My column last Monday wrongly stated that Ronald Reagan cut the top income tax rate from 80 percent to 50 percent. Actually, he cut it from 70 percent to 50 percent. My thanks to Bruce Bartlett, who pointed out my error. My apologies to readers. (Published 11/18/02)
My colleague Charles Krauthammer says that Democrats haven't had a fresh idea since the Great Society programs of the 1960s and that the party is "brain-dead." There may be some truth to this delicious provocation. But in a climate of post-electoral Republican smugness, it's worth asking whether the GOP is different. If you set aside President Bush's strong response to Sept. 11, the Republicans are notable mainly for clinging to their own version of the Great Society -- a stale and lifeless Reaganism.
Just as the Great Society was once a powerful platform, so Reaganism was potent in its day. When Ronald Reagan cut taxes, he could argue that he was boosting the "supply side" -- he slashed the top income tax rate from 80 percent to 50 percent, dramatically sharpening high earners' work incentives. But this administration inherited a top rate that was already below 40 percent and cut it only fractionally. Work incentives barely have been affected. A few Republicans cling to the supposed supply-side magic of tax cuts, but the truth is that the Bush tax package was mainly about rewarding rich backers.
In short, Republicans are in danger of sounding brain-dead on the tax issue. In the 1980s people who wanted to cut tax rates had some decent economic arguments. Now that is much less true.
The same goes for Republican bashing of big government. Like tax cuts, this bashing made sense once. In the 1970s there was plenty of dumb government; the deregulation of airlines (1978), trucking (1980) and railroads (1976 and 1980) saved American consumers an estimated $50 billion a year. Given the dates of those reforms, modern conservatives ought to be worshiping Carterism, not Reaganism. But the main point is that the easy deregulation is behind us. The government-bashing at the heart of neo-Reaganism is mostly out of date.
Today's regulatory debates cannot be resolved with a thumping victory for the market. In electricity, for example, government-bashers need to accept that there's no good way to deregulate transmission lines: They're a natural monopoly. In theory, it makes sense to deregulate electricity generation, but California's blackouts showed that in practice, it's tricky. The same goes for telecoms. Long-distance calls have been successfully deregulated, at least from the point of view of the consumer. But government intervention remains essential in the local phone market, because the wires going into people's homes are another natural monopoly.
Government-bashing is dated for another reason. Much of the regulation that remains is not there to fix prices of things like trucking or air transport; it's there to protect health, safety and the environment. Such public goods cannot be produced by the market, so there's no alternative to government action. And that means big action: Each year public-goods regulation imposes costs on Americans larger than the entire discretionary federal budget. Even the Bush administration's regulatory experts concede that this vast stock of regulation cannot be cut. The era of big government is not over, nor will it ever be.
A few Democrats exist in a 1960s la-la land, reflexively pushing spending plans and costly regulation as though the state's growth should have no limit. But at least as many Republicans exist in their own time warp. They are still in revolt against the overtaxed and over-governed 1970s. They imagine themselves to be fighting a bloated and brain-dead statism, and so they regard as historically inevitable the ultimate triumph of conservative ideas.
This fantasy returns with each electoral setback for Democrats. There was a lot of it about after the 1994 elections, partly because of the scale of that year's Republican victory and partly because Newt Gingrich and his cohorts were fizzing with ideas. But the Gingrich experience showed how barren neo-Reaganism is. It proved almost impossible to shrink government, partly for the bad reason that lobbies ruthlessly defend dumb programs (farm programs, for example), but also for the good reason that most of what the government does is genuinely needed.
In the wake of last week's elections, the fantasy of conservative intellectual superiority seems particularly farfetched. True, Democrats are muddled: In the recent campaigns, they were variously against the Bush tax cut, neutral on it and for it. But the Republicans were scarcely better. To the extent that their party has ideas, most candidates downplayed them, and when Bush took to the campaign trail, he focused mainly on making his tax cuts permanent. His party's narrow victory should not be interpreted now as a triumph of ideas.