The Conservative Economic Message

Promising Upward Mobility for Every Step of the Economic Ladder

by Prof. Patrick Garry:

At the crux of the conservative view of America is the promise of economic mobility and opportunity for individuals at every step of society’s economic ladder.  Given recent economic developments during the Obama era, however, conservatives may need to broaden their focus so as to ensure that the goal of economic mobility and opportunity is available to all members of American society, particularly those occupying the lowest rung of the income ladder.

There’s an old adage: what was good for General Motors was good for the country.  Given the distortional effects of globalization, automation and increasingly multinational corporations, the new conservative directive should be: what is good for the American worker is good for America.  And the conservative hierarchy of economic values should be: first, economic freedom, since only economic freedom can lead to true economic security; second, economic opportunity and mobility, because only true mobility can lead to a freely chosen state of economic security; and third, economic growth, since economic growth is the only way to ensure both security and economic mobility.

Liberalism stops short in its economic agenda, settling for a false promise of economic security – false, since true security can never be achieved without economic freedom, and can never be preserved without economic growth.  Liberalism dismisses growth, as if it is something only the rich want.  But in reality, growth is most needed by the lowest income classes.  Because without growth, the only way lower income classes can advance is through wide scale government-mandated redistribution, which has always proved disastrous for any society that has pursued it.

In The Moral Consequences of Economic Growth, Benjamin Friedman demonstrates the importance of economic growth to a healthy democratic society.  Economic growth leads to a rising standard of living, which in turn fosters greater social tolerance, commitment to fairness, and dedication to democracy.  On the other hand, economic stagnation produces a zero-sum politics, which then decreases a society’s spirit of generosity and weakens cultural confidence.

Liberal Economic Policy and the Erosion of Work

The current crisis in America revolves around an economy of tepid growth.  Median household income in 2013 was 8 percent lower than in 2007, the last year before the recession began.  And as predicted by Friedman, this erosion of middle-class income has produced a very pessimistic public mood.  According to the Pew Research Center, 79 percent of the public rate current economic conditions as only fair or poor.  Just 22 percent think the economy will be better a year from now, and only 21 percent think the recession has ended.

During the Obama era, the integrity of work has been one of the most serious casualties.  According to The Wall Street Journal, nearly seven million Americans are stuck in part-time jobs.  They want full-time jobs, but those jobs are not available, largely because of such full-time job-depressing influences as the Affordable Care Act.  There are still two million fewer full-time workers than there were in 2007.  Only 47 percent of all adults are working full-time.  And the proportion of Americans in the labor force is at a 36-year low.

Other Indications of the Current Economic Malaise

The decline in job creation corresponds with a decline in new business start-ups, which in many industries is near a 35-year low.  Indeed, if the rate of start-up formation after the Great Recession had been equal to what it was during the Reagan recovery, 760,000 additional jobs would have been added in just one year.

The Obama administration has tried to spur economic growth and prosperity through government spending.  But, as demonstrated by the decline in median household incomes, government spending does not produce economic growth.

The Obama economic policy has essentially relied on three approaches: a huge boost in government spending, which was supposed to create new jobs; a tax on the wealthy, which was supposed to address the growing inequality; and a reliance on the Federal Reserve zero-interest rate policy, which hasn’t increased median family income, but which has fueled a record stock market and significantly added to the wealth of the already-wealthy.

A Contrast to the Liberal Approach

The Left does not have any growth ideas for the economy.  The minimum wage, for instance, is no growth measure.  Furthermore, the minimum wage may not be effective at helping poor families, since there is a strong possibility that low-wage workers may not necessarily belong to low-income families.

A better means of helping low-income families would be to expand the Earned Income Tax Credit, which directly targets low-income families rather than just low-wage workers.  Moreover, since the EITC operates through the tax code, it has the benefit of being financed disproportionately by those with the highest incomes; on the other hand, raising the minimum wage operates as a burden on those employers who hire low-wage labor.  And normally, such employers are not wealthy individuals.

The Left talks about making the tax code more progressive, as a way of remedying the growing inequality.  But this is not a true remedy; it just looks like one.  Income taxes cannot be cut for the nearly fifty percent of individuals who do not pay any taxes.  And since the top five percent of taxpayers already pay about 64 percent of income taxes, it becomes nearly impossible to wring anything more out of those taxpayers without them moving their income to some tax-protected haven.  This reality is demonstrated by the Obama tax hike, which although designed to soak the rich instead gave the middle-class a bath.

It is often argued that liberalism advocates a redistributionist economic program.  But that is not the most accurate description of the liberal aim, since all the government programs since the 1960s have not been too successful at actually achieving an income redistribution toward the poor and working class.  Instead, the best description of the liberal agenda is one of public sector enhancement.

Economic versus Government Growth

The growth of government, either in power or influence or scope of activity, lies at the core of the liberal agenda.  Entitlement reform is opposed because it might shift some responsibilities or activities toward the private sector.  Deregulation is not supported because it might result in reforms that would diminish the role or power of government.  Taxes are not cut because the reach of government might be scaled back.  Given the historic failure of liberal policies to produce either vibrant economic growth or a just and sustainable income distribution, the only rational description of the liberal agenda is a desire to expand the size and influence of the public sector and those who occupy it.

The conservative economic program focuses on the private sector, because, as history has demonstrated, only the private sector can provide the kind of growth needed by those on the lower income steps of the economic ladder.  This is not to say that the private sector can provide perfect economic results if the government just stays out of the picture; it is just to say that the private sector is the engine of economic growth.  Like any other engine, it may need tune-ups and repairs; but the tune-ups and repairs serve the needs of the engine, because only an engine can power the vehicle.

Conclusion

A basic difference between conservative and liberal economic policies is the difference between growth and status.  Conservatism seeks to encourage and maintain a growth culture within the economy, whereas liberalism seeks to provide government benefits based on a static individual status.  But this latter approach ensures a continuing level of strife and conflict built into society, which in turn will ensure the constant presence of government as the final and central arbiter.

The liberal approach seeks an unsustainable security through government mandates and penalties.  It envisions individuals as government beneficiaries, whereas conservatism sees individuals as individual actors able to take advantage of what upward opportunities the economy offers.  And it is the job of government to ensure that these opportunities remain open and accessible.

Patrick Garry is a professor of law at the University of South Dakota, and Director of the Hagemann Center for Legal & Public Policy Research.