Seeing pictures of Mitt Romney doing his laundry reminded me why I am not a populist. If I were a populist, I’d actually care if a presidential candidate did his own laundry. Though I want my president to have a strong grasp of how an economy operates, I’m really not that concerned whether he knows how to get out those really tough stains, or knows the proper way to fold a shirt. To be honest, I really don’t spend much time considering if the multi-millionaire former venture capitalist and governor is more “in touch” with the average American than is the multi-millionaire consultant and former congressman, or how either one of them stacks up in this regard with the multi-millionaire Harvard-educated lawyer who has never attempted to make a living outside of government. The problem with populism, whether on the left or right, is that it tends to play to the prejudices of the “common man” whether or not those prejudices are based in fact. Both the “Tea Party” and “Occupy” rail against Wall Street as a symbol of corporate greed that has fleeced the common man. Now it is true that the focuses are a bit different. Occupy argues for Wall Street’s destruction; the Tea Party argues against government “bailouts.” But both tend to portray Wall Street (by which they usually mean investment bankers, mortgage bankers, and commercial banks generally) as inherently corrupt, a leach on society whose members are paid more than they “deserve.” Occupy, apparently not following the stock prices of Bank of America or Morgan Stanley, argues that Wall Streeters actually engineered the financial collapse for their own benefit. Newt Gingrich, taking on the mantel of conservative populist, portrays successful private equity firms, responsible for the growth of numerous business enterprises (like Mitt Romney’s Bain Capital) as “vulture capitalists” and argues that owning stock in Goldman Sachs is evil. People involved in finance, especially those who make a lot of money at it, are inherently far removed from the common man and hence an easy populist target. Aside from making money, many people have very vague notions of what the financial industry actually does. Even Democratic Senator Max Baucus, chairman of the Senate Finance Committee, commented that the financial industry is not part of the “real economy.” Everyone knows that manufacturing (idealized as it is) is “real” but services are a bit harder to grasp. But the fact is that those ghouls on Wall Street who make the flow of equity and debt capital remarkably efficient play a key role in bringing together those who need capital to expand businesses and those who have capital to invest, and thus are responsible for keeping the cost of capital (a major cost to most every business) significantly lower than it otherwise would be. It might not play well on Main Street to defend Wall Street, but demonizing Wall Street is not good economic policy. The so-called bailouts to banks and other financial institutions may be hard to swallow, particularly given the culpability of many of those institutions in engaging in bad lending practices, not understanding financial instruments they were buying or insuring, and doing a poor job of managing risk. But many were more sinned against than sinners — victims of government policies that essentially mandated risky lending, corrupted rating agencies that routinely gave AAA ratings to securitizations they knew carried far greater risk, and being blindsided by the ripple effect of forced deleveraging and imploding home prices resulting from the collapse of the bubble caused by other, more reckless lenders. Stepping in with support to prevent the financial collapse from wiping out most of Wall Street and the banking industry, and with it a good deal of Main Street, may not have been popular, but it was nonetheless imperative (though certainly the execution by the government and the Federal Reserve may have been far from perfect). Good economic policy, however, does not usually make for good populist politics. Take for example President Obama’s push for the so-called “Buffett Rule” that would effectively double the tax rate on capital gains on those who do the most investing by taxing anyone who makes more than $1,000,000 a minimum tax rate of 30%. Raising the tax rate on capital gains from 15% to 30% effectively raises the cost of capital to all those businesses that need that capital. There could hardly be a more effective job killer. But this is “fair,” argues Obama, because millionaires and billionaires shouldn’t pay a lower rate than their secretaries. Fairness is a big populist war cry. The problem is that fairness is rather subjective. It’s easy to argue that a billionaire shouldn’t have a lower effective tax rate than an average office worker. The reality, however, is most high income people pay effective average tax rates well above those paid by the middle class. In fact, according to the CBO, the average effective average federal income tax rate (federal income tax paid divided by total taxable income) in 2007 for middle America — the middle 60% of Americans — was 4.2%, well below the 14% paid by Romney. So, is that “fair”? Is it “fair” to have one person paying many multiples of what another person pays in taxes simply because he works more hours, or took his education