Last week, I criticized the House Republican Study Committee’s alternative budget as too libertarian-inspired to serve as the template for GOP policy, as it would alienate the party’s populist faction. But that doesn’t mean that a suitable budget for the emerging conservative-populist alliance shouldn’t include big cuts in federal spending that both traditional conservatives and populists can endorse.
The two factions agree on many things, but entitlement spending has the potential to divide the coalition. Conservatives tend to value smaller federal government as an end in and of itself, while populists tend to benefit from an extensive social safety net. The clash between the two views has led to some notable Republican missteps.
In 1995, then-House Speaker Newt Gingrich tried to balance the budget in part by proposing to cut the rate of growth in Medicare spending. Republicans kept the House in 1996, but no one can plausibly say that the proposed cuts were successful. Neither President George W. Bush’s proposed creation of private retirement accounts as a partial replacement for Social Security in 2005, nor then-Rep. Paul Ryan’s proposed voucherization of Medicare in the run-up to the 2012 election led to Republican victories. In both cases, moderate, largely working-class Democrats, who might have found other aspects of the Republican message attractive, strongly disliked these policies. Many of the same voters who had given Republicans massive majorities in the 1994 and 2010 midterms to stop Democratic overreach reelected Democratic presidents two years later to prevent Republican overreach.
President Donald Trump did attract these voters, in part by largely abandoning any pretense to fiscal discipline. Trump’s signature tax cut, largely a version of the supply-side ideas Ryan had long championed, helped increase the already large federal deficit. Meanwhile, both parties agreed to bust tea party-era caps on domestic and defense spending. The result was record-high $1 trillion annual deficits before the pandemic hit.
Conservatives rightly want to return to some measure of fiscal sanity, but they can’t do it without the support of the populist, working-class voters who Trump attracted. Political history shows returning to the old, rejected attempts to reduce entitlements won’t do that. Crafting a responsible yet attractive budget requires getting inside the head of populist voters to see what type of spending cuts they might accept.
Fortunately, that shouldn’t be too hard. Working-class voters tend to strongly believe in the value of work. Thus, they agree with small-government conservatives that public benefits should come with work requirements for able-bodied adults. Progressives howl at these efforts, but polling from the Foundation for Government Accountability shows that voters of all political stripes favor work requirements as a condition of receiving food stamps or Medicaid. Once the pandemic is over, implementing or tightening these policies would tend to reduce government spending as people get the push they need to find jobs.
Cutting subsidies and benefits for the well-off would also satisfy populist concerns. Brian Riedl, an economist with the Manhattan Institute, recently published a report laying out how lawmakers can save as much as $1 trillion over 10 years just by restricting who receives benefits from Social Security, Medicare and farm programs. Merely changing Social Security benefit formulas for the top 20 percent of seniors — who earn on average at least $87,000 a year for singles and $123,000 for couples — and scaling back the taxpayer subsidy of Medicare premiums for seniors earning $174,000 a year or more would save more than $500 billion over a decade. Eliminating the Medicare premium subsidy entirely for wealthy seniors would surely save much more.
Applying Riedl’s approach more broadly would yield much higher savings. Currently, all premiums for employer-provided health insurance are excluded from taxable income for all taxpayers. The House Republican Study Committee budget proposed capping the amount that can be excluded, which would raise taxes on everyone with comprehensive health plans from their employer, regardless of how much they earn. A better approach would be to phase out the exclusion entirely for the well-off. Why does a family earning $250,000 or more need a subsidy to purchase health insurance? This exclusion costs roughly $191 billion a year; cutting out high-income earners from this benefit would save tens of billions annually.
Conservatives and populists should scour the federal budget and tax code to find similar examples of subsidies going to people who either don’t need them or don’t do what they can to help themselves. No one wants to throw Grandma out into the street, but no one wants to support a scrounger or help pay for a rich family’s European vacation through the back door either. This approach won’t satisfy libertarian purists, but it would find substantial savings without endangering the core government support that working-class Americans need.
Building a multiracial, conservative-populist alliance is the only feasible way for Republicans to stop the left. Ideas such as those promoted by the Foundation for Government Accountability and Riedl are a good foundation upon which that alliance can be built.