ConservativeHome's Big Ideas blog

Acting on his promise to create 250,000 jobs, Governor-elect Scott Walker introduces his proposal for a partially private "economic development authority"

Natalie Gonnella 

Throughout his 2010 gubernatorial bid, Wisconsin Governor-elect Scott Walker heavily focused on his aims to make Wisconsin a more favorable place for business development and one of the top ten states in the country for job creation. Facing an unemployment rate of over 7%, the Governor-elect even went so far as to promise to create at least 250,000 new jobs during his first term in office:  

I want my cabinet secretaries to have branded across their heads, '250,000 jobs…I want them to know their job is on the line because my job is on the line to create 250,000 jobs in the private sector.

Wasting little time in addressing his goals in the midst of a state budget deficit of over $3 billion, Walker today announced his plans to replace the existing Wisconsin Department of Commerce with a partly private “Wisconsin Economic Development Corporation.”  According to The Milwaukee Wisconsin Journal Sentinel the new department will be structured like an authority, with a chief executive officer reporting to a 12 person board of directors, with the Governor acting as chairperson. The sole focus of the revamped department will be the creation of jobs in Wisconsin.  Of his proposal Walker said: 

For too long the Department of Commerce has spent more time regulating business than promoting it. Throughout the campaign I promised to fundamentally change our government's approach to job creation. I am serious about enacting aggressive reforms focused on revitalizing Wisconsin's private-sector economy.

Calling a special session of Wisconsin policymakers next week, Walker hopes the GOP-led Legislature will take up his proposal for the economic development authority as well as his plans for cutting taxes on small businesses, eliminating the state tax on health savings accounts and enacting overall regulatory reform. 

With many states facing high unemployment and substantial budget shortfalls, Walker's plan (and promises) for Wisconsin will be one to keep track of as new GOP governors attempt to set their states on pathways to economic success.

More good news for believers this holiday season: Gallup says the more religious you are, the healthier you are

Ryan Streeter

As the faithful across America give thanks for the deeper realities underlying their belief this Christmas, they can also find encouragement in something else: their health. Gallup's Well-Being Index released findings yesterday showing that religious Americans are healthier than their non-religious neighbors. 

Here's Gallup's summary statement:

The most religious Americans score a 66.3 on the Gallup-Healthways Healthy Behavior Index compared with 60.6 among those who are moderately religious and 58.3 for the nonreligious. This relationship, based on an analysis of more than 550,000 interviews, is statistically significant after controlling for major demographic and regional variables.

The report goes on to say:

Very religious Americans make healthier choices than their moderately religious and nonreligious counterparts across all four of the Healthy Behavior Index metrics, including smoking, healthy eating, and regular exercise. Smoking is one area of particular differentiation between the very religious and less religious Americans, with the nonreligious 85% more likely to be smokers than those who are very religious.

Michele Bachmann's "new Congress resolution": Reduce the US corporate tax rate to 25%

Natalie Gonnella

Responding to Japanese Prime Minister Naoto Kan’s announcment that Japan will lower their corporate tax rate to 5% next year, Minnesota Representative and Tea Party darling, Michele Bachmann took aim (via an Investor’s Business Daily op-ed) at current US tax policy.

At 40%, the United States (after Japan’s reduction) can sadly "boast" the highest corporate tax rate in the world. To this troubling news, Bachmann commented:

 “The U.S. must remain competitive. As an industrialized nation and leader on the world stage, we must be out front in the race for jobs and a robust economy. It is time to sink or swim and, as a former federal tax attorney, I know that if we allow our businesses to face the highest existing corporate tax rate, we will certainly sink.”

To combat this issue, earlier this month, Bachmann introduced the End Tax Uncertainty Act of 2010 which she believes will “effectively ease the tax burden on America's families, individuals and businesses.”  The bill aims to cut the federal corporate tax rate to 25%, giving the US a more competitive edge in relation to corporate growth and business investment.