more seriously, and/or put a lot of capital at risk in a business enterprise that prospered? Fairness is a tricky issue when you get beyond populist rhetoric and actually look at the facts. Obama, however, is merely playing the populist card. Does he really believe that sticking it to the rich is more important than creating jobs? Probably not. But he knows that much of the voting populace can not make the connection, and so he can potentially win needed votes with a populist rallying cry against the rich, knowing full well that the “Buffett Rule” has no chance of passing in either the House or Senate. Obama also knows that even if a “Buffett Rule” became reality, the effect on revenue to the Treasury would not make a dent in his trillion dollar deficits. There simply are not that many Buffett’s and Romney’s out there. Sticking it to some bogeyman should not be an end in itself, regardless of how satisfying it might feel. Yes, I understand that politics is politics and populist pandering will always be a part of it. It is far easier to play to a crowd than to educate a crowd. But we should always understand that playing the populist card is inherently dangerous, particularly when it seeks to place the blame of our problems on some small group of people who we deem to be not much like ourselves. Conservatives have always competed well in the realm of ideas, and that’s where we should strive to keep any political debate. When government becomes more beholden to populist politics than to sound policy considerations, we all lose in the long run.
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Beware the Election Year Populist
This was reported back in December. With this kind of thinking there will never be a recovery in this nation. California ought to be ashamed considering the economic situation in that State.
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Nocovery With Decisions Like This
[Posted by Karl] Media outlets from Salon to the Wall Street Journal have hyped the uptick in optimism about the economy and Pres. Obama’s job approval number in the latest NBC/WSJ poll , emphasizing the danger it poses to the eventual GOP nominee come the general election. Salon’s Steve Kornacki summarizes: By a 37 to 17 percent margin, respondents said they expect the economy to improve in the next year; back in October, they thought it would get worse by a 32-21 margin. And the number of Americans who believe the country is heading in the right direction now stands at 30 percent – hardly a huge number, but a clear jump from the 17 percent who said so in the fall. Overall, Obama’s approval rating is at 48 percent, the highest it’s been in an NBC/WSJ poll since June, when he was still basking in the afterglow of Osama bin Laden’s demise. Gallup also finds more optimism about the economy, but 49% say they are worse off financially today than a year ago, a near-record high. Gallup’s version of the right track/wrong track question is at 18% — again up from Autumn 2011, but the lowest recorded for January of a presidential election year. Americans’ worries about maintaining their standard of living, being able to pay medical bills or losing their job in the next tear are among the highest Gallup has measured in the past 20 years, rivaling the levels seen in 1991 and 1992. Americans are broadly dissatisfied with the state of the nation’s economy, the size and power of the federal government, and the moral and ethical climate in the country. Kornacki gets this next bit right, but there’s a kicker: The numbers are a reminder that a president’s reelection fate is ultimately more dependent on the state of the economy than on what strategy the opposition party employs and which candidate it nominates. If economic anxiety and pessimism are rampant, then winning a second term is a profoundly uphill slog, even if the opposition fields a supposedly weak nominee. But if the public widely believes that conditions are healthy or at least improving, then credit – deserved or undeserved – invariably goes to the White House occupant. Kornacki must be hoping his readers do not click on his link. He’s citing Douglas Hibbs, whose “Bread and Peace” model analyzes just how much of post-WWII election outcomes may be explained by peace and prosperity (I have cited Hibbs myself a number of times). His formula uses only two variables — real disposable personal income per capita and military fatalities in unprovoked wars. Here are the results through 2008 : Kornacki links to the Q3 2011 update, in which Hibbs calculated that per capita real income growth must average out at 4% or more per year over the last four quarters of the term for Obama to have a strong chance of re-election: If the US economy gets into robust recovery mode, real income growth could be high enough to secure the President Obama’s re-election. However, the pace of recovery from the 2008 Great Recession remains sluggish, and the famous 2009 book This Time Is Different: Eight Centuries of Financial Folly by Reinhart and Rogoff documents that recoveries from contractions originating with the bursting of speculative financial bubbles are not V-shaped as in garden-variety recessions, but instead are typically prolonged U-shaped affairs lasting 5 to 6 years. The statistical properties of the time path of US per