Why Republicans Lack a Compelling Economic Agenda

Josh Barro is the lead writer for the Ticker, Bloomberg View's blog on economics, finance and politics. His primary areas of interest include tax and fiscal policy, state and local government, and planning and land use.
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Bloomberg View columnist Ramesh Ponnuru has an essential piece in the forthcoming National Review, rebutting several narratives of Mitt Romney’s loss in the presidential election and Republicans’ simultaneous loss of three Senate seats.

Ramesh argues that the Republican Party's key problem is that its economic agenda does not strike most Americans as likely to improve their economic fortunes:

The perception that the Republican Party serves the interests only of the rich underlies all the demographic weaknesses that get discussed in narrower terms. Hispanics do not vote for the Democrats solely because of immigration. Many of them are poor and lack health insurance, and they hear nothing from the Republicans but a lot from the Democrats about bettering their situation. Young people, too, are economically insecure, especially these days. If Republicans found a way to apply conservative principles in ways that offered tangible benefits to most voters and then talked about this agenda in those terms, they would improve their standing among all of these groups while also increasing their appeal to white working-class voters. For that matter, higher-income voters would prefer candidates who seem practical and solution-oriented.

I think Ramesh is absolutely right, but a question he does not address in his piece, or his Bloomberg View column earlier this week, is why the Republican Party hasn't fixed this problem. And the reason, unfortunately, is not simply that Republicans lack the imagination to come up with ideas to get higher wages, more jobs and affordable health care to the middle class. It is that there is no set of policies that is both acceptable to conservatives and likely to achieve these goals.

Take health care. Ramesh laments that conservatives were not pushing Romney "to outline a health-care plan that would reassure voters that replacing Obamacare wouldn't mean taking health insurance away from millions of people." They weren't doing so because conservatives do not want a federal policy to achieve universal health insurance coverage.

Any plan that will achieve universal coverage must have one of two characteristics. Either it must spend hundreds of billions of dollars over the next decade on new health care subsidies, like Obamacare does. Or it must drastically reduce the cost of health care to a point where it falls in line with other advanced countries -- which means, in practice, paying doctors much lower salaries than they earn today.

Conservatives simply do not want to do either of those things. So a few years ago, many (but by no means all) conservatives supported a creative solution to the health insurance problem: Mitt Romney's health plan in Massachusetts, which was similar to Obamacare but, due to creative accounting and federal subsidies, appeared to be quite inexpensive.

Obamacare could not hide its true fiscal cost, and its key backer was a Democrat, so Republicans turned strongly against it. That left the Republicans in the position of effectively conceding that they had no plan to cover the uninsured. Republicans will be stuck in that position until they decide that they also are willing to spend heavily on expanding coverage, or that they are willing to stiff the doctors' lobby in a way Democrats won't. I am not holding my breath.

Similarly, Republicans have not put forward ideas that middle-class Americans see as likely to cut unemployment or raise wages. Republican talking points about lower taxes and less regulation are unchanged since the Reagan administration, and the public has found them to be wanting, for good reason, given the stagnation of middle-class incomes.

But what other policies could they put forward? I share Ramesh's view that a nominal gross domestic product target would have cut unemployment and spurred real GDP growth over the last few years. But nominal GDP targeting would have meant looser monetary policy over that period, and most conservatives seem to think that the Fed is already too loose -- Many are irate about quantitative easing.

Conservatives have strongly opposed fiscal stimulus to create jobs. A few prominent conservative economists have called for aggressive mortgage market interventions, but Republicans in Congress have been resistant. More high-skill immigration would grow the economy and jobs, but conservatives are skeptical of immigration. Nor are conservatives likely to endorse left-wing approaches to growing low and middle incomes, such as easier unionization, higher minimum wages or significantly more progressive taxation.

Given this issue landscape, it's no surprise that conservatives were left just with platitudes about taxes and regulation -- and with an issue that both Ramesh and I have noted as Republicans' one popular idea to create middle class jobs: increased fossil fuel production, an issue on which President Barack Obama worked very hard to match Republican rhetoric.

And that is the problem with Ramesh's prescription that Republicans should find "a way to apply conservative principles in ways that offer tangible benefits to most voters."Any conceivable agenda that is likely to be effective in getting health care, jobs and higher wages in the hands of the American masses will be unconservative, at least on the terms by which most American conservatives define conservatism.

(Josh Barro is lead writer for the Ticker. E-mail him and follow him on Twitter.)

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.