She has also noted that the impact of the change would “increase the number of jobs annually by 581,000 on average from 2011 to 2020. Our GDP will rise by an average of $132 billion, and a typical family of four will see its after-tax annual income rise by almost $2,500.”

With the lame duck session now complete, Representative Bachmann aims to make her proposed tax reduction one of her key goals for the 112^th term.  As the GOP majority looks to decrease unemployment, encourage business growth and make a serious dent in the current deficit, Bachmann's proposal will be an interesting one to watch as the new congressional session unfolds in 2011.

Essay of the Week: Jim Capretta on “Priorities for a New Congress” – Get ready, GOP, you'll need courage to do more than just budget-cutting

Ryan Streeter

In an online release of an article in the Winter edition of National Affairs (see 3rd shield from the right above), Jim Capretta writes:

As more Americans have become dependent on federal programs — and thus opposed to significant reform of them — the federal government has morphed into an unwieldy, self-perpetuating Leviathan. It tries to do everything for everyone — and does almost none of it well. All of this was true even before the most liberal president in four decades, Barack Obama, took office. But he has since made matters worse.

There are 3 big idea in the essay worth looking at. Here's how I summarize them:

1. The GOP needs the courage to speak honestly with the American people about fixing America’s long-term fiscal situation, since some of the main fixes may not be what people want to hear.  Spending is out of control, and voters want that reversed, but budget-cutting is not an end in itself: Capretta says, “Measures like spending cuts…are simply means to an end: robust long-term economic growth.” And this cannot be achieved by grabbing the lower-hanging fruit of earmark bans and bureaucracy shrinkage (which themselves are not as easy as they sound). It can only happen if we play a big game consisting of reforming the tax code and moderinizing Social Security and Medicare to conform to demographic reality. It’s not clear that Americans are ready to hear what these reforms will require, or that Republicans have the courage to be up-front about them. One way to force this is to see who is willing to back Paul Ryan’s Roadmap, the most compelling GOP proposal to fix entitlements without new tax burdens that not all Republicans seem willing to embrace.
2. Obama’s health care law is both the Democrats’ holy grail and the best example of Democratic overreach, and Republicans are well-positioned to confront it loudly and publicly, mainly because they have done a better job at developing policy alternatives in health care than in other areas. Republicans should hold hearings and take votes on unpopular provisions such as the individual mandate, the new long-term entitlement, and costly administrative burdens on businesses. Regardless of whether Obama vetoes anything or measures fail in the Senate, this will build public support for full repeal in 2012.
3. Republicans need to show a strong commitment to spending reductions and propose a reduction package of at least $200 billion. Capretta outlines a reasonable yet aggressive package of mainly non-defense discretionary cuts. He also proposes terminating low-value agencies. 

Capretta ends by saying it’s “now or never.” He's right. The longer we wait, the higher the tax burden on the middle class and the lower our economic growth projections will be. It's basic math. 

I think it’s time we start getting a bit more vocal about who in the GOP is ready to embrace far-reaching reforms and who isn’t. At the risk of a few internecine battles here and there, it will have a purifying effect and increase the odds of real reform. ConservativeHome welcomes nominations of Republicans who are squishes on reform in these areas. Just email whoever is listed as Duty Editor on the home page.

Increasing equality of opportunity by increasing inequality by letting the richest get richer

Ryan Streeter

Tyler Cowen's excellent essay in The American Interest on income inequality deserves a lot of attention and reflection. 

The real inequality in America, Cowen shows, is between the top 1% and the rest of us. And the top 1% are largely in finance or sectors related to finance. Inequality between everyone else under the 99% threshold isn't that much of a story.

The story is not the inequality. The real story is the trend of bailing out these super-smart finance giants when they do super-dumb things and our overall inability to control what they do. And this is the real story because these super-giants exercise a certain ingenuity that is ahead of those who would try to rein them in. Stopping their rise to the top is nearly impossible.