capita real disposable personal income indicate that the chances of year-long quarterly growth rates on the order of 4% or higher are no better than 1/7. Henry J. Enten gave his own update using the Hibbs model earlier this month: Wells Fargo experts predict increasing growth of RDPI over the next year. The problem for Obama is that he already is in such a deep hole that the expected growth (when population growth is taken into affect) is only predicted to be about about 1%, for an overall weighted growth of +0.3% over the presidential term. And this +0.3% growth would forecast Obama garnering 46.8%, which is obviously not enough to win re-election. Indeed, even after Enten boosts Obama’s number by adjusting for incumbency and divided government, he cannot get Obama to 49%, although that would at least get Obama within the standard error for a modified Hibbs model. In the real world, the newest figures for Q4 2011 are not much better: real disposable personal income increased at only a 0.8% annual rate, after declining the prior two quarters. On a year-ago basis real disposable personal income declined 0.1%, the only decline ever recorded in a non-recession environment. That 0.8% rate is the Obama average . Of course, campaigns matter : Political scientist Lynn Vavreck argues that if the out-party successfully capitalizes on a weak economy or, in times of economic growth, successfully locates another issue to campaign on, then they are expected to win an additional six points — even controlling for the actual state of the economy and casualties in war. But this underscores the drag the weak economy is on Obama’s odds for re-election. –Karl
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Fundamentals are fundamental
Everybody is talking about fixing earmarks as if they are the sole source of today’s deficit woes, despite the fact that all of my opponents enthusiastically participated in the process, and that earmarks have now been halted. But what I’m talking about is how to fix America’s economy so that entrepreneurs can create jobs and we as a nation can once again live within our means. My plan to cut spending and taxes will help hard-working Americans, and by one estimate, create ten million jobs within three years and move unemployment to below 6%. I will do this with your help by cutting $5 trillion in five years of federal spending we cannot afford, and passing a Balanced Budget Amendment so that we don’t do this again to future generations. More important to our fiscal health than a smokescreen on earmarks, I will reform Medicare and Social Security and end other entitlements for the able-bodied just as I have already done with welfare reform. Some specific spending cuts I will make include eliminating all energy subsidies while unleashing America’s domestic energy sources, eliminating at least half of the U.S. funding contribution to the United Nations while standing for America’s interests and values around the world, and downsizing the federal bureaucracy by eliminating at least 10% of non-defense related workers. The only government jobs President Obama is willing to cut are military jobs, the men and women who have served our nation in harm’s way, undermining our core constitutional responsibility to defend America. The one thing I will not cut is defense; the top responsibility of the federal government is to keep America safe. The real fiscal challenge that we face as a nation is the fact that President Obama and Congress are spending more than 40% more than we take in each year; racking up deficits of more than a trillion dollars a year on top of our 15-trillion plus debt which holds back our economy and undermines our future. The federal expansion of entitlements under ObamaCare significantly worsens this problem. President Obama thinks he can tax his way to growth to cover up his extreme over indulgence of hard earned taxpayer money. His theory and practice is to “spread the wealth” which actually spreads poverty and economic decline. In 2008, John McCain, whose impressive military service to the nation, one I greatly respect, based an entire presidential campaign attacking the earmarking process. Apparently he is bringing this back again as attempted cover for Governor Mitt Romney’s big-government ways such as the freedom-undermining insurance mandate in RomneyCare embraced in ObamaCare. Senator McCain, a moderate in many areas, did that in part in 2008 to shift the focus from his weak record on addressing the financial burden of growing entitlements, the real challenge to our long-term economic viability. I don’t recall Senator McCain joining me in leading the fight to reform entitlements on Welfare Reform, or arguing around the country for Social Security reform, or successfully embedding fundamental health-care reforms in Medicare, later undermined by ObamaCare. Having said that, Senator McCain is right about at least two things; Mitt Romney was significantly more moderate and big government than he, and, the earmarking process was being abused and had to be stopped. Just listen to Mitt Romney on earmarks: “I’d be embarrassed it I didn’t always ask for federal money whenever I get a chance.” That’s why I supported a moratorium on earmarks. The real straight-talk express on fiscal issues is the message I’ve been