaker John Boehner saw most of his caucus easily reelected, but he clearly was spooked by the Republicans’ drubbing in the presidential race and in key Senate races. The Republican steering committee announced its intention to strip key House conservatives of relevant committee positions. Senator Jim DeMint has concluded, not without reason, that he will be a more effective force for limited government as head of the Heritage Foundation than he could be as a leader in the Senate.

One of Rush Limbaugh’s key insights, and an oft-reiterated one, is that the Republican party functions best when the leader of the party also is acting as the leader of the conservative movement, e.g. Ronald Reagan in his day or Newt Gingrich in his. Right now, the Republican establishment is deeply at odds with conservatives, who once again find themselves playing the role of an insurgency in their own party. If my correspondence with National Review readers is any indicator, Boehner’s stock is not trading much higher than Barack Obama’s among limited-government true believers and deficit hawks. The coalition is indeed in disarray, and a crisis of leadership is upon us.

The implicit proposition of Boehner’s leadership has been that with President Obama in the White House and Harry Reid running the Senate, a go-along/get-along strategy was Republicans’ surest ticket to gaining the Senate, the White House, or both in 2012. When the party suffered a humiliating rout instead, conservatives’ already heated frustration came to a boil.

How to go about fixing this? As much as I admire Senator DeMint, he is mistaken that Republicans’ current troubles are the result of a failure to “clearly articulate the failures of liberalism and the common sense of conservative alternatives.” There is no shortage of conservatives who spend day and night clearly articulating the failures of liberalism and the good sense of conservative alternatives, from talk-radio populists to think-tank wonks and numbers geeks. While there have been some bad candidates, weak campaigns, and defective GOP leaders, that is always true. The fundamental problem is the Republican policy agenda.

A very large part of that problem is the focus on tax rates to the exclusion of many other economic goods. I do not wish to see a tax increase, on wages or on capital gains, for anybody. But if the top rate on incomes goes from 35 percent to 39.8 percent, that is not the end of the world. That is certainly not the hill Republicans should choose to die on. As policy, there are more important issues; as politics, it is worth noting that there are not very many voters who earn $388,350, the income at which the top rate kicks in. And many of the voters in that exalted bracket are not single-issue tax-rate voters. Single-minded and borderline fanatical insistence on this one issue, together with the pageantry of related pledges, has done a great deal to provide cover for the radicalization of the Democrats under Obama.

Compare the 2012 debacle with the conservative triumph of 2010. It is true that there were a great many anti-tax voters in 2010 — with some making the “tea” in “tea party” an acronym for “Taxed Enough Already” — but the proximate cause of the 2010 win was a very strong popular reaction against a radical increase in government spending and government intrusion into the economy: the stimulus, Obamacare, and the bailouts of Wall Street and Detroit (though this last reaction was slightly deferred). President Obama was at the time arguing for the preservation of the Bush-era tax rates, at least for the $250,000-and-under set, which, as Kate Trinko points out, means that Democrats then and now are defending the great majority of the Bush tax cuts. The Democrats were allowed to escape their reputation as tax-raisers, and Republicans put themselves in the position of cementing their reputation as the party of the rich. (Of course here “rich” means high-income people who didn’t make their money in Hollywood, in government, in ambulance-chasing, in academia, or, for the most part, on Wall Street, but let’s not let reality get in the way of a good political narrative.)

Republicans, as I have recently argued, have a great deal more to offer the country than tax cuts. They might ask: Do we wish to see our country’s energy sector continue to grow, and to see America displace Saudi Arabia as the world’s largest oil producer? The country will answer “Yes,” and Republicans should be ready with a list of specific policies to ensure that this happens. Republicans might ask: Do we wish to create a great many more solid career opportunities for the very large share of our young people who are not headed for MBAs, law degrees, or information-technology jobs? The country will answer “Yes,” and Republicans must be ready with a solid policy agenda. Ask the country if it wants to end subsidies to politically connected businesses, and it will answer “Yes.” Be ready. Instead, Republicans have been asking if the country is ready to put everything on hold to forestall a relatively small tax hike for households with incomes approaching $400,000 and up, and the country has answered “No.” The country is wrong to want to raise taxes for reasons having to do more with envy than economics, but certain human realities have to be accounted for in politics.

As for the more difficult questions, such as whether the country will protest if the Republicans attempt to reform entitlements by changing the indexation benchmark from wages to prices — a reform that would save billions of dollars without actually cutting the current benefits of one person — the answer is not obvious, but then that is the nature of hard questions. But it will be easier for conservatives to do the hard thing if they have an agenda that emphasizes the great many relatively easy and popular proposals that conservatives can and should support. But that is going to take deft and imaginative leadership of a sort that we have not lately seen from Republican leaders. John Boehner has not been the catastrophe that many fiscal hawks accuse him of being, but it is not clear that making the best of a bad hand is the most we can or should hope for. 


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