The economy simply isn’t growing as it should. The latest evidence comes from the Federal Reserve, which, following a pattern it has set out in years before, downgraded growth. The New York Times reports:
The pattern over the last four years has been this: The Federal Reserve forecasts stronger growth right around the corner; it doesn’t materialize; the Fed downgrades its forecasts.
It happened again Wednesday. Leaders of the central bank now expect G.D.P. to rise only 2.1 to 2.3 percent in 2014, compared with a 2.8 to 3 percent forecast in March.
In other words…blech. The recession that began in 2007 still has its ugly tentacles dug into this economy a full seven years later. During this time it should have become clear that the liberal response, largely cribbed from the 1930s, is woefully out of date and as a result only marginally effective at spurring employment, wage and economic growth.
Disappointingly, liberals are largely sticking to their policy guns. But the recession and its aftermath is spurring something incredibly interesting amongst conservatives: An intellectual debate between some of the smartest young minds in the movement.
Sadly, the mainstream media is largely ignoring the wellspring of academic thought happening amongst conservative thinkers with names like Ramesh Ponnuru, Reihan Salam, and Yuval Levin. But it’s happening nonetheless. The latest eruption was between the Wall Street Journal’s Kim Strassel and a number of “reform conservatives” who contributed to a collection of essays called “Room to Grow.”
The reformists argument is summed up best by the American Enterprise Institute’s James Pethokoukis:
The book’s central premise is that conservative economic policy should address today’s economic challenges, not yesterday’s. And those problems extend beyond tax policy. Robert Novak’s famous axiom, “God put the Republican Party on earth to cut taxes. If they don’t do that, they have no useful function,” is incomplete in a nation where (a) health care costs are rising faster than income and gobbling up wages, (b) the nation’s $600 billion in annual K-12 spending is failing to prepare students for the modern job market, (c) family life in middle-class America is growing increasingly fragile. At the same time, the job market is becoming steadily more bifurcated due to automation and globalization.
These new challenges, many of which were not present (at least to the degree they are now) in the Reagan era, mean that we can’t simply respond the way Reagan did – that is, by cutting marginal tax rates. That’s all the more true, the reformists argue, because the top tax rate is 39.6 percent today, much lower than the 70 percent rate that plagued America through the mid-century. So while reducing the rate is still important, it would likely generate fewer economic benefits, and thus should be a lower priority that other measures that are more targeted at helping the middle class.
Strassel strongly criticized this view:
This again confuses policy and politics. Good economic policy doesn’t have a sell-by date. ( Adam Smith ? Ugh. He is just so 1776.)
What can require periodic overhaul is political messaging. The “reformers” are right that, politically, selling a cut to a 39.6% top rate is harder than was Reagan’s job of selling a cut to a 70% rate. What they miss is that the past 40 years have provided entirely new and powerful selling points for a flatter, cleaner code. Americans have grown frustrated with the insane complexity of taxes, furious over the crony loopholes, and wary of the power all this hands abusive IRS bureaucrats.
In her eyes, these types of redistributive ideas (even if they’re purpose is to combat existing redistributive schemes, like entitlements) is contra to traditional conservative thought. Attempting to try and out-clever the Left risks being too clever by half, in her eyes. Better to just stick to traditional conservative economics that encourage investment, which will then trickle down to the masses.
Who has the stronger argument? We’ll leave that to you to decide. The more important point is that an actual debate is being had about how best to tackle the economic, social and political challenges in front of us. That’s exciting; not only because it means America may soon be able to shake off its economic doldrums, but because it could lead to a conservative intellectual renaissance that could enthrall a generation.