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.