Smart people have greater reach than ever before, and nothing really can go so wrong for them. As a broad-based portrait of the new world, that sounds pretty good, and usually it is. Just keep in mind that every now and then those smart people will be making—collectively—some pretty big mistakes.

This means that fighting against inequality, as the Democrats love to do, is basically fruitless (and let me remind the reader that a large number of people within the finance crowd lean left politically). The bigger problem is the slower growth we see among the lower and middle income groups. Cowen writes:

Wage growth for the median earner has slowed since 1973. But that slower wage growth has afflicted large numbers of Americans, and it is conceptually distinct from the higher relative share of top income earners. For instance, if you take the 1979–2005 period, the average incomes of the bottom fifth of households increased only 6 percent while the incomes of the middle quintile rose by 21 percent. That’s a widening of the spread of incomes, but it’s not so drastic compared to the explosive gains at the very top.

Cowen writes elsewhere of the depreciating return to knowledge, and this, it seems to me, is the really big challenge for us. Michael Mandel says this problem is the key underlying cause of our recent crisis rather than our debt (as Paul Krugman would say). 

So the troubling conclusion from all of this is: knowledge and intelligence lead to greater wealth, and yet the returns to knowledge are diminishing for most of us. It seems that we face a knowledge capital dilemma in which we need to invest as a country in new technologies that will benefit the greatest number of people globally and create the most jobs domestically - and let the richest get richer so the rest of us can have growth-sector jobs for at least the next generation.

Might Arthur Brooks' and Pete Wehner's description of three types of human nature suggest the Tea Party is a source of American renewal?

Ryan Streeter

There are three competing views of human nature at the heart of our debates about how we address our economic troubles, and they've been with us for a few hundred years. This thesis forms the basis of an article in today's American by American Enterprise Institute president Arthur Brooks and Ethics and Public Policy Senior Fellow Pete Wehner. I would summarize the three views this way:

1. People are perfectible, and so we need to engineer society with institutions that make people better, smarter, happier. Utopians, socialists, communists and other fans of collectivism are found here.
2. People are fatally flawed, and so we need strong political power to limit the damage they can do to themselves and others. Hobbsian advocates of pure political power are in this camp, whether they are dictators or those who pursue non-democratic means within democracies to increase power and control economic affairs.
3. People are flawed but not fatally so, and capable of self-government and virtue, but not perfectible; and so they need to benefit from the exercise of virtue, and feel the effects of their mistakes if they are to correct course.  The American founders and others who prefer limited governments and strong markets fall in this camp.

The line of thought Brooks and Wehner pursue stems very much from a tradition familiar to readers of Michael Novak, Irving Kristol, Bea Himmelfarb, and other defenders of a robust democratic capitalism. I won't rehash those arguments here.

The main big idea here is the conclusion they reach that capitalism is ultimately the best system of social organization for building on the insights embedded in the third school of thought. Brooks and Wehner write:

A capitalist society needs to produce an educated citizenry. It needs to be buttressed by people who possess and who teach others virtues such as sympathy, altruism, compassion, self-discipline, perseverance, and honesty. And it needs a polity that will abide by laws, contracts, and election results (regardless of their outcome). Without these virtues, venality can eat capitalism from within and use it for pernicious ends.

We need to understand that capitalism, like democracy, is part of an intricate social web. Capitalism both depends on this web and contributes mightily to it. Morality and capitalism, like morality and democracy, are intimately connected and mutually complementary. They reinforce one another; they need one another; and they are terribly diminished without one another. They are links in a golden chain.

They don't lay out what this means for policy and action. For that, presumably, we need to acquire their new book from which this excerpt is adapted. 

So let me suggest one possible interpretation of their framework: the recent Tea Party-fueled public upheaval may very well be the third view of human nature making its voice heard again at a unique point in history. The Tea Party is apiece with John Adams, Thomas Jefferson, and the Scottish enlightenment? Perhaps.

