Can Republicans Be the Party of Growth?

Via Michael Mandel, here's an interesting piece about fixing the GOP from Amity Shlaes. She's the conservative whose tome about FDR, "The Forgotten Man," argued that the New Deal was bad for the economy, and Capitol Hill Republicans bought the book in bulk. Now she's speaking directly to her most avid readers with a pretty simple message: Stop blowing up your marriages, and start blowing up your party.

Her solution is to turn the GOP (Grand Old Party) into a POG (Party of Growth), by following four simple steps:

1) Junk social conservatism.
2) Balance the budget.
3) Attract foreign investments.
4) Protect property rights.

There is some interesting thinking here, for sure. But wrapped up in Shlaes' POG message is this pesky idea from "The Forgotten Man" that what Republicans should be doing at a time of economic crisis is to advocate for balanced budgets. Shlaes' revisionism is interesting and possibly even influential, but the commonly accepted interpretation of the 1930s explains that attempts to balance the budget and restrain monetary policy in 1936 triggered a second dip in the Great Depression, sending unemployment to 19 percent from 14 percent and halting production. The history of the Great Depression is still a matter of debate, but it seems to me that one of the least contentious parts of that debate should be the bang-bang effect of FDR's premature balanced-budget policies and the depression within a depression that occured in 1937-8. That's not a great template for the Party of Growth.

It is further strange that Shlaes' only example of a balanced-budget platform is Social Security reform. As Americans get older, Social Security will face a long-term budget short-fall, which will require tweaking -- that is something that no student of economics will argue with. But Social Security's long-term forecast isn't anywhere near as dramatic as health care's. Balancing the budget through Social Security reform is like putting out a house fire by watering the garden. Watering the garden is a really good idea! But that's not where the fire is.

Shlaes wants two things: Growth and balanced budgets, both as soon as possible. So do I and, I expect, all Americans. But one has to appreciate that tension between these two ideas. If you really want the first, history indicates that you'll have to run a short-term deficit. That's not a balanced budget. And if you want the second, you'll have to either drastically revamp major government expenditures (like health care), raise taxes, or wait for a 1990s-type productivity burst to juice tax revenue. The first is nearly impossibly tricky, the second is anathema to the GOP and the third is elusive. So, again, what should the Republicans actually do?