delivering: the need for sustainable entitlement reform. I have been riding around in a truck telling seniors in nursing homes in Iowa, and retirees in South Carolina, of the need to reform Medicare and Social Security, in particular. Entitlement programs represent nearly 60% of government spending, growing further on an unsustainable path as more people are in poverty under Obamanomics and more of our citizens become seniors. Let’s clear the record on earmarks with the help of Congressman Ron Paul whose passion I admire but who captures well the Massachusetts big-government flip- flopping on earmarks and spending, and Texas-sized grandstanding of my fellow candidates on this issue. During an interview with Neil Cavuto, after his second run for the presidency, Congressman Paul pointed out that eliminating earmarks wouldn’t cut one penny from the federal budget. Cavuto asked: “But would you argue, then sir, that, when John McCain was here saying the whole earmark thing itself is what’s out of control?” Paul: “Oh, no, no. He – he – totally misunderstands that. That’s grandstanding. If you cut off all the earmarks, it would be 1% of the budget. But if you vote against all the earmarks, you don’t cut one penny.” Here in 2009 Congressman Paul is telling it straight. Properly done, earmarks don’t add to total spending numbers, they take a percentage of dollars from the control of Washington bureaucrats and let local officials decide what is most important for their community instead, like those in South Carolina did in support of improving Charleston Harbor. You may not have heard that in 2009 Congressman Paul had more earmarks in a spending bill than any other Republican that same year. Paul, representing a single district, made over $157 million in earmark requests for 2011, one of only four House Republicans to request any earmarks. Additionally, he made over $398 million in earmark requests for 2010, again one of the leading Republican House members. I’m sure Governor Rick Perry, many of whose values I share, also agrees that his 1,180 plus special requests for funding from the federal government and his 26 years of Texas government service doesn’t mean that he no longer supports the 10 th Amendment. This adds up to about one federal funding letter request to Washington every four days. To say it’s OK to lobby for local projects — just not vote for them, or to ask for special projects but not to support the constitutional role of the legislature to provide them — doesn’t pass the test. While I share cowboy boots and many values with Texans, that’s not straight shootin’ where I come from in Pennsylvania. This is Texas-sized grandstanding to quote Congressman Paul. The real gateway drugs and the real challenge to America are not earmarks but exploding overall spending and rapidly growing entitlement liabilities which grow government, dependency, and economic decline. I’m not ashamed that I fought to have local officials and county commissioners in Pennsylvania decide the best use of their tax dollars rather than Washington bureaucrats. The question of who decides where to spend federal taxpayer dollars has already been decided by the Constitution — it’s the Congress. Abuse should be stopped and corruption should be prosecuted. I raised my hand and swore to uphold the Constitution for 16 years as a member of Congress, and I still passionately support it and thank God for the wisdom of our founders to let the representatives of the people decide rather than bureaucrats. The real question for our nation is who will lead us back to fiscal and economic strength. My focus is not on debating 1% of our fiscal challenges but on facing 100% of them. This abdication of leadership and smokescreens rather than telling the truth will only increase insecurity for seniors, limit the opportunities of young people, and put our nation’s security at risk. I have held more than 380 public events and town hall meetings in Iowa, more than 100 in New Hampshire, and I’ve already held nearly 150 public events in South Carolina. In every meeting, the American people are responding to real answers because they know the truth and they want the games to stop. They want the real challenges to be addressed head on. They want problem solving and a brighter future for their children. As far back as 1995 I was taking heat from the establishment for “rocking the boat” when I called on the Republican Chairman of the Senate Appropriations Committee to resign after he switched his vote to defeat the Balanced Budget Amendment by just one vote. Had he joined me and those who voted for it, we could have worked together to take away the credit card and put America on a budget. I can promise you this: nothing has changed since then except our growing debt. I am prepared to take the heat in order to lead our country once again to fiscal health and to restore America’s greatness for the future. Let’s keep our focus on the real spending problem: entitlements that need to be modernized, restrained, and made sustainable, the real need for a Balanced Budget Amendment, and the real goal which is defeating Barack Obama and restoring America’s future together. Game on. Rick Santorum, a former representative and senator from Pennsylvania, is a candidate for the Republican nomination for president.
