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The republicans Lose With Trump

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WASHINGTON, DC: The Republican Party substantially underperformed in this year’s US midterm elections, with the candidates most closely associated with former President Donald Trump performing the worst. The absence of the anticipated “red wave” may be the moment when the party finally realizes that Trump is an electoral liability.

Trump’s economic policies weren’t a significant factor in the party’s poor performance. But they surely didn’t help, either. Trump’s brand of economic policy is faux populism, offering empty promises to the working class, as if anger and grievance were adequate substitutes for higher wages and better opportunities.

While he was president, Trump didn’t deliver for typical workers and households. His 2017 corporate tax cuts will put upward pressure on wages by incentivizing productivity-enhancing investment, but he counteracted the good from those cuts with his destructive, investment-reducing trade war. Moreover, the trade war reduced manufacturing employment – even that favored group of voters wasn’t helped.
American workers and households want access to more and better employment opportunities, lower drug prices, more efficiency and innovation in health care, and better schools. Instead, Trump offered a populist scream, exploiting the anger and angst that resulted from the collision of the long-term decline of manufacturing jobs, the slow recovery from the 2008 financial crisis and Great Recession, and cultural grievance.

It’s long past time for the Republican Party to turn the page. Enduring political success is built on a foundation of sound, effective policies that are understood by the public to have improved their economic outcomes. The GOP needs a post-Trump, growth-and-participation policy agenda.

Such an agenda should be a vehicle to communicate the traditional commitments held by economic conservatives – to the free-enterprise system, individual liberty, personal responsibility, and economic opportunity – as well as offering concrete solutions to real economic challenges.

This does not mean reversing the party’s Trump-era focus on the working class. But it does mean attaching some actual policies to pro-worker rhetoric.

Those policies should include an expansion of federal earnings subsidies like the earned-income tax credit, which reduces poverty and increases employment by boosting the financial returns of working. By introducing supply-side reforms to the commercial childcare sector, conservatives could reduce prices and expand access to services, making it easier for parents to work.

Well-designed worker training programs that combine occupation-specific skill training, “soft skill” development, and wraparound services like life skills training and job placement and retention services have been found to generate substantial and long-lasting increases in earnings. Figuring out how to scale up these programs should be a top priority for a pro-worker party.

Longer school days and a longer academic year would help to counteract the devastating effects of pandemic learning loss from closed classrooms and online schooling. It would also make it easier for parents to work. And it would be pro-worker: By increasing the skills of today’s students, tomorrow’s workers will be more productive and command higher wages.

There is room in this agenda to scratch the populist, anti-elite itch. Employer power in the labor market, non-compete clauses in employment contracts, and occupational licensing restrictions all favor incumbents and big firms over workers. These barriers to opportunity should be weakened.

To sustain economic growth, the US needs more workers – including foreign-born workers. Reasonable people can disagree about the right number of green cards and work visas that the US should issue each year, but Trumpian nationalism demonizes immigrants, effectively hanging a “no immigrants need apply” sign on the Statue of Liberty. This diminishes America’s standing as the preferred destination for many of the world’s most ambitious, risk-tolerant, and hardworking people.
Beyond worker-specific policies, conservatives should support an agenda that will fuel long-term prosperity. This should not focus on deficit-financed individual income tax cuts, but rather on a revenue-neutral tax reform that would increase economic efficiency and reduce the “shadow spending,” like the mortgage interest deduction, that occurs through the tax code and disproportionately benefits high-income households.

The expiring provisions of Trump’s 2017 tax law that encourage business investment should be extended in order to boost productivity, wages, and economic growth. To help foster innovation and the new inventions that fuel lasting prosperity, conservatives should support additional incentives for corporate research and development and federal support for basic research.

Industrial policy, protectionism, and maintaining a fixation on manufacturing jobs will not create the outcomes that are necessary for enduring political victories. More importantly, they will not lead to long-term prosperity or address the immediate issues facing workers and households.

Enough with building walls. Enough with rhetoric and symbolism without substance. Enough with nostalgia for an imagined past. Conservatives should embrace economic growth, not downplay its significance. They should encourage participation in economic life, rather than indulge a narrative of victimization. Conservatives should be optimistic about the future, not fearful of it.

Michael R. Strain is Director of Economic Policy Studies at the American Enterprise Institute.
© Project Syndicate 1995–2022

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