WHAT DOES THE GOP REALLY WANT?
Forgive us for being a little confused. The GOP took Washington by storm in 1994 on a platform of balancing the budget. Budget reduction was written into stone: the Contract With America. There was talk of a constitutional amendment mandating the elimination of government deficits. And now? Nary a whisper about deficit reduction among Republican primary candidates.
Instead, there are new voices. Steve Forbes sings about tax cuts that will suddenly double economic-growth rates. So much growth, we are told, that we won't have to really cut government spending deeply. No pain, all gain. Pat Buchanan shouts darkly about enemies in Big Business, immigrants stealing jobs, and the need for protectionism. In a world of the global Internet, he prescribes tariffs. Will the real GOP economic platform please stand up?
We think reasonable people agree that economic policy should revolve around the twin tasks of cutting the deficit and promoting growth. The two are intertwined. Balancing the budget would curb government borrowing and send interest rates down. That, in turn, should set off a refinancing surge, putting cash into consumers' pockets. Lower rates should also prompt a capital-investment boom, boosting profits and jobs.
Then cut marginal tax rates to allow individuals and corporations to keep more of what they earn. The flat tax would, in all probability, increase, not decrease, the budget deficit. True believers in the Republican party say that a 17% flat tax will generate enough economic growth and tax revenue to balance the federal budget without the pain of spending cuts. We wish with all our hearts that it were true. But little in life is gained without discipline and difficulty, and we suspect that curbing entitlement spending is one of them.
Balancing the budget must be done through real fiscal sacrifice, not economic alchemy. Spending cuts accompanied by tax cuts can be a potent policy brew that moves the economy to a new, higher plateau of growth, say 3% to 31/2% per year. At that rate, politicians in Washington might eventually even have a bit of a budget surplus to squabble over.
What is not acceptable is the protectionist demagoguery now spreading within the GOP. The Republican Party's historic tradition of free trade and open markets is being tarnished by an ugly kind of economic nationalism. Even the moderate Senator Bob Dole, to his shame, is beginning to echo the vile threats of extremism. There is no way to suppress the twin revolutions of technological change and market globalization, and there are no enemies to blame. Quite the contrary: Globalization and technology can spur growth.
It is time for the GOP to get a grip. Primaries by their nature tend to push candidates to extreme positions as each of them rushes to curry the favor of small, tightly organized voting groups. But the Republican Party is fast splitting into factions proselytizing strange, and dangerous, economic faiths. The common ground for GOP economic policy revolves around reducing the budget deficit and cutting taxes responsibly. The party should return to it as soon as possible.