October 30, 2008

THE NEXT CONTRACT (repost due to technical difficulties):

The GOP's Road Back (Peter Wehner, October 27, 2008, Washington Post)

[B]arack Obama is, in important ways, a testimony to the conservative disposition of the country. He resists the label "liberal" as if it were lethal (which it is in presidential politics) and has praised President Ronald Reagan for "delivering the right message at the right time" regarding the size of government and regulations.

Obama has tacked right since winning the Democratic nomination. He repeats often that he favors tax cuts for almost everyone. He stresses that he is against a government-run health-care system and supports charter schools and merit pay. He has professed a newfound attachment to the Second Amendment, terrorist surveillance, offshore drilling and applying the death penalty for rape of a child. He speaks about lowering the number of abortions rather than highlighting his plans to eliminate restrictions on them. Obama trumpets his willingness to engage in cross-border strikes in Pakistan and has toughened his views on meeting with dictators such as Iranian President Mahmoud Ahmadinejad.

An Obama victory, then, would be a partisan, rather than an ideological, win.

But saying that conservatism is in better shape than the GOP is not to say it doesn't face challenges. It would be silly and self-defeating for Republicans to repudiate conservatism's core principles of a strong national defense, limited government, constitutionalism and protection for unborn children. Yet it would be shortsighted to believe that the issues that worked more than a quarter-century ago will carry the day.

People forget that Reagan was a creative intellectual figure; facing "stagflation," he introduced supply-side economics. In the aftermath of Vietnam and the Soviet invasion of Afghanistan, he argued that rollback rather than containment was the way to win the Cold War. A deeply principled conservative, he crafted innovative policies to meet the demands of his time.

Conservatives are in a similar position today. Issues such as welfare and crime, which helped conservatism achieve dominance, are not as potent as they were. And while taxes and spending remain important, stagnant wages and middle-class anxieties, the housing and credit crisis, health care, immigration, energy, and the environment also command domestic attention. Conservatives need to convince the public that they have a compelling agenda to address these issues.

It is also a mistake to focus just on America, consider that Canadian New Zealander, and British conservative parties, the Australian liberal party, and even French and German conservative parties have all remade themselves in recent years along Thatcherite/Third Way lines and have assumed or are on the verge of governing power. However, in the case of Britain, Australia, and America in 2000 and maybe America again on Tuesday, they have done so at the expense of Thatcherite opponents suffering from exhaustion. There seems to be some sense in which the adoption of First Way (capitalist) methods to achieve Second Way (welfare state) ends leads to a kind of nervous breakdown over time on the part of whichever sort of party--Left or Right--embraces the Third Way. Thus, just as the Tories eventually ditched Margaret Thatcher herself, Bill Clinton's successors and Tony Blair's have more or less reverted to the Second Way and George W. Bush's to the First. However, as the rise of David Cameron demonstrates, and the intentional opacity of the Unicorn Rider confirms, some time in the wilderness can help a party reconcile itself -- at least for public consumption -- to the need to ditch the old ways.

As much as Bill Clinton, Newt Gingrich, and George W. Bush have accomplished over the last sixteen years, a good bit remains to be done and that unfinished business provides the roadmap for Republican resurrection.

In essence, what the Third Way (as we define it anyway) does is to recognize that the First Wayers are correct that wealth is created most effectively where freer markets obtain, but also to recognize that the uncertainties associated with such freedom lead to unacceptable insecurity for many people and that, therefore, government must guarantee a sufficient safety net (the Second Way). In fact, all of human history really just boils down to the competing impulses towards freedom (male) and security (female) and that governing philosophy that best satisfies both is most likely to be successful politically. Happily, it appears that real world success follows that political success.

So here are a set of proposals that the Republican Party can converge around. Each requires that conservatives accept that the underlying policy is going to endure irrespective of their ideological opposition to it but affords them an opportunity to achieve the policy in a manner that vindicates their own core principles:

(1) Personal Social Security Accounts:

The fight against government guaranteed retirement funding ended when Ronald Reagan and Bob Dole saved the Second Way version of SS. The remaining question is how best to pay for the program. The basic Third Way insight is that, given the fact that most people pay into the program for forty or fifty years, and that over that long a period of time a stock market fund has a higher return than the interest the federal government can collect on the money, it makes sense to allow people to buy stocks with the money they're paying in.

George W. Bush was obviously unsuccessful in convincing Senate Democrats of the wisdom of this reform in 1995, but he won two elections running on it and there remains sufficient hysteria over the pending collapse of SS that it is a viable issue to run on.

It will be argued that Democrats will simply squash it again. But it ought to be possible to build in enough incentives to win over the votes for passage. These would include: maintaining the current SS guarantee for anyone whose account is underfunded on retirement; means-testing, with a forfeit of the account payout for those above a certain measure of wealth; federal funding of the accounts for the unemployed, disabled, etc. As the generation that survived the Depression and ushered in the New Deal dies off and is replaced by older folks who have had mutual funds, IRAs and 401ks for decades, resistance to this sort of reform from within the Democratic Party will diminish.

It will be objected that the credit crunch and wild market swings make this a sub-optimal time to propose putting the nation's entire retirement egg into the market basket. But reports on the minimal withdrawals from current private programs are tracking with our earlier experiences after the '87 crash, the S&L crisis, and the post-911 drop. The hoi polloi seem to be a lot harder to panic out of the markets than the best and the brightest. Republicans ought not underestimate people's capacity to see beyond today's tribulation to tomorrow's payoff.