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Shootin’ Straight on Our Fiscal Challenges
There’s been a lot of talk, maybe too much talk, about the struggle between the GOP “Establishment” and “Outsiders,” sometimes – but sometimes not – meaning the Tea Party, however defined. There are many fault lines, wheels within wheels, that divide different groups on the Right, but it’s time to clarify the core issue that has people of perfectly conservative temperament and ideology scratching their heads at their own constituents. After all, we’re conservatives: establishments are a good idea, a necessary intersection of tradition and meritocracy, giving undue weight to neither and co-opting dangerous ideas about revolution and radical change. What’s so bad about that? The answer is a simple one: it’s almost entirely about spending. The current trajectory of American government spending is one in which spending by government in general, and by the federal government in particular, just keeps on growing as a share of the economy, further and further crowding out the space occupied by free private citizens and businesses in the private sector. Worse, much of this happens automatically, without the consent of the governed in any but the most perfunctory way: discretionary spending is designed to grow because budgets are set by using the prior year’s spending as a baseline, and entitlement and public employee benefit spending – which consume a far larger share of spending – grows by itself in the absence of any affirmative legislation to stop it. The federal government has not passed a budget in nearly 1,000 days (President Obama’s State of the Union speech will mark the 1000th), yet spending has continued to grow, and will continue to grow as far as the eye can see – a dramatic change in our country taking place on auto-pilot – unless dramatic action is taken in response to stop it. Jack’s magic beans have nothing on public spending. And the growth of spending bleeds over into every other issue. Federal spending comes with strings attached, and those strings reduce the independence of the states and burrow the arms of the federal octopus ever further into the area of social policy. Institutions like churches, schools, and hospitals become hooked on federal money, and have to dance the federal tune. Spending gets earmarked and targeted to favored people, businesses and groups, making society less equal and government less ethical. Spending distorts energy markets, housing markets, and markets for higher education, creating bubbles and inefficiency. And that’s before we even get to the metastatic growth of federal regulation. And eventually, runaway domestic spending saps our ability to adequately fund our national defense. There is general philosophical agreement among both Republicans and conservatives about all of this. Where the fault line lies is in exactly how far we are willing to go to do something about it. Many people who got into politics as good conservatives, and still think themselves good conservatives constrained by the limits of practical possibility, are at a loss when it comes to meaningful ways to tame Leviathan. For reasons, some good (the need to use political power to protect national security, preserve control of the courts and restrain regulatory overreach), some less so, they have thrown in the towel on the central issue of the day. That is who we speak of as the “Establishment.” Others – not always with a sense of proportion or possibility, but driven by the urgency of the cause – seek dramatic confrontations to prevent the menace of excessive spending from passing the tipping point where we can no longer save room for the private sector. They are the Outsiders, the ones challenging the system and its fundamental assumptions. The analogy of a Tea Party is an apt one: the Founding Fathers had much in common with the Tories of their day, but disagreed on a fundamental question, not of principle, but of practical politics: whether revolution was needed to protect their traditional rights as Englishmen from being eradicated by the growing encroachments of the British Crown. As it was then, the gulf between the two is the defining issue of today’s Republican Party and conservative movement. In short, the real “Establishment” and “Outsider,” “anti-Establishment” or “Tea Party” factions are not about who is conservative or moderate, or who is inside or outside the Beltway or public office, or who has fancy degrees or a large readership/listenership or attends the right cocktail parties or churches, or even necessarily who has or has not supported various candidates. The term “Establishment” is used and abused in those contexts, but invariably describes only a division of passing significance. The real battle between the Establishment and the Outsiders is between those who urge significant changes in our spending patterns as a necessity to preserve the America we have known, and those who are unwilling to take that step. It is, in short, between those who are, and those who are not, willing to take action in the belief that the currently