Two considerations:

• The strong reaction to Keynesian stimulus and growing spending was very much a joint cry by millions of people to "let us run our own lives and live by the consequences." Some - especially those in elite quarters - see the tea partiers as ignorant crazies. But that's nothing new. That's how the original tea partiers were viewed. The Tea Party has been an effort to reverse a trend in which an frighteningly large amount of taxpayer money was being used by people who seemed to be trying their hand at social engineering and the brute expansion of political power. At the end of the day, the clash between the Tea Party and elite America looks like a clash between the third view of human nature and the first and second views.
• Although the Tea Party was driven very much by spending and fiscal concerns, there's not much evidence to suggest they don't also care about the kind of virtue and moral order that Brooks and Wehner discuss. Popular conceptions of the Tea Party suggest they are unenlightened radical libertarians. The ConservativeHome Republican Panel, a weekly survey of more than 2,000 conservatives, suggests that a large number of tea partiers and sympathizers are both fiscally and socially conservative. The Tea Party has an underlying moral component to it - or at least there's just as much evidence for this point than against it. Sure there are some nut cases out there. But tea partiers seem to be people who value hard work, independence, and the kinds of habits needed for people to be self-governing citizens.

The point here is that if one accepts the Brooks-Wehner delimitation of the three kinds of human nature, one has to wonder how they're playing out today. If the Tea Party has unleashed new energy to support the third view, one has to ask who the primary advocates of the first two views are today - on both the right and the left.

The coming state fiscal crisis we don't talk enough about, and what we can start doing to get ahead of it

Ryan Streeter

State fiscal crises are a huge deal. And given everything else going on in Washington, the issue is left off the national policy debate docket - left to states, as it were, in a kind of devolutionary ignorance.

If we keep ignoring it, get ready for another bailout debate. Sympathy for bailing out states is higher than budget hawks might like to think.

Matthew Mitchell has a good starter idea in his Wall Street Journal column. He proposes that states replace faulty tax-and-expenditure limitation (TEL) policies, such as Florida's, with better versions such as we see in Colorado.

A TEL pegs government spending to some other factor, such as income or population - which often only increases spending more rapidly than necessary. Florida's, which 12 other states also use, is pegged to income and has driven up state spending as higher-income people have moved in. 

Colorado's formula is inflation-plus-population growth calculation. Mitchell writes:

Colorado enacted this type of TEL in 1992. Between 1997 and 2001, the state collected revenue in excess of the limit set by the TEL, allowing it to refund over $3 billion to the state's taxpayers. Colorado prospered, experiencing the country's fastest economic growth between 1995 to 2000.

On top of this kind of TEL, lawmakers should consider additional policies, all of which are state-tested:

• Adopt stronger balanced budget procedures, as most states get around the laws they currently have requiring budget prudence.
• Implement a super-majority rule for tax increases.
• Adopt the "item-reduction veto," which allow a governor to single out items in the budget for lower amounts than what the legislature has authorized.

Let's hope the silver lining in today's state fiscal crises is a willingness to experiment with reforms such as these. 

Association of leading CEO's releases recommendations for job creation and economic growth

Natalie Gonnella 

In the midst of intense debate over tax cuts and unemployment benefits in Washington, the Business Roundtable, an association of CEOs from leading US companies, released a new report today entitled “The Roadmap for Growth.” The document outlines key recommendations the association believes should be undertaken by US lawmakers to drive “robust and sustainable" economic recovery, promoting greater prosperity for all Americans.

The plan provides holistic recommendations in five key areas: fiscal policy, market access, education, regulation and energy, which association members feel need to be comprehensively addressed in order to encourage growth and stability in the American economy, allowing the US to maintain its place as a global leader.

