ConservativeHome's Big Ideas blog

From tax reform to trade agreements, Sen. Rob Portman offers seven 'easy' steps for economic growth

Natalie Gonnella
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Amid Washington's ongoing debt drama and June's dismal unemployment numbers, in his latest op-ed freshman Senator Rob Portman is challenging his congressional colleagues to get serious about economic recovery, outlining seven 'easy' ideas to boost private sector investment and job growth in America.

From tax reform to pending free trade agreements, here's a look at Senator Portman's common sense solutions for economic stability:

1. Energy independence: Washington should adopt a pro-growth national energy policy. Let’s attack our addiction to foreign oil with conviction. The plan must include using less energy through smart conservation and finding more energy by aggressively and responsibly developing our own resources. Washington shouldn’t pick winners and losers, but should remove government barriers that raise costs and threaten jobs.
2. Tax reform: Let’s start the process immediately to reform the tax code, something economists across the spectrum agree will create economic growth and jobs. Eliminating preferences and lowering tax rates will enhance our competitiveness, lead to a more efficient allocation of resources and ensure a tax code that’s fair for everyone, not just those who can manipulate it.
3. Cut the red tape: Let’s go beyond the rhetoric and enact common-sense cost-benefit analysis that separates the necessary regulations from those that kill jobs without justification, and insist that agencies use the least burdensome alternative.
4. Pass pending free trade agreements: With 95 percent of the world’s consumers living outside the United States, giving our workers, farmers and service providers fair access to those markets should be an urgent national priority.  
5. Reform and modernize our job training programs: Part of the answer is an improved education system that prepares our children for the careers of tomorrow, but Congress can also act immediately to help retrain today’s workers by revamping the $18 billion spent annually on federal training programs. Those already in the workforce deserve better than the bureaucratic complexities and red tape of 44 different federal employment and training programs administered by nine different agencies. 
6. Reduce costs, add choices and put consumers in charge: Many of us believe this requires repealing the new healthcare law, which will cost trillions of dollars and kill as many as 800,000 jobs. But in the meantime, let’s reduce the costs of healthcare and add jobs by expanding choices and putting consumers in charge, through expanding health savings accounts, allowing people to purchase health insurance across state lines and reining in frivolous lawsuits and other medical malpractice costs.
7. Cut and cap: Let’s reduce federal spending now and cap the growth of government. Obama was right when he said last week that dealing with our record debt and deficits would give businesses more certainty and lead to job expansion. 

George Soros's money manager: Obama's "plan" on the deficit is a mirage because, unlike Paul Ryan's plan, the money won't be there

Ryan Streeter
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The WSJ's weekend interview with Stanley Druckenmiller, the legend behind Duquesne Capital and one-time  fund manager for George Soros, is worth reading in its entirety.

This passage stands out in particular. In it Druckenmiller wonders why top administration officials are more worried about default than controlling the spending that is making the debt pile up in the first place.

Mr. Druckenmiller is puzzled that so many financial commentators see the possible failure to raise the debt ceiling as more serious than the possibility that the government will accumulate too much debt. "I'm just flabbergasted that we're getting all this commentary about catastrophic consequences, including from the chairman of the Federal Reserve, about this situation but none of these guys bothered to write letters or whatever about the real situation which is we're piling up trillions of dollars of debt."

He's particularly puzzled that Mr. Geithner and others keep arguing that spending shouldn't be cut, and yet the White House has ruled out reform of future entitlement liabilities—the one spending category Mr. Druckenmiller says you can cut without any near-term impact on the economy.

At the end of article, Druckenmiller says: "We don't have a choice between Paul Ryan's plan and the current plan, because the current plan is a mirage. . . . That money is not going to be there."

You can read the piece in its entirety here.

In her new book, economist Dambisa Moyo says that without structural changes, the US is on a dangerous path to the most "venal form of welfare state"

Natalie Gonnella 

This weekend, Britain's Telegraph newspaper offered a fantastic look at Dambisa Moyo's new book: How the West Was Lost: Fifty Years of Economic Folly--and the Stark Choices Ahead.