established structure of how public money is spent is unsustainable and must be fixed while it still can if we are not to lose by encroachments the all the other things Republicans and conservatives stand for. The Background In a way, the division between confrontation and accommodation with the growth of the public sector is one that dates back to the 1950s, and the historical origins are useful in understanding why National Review , in particular, has found itself caught in the crossfire between its editors and its readership. The great GOP debate of 1933-1956 or so was how to react to the New Deal: try to moderate its excesses, or assault its premises. Dwight Eisenhower, in the long run, won the battle within the party in favor of the former; William F. Buckley, jr., in the long run, won the battle within the conservative movement in favor of the latter (hence the slogan “standing athwart history, yelling ‘stop!’”). Yet even Buckley and his magazine spent more effort combatting the status quo in national security policy than on the size of government. From Goldwater’s failure in 1964 to Reagan’s victory in 1980 and Newt Gingrich’s victory in 1994 and failure in 1995-96, the common thread has been that conservatives win arguments about cutting taxes and restraining domestic discretionary spending, but lose arguments about dismantling the entitlement state created by FDR and LBJ and the auto-pilot budget-bloating processes of the 1970s. George W. Bush cemented this consensus in 2000-05: he could get the public behind cutting taxes and (sort of) restraining the growth of discretionary domestic spending but couldn’t get the public behind Social Security reform and was only able to get elected in 2000 by promising – then delivering in 2003 – a pricey new Medicare prescription drug entitlement. It seemed at the time that conservatives would have to content themselves with winning battles on taxes, national security, social issues/the courts and occasionally discretionary spending, but couldn’t challenge the status quo on the entitlement state and its compulsory collectivist impulses. Then we got the multiple whammies of 2006-2011, which collectively pushed a lot of people on the Right from a position of accepting that they might be naive about how much change was possible, to being determined that the Establishment was naive about how long the old system could stand: 1. The Congressional GOP got swamped in the 2006 and 2008 elections, casting doubt on the long-term electoral viability of a strategy of modest ambitions in restraining spending, as well as spotlighting the ethical hazards of co-existing with massive federal spending. 2. The U.S. financial crisis left the federal and state governments in an immediately and visibly horrible fiscal position, bringing a renewed focus to the fact that entitlements (both citizen entitlements and public-employee benefit entitlements) would have brought us to this pass eventually and were only getting worse – a fact that otherwise-moderate public officials like Chris Christie and Mitch Daniels were able to exploit to get significant public support behind rethinking the social contract between government and its employees, if not its constituents. 3. The U.S. fiscal crisis paled in comparison to the fiscal crises of Europe. The horrible position of Greece in particular was a radicalizing event, as observant Americans were presented with a vivid example of how an entitlement state unravels. And the downgrade of the U.S. credit rating in the summer of 2011 cracked the complacency of those who assumed such things could never happen here. 4. More broadly, the financial crisis shook the faith of people throughout American society in our leading institutions, public as well as private. It made many people less trusting of experts, and less easily soothed by appeals to the status quo. The Occupy Wall Street movement, in its own way, underscored the fact that the center was fraying from both sides. The growth in support for Ron Paul is likewise a symptom of this dynamic. 5. Barack Obama got elected and pushed the most dramatic expansion of the universal-entitlement state in memory on healthcare, destroying the illusion that Republicans could hold the line by being reactive and awakening many previously sleepy citizens to the danger of comprehensive, compulsory national policies dictating the details of our daily personal lives. 