A path out of the wilderness.
Dec 15, 2008, Vol. 14, No. 13 • By MATTHEW CONTINETTI
If you're out of power, you might as well take advantage of it. Surely this moment calls for some creative conservatism. The economy has been in recession since December 2007. The financial, housing, and automobile sectors are in disarray. You need to take a healthy dose of anti-anxiety medication before watching the volatile equities markets. Consumer spending is falling to places where it hasn't been in decades. November saw the largest one-month drop in employment since 1974. The Bush administration has been zig-zagging from one policy fix to another with no sign of success.
The GOP is shell-shocked from last month's election results. The gains the party made in the years since the 1994 Republican revolution have been erased. Republicans are without a clear agenda. People say that Republicans don't have any ideas, but that isn't entirely true. They have plenty of ideas--but too many of them are about which part of their coalition is to blame for their current misfortunes.
This sort of squabbling is less than useless. It's inward-looking, woolly-headed, and only furthers the perception that the GOP is out of touch. Unfortunately, when Republicans have tried to be in touch, they've been tempted to be irresponsible. In September, more than a few were ready to risk the global banking system's collapse in the hopes that they could ride anti-Wall Street populism to victory.
These days, plenty of Republicans and conservatives are ready to turn their backs on the big three automakers, and risk a spike in unemployment and who knows what other spillover effects, because the government has to draw the line somewhere. This doesn't mean it's the right policy to support the bailout the automakers want. It probably isn't. But sometimes it seems as if the sum total of the current GOP economic agenda consists of calling for capital gains tax cuts (who has gains?), corporate tax cuts (are there any profits to tax?), and relishing the prospect of bankruptcy for GM, Chrysler, and Ford. How exactly would any of this help the average working--or unemployed--family?
Meanwhile, liberal Democrats, relatively unimpeded, will move on with their agenda.
That agenda is clear. Conservatives may not have any definite answers to what ails the economy and how to fix it, but liberals do: an enormous Keynesian stimulus--somewhere between $500 billion and $1 trillion over two years.
The good news is that conservatives now have a lot of time on their hands. They can think about the future. They can enjoy the luxury of opposition and explore policy alternatives. They can look for something more substantive than fanciful and nostalgic small-government talk, something more principled than going along with Obama. They can pick their battles.
A place to start would be to distinguish between interventions in the economy that might lead us out of this mess and those that will prolong the suffering. The right kind of tax cuts would help. Lower payroll taxes, for instance, would make it cheaper to hire workers and put more money in the pockets of those already working. And there are some regulations--like increasing capital requirements for financial institutions--that might actually shore up confidence in the financial sector.
To purge the complicated and debilitating mortgage securities from the banking system, conservatives might back a federal mortgage refinancing proposal along the lines of what Lawrence B. Lindsey outlined in these pages ("Building a Better Bailout," December 1, 2008). And there are other serious proposals worth considering. At the same time, it will be necessary to energetically oppose those measures that would seriously damage the chances of recovery, such as the rapid unionization that would follow "card-check" legislation, a return to protectionism and high tariffs, and the tax hikes scheduled for 2011.
On the auto bailout, it might help if Republicans abandoned their knee-jerk, anti-Detroit mentality. And not just because of the human costs of a bankrupt American auto industry. An awful lot of Detroit's problems were actually made in Washington. Why not call loudly for the repeal of onerous CAFE regulations (which force Detroit to lose money making small cars no one wants to buy), perhaps in exchange for a gradual increase in the gas tax? The hit to consumers at the pump could be compensated for by the payroll tax cut mentioned above.
A party with bold prescriptions--even competing bold prescriptions--for the future is bound to perform better than one without ideas. And a politician who adopts a program of principled reform--one that responds to the problems of late 2008 and beyond--could just wind up a Republican leader in the process.
The wilderness beckons. Let a thousand conservative flowers bloom.
--Matthew Continetti, for the Editors