Group chairman Ivan Seidenberg, chief executive of Verizon Communications, said "Congress and the administration must bring clarity and focus to the legislative agenda in order to enable businesses to do what they do best - create jobs and drive growth" (WSJ).

Here’s a look at the reports key proposals:

Fiscal Policy and Competitive Taxation: Redesign the corporate tax system to promote investment and strengthen US competitiveness in the international economy, and undertake significant reforms to reduce government spending before the American economy is swallowed by debt.

Market Access: Pass all pending free trade agreements and aggressively pursue more to increase America’s exports.

Education: Invest in programs that focus on performance and encourage innovation – such as Race to the Top – and place a stronger emphasis on math and science education to promote a competitive and well-educated 21st century American workforce.

Government Regulation: Re-evaluate wide-ranging financial, environmental and health care regulations passed under the previous Congress to ensure they promote the greatest possible measure of competition, choice and growth. 

Energy and the Environment: Invest in a comprehensive suite of new energy technologies and expand access to traditional sources to simultaneously advance America’s environmental, economic and energy security interests.

“America’s dynamic business sector has the knowledge, experience and grit to drive unprecedented economic growth and job creation, but we need support from policymakers in Washington.” said Andrew N. Liveris, Chairman and CEO of The Dow Chemical Company (Business Wire). 

Roundtable CEOs are scheduled to meet with members of Congress as well as the Obama Administration to discuss their recommendations this week, and the association hopes to stay engaged with Washington in addressing economy recovery in the coming months.

Gary Becker and Richard Posner with a gloomy outlook: we are in a depression and the ideal solution is unattainable

Ryan Streeter

Becker and Posner write on their blog that:

• the latest unemployment numbers show just how stuck the economy is
• we are exhibiting traits of a depression
• recovery most likely depends on (1) short term stimulus that can get people to work in needed jobs and (2) long-term fiscal and regulatory reform that chops down deficits and increases growth
• (1) and (2) in the previous point are highly unlikely because the Obama administration and Congress botched the stimulus last year and there won't be political support for a new stimulus; and (2) it's too hard to get political support for the long-term deficit reduction we need

Here is what they say:

Real (inflation-adjusted) GDP is roughly the same today that it was three years ago; it “should” be 9 percent higher—which would make GDP almost $1.5 trillion greater today than it is. The economy cannot rejoin the trend line with unemployment as high as it is.

They say that we should be honest with ourselves and recognize that our conditions match those of a depression, not a recession:

It is now three years since the depression—and it is a depression, not a “recession” or even a “Great Recession”—those are euphemisms—began, and it did not end last summer when GDP stopped falling (by that measure, the Great Depression ended in 1933). 

And then, they strike an especially gloomy tone when it comes to getting out of the mess:

What is to be done, if anything? The ideal solution—which is unattainable—would be to combine a short-term stimulus with long-term fiscal and regulatory reform aimed at reducing governmental deficits and increasing economic growth. With interest rates very low and much savings in inert forms (such as the $1 trillion in excess reserves held by the banks), there is an argument for the government’s borrowing those savings and putting them to work on projects that would require labor, and thus reduce unemployment. But not only is a further stimulus politically impossible (in part because of the poor design, execution, and explanation of the large stimulus program enacted in February 2009); it would take too long to put into effect to avoid a risk of its crowding out private investment when the private economy begins to grow more rapidly.

For the sake of growth, America needs a concerted effort to tackle deficit reduction. We need more Paul Ryans out there making the case for getting our fiscal house in order. He can't do it on his own. We are already behind schedule for getting our fiscal house in order by changing the real deficit drivers: our entitlement programs. 

ConservativeHome will be making the case in the coming months that all of us - not just policymakers - need to get engaged in the solution.

John Thune: "The Republican Party must reclaim the mantle of reform"

Senator John Thune of South Dakota, whose name has been floated as a potential presidential contender in 2012, recently answered 10 questions from ConservativeHome's Ryan Streeter.

