If you're a boxing fan, you've probably seen a video of Frazier vs. Foreman. It's one of the most one-sided fights in history -- Frazier, who had conquered Muhammad Ali just two years earlier, gets knocked down six times in less than two rounds by the future barbecue-grill merchant. Again and again, Frazier fires his most fearsome weapon -- the famous left hook that had felled Ali. But this time, it wasn't working.
Watching Republicans come up with economic policy ideas reminds me a little of Frazier vs. Foreman. Tax cuts are the Republicans' left hook -- the weapon that swept them to glorious victories in the Ronald Reagan years. Today, after having been knocked down twice by Barack Obama, the GOP is throwing its roundhouse again and again -- and just not connecting.
The American Enterprise Institute's James Pethokoukis sums up why the Republicans are so intellectually impotent:
A new manifesto making the rounds in conservative circles is ... a time-travel tale ... Activists hope that embracing supposedly timeless economic policies, such as tax cuts and balanced budgets, will unite and then ignite the Republican Party ...
Not surprisingly, the conservative plan calls for a vague lowering of "tax rates for every taxpayer." ...But even with the Obama tax hikes, the top-marginal tax rate today is just 39.6 percent. And [for most people,] payroll taxes are what really count ... Moreover, lowering income taxes without offsetting spending cuts or higher taxes elsewhere — the plan offers neither — is unrealistic. And let's face facts: Coping with America's rising elderly population will require a higher national tax burden in coming decades even with a reformed entitlement system ...
If conservatives and Republicans desire a return to relevancy, then they can't offer today's voters reruns from the '80s and '90s in an attempt at solving yesterday's problems.
If you're a conservative and you've lost the American Enterprise Institute, you've lost.
The fact is, policies that work in one era may not work in another. One reason is that success can't be repeated ad infinitum. When Reagan came into office, top federal income tax rates were 70 percent. By the time Obama arrived in the White House, they were half that. You can't cut taxes forever; eventually, you stop being able to fund programs that the voters want. And the economic boost from cutting taxes gets smaller and smaller as taxes get lower. This comes directly from economic theory, but you can sort of see it by looking at a graph of federal tax revenue as a percent of U.S. gross domestic product. Reagan's tax cuts didn't reduce revenue very much -- as Arthur Laffer might have predicted. But when George W. Bush cut taxes from a much lower base, revenue plunged.
In other words, some conservative ideas may have been a victim of their own success.
Another reason that the golden oldies won't work anymore is that the world itself changes. For example, it made sense to call for hard money when inflation was running at over 10 percent in 1980. But with inflation below 2 percent now, the Wall Street Journal editorials warning of imminent inflation look more than a little out of place. And the intermittent Republican calls for a return to the gold standard look downright nuts.
Some conservative intellectuals have realized this, of course, and they're trying to retool and revitalize the movement. E.J. Dionne has a good rundown. But as Dionne points out, the reform movement is going to be hampered by the reactionary fervor of a Tea Party dominated by a visceral fear of losing the country -- and not by economic policymaking.
As happens all too often in politics, ideas are yoked to the Culture War rather than to sound economic thinking.
There may be a more fundamental problem with reforming conservative ideas. Over the last few decades, the definition of "conservative" has hardened into dogma. "Less government" -- deregulation, lower taxes and privatization -- is "conservative." Any policy that doesn't include cutting government is "liberal."
But there are a lot more ways to use government than not to use it, so the universe of "conservative" policy is therefore much smaller than the set of "liberal" ones. There are a million and one interventions, but there's only one free market.
There may be some areas where we still need to just slash the government -- simplification of regulation, perhaps? -- but in most areas, we've cut so much that going further is either impossible or inadvisable.
So don't expect a conservative reform movement to quickly return conservative ideas to the forefront of American policymaking. Maybe forward-thinking conservatives should just admit that it's time for liberalism to take the helm for a little while, so they can start planning for a future moment when the policymaking pendulum swings back in their direction.
Or perhaps it would be simplest and most useful to dispense with the idea of "conservative" and "liberal" ideas altogether. America's intellectual movements have come to uncomfortably resemble religious dogmas. In principle, there's no reason why someone who supports deregulation should also have to support tax cuts -- maybe we need one but not the other! In practice, however, this kind of eclecticism can get you excommunicated, ask David Frum or Bruce Bartlett.
Maybe what conservative reformers need to attack is the idea that being "conservative" is more important than being right.
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