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A Free Market Guide To Assessing Reform Conservative Policies

The right’s reform agenda should be based on a few fundamental, free market principles on which most conservatives and libertarians can agree.

In the wake of Republican disappointments in 2008 and 2012, the market for the “future of conservative policy” is thick.  The latest entrant into the fray is the YG Network’s Room to Grow – a lengthy collection of policy proposals from the right’s “reform conservative” wing.  Whether any of these policies will actually become law is an open question, but, given the book’s authors and political champions, there is no denying that its prescriptions will influence many Republican lawmakers’ policy views in the coming years.  As such, debate over – and, where applicable, praise or criticism of – the YG policies is not just warranted, but also necessary to ensure a brighter future for the GOP and the country more broadly.

A thorough assessment of every policy advocated in Room to Grow is far beyond the scope of this article – there are a lot of policies (22 of them summarized here), and I’m but one man with a toddler and a day job.  Anyway, a lot of virtual ink has already been spilled on the new book’s policies, and the world at this point probably doesn’t need yet another smug pundit telling it what to think about each and every thing in there.  (Especially if that pundit’s track record on Republican policy is, ahem, less-than-sterling.)

What would be helpful, I think, is a way to assess each of the Room to Grow policies based on (i) a few fundamental, free market principles on which most conservatives and libertarians can agree (even, it seems, the most adventurous of reform conservatives) – things like federalism, fiscal restraint, enumerated powers and economic growth – and (ii) a sober recognition of the current, messy state of (big) government policy in the Bush-Obama years.  This way, you, the reader, can come to your own conclusions about whether the specific policies advocated in the YG Network’s tome really do advance smart, principled positions that should be embraced by the GOP in 2014 and beyond.  (And you can focus on whatever interests you – education, energy, jobs or whatever – and leave other issues, as well as the broad and insufficient summaries, to the rest of the interwebs.)

Applying these principles to Room to Grow, I’m left with mixed feelings – some of the policies appear to pass with flying colors, while others seem to result from a well-intentioned-but-poorly-contemplated desire for policymakers to “just do something” (or at least be seen as trying to just do something) rather than a systematic approach to policymaking couched in free market, limited government principles.  It’s my hope that the latter policies do not overshadow the former, but only time will tell if that’s actually possible – especially given that some of the more questionable policies appear to be gaining the most political traction.  Hopefully, coming months will allay these lingering doubts.

So, without further adieu, here’s a hopefully-handy list of questions to ask about every policy in Room to Grow (and beyond it):

1) Is the problem identified caused or exacerbated by market failure or government failure?

In my humble opinion, this question really should be the starting point of any market-oriented policy discussion.  The course of human history teaches us that the free market is overwhelmingly superior to the state in terms of delivering social and economic benefits to the vast majority of the populace, and thus only real market failures justify government intervention.  This simple presumption against government action can and should orient one’s views on the proper policy for any given problem.  If, for example, we have a relatively free market in energy (or health care or child-rearing or whatever), and that market consistently fails to achieve generally-agreed policy goals, then even a radical free marketer like me can acknowledge and accept a role for the state.  Where, on the other hand, a problem is overwhelmingly the result of one or many bad government policies, fiscal conservatives should first seek to reform or eliminate those policies before advocating any new government intervention.

In this regard, it’s important to note here that, contrary to some claims, there is a fundamental difference between achieving desired economic or social objectives through the reform or elimination of existing, distortive government regulation and doing so via additional government spending, taxes or entitlements.  The former permits the market (and individuals) to freely function as it/they would in the absence of government intervention.  The latter is an affirmative government action intended to artificially create those same “free market” conditions (typically by offsetting other artificial government distortions).  And to claim that such policies are the same is as misguided as, for example, equating the elimination of trade barriers with “industrial policy” – something that only the zaniest of statists try to do.

Which brings me to…

2) Does the proposed policy explicitly reform, replace or eliminate current government policy, or just add to it?

