Magazine | December 17, 2012, Issue

Right to the Middle

(Roman Genn)
Conservatives need not surrender voters of moderate income to the Democrats

The public has never fully trusted Republicans to advance the economic interests of the middle class rather than those of the rich, and that problem may be getting more acute. That’s the reason Republicans never became the country’s majority party after the Democrats lost that status. It’s the reason Mitt Romney beat President Obama by only one point in the exit polls on the question of who would better handle the economy. It’s the reason Obama found it so easy to convince 53 percent of the electorate that Romney’s policies generally favor the rich. It’s part of the reason Romney and other Republicans have done so poorly among Hispanics, young people, and single women, and sometimes, as in the election just finished, failed to motivate blue-collar whites to vote in great numbers.

If Obama’s second term is sufficiently disastrous, Republicans may bounce back without having to solve this problem. To achieve lasting success, though, they will have to find a way to make a plausible case that conservative policies will yield tangible benefits for most people. That means, first, that they will have to devise policies with the actual circumstances of today in mind. So, for example, they will have to rethink an approach to taxes that has been frozen in 1981 for too long. Across-the-board cuts in income-tax rates worked politically at that time, but for many years now, middle-class families have been paying more in payroll taxes than in income taxes.

Second, Republicans will have to communicate the positive difference their policies will make in the lives of most people. For a major political party, they are surprisingly inconsistent about telling people about the payoff from their proposals. Romney’s policy advisers, like John McCain’s in 2008, surely believed that their candidate’s platform would increase wages. Neither candidate did much to share the news with voters (although the Romney campaign in its closing weeks sporadically made the point).

Giving this advice to Republicans strikes some people as equivalent to telling them to drink up a lake and stand on their heads: The project is impossible. Josh Barro, writing in Bloomberg View, asks why Republicans have not solved their middle-class economics problem and then answers his own question.

The reason, unfortunately, is not simply that Republicans lack the imagination to come up with ideas to get higher wages, more jobs and affordable health care to the middle class. It is that there is no set of policies that is both acceptable to conservatives and likely to achieve these goals.

Republicans cannot achieve universal health care, he writes, without either spending hundreds of billions on federal subsidies or reforming medicine in a way that sharply reduces doctors’ pay. “Conservatives simply do not want to do either of those things,” Barro observes. He goes through a list of other policies that might help the middle class but that, he thinks, conservatives are unlikely to embrace, before concluding: “Any conceivable agenda that is likely to be effective in getting health care, jobs and higher wages in the hands of the American masses will be unconservative, at least on the terms by which most American conservatives define conservatism.”

It is a bleak conclusion, at least for those of us who, unlike Barro, consider ourselves conservatives — who wish, that is, to see the middle class prosper, taxes remain low, judicial conservatives get appointed to the bench, and so on. American conservatism may, however, be a little more capacious than Barro thinks, or than it has demonstrated itself to be in recent years.

#page#Let’s start with health care, as Barro does. The health-care analysts at conservative think tanks generally agree that we should change the way health insurance is taxed so that people who buy insurance for themselves get the same break as people who buy it from their employers do, and so that the dollar value of the break stays the same regardless of how expensive an insurance policy the employee chooses. In one version of this idea, everyone would receive a $5,000 tax credit to buy his family health insurance (or $2,500 for an individual policy). The think-tankers also believe that people should be allowed to buy this individually purchased health insurance from out-of-state sellers.

Under such policies, millions of Americans who lack access to employer-based insurance would have it, competition for cost-conscious consumers would restrain premium growth, and people could take their insurance from job to job. With insurance more affordable, accessible, and portable, fewer people would find themselves without insurance when they got sick — and thus unable to get it because of a preexisting condition. Most conservatives favor funding “high-risk pools” to cover those already in this situation. This plan, they plausibly contend, would get us at least as close to universal coverage as the health-care law signed by President Obama, avoid its downsides, and do much more to cut costs. By restraining the growth of insurance premiums, these reforms would also boost wage growth.

The plan involves hundreds of billions of dollars in subsidies. It shifts the tax burden upward, raising taxes on high earners by curtailing a tax break that disproportionately benefits them. It is thus progressive and redistributive. The think-tankers nonetheless support it because it would be a major step forward for free-market health care and a net reduction in the government’s role. It is true that House Republicans have never endorsed a tax-credit plan, in part because some of them worry about providing additional tax credits to people who do not pay income taxes. It is true as well that Romney refrained from endorsing health-care tax credits, instead saying he would offer unspecified tax breaks for people buying health insurance.