The author of the controversial Dead Aid, in her latest work, Moyo examines "how a host of shortsighted policy decisions have left the economic seesaw poised to tip away from the Western industrialized economies and toward the emerging world."

For the US, Moyo says the impact will be the country's transformation to a "venal" socialist state, caused by years of damaging "economic policies and a society that rapaciously feeds on itself.”

During the Telegraph interview with Andrew Cave, Moyo explained that in the West, through our governments' best intentions, we have created some of the most harmful consquences to our economic well being.  Citing the example of retirement income, Moyo referred to pensions as the "the next great Ponzi scheme after Madoff."

Discussing the books "long term" focus on current fiscal concerns, Moyo said:

People are missing the bigger issues because the way the political structure is set up encourages you to focus on the immediate, rather than what I would say are the important issues, the structural things which have been going on for 50 odd years.

And while she says it won't be easy to change direction, Moyo does offer solutions:

By forging closer ties with the emerging economies, rethinking trade barriers, overhauling their tax systems to encourage savings rather than ravenous consumption, and specifically addressing the three essential ingredients for growth (capital, labour and technology) it might yet still be possible for the West to firmly get back in the race.

A former Goldman Sachs economist, Moyo is one of the World Economic Forum's "Young Global Leaders" and in 2009 she was named as one of TIME's 100 most influential people.

How the West was Lost  will be released in the US in February. Andrew Cave's book review and full interview with Dambisa Moyo can be read here.

Paul Ryan at the e21-Manhattan Institute event today: it's all about more makers, fewer takers

Ryan Streeter

Wisconsin Congressman Paul Ryan has become something of a wonk's celebrity. Think tank types in Washington love him because he's geeky about numbers, policy intricacies, and complex issues.

But he's a got a phrase he uses quite a bit, which is very slogan-y - something a plain-spoken political stumper would come up with - and he used it again today while answering questions at the e21/Manhattan Institute forum, hosted by the Wall Street Journal's Paul Gigot: "makers and takers."  He likes to say that we are increasingly becoming a country where we have more takers than makers, and we need to get back to producing more makers. 

The "takers and makers" line in his Young Guns book with Eric Cantor and Kevin McCarthy. George Will has quoted him saying it, John Stossel at Fox has, too, and so on. 

The term is, for this wonkiest of elected officials, his unifying concept that ties together his rabbit-hole detours into policy particulars. Ryan was very clear in today's talk that entitlement reform, budget cutting, new House rules on spending, and everything else he is known for, are all about growth, not austerity (austerity being what you do, he says, when it's too late and you're in an all-out debt crisis). And we need to care about growth, because - you guessed it - we are quickly trending to a society of takers, not makers.

Getting rid of the built-in pro-taker policy of the health care law, the multi-trillion dollar debt burden fueled by out-of-control entitlement programs, and cutting waste that imposes additional burdens on the economy - all of this is to pave the way for a growth environment. 

And so, Ryan says, all of that needs to be done in conjunction with positive policies (which the GOP hasn't completely worked out yet) in these areas:

• Tax reform that results in simpler, lower tax rates
• Regulatory reform that creates certainty and predictability, and which are efficient and "honest"
• Sound money. The GOP needs to be "the party of sound money" that pushes the Fed to ensure our money is a reliable store of value
• Tort reform that eliminates growth-slowing lawsuits
• More trade
• Energy policy that lowers commodity and fuel prices and creates jobs

(e21 will be posting the video of the event here when it's available)

Yuval Levin: "I think left and right mean more in American life today than they ever have before"

Yuval Levin is the editor of National Affairs and the Hertog Fellow at the Ethics and Public Policy Center. 

National Affairs occupies an important place in the American public square. Filling the vacuum left behind when The Public Interest closed its doors in 2005, National Affairs gained a reputation out of the gates in 2009 for its thoughtful, provocative essays on the most important issues facing America.

To mark the publication of the first National Affairs issue of 2011, ConservativeHome's Ryan Streeter posed 5 questions to Editor Yuval Levin on the left-right divide in America, changing the GOP, economic growth, replacing the health care law, and more.  

