Economic Liberty vs. Security

UT Dallas_tex_orangeBy Ryan Streeter

Another time for choosing.

Whatever the outcome of the 2016 presidential election, the summer of 2015 will be remembered as the summer of Trump and Sanders. The other candidates, especially the Republicans, could learn a lesson from the two renegades, who have figured out how to capitalize on the fact that America is in a funk even as its economy improves.

The summer of Donald & Bernie

Unemployment is at a seven-year low, and job growth is steady, but 65 percent of respondents in the latest NBC/Wall Street Journal poll say the country is on the wrong track. Six years ago, at the low point of the recession, the figure was 49 percent—when unemployment was 9.5 percent. It’s 5.3 percent today.

Nearly all of the 2016 presidential candidates agree that middle-class stagnation is a key source of America’s foul mood. But Trump and Sanders have done more than the others to blame well-connected, powerful interests for that stagnation. Sanders rails against banks, and Trump against entire countries. They have pledged a fight against forces over which everyday Americans feel they have no control, while the majority of other candidates speak as thoughtful managers and policy wonks. Hillary Clinton and GOP favorites Jeb Bush, Scott Walker, and Marco Rubio engage economic issues as capable policymakers.

But to many Americans, low wages and low-quality jobs are symptoms of a deeper problem in which, to use Elizabeth Warren’s words, the game is rigged. Banks and corporations, foreign governments, and our own government are profiting from policies they have shaped with politicians at the expense of ordinary people. Sanders’s promise to break up the banks or Trump’s promise to take on China (all by himself, apparently) strike a chord with frustrated voters who feel helpless and want someone to fight for them.

The feeling that the powerful are rigging the game against the rest of us runs deep. According to Gallup, the share of Americans who say they are satisfied with the freedom they have to choose the direction of their lives has dropped steadily over the past decade, while the percentage of Americans who believe the U.S. government is corrupt has grown. For nearly 50 years until 2000, more than 80 percent of Americans said the United States offers plenty of opportunity to get ahead, but that figure steadily dropped to roughly 50 percent in recent years. In Pew’s political typology study last year the vast majority of Americans, including steadfast conservatives and “young outsiders” who lean right on many issues, believe too much power is concentrated in the hands of too few companies. A smaller yet still significant share of people in the survey believes our current economic system favors the powerful. All of these trends stand against the backdrop of flagging confidence in institutions. With the exception of the military and small business, every institution Gallup tracks suffers from lower public support than its historical average, with the presidency, the courts, and Congress near the bottom along with banks.

Middle America’s anxieties are not unfounded. The regulatory state and big business are getting bigger together as government policy increasingly favors the powerful. From 1994 to 2013 Fortune 100 companies grew their share of nominal GDP from 33 to 46 percent, while federal regulations grew nearly 30 percent. Vast new regulatory powers at the Departments of the Treasury and Health and Human Services are making banks and insurance companies fewer and larger. This distention of the regulatory state has exerted a downward pressure on income and growth over the years. According to a 2013 study, if we’d had the same regulatory system we had a half-century ago, we would have seen growth of 2 percent more per year, which effectively means the economy would be more than three times larger today than it is.

Democrats have done a better job than Republicans talking about Americans’ feeling of disempowerment. The ascendant progressivism of Elizabeth Warren and Bernie Sanders, which Hillary Clinton is embracing even if not persuasively, uses economic security as its framework for fighting back against the forces of inequity in America. Their view relies on a more muscular redistributive state and old-fashioned tools of the left such as confiscatory taxes, higher minimum wages, and stricter labor laws. When Hillary Clinton threatened to impose “workforce protections” on sharing-economy companies such as Uber and Airbnb in her July economic address, she was using the language of economic security.

Even as GOP presidential candidates have parroted the conventional wisdom that Trump has “tapped into” the frustration voters feel, they have largely avoided doing so themselves. When they talk about the middle class, they thoughtfully discuss familiar topics such as tax reform, education reforms, and replacing Obamacare. Their focus on upward mobility for the middle class is a welcome departure from Mitt Romney’s 2012 focus on “makers and takers” and the 47 percent, but they are missing an opportunity to tie their tax and health care policy ideas to a more compelling policy framework.

LIfe 2x 3They would do better to fight for an alternative vision for America, one of economic liberation as opposed to the left’s economic security. Many people legitimately want security, but many also want to know it is possible to be freed from an elite who use government to serve themselves while limiting opportunity and making life more expensive for everyone else. A majority of Americans believe the government is doing too much, and small-business owners increasingly worry more about government rules than taxes as threats to growth.

Ronald Reagan, whom GOP candidates frequently cite to justify tax and foreign policy ideas, eloquently addressed the problem of self-dealing elitism years ago. In his famous “Time for Choosing” speech in 1964 he said, “This is the issue of this election: whether we believe in our capacity for self-government or whether we abandon the American revolution and confess that a little intellectual elite in a far-distant capital can plan our lives for us better than we can plan them ourselves.”

Reagan’s insight was not only that government has grown too big, which all conservatives acknowledge, but that it is too intrusive. In the same speech, he warned of the disquieting trend of “proliferating bureaus with their thousands of regulations [that] have cost us many of our constitutional safeguards.”

Ours is an era in which the IRS bullies people because of their politics, activists collude through lawsuits with federal agencies to reach mutually beneficial settlements, and government agencies meddle with entrepreneurs whose new ideas threaten the regulatory status quo. People have long complained about bureaucracy. The real problem is the intrusiveness of those bureaucracies and their disturbing penchant for targeting their critics while rewarding their friends.

GOP candidates should speak more directly about the need for economic liberation from such powers as a way to create hope and opportunity for the middle class. They will not do this by simply supporting “regulatory reform,” which they all do (and which bores crowds). They need to go further and make the case, as Columbia University law professor Philip Hamburger has done in his excellent book Is Administrative Law Unlawful?, that government agencies often act outside the law in a manner akin to the 18th-century absolutism that our Constitution was written to prevent. The fight is not between “outsiders” and “Washington,” which candidates repeat ad nauseam every political cycle, but between those who understand how freedom produces happiness and the unlawful powers bent on restricting that freedom.

Next, they should promise to push legislation that will force Congress to do its job and stop delegating the unlawful writing of rules to the unelected employees of government agencies. Similar legislation has passed the House in recent years but has never become a nationally debated issue. An imaginative candidate could change that.

Finally, candidates could lay out specific ideas for several types of economic liberation. Candidates could promise to liberate young workers, the self-employed, and small-business owners by working with states to create alternatives to the licenses that now require a third of the workforce to get government permission to work. States could opt, for instance, to allow people to join a nationally recognized, self-certification registry for a particular profession as an alternative to going through burdensome professional requirements. They could promise to liberate the most highly regulated population, low-income families, by flexibly consolidating benefits, promoting portability, and rewarding demand-driven training. Candidates could also promise to give states a more muscular and active role in approving or rejecting federal rules.

The appetite for checking the power of unaccountable elitism is growing. Within a week in May, American Enterprise Institute scholar Charles Murray and legal activist Jay Sekulow published books proposing new strategies for pushing back against overreaching government agencies, even to the point of civil disobedience. These books were not written in a vacuum. They are a sign of our times—times in which the Export-Import Bank fails reauthorization and states are threatening to disregard the EPA’s latest rules.

The Republican candidate who figures out how to convert this anticrony, anti-elitist energy into a positive plan for change could do very well next year indeed.

Ryan Streeter is the executive director of the Center for Politics and Governance at the University of Texas at Austin. 


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