Growing Pains

Published June 12, 2014

National Review Online

Room to Grow, the new collection of essays about conservative policies that would help the middle class, continues to attract comment. (Each of us contributed to it and helped edit it.) Its reception continues to be largely positive, but here we will concentrate on criticisms that seem to us misguided.

Ira Stoll, Newsmax
Ira Stoll says there is much to like in the book but criticizes its “obsession with the middle class,” which “divides America into economic factions rather than uniting us, and . . . fails to provide any useful response to left-wing demagogues who blame all of America’s problems on the rich (and who think raising taxes on the rich is the solution to those problems).”

Americans largely are united in thinking of themselves as “middle class”: As Pete Wehner points out in his introduction to the book, roughly 85 percent of Americans identify themselves that way. Political movements that aspire to success, including conservatism, should have no qualms about addressing people in terms to which they can relate. And the book does offer a response to blame-the-rich rhetoric: Dysfunctional institutions and bad government policies have caused many of the problems that concern the middle class, and a conservative approach to government could help solve them.

Stoll criticizes two of the book’s proposals. He sees an increase in the child credit as redistributive, wholly ignoring the book’s argument that it reduces redistribution by countering the tendency of entitlement programs to redistribute money from large families to small ones.

He does not think, either, that political leaders or government should try to spread the word that people maximize their chances of staying out of poverty if they “finish school, get a job, marry, and have children — in that order.” He writes that “a short list of those who got a job before they finished school — Steve Jobs, Michael Dell, Bill Gates, Mark Zuckerberg — renders this advice questionable, at best.” He’s referring to W. Bradford Wilcox’s chapter, and in context Wilcox is referring to completing high school, as every person on Stoll’s list did. The idea that everyone has to finish college, too, runs directly against the argument of Andrew Kelly’s chapter on higher education.

Ben Domenech, The Federalist
Domenech offers some support, and some smart advice, to many elements of the project embodied by Room to Grow and is especially friendly to its overall populism. But he makes three arguments against expanding the child credit in particular: It’s an entitlement; it attempts to reverse the trend toward shrinking families that has been going on for a long time and throughout the developed world; and it therefore makes no political sense.

The child credit is an entitlement in the same sense that characterizes any other provision of the tax code, like the personal exemption. If you meet the qualifications, you have a legal right to keep more of your money from the taxman, with no review by the appropriations committees of Congress. On this basis, one might as well say that any tax relief is an entitlement. The question is whether this type of tax relief is justified.

The child credit does not attempt to restore the pre-industrial model of large families. Its premise is merely that public policy has accelerated the trend toward smaller families and should desist. It would certainly be unwise for politicians to promote the policy by telling people they need to have more kids. But in our country, actual family size runs a little below desired family size, as James Pethokoukis points out. Republicans have in the past been able to first put the credit into law (under Newt Gingrich) and then expand it (under George W. Bush) without suggesting that its purpose is to bribe people to have more children. It isn’t.

The idea polls very well: Most people consider it a way to help families, not to bring about some eugenic dystopia. A pro-family tax policy — or really a less anti-family one — is more controversial among conservative elites than among the American public.

Domenech’s alternative of getting rid of the payroll tax altogether may or may not be a good one — it would depend on what it was replaced with, and we suspect the politics would be extremely difficult because opponents would have a plausible-sounding case that it would endanger Social Security and Medicare — but it would do nothing to change the fact that our old-age entitlement programs contain a bias against larger families. It is hard to remedy that bias without enlarging the child credit (or doing something more complicated to the same effect).

Lawrence Kudlow, NRO
Kudlow generously contributed a blurb to the book, but objects that the chapter on taxes in particular “actually attacks supply-side economics” and “never even mentions corporate tax reform.” We do not read Robert Stein’s chapter as an attack on supply-side economics but rather as a warning against misapplying its core insights. As Stein writes in the chapter’s conclusion, tax rates matter but the economic payoff from bringing them down is lower now that they are at 40 percent than when they were at 70. As Stein has explained at greater length before, he takes his proposal to be an extension of the very logic that led to Reagan’s tax cuts, but applied to the circumstances of our own day.

It’s true that the chapter includes only one glancing reference to cutting taxes on investment. That’s because the book does not attempt to present a complete conservative agenda but rather tries to add to the Right’s agenda new ideas that would have tangible benefits for most Americans. Even the policy-light McCain campaign of 2008 proposed cutting corporate tax rates. It is a point where there is already a conservative consensus (and to some extent a bipartisan one).