Still, John McCain endorsed the health-care tax-credit idea in his 2008 presidential run. Paul Ryan has endorsed it too, strongly. Nobody on the right has complained about their support for it, and Ryan’s has not kept him from being a conservative hero. The idea may well need modification — it would be important to implement it in a way that did not cause people to lose their employer-provided coverage if they wanted to keep it — but getting more Republicans to support it seems like a winnable fight. Liberal health-care analysts (and Barro, for all I know) may think this idea is a bad one. But Republicans need a middle-class agenda, not an uncontroversial one.

Republicans have often in the past had an advantage over Democrats when it has come to middle-class taxes. They might reclaim that advantage by championing an idea of Robert Stein, an official in George W. Bush’s Treasury department, who argues that any tax reform should include a much larger tax credit for children that applies against payroll taxes as well as income taxes. The policy rationale is that parents contribute more than their fair share to entitlement programs: They pay payroll taxes, but also make financial sacrifices in raising future taxpayers. A large credit would recognize this contribution.

In 2008, conservative pollster John McLaughlin asked respondents whether they favored expanding the child credit from $1,000 per child to $4,000. They supported it by 56 percent to 23 percent. Support was highest in the middle class, with 67 percent of people making between $40,000 and $60,000 a year favoring the idea. Interestingly, support rose as people moved left on the political spectrum. Liberals were more supportive than moderates and moderates more than conservatives (although conservatives still supported it, 46 to 32 percent). Those numbers seem to confirm that the idea is not a natural fit for conservatives.

#page#The history of the child credit, however, argues otherwise. In 1994, Republicans ran on the “Contract with America” in a successful bid to take control of the House for the first time in 40 years. The major tax cut the contract proposed was a $500 tax credit for children. In 1997, the Republican Congress enacted the credit as part of a budget deal with President Clinton. Running for president in 2000, George W. Bush proposed doubling the credit to $1,000.

The tax credit is popular, which is why both parties in the tax talks currently under way in Washington, D.C., say they favor its extension. In practice, though, it has been Republicans who have mostly been responsible for letting parents keep more of their money to spend as they wish, and perhaps this should not be surprising. (The middle-class parents who would benefit most from Stein’s idea tend to be Republicans, after all.) The Republican position on child credits was probably an important reason the party held on to its advantage on taxes in the mid-1990s and early 2000s. For Republicans to go back to their winning formula might require some legislative creativity, since the nation’s fiscal condition is much worse than it was when the credit was created and expanded. It would not, however, require any ideological innovation.

The cost of higher education is another area where Republicans could make headway. Simplifying financial aid, requiring colleges that receive direct or indirect federal funding to disclose how their graduates do in the job market (preferably by major), encouraging online learning, and creating alternative forms of credentialing could all promote upward mobility. Some Democrats are surely interested in such reforms, but because they have emotional and sociological ties to the higher-ed status quo, Republicans should be able to outflank them — if they take up the issue. Offhand, no segments of the Right that would oppose these efforts come to mind.

Republicans already have a winning message on energy, which they have been dogged in their determination to make as cheap as possible. They have promoted energy exploration and development and opposed cap-and-trade and other plans that would impose heavy taxes on the use of energy. They would be in an even stronger position to reject liberal prescriptions on energy if they supported relatively modest government funding of research on mitigating the risks of global warming.

Doubtless there are other areas where recognizably conservative initiatives could improve the lot of most Americans. Formulating a conservative agenda that might have broader appeal than the current one will have to be the work of many people. It is a task that is particularly urgent, not only because of the election results, but also because the traditional middle-class entitlements are going to have to become less generous.

The preceding is a beginning: a very rough outline of a conservative agenda to cut the costs of energy, health care, child-rearing, and higher education. Each initiative would raise the middle-class standard of living. None involve the further centralization of decision-making authority in Washington, D.C. Rather they rely on letting people keep more of what they earn and expanding their options. None require conservatives to cross any previously drawn red lines. Together, they identify institutions that too often frustrate the achievement of the American dream — the health-care system, higher education, the fiscal-transfer state — and reform them to make possible, and reward, individual initiative and familial self-sufficiency.

Perhaps conservatives will not take up the challenge of proving that our political philosophy has something to offer for most people, in our day no less than in times past. If so, it will be our own fault, and not because the thing was beyond the wit of man.

Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.

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