In the interview below Senator Thune says that:

• Republicans need to become reformers again by remembering what limited government, fiscal responsibility, and pro-growth policies require of us.
• America's debt is a national security problem, as Admiral Mullen says, and therefore we need budget reform legislation along the lines of what Sen. Thune proposed this past summer if we're going to get America's fiscal house in order.
• From the real and present danger of Iran's nuclear program to our ongoing commitments in Iraq and Afghanistan, we as a country need to remember just how much it costs to prevent more terrorist attacks.  
• The middle class understands that runaway spending will destroy their children's future. We owe it to them to show serious leadership on fiscal responsibility.

RS: What is your first political memory and/or what event or person first got you interested in politics? 

Sen. Thune: My interest in politics was sparked at a young age. After making five of six free throws during a basketball game as a freshman in high school, I was greeted by a spectator who said, "I noticed you missed one." That spectator happened to be well-known sports enthusiast and U.S. Representative Jim Abdnor. That introduction was the start of a friendship that ignited my career in public service. After completing my MBA at the University of South Dakota, I went on to work for then U.S. Senator Jim Abdnor and have stayed in close contact ever since.

RS: Who is your political hero and why? 

Sen. Thune: President Ronald Reagan is a political hero of mine. I was inspired by the strength of his convictions, by his belief in American exceptionalism and by his willingness to confront the communist threat. There was an authenticity about him that is too often lacking in politics today. He had a big, bold vision for this country but never lost his common touch or his fundamental belief in the greatness of the American people. I had the privilege of serving in his administration and have tried in my public life to live up to the high standard that he set.

Another one of my heroes is former Senator Jim Abdnor, whom I also had the privilege of working for as a young staffer. His decency and integrity were the embodiment of everything that is good about public life and a great example to me.

RS: Looking to 2012, are there 3 big ideas that you think should determine the presidential race (ie, which 3 issues should the Republican candidate use to set him/herself apart from President Obama)?

Sen. Thune: Voters sent a clear message to Washington this past November. Americans are not happy with the direction in which our country is headed and are seeking a new way forward. In order to successfully lead our country to more prosperous days, I believe Republican leaders must return to the time honored Republican principles: (1) A limited government and a government that works, which means unwinding the massive health care takeover, and reform of entitlement, budget, and tax policies. The Republican Party must reclaim the mantle of reform. (2) Fiscal responsibility—living within your means is an American tradition that needs to become a Washington tradition. (3) Pro-growth, pro-jobs policies that focus on free enterprise and free markets as opposed to government expansion. That means reducing America's tax and regulatory burdens on businesses, thereby lowering the cost of doing business in this country, and allowing America's entrepreneurs to be competitive in the global marketplace.

RS: What can Republicans in Congress do beginning in 2011 to respond to the public's mounting frustration with runaway spending, the deficit, and the size of government?

Sen. Thune: According to the Chairman of the Joint Chiefs of Staff, Admiral Mike Mullen, America's biggest national security threat is our national debt. To attack out of control spending and borrowing, this past summer I introduced a budget reform bill, the Deficit Reduction and Budget Reform Act of 2010. My legislation gets our country's fiscal house in order by cutting discretionary spending, reforming Washington's broken budget process, and creating a permanent Joint Committee on Deficit Reduction. There are 26 committees or subcommittees in Congress that spend money, but none that save money. It is high time that changed and my bill does that.

Additionally, I recently proposed a resolution that was accepted by the Senate Republican Conference to cut non-security discretionary spending back to 2008 levels. Since 2008, non-security discretionary spending has increased by over 20 percent, at a time when inflation in our economy amounted to less than two percent. In other words, the federal government has been spending at 10 times the rate of inflation. While every day, hardworking Americans struggle to make ends meet, Washington continues to spend with reckless abandon. This unsustainable level of spending has to stop. We can start by forcing votes on reducing spending back to 2008 levels to see who's serious about fiscal responsibility.