Along with conservatives' positions on other subjects, conservative economics has changed over time. The most important change during my four decades in Washington was probably the acceptance of supply-side economics, the idea that if we cut marginal tax rates, the economy will grow so much that government revenue will actually increase. While some enthusiasts overstate the case, I think that may broadly be true, so long as it is coupled with conservatives' traditional insistence on balanced budgets and firm controls on government spending. Certainly, all conservatives should favor lower taxes and specifically lower marginal income tax rates.
So where does conservative economics go from here? I think the next conservatism needs to start by putting economics itself in its proper place. Today, most people seem to accept the primacy of the economy: anything is good if it helps the economy, bad if it hurts it (or special interests say it will hurt it). That is not the traditional conservative view. Even less have conservatives made economic efficiency their highest virtue. If economic efficiency means, for example, that America should send all its manufacturing jobs overseas in the name of free trade, I think the next conservatism should oppose that. To conservatives, people should be more important than things. Life is not just about getting more stuff.
It seems to me that the next conservatism needs to start with what conservatism has gotten right about economics, then build on that base to address some problems we have largely ignored. Among the things we have gotten right are the need for lower tax rates, the desirability of a flat tax (something more and more foreign countries are adopting) , replacing the income tax with some form of consumption tax so we stop penalizing savings and demanding balanced, and smaller, federal budgets. Restoring the republic and adopting a foreign policy for Americans should help the next conservatism reduce the size of the federal budget by hundreds of billions of dollars.
Here are some of the new economic issues the next conservatism needs to address:
- The need to restore American manufacturing and labor. Unless we want to become a Third World country, we need to make things. We have to stop the movement of all our manufacturing to China and other foreign countries. If that requires tariffs, starting with tariffs to protect industries of strategic importance, so be it. More, we need the well-paying jobs manufacturing offers to ordinary people. Many conservatives see labor as an enemy. I think that view is outdated although union's leadership continues to be a part of the leftist coalition which opposes everything we believe in. Instead of thinking of labor as the unions, we need to see it as people: as average Americans who want to be able to give their families a middle-class standard of living on one income, so mom can stay home and take care of the kids. You cannot do that with retail or most other "service" jobs. It requires manufacturing jobs. The next conservatism must find ways to preserve and re-create such jobs.
- We need to restore thrift as a virtue instead of consumption. Part of the reason we are selling America to foreigners is that Americans save so little. Two-thirds of the American economy is now based on consumer spending. That is not sustainable, and it points toward a crash. The next conservative economics needs to reward thrift, again possibly by adopting a consumption tax in place of the income tax. Thrift also allows citizens to provide for their own futures instead of depending on the "nanny state" to bail them out. The return of thrift and smaller government go hand-in-hand.
- The next conservatism of course will favor free enterprise. But is enterprise truly free if there are no limits on its scale? Now, big business outsources jobs overseas as fast as it can. Would small businesses that are anchored in their communities do that? I think maybe not. Are local entrepreneurs free if they have to compete against huge chains of big box stores? I am not sure they are. The next conservative economics needs to define free enterprise more broadly, looking not just at the danger from government but also at the threat from vast corporations, many of them multi-nationals that could care less about America's future. Traditionally, conservatives have favored things that are local and small in scale. Those are roots to which the next conservatism should return.
This leads back to where this column began, with the requirement to put economics itself in its proper place. Life is not just about getting and spending.