6. The war – the glue that had held together Bush’s coalition – first turned politically toxic in 2006 and then began to recede in importance, almost immediately after both parties chose their presidential nominees in 2008 primarily on the basis of their positions on the Iraq War. Without the war as a unifying political force, it was no longer possible to convince spending hawks to set their concerns aside for the greater good. 7. The success of some – but by no means all – Tea Party candidates in the 2010 elections laid bare the fact that a lot of voters out there were open to the idea that possibly the whole structure of the federal government’s relationship with the voters was unsustainable. Ben Domenech offers a helpful graph that sums up the impact : Confronting Leviathan Where do we go from here? Congress The Establishment vs Outsiders dynamic has manifested itself most clearly in the various battles John Boehner – to his credit, despite being temperamentally and by experience a classic establishment figure himself – has attempted to wage on budget issues, most of which have ended with him surrounded and outmaneuvered by a de facto alliance of the Obama Administration, Harry Reid, and most depressingly Mitch McConnell. A line of battle is only as strong as its weakest link, and Boehner has repeatedly gone into battle without being able to depend on McConnell and the Senate GOP to hold his end of the line, making his negotiating position untenable. For the most part, the House-Senate divide has not been about ideology, but about tactics, and the Senate Republicans simply have not been willing to go as far as the House. This is precisely what I mean by “Establishment.” The small but determined Outsider faction in the Senate, led by men like Jim DeMint and Ron Johnson, will need reinforcements, and all the moreso if – as discussed below – we end up with Mitt Romney as the GOP nominee and possibly the next President. This is why I have stressed, here and here , the importance of continuing to build a counterweight within Congressional GOP to whatever emerges from the presidential race, in particular unbeholden to Romney, and with particular focus on wresting control of the Senate GOP from its current accomodationist leadership. The results thus far have been mixed, although Jim DeMint’s refusal to endorse a candidate before the South Carolina primary is at least a start. The White House The presidential race, of course, has been a great disappointment. Of the remaining five candidates, the two Texans are truly anti-Establishment, but one (Rick Perry) has struggled to get traction and is not (despite his impressive record) a particularly persuasive spokesman, while the other (Paul) is limited by the many other ways in which he is unacceptable to the Right and unworthy of significant office. The two Northeasterners are classic Establishment figures on spending: Mitt Romney’s entire career (like that of his father) embodies the Eisenhower-era approach of accommodation, complete with his signing of a huge, costly new entitlement in Massachusetts; while Rick Santorum is in many ways tempermentally more of a populist outsider, his career ended as part of the Senate leadership that lost its way and then its offices in the run-up to 2006. Both have attracted vocal, overlapping cheering sections dedicated to arguing that the tiger must be ridden. In the middle we have Newt Gingrich, who as I have written before , is a mixed bag on these issues; Newt is a believer in finding less confrontational ways to start unraveling the entitlement state, but he’s not fully a small-government guy, and your view of the weight to be placed on his successes and failures in this area may vary. The contrast can be illustrated by the responses at last night’s debate by Santorum and Romney to Gingrich’s plan to offer voluntary private accounts as an opt-out of the Social Security system for younger workers. Santorum: [Newt's plan is] irresponsible. And I say that against Newt because there’s nobody for the last 15 years that’s been more in favor of personal savings accounts than I have for Social Security. But we were doing that when we had a surplus in Social Security. We are now running a deficit in Social Security. We are now running a huge deficit in this country. Under Congressman Gingrich’s proposals, if he’s right, that 95 percent of younger workers [choose to opt-out], there will be hundreds of billions of dollars in increased debt , hundreds of billions of more debt being put on the books, which we can’t simply – we’re going to be borrowing money from China to fund these accounts , which is wrong. I’m for those accounts, but first we have to get our fiscal house in order, balance this budget and then create the opportunity that Newt wants. But the idea of doing that now, is fiscal insanity. Romney: Rick is right. I – I know it’s popular here to say, oh we could just – we can do this and it’s not going to cost anything. But look, it’s going to get tough to get our federal spending from the current 25 percent of the GDP down to 20, down to 18 percent, which has been our history. We’ve got a huge number of obligations in this country and cutting back is going to have to happen. I know something about balancing budgets. In the private sector, you don’t have a choice. You balance your budget, or you go out of business. And we – we simply can’t say we’re going to go out and borrow more money to let people set up new accounts that take money away from Social Security and Medicare today. Therefore, we should allow people to have a voluntary account, a voluntary savings program, tax free. That’s why I’ve said anybody middle income should be able to save their money tax free. No tax on interest, dividends or capital gains. That will get American[]s saving and accomplishes