A few stray thoughts:
(1) Had congressional Republicans taken pragmatic steps on health reform between 1994 and 2008, PPACA wouldn’t have happened. President Bush’s reform of the tax exclusion for employer-provided health insurance alone would have made a significant difference, as would his plan for giving the states greater control over Medicaid. If you believe that the 111th Congress made many bad calls, Republicans in previous years deserve much of the blame. Major policy shifts are rare. But when it rains, it pours.
As Andrei Shleifer and Robert Vishny argue in their wonderful book The Grabbing Hand, both the invisible hand and helping hand models of the state are misleading. As Mancur Olson and the public choice gang have long argued, governments are composed of self-interested individuals, and that gives rise to serious agency problems. Political entrepreneurs need to engage in policy activism to resist the structural drift towards the centralization of power. Though I’m a great admirer of Calvin Coolidge, just standing there is not enough. Maintaining an open and competitive economy is a Red Queen game: you have to run to stay in place. In Government’s End, Jonathan Rauch described the process of warding off “demosclerosis” as akin to chemotherapy. The cancer of rent-seeking can’t be cured, but it can be contained through efficiency-enhancing policy activism.
With a few exceptions, congressional Republicans failed on this front during their time in power. Conservatives need to understand how short-sighted this is — and I think a few congressional conservatives, like Rep. Paul Ryan, understand exactly what’s at stake. The right has to do more than grandstand.
(2) Listen to Josh Barro and get behind the Orszag plan: extend all of the 2001 and 2003 tax cuts for two to three years, and then let them expire. Once they expire, fight for the Growth and Investment Tax Plan, perhaps with the tweaks proposed by Ramesh Ponnuru and Rob Stein, e.g., a much larger child tax credit balanced by slightly higher rates. The current tax code should absolutely not be made “permanent.”
(3) Let James Capretta be your guide to how to think about entitlement reform. We need a more personalized safety net, ideally one that helps households save for predictable expenditures and protects them against catastrophic medical expenditures.
(4) We need a federalism agenda: allow state governments to request “advances” against future federal transfers to help them endure downturns, more block grants with fewer strings attached, eliminate the state and local tax deduction to make state governments bear more of the cost of profligate spending.
(5) Reform the federal approach to public infrastructure by insisting on true fixed price contracts.
(6) Be humble, work hard, don’t get baited into pointless controversies. This last part will be particularly difficult.