In any case, a properly designed reduction in the taxation of business investment (corporate and otherwise) could complement tax relief for families rather than compete with it, and such relief for families would make the politics of both corporate tax reform and the broader simplification of the code that Stein (like most conservatives) calls for much easier. In general, supply-side policies seem more likely to advance in tandem with a popular initiative like expanding the child credit than in opposition to it.

David Brooks, New York Times
After some thoughtful observations about the potential and the limits of the book, Brooks contends that the authors make two general errors. First, we “underestimate the consequences of declining social capital,” as a result of which we need “programs that encourage local paternalism: early education programs with wraparound services to reinforce parenting skills, social entrepreneurship funds to reweave community, paternalistic welfare rules to encourage work.” Second, we overlook the need for government efforts “to disrupt local oligarchies and global autocracies by fomenting creative destruction.”

On Brooks’s first point, we do indeed disagree. We think he overestimates the likelihood that government paternalism (especially if it is directed from Washington) will do good while underestimating the capacities of civil society and the importance of reinvigorating its institutions by entrusting them with real power and authority. The agenda in the book would, however, enable state governments to engage in some of the paternalistic efforts that Brooks wants on the welfare front if they saw fit; and even at the federal level the authors advocate expanding work requirements. On the second point, we think that Brooks is talking about adding to our agenda more than changing it. But the financial reforms in Pethokoukis’s chapter, the health-care reforms in Jim Capretta’s, and the higher-education reforms in Andrew Kelly’s would all do a lot to foster creative destruction in fields that have been too insulated from it and have grown too concentrated and consolidated.

Paul Krugman, New York Times
Krugman attacks two chapters of the book while covering the rest in bile, as you’d expect.

He says the health-care chapter makes “borderline dishonest” claims because it doesn’t note that most of the people who would remain uninsured under Obamacare would be so because “for whatever reason they choose not to sign up” or their states chose not to expand Medicaid, and that others are illegal immigrants. And he notes that the chapter cites the CBO figure for spending on Obamacare’s coverage provisions that was current when it was written (in March) rather than an updated projection published later. It’s hard to see a case in any of that for dishonesty. And of course Krugman himself chooses not to mention that Obamacare also involves massive tax increases and envisions blunt and poorly designed cuts to Medicare to help pay for its new entitlement. That’s not dishonest either.

Regarding the actual proposal made in that chapter, Krugman vaguely casts doubt (without raising any particular question) about how a version of it proposed in the Senate was scored by an outside group he doesn’t like. He then says he’s not impressed with the fact that the proposal could cover more people than Obamacare for a lower cost because it would cost less in part by allowing people to purchase less comprehensive coverage. He suggests that coverage that would protect people only from catastrophic financial risk isn’t really insurance. But in fact, coverage from catastrophic financial risk is valuable, as Krugman has acknowledged in the past. We would say it’s exactly what insurance means.

The key reason it’s important to reduce the number of uninsured Americans is to make sure people have coverage for high-cost care, and therefore ready access to such care without fear of financial disaster in case of a medical disaster. Krugman dismisses that as less important than third-party payment for lower-cost, routine care, which has generally been shown to provide very little benefit (health or otherwise) to consumers. We think insurance should be an option in our health-insurance system.

Krugman then turns to the child credit, writing:

The chapter on tax reform does break some new ground, but some ground shouldn’t be broken. It suggests that the big problem with the welfare state is that people no longer count on their children to support them when they’re old, so birth rates drop — because nothing makes children feel loved and valued like knowing that their parents viewed them as organic 401(k)s. And the answer is tax credits — nonrefundable, of course, so only worthwhile to people with enough income.

Even caricatures shouldn’t be this lazy. In truth Stein writes about the effects of old-age entitlements (not the welfare state as a whole) on birth rates, does not call these effects “the big problem” to the exclusion of other problems, does not treat children as purely investments, and does not imagine that the quality of parental love depends on the public-policy choices he considers. The tax credits he proposes would not be “nonrefundable, of course”: Even parents with no income-tax liability could take the credits to wipe out part or all of their payroll-tax liability (including the employer portion).

If we thought that Krugman actually knew what he was discussing, we would say that he had gone well beyond the “borderline dishonesty” of which he accuses the book. But we don’t think that. We think he is a smart man who nowadays unfortunately prefers sneering to thought, at least when he is writing about conservatives.

— Ramesh Ponnuru is a senior editor of National ReviewYuval Levin is the Hertog Fellow at the Ethics and Public Policy Center, the editor of National Affairs, and a contributing editor of National Review.

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