Unfortunately, there are few (if any) sectors of the U.S. economy that function as the aforementioned “relatively free market,” and the federal government’s impediments to both the efficient allocation of resources and Americans’ pursuit of happiness are myriad and seemingly boundless.  Thus, any new “conservative” policy proposal should ideally be centered on, or accompanied by, calls to reform or eliminate current, related policies in order to ensure that it does not merely add another layer of government (and its attendant market distortions) on top of several, poorly-functioning layers of government.  For example, various federal government subsidies and regulations inflate the cost of housing and education and act as a regressive penalty on the ability of America’s most vulnerable citizens to consume these necessities.  To advocate new in-kind or monetary transfers (tax credits, wage subsidies or whatever) to the poor and middle class without also fixing the policies that inflate prices and hinder consumption won’t actually permit these Americans to improve their and their families’ lives.  Put simply: who cares if you have a few extra dollars per week from the government if the cost of many highly-regulated and subsidized necessities keeps outpacing any such increase?

Requiring new policies to focus on, or be accompanied by, explicit proposals to reform or eliminate current government policy is not only common sense, but also absolutely essential to ensuring a stronger, more dynamic American economy and more limited, constitutional federal government.  In Chapter 2 of Room to Grow, Yuval Levin promises us that YG Network’s vision of government “would no doubt be much smaller, more restrained, and less expensive than the one we have today” (emphasis mine).  But – and no offense to Levin – the GOP of the 2000s taught us quite well that doubting the party’s ability to actually restrain government is precisely what we should be doing today.  And only specific, detailed proposals to cut taxes, spending and regulation will assuage our well-earned concerns.

Certainly, political realities must play a part in any serious batch of policy proposals, and the YG scholars are quite explicit about their plans’ supposed political palatability and admitted lack of comprehensiveness.  Nevertheless, a quick text search of Room to Grow reveals, for example, no specific calls for eliminating farm subsidies, biofuels mandates, trade protectionism or energy export restrictions – policies that, while profitable for certain Republican friends, are universally criticized by folks on the right and impose significant costs on many American businesses and families (thus undermining any new government efforts to assist them, including some of those proposed in Room to Grow).  Certainly, some allowance for political realities is expected (particularly from a group like the YG Network), but the political exception can’t be permitted to swallow the general conservative/libertarian rule for freer markets and a more restrained federal government of enumerated powers.

Speaking of which…

3) Does the proposed policy have any limiting principle?

An ambiguous, open-ended mandate is a recipe for government growth and troublesome regulatory adventurism.  Thus, strictly-defined objectives/benchmarks and real limiting principles – be they legal, economic, philosophical or social – are essential to ensuring that a policy (or set of policies) maintains the government’s proper, subsidiary role in American life.  An open-ended mandate to “help” a disadvantaged group or “close the empathy gap” contains no such principles and thus permits an ever-expanding state pursuing nebulous, never-finished (according to some) objectives.  The six-and-a-half year expansion of “emergency” unemployment benefits – still demanded by the left on “empathy grounds” despite a clear record of inefficacy and debunked economic benefits – provides a good, albeit expensive, example of the policy and political problems caused by the “just help people” approach.  As circumstances change, so do the never-defined goals, thereby allowing entrenched interests, politicians and bureaucracies ample ground to fight for their newfound benefits or power.

Yes, the imposition of clear limiting principles means that certain policies, regardless of their promised benefits or “pragmatism,” are off-limits – for example, those which permanently alter the fundamental relationship between the federal government and employers, workers or the states.  But there are just some things that Uncle Sam should not – and, as events frequently remind us, cannot – do.

For example…

4) Does the proposed policy even remotely align with conservative/libertarian views on the Constitution and federalism?