Read the interview in its entirety. It's packed full of good stuff. Here are some highlights:

• "I think left and right mean more in American life today than they ever have before." The centuries old division between technocratic radicalism (the left) and defenders of mediating institutions and markets (the right) is manifesting itself in American politics more today than in the past.
• "[If I could wave a wand and change one thing about the GOP,] I would make it so that every time we are tempted to talk about the size of government we talk also (and more so) about the purpose of government." Republicans need a firm idea of what government is for, in order to structure the policy changes we need today.
• "Our tax system [when the supply siders came on the scene in the 70s and 80s] was a major impediment to growth. Today, reductions in marginal tax rates would have a much less significant effect." If Republicans really care about growth, they need a more creative, robust set of policies than relying on what worked in the Reagan years (see below for some of Yuval's ideas).
• "Two plain and boring words: defined contribution.  That is the key to the conservative approach to reforming American health care." Replacing Obamacare requires a radical shift to up-front payments as a way to create a consumer marketplace that will in turn force providers to offer lower-cost options in a competitive marketplace.
• "American conservatism is exceptionally interested in...the way ideas and ideals intersect with concrete policy questions." National Affairs sits at that intersection, and should be required reading for all aspiring and current lawmakers.

RS: You're a University of Chicago Ph.D. who did his research on Edmund Burke, that legend of conservatism whose thought was central to some of the 20th century's leading conservative thinkers. Now you're sitting in Washington as Editor of National Affairs. How did your study of Burke  inform what you're doing?

Well, the great thing about National Affairs is that it lets me stand at the intersection of the world of policy and the world of ideas, which for me is just about the ideal place to be. And it’s a place that lets me draw quite a bit on what I learned from Edmund Burke—who after all spent his career right at that intersection (at a far higher level, of course), as a great reforming politician who was also a great political thinker and writer.

I think American conservatism is exceptionally interested in that intersection, in the way ideas and ideals intersect with concrete policy questions. We want to take the American founders and the Constitution seriously while wrestling with the challenges of the day. That takes a combination of a deep sense of the American political tradition and national character together with a clear understanding of contemporary public-policy challenges. Our hope at National Affairs is to provide some guidance and help on both fronts, and so I think that by a lucky chain of coincidences I’ve actually ended up doing something that really lets me apply political ideas to policy questions. 

RS: You've got a keen sense of how politics and policy affect each other and unite or divide people. Beyond the usual right-left divides in Washington, what are the major sources of difference and disagreement you see between today's major political ideologies or factions.

I’m actually always struck by the way in which our left-right divide encompasses a broad array of not only political but also cultural, social, and economic differences. On the face of it, the division of our politics into two camps seems peculiar and paradoxical—we’ve got one party that combines social conservatives with economic libertarians and another that combines social libertarians with economic statists. The tension between libertarian and communitarian impulses clearly divides each party internally. So why shouldn’t we have a party of social and economic communitarians and another of social and economic libertarians? But I actually think the coalitions we have make a lot of sense—both philosophically and (more importantly) as a response to the circumstances of American history and American life.

At the level of ideas, Western politics has long been divided (in very general terms of course) along the axis created by the response to the radicalism of the French Revolution, and then sharpened and clarified by the response to the radicalism of communism. The radicalism of the French took the form of an assault on what they perceived to be irrational traditional mediating institutions like the family, religion, and local ties in pursuit of a pseudo-scientific technocratic mastery of human affairs that was thought to offer the promise of more rational, just, and effective administration. The radicalism of the communists accepted that aim and added to it an assault on what they perceived to be irrational and unjust market economics in pursuit of a pseudo-scientific technocratic command economy that was thought to offer the prospect of greater economic efficiency, justice, and equality. The left wing of modern Western politics emerged to advance these two sets of views, with varying degrees of radicalism in various countries at various times. The right wing of modern Western politics emerged to oppose these views, and so to defend first traditional mediating institutions and practices, and second the market economy.

