Changing the Underlying Narrative

On Friday there was this piece about reformocons and the need for the Republican Party to rethink its core message.

“What it means to be a conservative is up for grabs,” said Reihan Salam, the executive editor of the conservative National Review.

This rethinking probably can't happen during the campaign more than it has already happened.  Salam wrote a book with Ross Douthat back in 2008, which may pave a path toward what this rethinking will look like, post election. Though not a Conservative myself, it is right to be much more focused on the welfare of working class people.  Both parties should do that.  But the Republican focus on wage subsidies, such as via the Earned Income Tax Credit, is likely to have only limited impact on the welfare of working class people.  In general, that impact will depend on the elasticity of labor supply.  The more elastic the labor supply, the less impact will the subsidy have on after tax wages.  In other words, it is possible for taxpayers to be paying a substantial share of wages and thus to increase the profitability of the work, without much increase in income going to the people for whom the subsidy program is intended to benefit.

Aware of this issue and not really happy with the NY Times piece linked above, because it listed a bunch of policy prescriptions but never discussed the principles from which those policies might be derived, it occurred to me to do a Google search on "rugged individualism" (without the quotes) as I took that to be the backbone of much Conservative thinking today.  I soon found Herbert Hoover's speech where the expression was first introduced.  It is called Principles and Ideals of the United States Government.  The speech is from October 1928 and was part of Hoover's campaign for the Presidency.

It is quite an interesting read and I would recommend everyone to read it, regardless of political persuasion.  It is well thought through and gives a much more balanced picture about the role of government in the economy, more as umpire than as alternative producer.  But it is no paean to capitalism.  This particular paragraph is worth quoting in full:

Nor do I wish to be misinterpreted as believing that the United States is free-for-all and devil-take-the-hind-most. The very essence of equality of opportunity and of American individualism is that there shall be no domination by any group or combination in this Republic, whether it be business or political. On the contrary, it demands economic justice as well as political and social justice. It is no system of laissez faire.

Yet this paragraph and its emphasis on justice doesn't appear to have had a lasting impact on today, while the phrase rugged individualism has endured.  Not being a historian, I can only guess at why that's true.  Hoover is most remembered for being President when the Great Depression started and then for being too rigid thereafter for using government policy as a counter force to get the economy going again.  Indeed, the introduction of Hoover's speech is all about progress and that government's job is to facilitate sustained progress that is broadly shared.  After all, it was the Roaring Twenties.

The question then is how to articulate a principle of justice that gets buy in from a good chunk of the electorate.  My candidate is this.

Everyone must play by the same rules.   

Now you hear a lot of - the system is rigged.  The uber rich play a different game than everyone else.  It seems to me that reining in their excesses is at least as important as paying attention to the welfare of working people, maybe more so, because without the former not much can be accomplished on the latter.

How one does this I really don't know, especially given that so may politicians seem beholden to the high rollers.   The wishful thinking in me hopes that many of the high rollers have been so frightened by Donald Trump's candidacy that they are now willing to subject themselves to restrictions for the good of the order and to ward off ugly identity politics on into the future.  Yet even if that were to happen, one should not expect self-reform sufficient to make the system fair.  So I want to articulate some of the excesses that need to be reconsidered.  And then I want to argue that for many of these, addressing them seriously would actually help on the economic growth front.  Here then are a few items to consider, though I don't mean that this list is exhaustive.

• Capital income can be expatriated to avoid taxation.  Labor income can not.  This is the quintessential example of unfairness of the system.  It also makes it very difficult to use tax incentives as a way to steer socially desirable corporate behavior.
• Effective lobbying requires big infusions of capital, not just to wine and dine the politicians but also to do credible background work for which the government lacks expertise and funding.  New rules get written or new law gets made to favor the lobbyist.  Quite frequently the consequence is to thwart potential competition.  The special interests win out over the general interest. 
• Existing law can be used in ways that were unintended by the authors of the law, primarily to thwart potential competition and thereby create more monopoly than there otherwise would be.  Sleeping patents are an example of this behavior.  Much regulation ends up doing this as well.  

Could a reformocon candidate emerge to deliver on this in the next Presidential election cycle?  Based on the crop of candidates this time around, one would have to say no.  This is why the narrative needs to change to precede any possible candidate.  Then, on the only-Nixon-can-go-to-China theory, what will be needed is a person with a track record of being pro business in an obvious way then embracing this leveling of the playing field.

So here is wishing the reformocons some success in writing their narrative and hoping that they are wise enough, not just to include policies that benefit working class people but do that part and parcel with reining in the uber rich.  It is the only way reform can work.