Mitt Romney nostalgia is cresting among conservative intellectuals, and for good reason. In 2012, Romney offered an inclusive center-right politics, one with an appeal starkly different from that of Donald Trump’s 2016 campaign. Trump has a withering disdain for policy specifics; Romney demonstrated comprehensive mastery of the ins and outs of governance. Trump’s moral record is highly questionable; Romney seemed to epitomize personal integrity and virtue. Like many others, I entertained the fantasy of Romney-as-white-knight well into the long, hot summer of 2016.
In this new book, Edward Conard — Romney’s longtime friend, business associate, and high-dollar fundraiser — has produced an extended defense of the economic philosophy that drove the Romney-Ryan campaign. And while the thrust of his argument — that inequality is a necessary condition for and by-product of economic growth in the 21st century — is correct, the book also serves as an inadvertent reminder of the profound flaws in the donor-class economic ideology that was a more significant force in pre-Trump Republican politics than we nostalgists sometimes remember.
Conard first achieved notoriety with another election-year book: Unintended Consequences (2012), a Wall Street–friendly account of the financial crisis and an extended attack on the Obama administration’s first-term fiscal policies. “Because my business partner, Mitt Romney, was running for president when Unintended Consequences was published,” Conard writes in the introduction to The Upside of Inequality, “the media held up my book as a defense of the 1 percent.” Though this characterization was unfair, he decided to take it as a challenge. “The critics’ demand for a comprehensive defense of income inequality,” he says, in a preview of the gleefully contrarian attitude that animates his argument, “planted the seeds for this book.”
Mounting an intellectual defense of the market and the unequal outcomes it produces is a critically important project, especially in the face of a newly energized Left increasingly convinced that government can command and control the allocation of resources with few if any trade-offs. But Conard’s effort to do so falls short on a number of fronts, beginning with his tone and style of argument. Like his former colleague, Conard has a tendency to lionize “entrepreneurial risk-takers” and use value-laden consultant buzzwords that obscure more than they illuminate. For example, the top 1 percent of income earners are never “rich” or “wealthy” or “affluent”; they are only “successful.” (Relatedly, the government does not tax the “incomes” of high earners, it only taxes their “success.”)
While Conard is confident that lower top marginal tax rates would make successful people work harder and invest more, he is concerned that cutting taxes on the middle and working classes (i.e., non-successful people) would have the opposite effect. “The lower price of government services will motivate demand for more services,” he says (in an interesting inversion of traditional starve-the-beast fiscal policy). “Lowering the middle-class tax rate . . . will likely lower work efforts and increase government dependence.” The view that people of modest means are if anything not taxed enough might raise eyebrows today, but it was sadly at the heart of Republican orthodoxy during Obama’s first term, forming the basis of Paul Ryan’s “makers-vs.-takers” framework and Romney’s infamous “47 percent” remarks. And while both candidates from the 2012 ticket have distanced themselves from these positions, Conard unabashedly doubles down, insisting that people who pay less in taxes than they consume in government services should be “more appreciative of the benefits they are receiving from others.”
The Manhattan multimillionaire’s moralism flows from his confidence that the distribution of wealth in America is a near-perfect reflection of individuals’ talent and hard work. “The evidence shows the top 1 percent of income earners have largely earned their success by commercializing successful innovation,” he says. Moreover, the economic surplus from the innovations they create is captured overwhelmingly by working- and middle-class families. So why are demagogues “demonizing” entrepreneurs?
Conard makes important and under-recognized points about the proceeds from innovation; Steve Jobs made Americans as a whole far wealthier than he made himself. But his representation of America’s 1 percent as consisting almost entirely of Silicon Valley innovators (most of the wealthy people he cites with admiration are technology tycoons) is highly misleading. As Jonathan Rothwell demonstrated in a Brookings paper last March, just one in 20 1 percenters are employed in high-tech fields.
The vast majority of America’s wealthiest people are not entrepreneurs but doctors, lawyers, dentists, bankers, consultants, and even university administrators. While most of these people are talented and highly trained, they are also well positioned to use government power to extract rents from the rest of the public. Doctors, lawyers, and dentists all control access to their professions through guilds that are often more concerned with maximizing their members’ compensation than with advancing the public interest. (Think of the American Bar Association’s strict barriers of entry to the legal market.) As Steven Teles has argued in National Affairs, bankers are also implicitly subsidized through the “insurance of the too-big-to-fail status” and “the creation of a huge pool of assets for investment managers through a variety of tax-advantaged savings devices.” College administrators benefit from federal higher-education regulations, which favor entrenched institutions, and from student-loan subsidies, which enable them to raise tuition prices. And armies of consultants and accountants are enriched by the complexity of the U.S. tax and regulatory codes.
This type of “upward redistribution,” as Teles calls it, doesn’t account for all of the rise in economic inequality over the last several decades. But it has played an important role, and an effective center-right party would seek out and eliminate forms of rent-seeking and state-enforced special privileges rather than howl with wounded indignation when the public expresses concern that the gains from decades of economic growth have accrued disproportionately to those who were already wealthy.
Though Conard’s tone is aggressively anti-populist, he parts with the Wall Street Journal consensus in offering populist prescriptions on immigration and trade. “To advocate both for more immigration and for faster wage growth for the working and middle class is to work at cross-purposes,” Conard says, recognizing that the post-1970 wave of less skilled immigration has suppressed wages. He also highlights the uneven impact of U.S. trade policy: “Lesser-skilled workers,” he says, “suffer the entire burden of lower wages but capture only a portion of the benefits from lower-priced offshore goods.” Moreover, massive U.S. trade deficits have depressed productive investment: Foreign governments park their surpluses in U.S. government bonds rather than “risk-bearing capital” that promotes innovation and wage growth. Conard muddles these points somewhat when he says that the elite that engineered and benefited from the trade and immigration policies has no responsibility for working- and middle-class wage stagnation (and that people who get more in benefits than they pay in taxes have nothing to complain about, anyway).
The Upside of Inequality is flawed, but it is also admirably forthright. Conard has no qualms about expressing views he knows will be highly unpopular. Some of his insights — on the importance of supply-side incentives, the payoffs from innovation, and the role of trade — are well reasoned and worthy of attention. But most of all, this book is useful for displaying what Conard, despite his obvious intelligence and business acumen, fails to grasp: that attention to middle-class priorities is not optional in politics, that the GOP’s supply-side shibboleths can easily veer into self-serving moralism, and that, as journalist Michael Brendan Dougherty has said, “the market was made for man, and not man for the market.” In other words, if and when the Republican party recovers from crude Trumpian populism, it must be careful not to succumb to the plutocratic temptation that afflicted the last GOP campaign.
– Mr. Willick is a staff writer at The American Interest.