Americans, in this regard as in most regards, have been less extreme than our European cousins. Our left wing, therefore, has for the most part not consisted of communists or radical anti-family atheists (though we have had our share, to be sure) but of more mundane technocratic reformers and social activists who view traditional institutions (sometimes rightly, sometimes wrongly) as oppressive and unjust. And certainly in our time, with the left all over the world reeling from the collapse of communism and the growing decay of the welfare state, the left is on its heels a bit. But our political debates are still, to a great degree, defined by the debate between organic or traditional mediating institutions on the one hand and technocratic expert management on the other. That distinction is at the heart of the health-care debate, for instance. It is at the core of many of what we call the social issues in our politics. It is the essence of our economic policy arguments. And it is still what divides left and right.

Our parties today actually embody this division better or more clearly than they used to. There have always been conservatives and liberals (or progressives) in American politics. But until fairly recently, there were some of each in each party, so the parties didn’t so much embody as contain our deepest ideological divisions. Today, the parties come much closer to embodying those divisions, so that we really have a conservative and a liberal party. In the course of the second half of the 20^th century, the conservatives were made to feel unwelcome in the Democratic Party, as it grew more culturally liberal and more aggressively technocratic. Friends of the market and friends of the family, threatened by a common enemy, found common cause in the conservative camp. This in turn made the Republican Party more decidedly conservative, and therefore made many liberal Republicans feel unwelcome, and turn to the Democrats.

So we find that the various social, cultural, demographic, and economic distinctions that fall along the axis of ideas that has given shape to Western politics for more than two centuries now fall pretty neatly along our partisan axis as well. Our parties are increasingly divided between adherents of expert management and pseudo-scientific rationalism in politics on the one hand and defenders of traditional mediating institutions and self-organizing markets on the other. Obviously tensions remain within each camp: the family and the market are not always natural allies, and neither are technocracy and equality. But there is both a historical and a philosophical logic to this division, it speaks to the debate at the heart of modern life, and so it persists. It has made our conservative party increasingly populist and our liberal party increasingly elitist, and it has made our politics increasingly sharp and clear (or, if you like, polarized and divided).

All of that is both good and bad, like everything else in life. But, to return to your question, it means that our partisan divisions today actually capture quite a lot of underlying social, cultural, and historical divisions. I think left and right mean more in American life today than they ever have before.

Quote of the day: Governor Rick Snyder calls for sacrifice and ingenuity to move Michigan forward

Natalie Gonnella

In his inaugural address, Governor Rick Snyder called on Michigan residents to adopt a "cultural change" to address the state's current financial woes.  

"Eleven months after introducing himself in a TV ad as "one tough nerd,"' Governor Snyder challenged the people of Michigan to embrace a shared responsibility to get the state back on track:

The underlying key to success...is to change our culture. We need to move from negative to positive. We need to stop looking in the rearview mirror and look toward the future. We need to stop being divisive and become inclusive. We have spent too much time fighting among ourselves and become our own worst enemy. This will not be simple or easy. There are no magic solutions to our problems. But with most problems, there also comes opportunity. I've been hired to represent all of the people of the state of Michigan and to move us all forward together. It will require shared sacrifice from all of us. Many have already made sacrifices. Many of us need to join those who have already contributed. When we make changes like this, we are faced with the realization many of us will have to take a step back in the short term to move us all forward together in the long term.

 The Governor added:

With high expectations, you can achieve great results, but also importantly, with respect to innovation, we have to remember innovation is not about technology, it's a state of mind that we all have the power to do.

Michigan currently faces one of the highest unemployment rates in the country (over 12%) and the subsequent population decline has seen the state lose five seats in Congress over the past forty years.

While the effectiveness of his proposals will certainly be something to watch, Rick Snyder's willingness to face the realities of the current fiscal crisis and his advocacy for "shared sacrifice" is something that should be replicated throughout the GOP. His bold call for innovative ingenuity is a departure from Michigan's well known history of "politics as usual" and a message that politicians across all offices should seriously consider as the US prepares to tackle a record deficit.  

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.

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.

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.