Liberals and progressives have responded to this grim new reality with proposals for a much higher degree of direct and indirect government intervention in the economy. Conservatives wish to beat them back in order to protect market freedom. That disagreement will divide politics in the next decade. For conservatives to compete effectively, they will want to find ways to enhance economic security that do not put government in control.
How to do so is the question that preoccupies the “reform conservatives” profiled in The New York Times Magazine last month. To date, the answers proposed do not meet the magnitude of the problem. Ryan’s pre-crisis version likewise falls short. Not only does it conceptualize the poverty challenge in a mistaken way, but it also will aggravate the larger problem of insecurity by imposing hardships on the near-poor.
Ryan’s poverty plan does not itemize costs and pay-fors. But unless Ryan has utterly repudiated his previous budget plans, his expansion of the Earned-Income Tax Credit and his expensive ideas about casework, combined with his promise of deficit-neutrality, do imply large cuts in other forms of means-tested assistance, most likely food stamps and Medicaid. (Remember, the various Ryan budget plans have always ruled out near-term changes in Medicare, Social Security, and other non-means-tested social programs.)
The Obama administration has raised the cost of means-tested programs in part by expanding eligibility to people further removed from poverty. If the Ryan budgets restore the pre-crisis status quo—or even approach it—they will impose added economic pressures on people who, if not actually poor, are much less well off than they were before 2008. It’s estimated that the typical American household lost a third of its net wealth in 2008-2009 and has not recovered it yet. Median incomes too have not yet returned to pre-crisis levels.
In the spirit of discussion, then, let’s add some other elements that need to be present in a conservative program for addressing the economic insecurities of the time:
- Conservatives should and will oppose measures that either override market wages (as the minimum wage does) or expand government employment (as universal state-provided pre-kindergarten education would do). Instead, conservatives should support ideas for “topping up” wages outside the market—not only the Earned-Income Tax Credit, but also food stamps.
- Conservatives who resist the Medicaid expansion in Obamacare need to think seriously about some other way of providing deductible health-care coverage for lower-income Americans. For people in the bottom quartile of the population, a small co-pay is sufficient deterrent against health-care overuse. The high-deductible/health-savings-account approach lacks relevance to people who aren’t paying income tax and can’t amass the savings to cover a big unexpected medical bill.
- Expect Democrats to make early-childhood education their big proposal in the presidential election of 2016, as Bill de Blasio did in the New York mayoral election of 2013. If nothing else, such programs function as huge job-creation schemes. The better approach is to fund parents to make their own childcare arrangements—and to focus public resources instead on early childhood nutrition. The present U.S. system of child tax credits excludes people who earn too little to pay income taxes. The reform-conservative idea of crediting child tax credits against payroll taxes would improve the situation, but better still would be straightforward European-style mother’s allowances. These put a more secure and predictable floor underneath income, especially for part-time workers. The experience of Germany suggests that even relatively small mother’s allowances can considerably reduce the incidence of abortion, a goal that should appeal to many conservatives.
- The Ryan plan raises the idea of studying government regulations with a view to identifying those that burden the poor. It’s also true that certain oligopolies and monopolies—notably cell-phone and cable-television companies—structure their fees to ensnare unwary and unsophisticated customers. Consumer protection and deregulation need not be alternatives to each other. Canada’s governing Conservative Party has introduced effective and popular rules to protect consumers from cell-phone overcharges. Republicans who inveigh against “crony capitalism” might do well to direct their ire here.
- Above all things, low-wage Americans need a tighter labor market. Yet President Obama is advancing immigration reforms that would not only legalize millions of new workers—but are also inviting new waves of illegal migrants to seize their opportunity while they can. Conservatives have their own reasons for preferring restrictive immigration, most importantly that recent immigrations have depended much more heavily than the native-born on social services. More immigration means more public spending and more taxes. Conservative values here coincide with the economic interests of working Americans. One of Donald Rumsfeld’s famous rules was, "If you can't solve a problem, make it bigger." That seems to be the immigration reformers’ approach to the problem of wage insecurity in the lower half of the job market. Immigration restriction would thus seem integral to poverty reduction.
More important than any specific proposal however is the larger spirit of the Ryan discussion paper. Conservatives are back in the idea business. They are competing to offer solutions, not only complaints. Game on—at last.