your objective, Mr. Speaker, without threatening the future of America’s vitality by virtue of fiscal insanity. Santorum and Romney plainly both recognize that Newt’s proposal would be good for younger workers, but Santorum argues that we need to keep them trapped in the current system to pay for other people’s current benefits , which of course is the self-fulfilling cycle that keeps the system impervious to reform. This is the rationale of Romneycare and Obamacare – compelling individuals to subsidize a collective program – and why such programs are so hard to uproot once they have been in place for a while. More crucially, what both Santorum and Romney are missing – both with regard to Santorum’s pleas for delay and Romney’s offering of an alternative savings system on top of Social Security – is that we already owe benefits to current recipients, no matter how we fund them, but an opt-out system would prevent us from accruing further obligations to younger workers who would then be self-financing their retirements, changing the system gradually from a defined-benefit to a more actuarially sustainable defined-contribution system, as most private employers have in the past few decades and as even state and local governments are beginning to realize they must (Romney, surely, would recognize this if he was dealing with a private business). This is the fundamental philosophical argument that needs to be made if we are going to persuade the American people not only that the spending and entitlement crisis is real – something the public is prepared to accept – but also that the GOP has a more sustainable long-term answer to fixing it so it does not recur. At present, with Romney in the lead, it seems highly likely that whatever the outcome, the 2012 presidential election will be an enormous lost opportunity to educate the American public on the nature of the crisis and build a mandate for confronting it. The Commentariat Perhaps even more depressing has been the extent to which conservative commentators in general, and National Review in particular, have seemed eager to join not only the pro-Romney faction but the counterreaction more broadly against the “Outsiders” and their effort to shake the status quo on spending and entitlements. Thus, we get suggestions that Romney as President should raise taxes on the middle class by “lowering the floor for the top tax bracket” and preserve parts of Obamacare within a new comprehensive national system rather “than to have an emotionally satisfying but probably unwinnable fight over repeal per se.” This would be disastrous in many ways, not least symbolically: no federal entitlement program has ever been repealed wholesale, and the fact that a repeal of Obamacare would be shocking to the system is precisely why – in addition to its fiscal impact – it would be such significant progress in beginning to regain control over the system. And even worse than the economic and partisan impact of a GOP-sponsored middle-class tax hike is the extent to which raising taxes is official Washington’s longstanding solution to avoiding facing the spending problem. NR still employs a number of wonderful conservative and/or Republican writers who serve an important purpose in the world of political journalism, but that purpose is no longer the one that many of its readers so clearly want: a sustained and serious voice of resistance to an Establishment that is unsustainable. Which may say a good deal about why RedState’s following has grown apace these last few years: our corps of mostly volunteer contributors generally can’t match the resources and output of NR or The Weekly Standard (which to be fair has never positioned itself as an anti-Establishment outfit), but we’re giving voice to a message a lot of people want and need to hear and act on. The States The future, if Washington (in particular the Obama Administration) doesn’t cut off its freedom of movement entirely, lies in the states, in the example of greater or lesser reforms pursued in Wisconsin, Ohio, Louisiana, Florida, Indiana, and to some extent New Jersey (where the problems are worse) and Texas (where there was less to reform). The states can provide models not only on the wonkier question of how to fix government’s finances, but on the far more significant underlying question of how to win and lose battles to persuade the public that meaningful change can wait no longer. The front lines in the states are primarily battles over public employee pensions, but important as those battles are, they are a dress rehearsal for the larger and more bitter fights to come over entitlements. The specific outlines of those changes will continue to be debated, but the Republican Party will continue to be riven internally by a collision between the Establishment and the Outsiders until we have resolved the fundamental question of whether or not we are truly serious about spending and entitlements. If you know where you stand on those questions, you know which group you belong to.
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What The Republican “Establishment” Really Means
