The GOP on Economics: The good, the bad, and the ugly

header-hoover-institution-fellows1-1By WSJ, Editorial

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2016 Republican presidential candidates, from left, John Kasich, Jeb Bush, Marco Rubio, Donald Trump, Ben Carson, Ted Cruz, Carly Fiorina, and Rand Paul in Milwaukee, Wisconsin.

Tuesday night’s Republican presidential debate wasn’t the most entertaining, but it was by far the most educational. The two-hour session gave the candidates a chance to critique the Obama record, as well as tease out some policy differences in illuminating ways.

Start with trade, which showcased Donald Trump. “I love trade. I’m a free trader, 100%,” said the businessman, after declaring that he opposed the only free-trade deal currently on offer, the U.S. agreement with 11 other Pacific nations.

Mr. Trump called it a “terrible deal,” though it wasn’t obvious that he has any idea what’s in it. His one specific criticism was its failure to deal with Chinese currency manipulation. But it took Rand Paul to point out that China isn’t part of the deal and would be happy if the agreement collapsed so the U.S. would have less economic influence in Asia.

Mr. Trump said on these pages Tuesday that he would label China a currency manipulator on his first day as President, triggering tariffs on thousands of Chinese goods. The businessman thinks economic mercantilism is a political winner, but we doubt that starting a trade war that raises prices for Americans would turn out to be popular. Many of Mr. Trump’s supporters care more about his take-charge attitude than his policies, but GOP voters are going to have to decide if they want to nominate their most protectionist nominee since Hoover.

Then there’s tax policy, in which all of the candidates offered up reform plans that would be an improvement over the status quo. Marco Rubio was challenged on his child tax credit, which he would increase to $2,500 from $1,000. The Florida Senator defended it in general terms as pro-family, but Mr. Paul was helpful again in pointing out that Mr. Rubio’s credit is “refundable,” which means that people who don’t pay income taxes would still receive a government check.

Mr. Rubio said the payments would offset payroll taxes too, but he never did respond to the point that at a cost of some $15 trillion over 10 years in forgone revenue the credit would be a vast new entitlement through the tax code that wouldn’t help the economy. Mr. Rubio and Chris Christie are the best communicators in the GOP field, and Mr. Rubio’s diagnosis of the changing economy has particular appeal to anxious voters. It’s too bad his tax credit is such an expensive political pander.

Immigration was also a flashpoint, with Ted Cruz slip-streaming Mr. Trump as an ardent restrictionist. He even embraced the lump of labor fallacy that the supply of jobs is so fixed that immigrants “drive down the wages for millions of hardworking men and women.”

Not so. In a 2013 analysis, the Congressional Budget Office estimated that the bill that passed the Senate that year would have raised average wages by 0.5% by 2033. CBO also found that among the poorest workers, new immigrants tend to lower the wages of other immigrants, not native-born workers. That’s because they work in industries like hospitality and agriculture that are dominated by newcomers. Mr. Cruz is positioning himself as the candidate of the nativist right and to pick up voters who now support Mr. Trump if the businessman fades.

On the other hand, Mr. Cruz’s pitch for “sound money” that helps the middle class stands out in the GOP field and deserves more elaboration. It’s also notable that nearly all of the GOP candidates identify the Federal Reserve’s post-crisis monetary policy as a source of rising inequality that has favored the wealthy. This is a populist note that has the added benefit of being true.

Because of its economic focus, the debate had fewer dramatic moments in which candidates could stand out or deliver knockout punches. But we thought Jeb Bush had his best debate by focusing his aim on Hillary Clinton’s economic policies rather than on other Republicans. His specificity on regulations he’d repeal was helpful, listing the three most costly in the Obama years.

John Kasich has a strong Ohio record, and his tax reform is solid, but for some reason he seems compelled to lecture Republicans about morality. “There’s too much greed” on Wall Street, he said. But greed has always been with us and blaming it for the financial crisis is what Democrats do. GOP voters are more interested in limiting greed in Washington.

By the way, though he appeared in the undercard debate on Tuesday, Mr. Christie deserves to be on the main stage. He dominated the early debate and his focus on “prosecuting” the case against Mrs. Clinton helps explain his recent rise in New Hampshire. GOP voters are still sorting the candidates to find a potential winner, and Mr. Christie deserves to be one of the serious contenders.

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