A near-term return to a federal government based on classical liberal, “Lochner-era” views on federalism, interstate commerce and economic rights is, as much as I might pine for it, highly unlikely.  Nevertheless, any conservative vision for policy must acknowledge at least some constitutional limits on the reach and authority of the federal government, especially in areas of policy not specifically enumerated in the Constitution (i.e., most of them!).  As banal as it might sound, pragmatism and empathy must be tempered by the rule of law, even in this era of creative constitutional jurisprudence.

5) Does the proposed policy maximize market dynamism and economic growth?

Because there are many ways to skin a policy cat and given today’s troubling fiscal realities, every effort should be made to ensure that a proposed policy is superior among all alternatives in achieving market dynamism and economic growth.  From a practical perspective, strict adherence to static, “pay as you go” rules is not required here – deregulation or tax reform can impose short-term costs while generating long-term growth and new revenues, after all – but recognition of this fact should not be carte blanche to abandon certain basic, free market, fiscally-responsible economic principles.  These include strong preferences for clear, simple, consistent, long-term (ideally permanent) and broad-based fiscal policies over ad hoc, temporary and/or targeted ones (something clearly recognized by at least one reform conservative wonk in at least certain settings).  And, of course, a preference for de-regulation or, at least, re-regulation over another layer of technocratic arcana.

The former policies have long been proven to help maximize economic growth and encourage innovation and entrepreneurship, thus making all Americans better off in the long-run and helping them adapt to scary-but-obviously-beneficial short-run market disruptions like the “rise of the machines.”  The latter policies, on the other hand, achieve lower growth at best and create substantial economic distortions and disincentives at worst – in other words, the exact opposite of what our stagnating economy and labor force need.  Thus, if two policies can achieve the same goal (e.g., a broad-based tax cut or a targeted tax credit which, as much as its advocates might wish, is not really a tax cut at all), priority should be given to the one more closely adhering to the aforementioned pro-growth principles (i.e., the one least resembling Cash for Clunkers).  This prioritization not only would boost economic growth, create a more efficient and dynamic labor market, and lower transaction costs, but also help protect against crony capitalism and “the tyranny of small decisions.”

In that regard…

6) Does it isolate certain constituencies or apply broadly throughout the economy?

Government policies that target a discrete set of companies or individuals not only raise the aforementioned growth concerns, but also create social division and government-dependent interest group lobbying to maintain or expand their benefit.  Fiscal conservatives have long decried liberal policies that create self-perpetuating government dependence, try to achieve economic or social objectives by “picking winners and losers” in the market, or pit various groups against each other for political gain.  AARP’s active and profitable support for Obamacare and the ridiculous charade that is the current legislative “effort” to “reform” the corporate tax code – little more than a way for lobbyists to shake down their state-dependent corporate clients for more cash – are instructive-yet-depressing examples of the problems that any conservative or libertarian policy should desperately seek to avoid.

Unfortunately, this well-deserved aversion to creating a new and powerful dependent class (and empowering the lobbyists who would gladly represent them in Washington) is not shared by all reform conservatives.  It should be.

Finding Reform Without Abandoning Principle

The above principles are by no means exhaustive, but I hope that they’ll help orient those who are supportive of systemic reform of GOP policy yet uncertain as to how to achieve such goals (and not ready to abandon hope entirely).  The YG policy wonks deserve praise for putting pen to paper with the goal of moving the GOP platform from policy-less Romneyism to a more focused and substantive place committed to free market, limited government principles.  It’s not clear to me, however, that many of the Room to Grow policies will produce a freer market, stronger economy, and smaller federal government.  Indeed, there are a lot of temporary, targeted economic and social subsidies mixed in with more systematic, consequential free market reforms.

Nevertheless, at least these Republican wonks are, for the most part, trying to move in the right direction.  That’s more than can be said for large chunks of the current Republican party and, needless to say, almost all of their Democratic colleagues.

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The views expressed herein are Scott Lincicome’s alone and do not necessarily represent the views of his employer, White & Case, LLP.

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