The Agenda

Josh Barro on Why Republicans Resist the Reformist Project

My central argument about the future of the center-right domestic policy agenda is that it should focus on making the basics of a dignified middle-class life — affordable high-quality medical care, education, and housing — more widely available. It happens that these are three sectors in which the state plays a particularly large role, for reasons that are a mix of the inevitable (regulation of providers of medical care and education is rooted in a legitimate concern about information asymmetries), the historically contingent (tax subsidies for employer-provided insurance coverage reflect an effort to work around wage and price controls, the mortgage interest deduction, all forms of interest were deductible in the federal income tax of 1894, etc.), and the predatory (higher education accreditation bodies are keen to stymie the growth of disruptive instructional providers, physicians and real estate agents are keen to resist the emergence of low-cost alternatives). A somewhat similar logic applies to infrastructure spending and mass transit, as Stephen Smith has argued on numerous occasions, to defense expenditures, which are inflated by excessively rigid personnel policies, and many other public sector domains. 

And so my view is that the center-right should champion efforts to break cartels by rolling back the spread of occupational licensing, reforming the terms of public employment, and certifying low-cost specialized instructional providers and medical providers that can compete against entrenched incumbents. The problem, according to Josh Barro of Bloomberg View, is that Republicans are highly unlikely to embrace this approach, despite noises to the contrary:

To reduce the need for subsidies, we need policies geared toward reducing pre-subsidy costs. Republicans have made some moves in this direction, particularly by pushing the expansion of high-deductible health plans that encourage consumers to pay closer attention to the cost of health care. But Republicans have not produced a health care cost control agenda that is sufficiently aggressive or that is linked to realistic plans to get health coverage to people who lack it today.

There are reasons for this failure. One is that controlling costs requires taking on powerful political interests. In the case of health care, that means Medicare beneficiaries, plus providers, pharmaceutical companies and health insurers. In higher education, that means schools, their employees, and some state and local officials.

Instead of fighting these forces, Republicans have chosen a cynical strategy of protecting the status quo and the incumbents who benefit from it. The party’s conduct on Medicare for the last four years has been particularly appalling. From bizarre opposition to the Medicare Independent Payment Advisory Board (conservatives don’t like big government, but if we’re going to have it, they apparently want it to cut checks indiscriminately) to a hugely irresponsible promise to hold those over 55 safe from any Medicare changes, the GOP has made its clear goal on health policy to protect the old at the expense of the young and uninsured, not to control costs or make the system work better. [Emphasis added]

Josh goes on to explain another aspect of an agenda that aims to increase the efficiency of the public sector:

This brings us to another reason Republicans won’t say smart things about cost control: It requires admitting that we need a mix of market and non-market solutions. Health care and higher education are and will remain sectors of the economy that have a large government share of expenses, and so the market will necessarily be distorted. The key objective should be making sure that those distortions balance each other. For example, policies that guarantee universal access to health care will necessarily push the cost to the consumer below the actual cost of providing health-care services, encouraging overconsumption; other top-down policies to restrain consumption will tend to make the market less distorted on net. [Emphasis added]

This is a fair point. Singapore’s health system, for example, involves universal health savings accounts, which encourage spending discipline; yet it also features stringent administrative price controls. Josh recognizes that Republicans embrace a role for the state, yet he maintains that their inability to accept the deeper implications of government involvement limit their ability to devise effective policies:

They are resigned to the existence of things like Medicare and federal student loan subsidies. But trying to make the programs work better, within their context as government programs, seems like too much of a capitulation to the statists. That’s how you end up with rhetoric on IPAB that’s not too far from “get the government out of my Medicare.”

An agenda of making government programs work better also doesn’t square with conservative tax-cutting dogma. Making government more efficient can make funds available for tax cuts. But sometimes when the government gets better it becomes a good idea to make it bigger. [Emphasis added]

That is, when it costs less to employ public sector workers, we might want to hire more of them. This idea was a subtext of recent discussions concerning Wisconsin’s Act 10, yet it needs to be made more explicitly. Josh’s conclusion cites a smart OC Register op-ed by Carl DeMaio, the conservative Republican who was recently defeated in San Diego’s 2012 mayoral race that is well worth reading. 

I think that Josh is right to suggest that Republicans are resistant to the idea that the goal of conservative policies should be to improve the efficiency of public services as well as to limit the spending and tax burden. Part of the reason is that the kind of people who are inclined to think deeply about the nuts-and-bolts of public service delivery are generally disinclined to join a political movement that is perceived as reflexively anti-government, and this has proven an intellectual as well as a political liability. Conservatives need to affirmatively embrace the idea of a social safety net as an important element of a free enterprise economy, not just as an unfortunate accommodation to political reality. 

Yet I also think that the demand for the kind of political message DeMaio articulates in his op-ed — that is, a reformist message that contrasts disciplined and effective public spending against wasteful public spending — is sufficiently great that it will eventually be met by political entrepreneurs, and that this message will most likely be taken up by conservatives with a keen interest in restraining the tax burden. 

Reihan Salam is executive editor of National Review and a National Review Institute policy fellow.

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