(2) Paul O'Neill Child Accounts:

The former Treasury Secretary's specific proposal called for a federal deposit of $2,000 at birth and then $2,000 per year until age 18 that would be put in a rather conservative stock index to be drawn upon starting at age 65. When he proposed it three years ago and anticipated an annual return of 6% such an account was estimated to grow to $1,013,326 over such a timeframe.

(3) Universal Health Savings Accounts:

The key insight here is twofold: (1) people like the idea that every citizen will have medical coverage; but, (2) it's mostly stupid for them to have comprehensive coverage throughout their lifetimes since we're generally healthy when young but then consume a massive amount of healthcare when old.

HSAs provide a way--like the O'Neill accounts--to sock away and make money during those healthy years so that you have a lot of it for the dying time. Universality in this instance need not require a federal contribution from birth to retirement. Employee/employee contributions could be required.

(4) Personal Unemployment Accounts:

Chile has already experimented with such a system, but basically you and your employer would pay into an account that you'd then be able to draw on if you were fired or quit your job.

Taken together, this set of accounts provides the social security net that the Second Way demands, but does so in a way that utilizes First Way principles, investment in free markets and a transfer of power away from the State and bureaucrats to the individual.

(5) Tax Reform:

There are as many plans for tax reform as there are tax payers (lower mine, lower yours, raise his) but there are two broad conservative principles can guide a broader reform plan: first, shift away from taxing income to taxing consumption generally; and, concurrently, tax eternalities specifically via Pigovian taxes.

The ideas here, that the tax code should encourage savings rather than consumption and should force people to bear the costs of their behavior upon society are well-suited to a Puritan Nation and the latter forms the basis for an:

(6) Energy Policy:

As part of the wider tax reform the GOP would propose vastly increasing the tax on gasoline. Not only would this tend to drive down consumption and liberate us from dependence on oil produced by enemyregimes, it would make gas expensive enough that alternative energy sources were made viable and would foster innovation. At the same time, it would not have government picking and choosing which innovative ideas to fund.

(7) Free Trade Reform:

The chief obstacle to obtaining the next round of free trade agreements is not, as the Right would have it, labor or environmentalists, or Europeans, or Democrats or whoever, but the agriculture subsidies that farm state Republicans have been only too happy to defend and maintain over the years.

Developing nations quite correctly point to this assistance that our federal government provides to our farmers and asks why they should be expected to ask their people to compete against us on a playing field that we've slanted in our favor. Phasing out ag subsidies would allow us to come to the trade table with cleaner hands and, at this point in the nation's history, is pretty much just Welfare Reform for the wealthy. Farmer Brown is long gone.

(8) Immigration Reform:

This is the most bitter point of contention that the GOP needs to get past in house, or it is not going to be a successful party at the national level. Polls consistently show that Americans are not anti-immigrant so much as they are anti-illegality. They are reasonably unbothered by the presence within our borders of twelve million illegal aliens, but quite bothered that they came illegally.

The solution is easy enough, though it will be unacceptable to those who are genuinely anti-immigrant (which would only provide clarity anyway): the current immigration system needs to be reformed in such a manner that it allows nearly all of those who seek to come to America to do so by going through a few legal channels. (Those barred could include criminals, political undesirables, etc.) Obviously some program would have to be implemented to legally document those who are already here. Providing a few visible though pointless hoops for them to jump through would quell some of the anger on the Right, but none of the steps should be too onerous or arduous.

(9) Campaign Finance Reform:

We need only look at the current campaign, between two candidates who we were assured would run an exemplary race, to see that the system leaves a lot to be desired. Republicans are quite properly repelled by the notion of public financing and object to current limitations on free speech, but have been largely silent about how they'd improve a system that, let's be honest, makes us all feel contempt for the processes of our own democracy. There is a clear conservative interest in cleaning up a system that is widely seen as corrupting and that fosters disregard for the Republic itself.

This seems to be an area where attempts to regulate the system have made matters worse, because all they've done is force donors and candidates to disguise what they're about without removing any money or the apparent influence of money from the equation. A set of reforms that restricted all political contributions to individuals only, that removed limits on contributions, that required immediate public reporting of all contributions and that required broadcasters to provide set airtime to candidates would not necessarily solve a lot of problems, but it might streamline the system a bit and make it more aboveboard.

(10) Line Item Veto Constitutional Amendment

The ability of the Executive to remove the discrete tax and spending provisions that campaign contributors and lobbyists currently spend money to get inserted in bills is another way to clean up the system. The Court having held it unconstitutional after the GOP passed it last time, it must now be revived via amendment to the Constitution.

There are certainly other items that the GOP can reorganize itself around, but those would appear to address many of people's main concerns right now. And the important thing is that it is more a reorganizing effort than a rethinking effort. These ideas have been percolating and really just await the sort of concerted enunciation and repetition that Ronald Reagan, Newt Gingrich and George W. Bush brought to prior successful Republican campaigns. The party isn't out of ideas, just out of breath. A legislator, like John McCain or Bob Dole, isn't generally who you look to for an agenda and for a sweeping vision of governance. They're who you have hammer out the details and make the compromises to put the plans into effect. They need to be on board, but not necessarily steering the ship. The next GOP agenda will be better carried by a strong executive voice at the RNC, by talk radio hosts and columnists, and by whichever one of the excellent group of governors we nominate next time.

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Posted by Orrin Judd at October 30, 2008 2:52 PM
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