Preserving Limited Government in Difficult Times

Donald Trump’s strong-arming (or bribing) of Carrier into keeping a thousand jobs in the US has scrambled our politics. Democrats who supported bailouts for the automobile industry are fuming, while Republicans who opposed those bailouts are cheering. (Conservative journalists and economists are, on the whole, being more consistent.) What does the Carrier deal mean for limited-government politics? How can principled conservatives accommodate themselves to Trump’s scrambling of political categories?

Bear in mind that our thinking on political economy was not altogether healthy before Trump. The Democratic coalition was statist and trending ever farther left. The Republican situation was summed up by Henry Olsen (the indispensable political analyst of this moment) after the 2013 election. Olsen said that the GOP’s offer was greater concessions to the boss so that the boss wouldn’t close down the factory … for a little while longer.

This lousy offer was joined to a series of mixed messages. Workers who had seen millions of factory jobs created overseas were told that manufacturing jobs had become scarce because of automation. That same automation was supposed to destroy even more low- and mid-skill jobs in the future, but, at the same time, we were told that we were in the midst of a labor shortage that necessitated an increase in low-skill immigration.

Each of the statements above contains some of truth—but, taken together, they look like rationalizations of the business class. If Americans have to choose between Chamber-of-Commerce special pleading and the promises of a Trump or of (a plausible version of) Bernie Sanders–style social democracy, then limited-government politics will lose.

As Josh Barro has pointed out, both Democrats and Republicans have misunderstood the politics of jobs. Most people think of a job as a way to live what they think is a dignified, somewhat secure middle-class life. Republicans are right to point out that there will be much less of that if there is little or no economic growth. Where they go wrong is in assuming that profits, which often come from overseas investment, will necessarily translate—in any reliable way—to all American workers. As automation and offshoring take their toll, some Americans will be left worse off. They will be looking for answers beyond another cut to the capital gains tax.

The concerns of conventional economic conservatives are sound but insufficient. All else being equal, lower taxes and regulation will be better for growth. The question is what to do on the margin and for those who have been left behind.

On the margin, we should focus less on that last tax cut aimed at high-earners and more on making jobs better—and work a little more secure—for the lower-middle class. This has been the project of “reform conservatives” such as Ross Douthat, who have supported wage subsidies and an expanded child tax credit in order to increase the take-home pay of working middle-class parents and low-wage employees.

A tax credit for catastrophic health care coverage would also make working life more secure. The loss of a steady job to offshoring, or automation, or anything, can be terrifying if it is replaced by a patchwork of part-time jobs that don’t offer coverage. A tax credit for catastrophic coverage can assure workers, even workers in steady jobs, that a badly timed medical emergency will not cripple their family’s finances.

But the conflict on the right regards the margin. In the 2012 campaign, Marco Rubio produced a tax plan that offered everything to everybody on the right. Businesses got huge reductions to investment income, while middle-class parents got an expanded child tax credit. The Wall Street Journal, in a moment of political megalomania, demanded all of the tax reduction for businesses and high earners—and more besides. That margin—that difference between a broad limited-government politics and a politics of self-interest for the right-leaning rich—might determine whether limited-government politics prevails or becomes an impotent, opposition faction.

One last point: I am no more in favor of having the government pick winners and losers when Trump is president than when Obama is—but I am reminded of the time Reagan forced Japan to agree to limits on imports of their automobiles. The original purpose of these import limits was to give the Detroit automakers a chance to catch up. The strategy failed miserably and, in the short term, increased automobile prices for Americans.

But the most interesting legacy of the import limits is how they encouraged Japanese auto firms to invest in American manufacturing facilities—both as a way to get around the Reagan-negotiated import quotas, and as a hedge against future US import restrictions.

These Japanese auto companies found that making cars in the US could be profitable. These companies now employ tens of thousands of American workers. Perhaps, again at the margin, some good could come of encouraging foreign firms to invest in American production in return for access to the American market.

But we should close with the wisdom of the conventional economic right. When those Japanese companies invested in US production facilities, the facilities were not in Michigan. They were primarily in low-tax, low-regulation states, and they were free of the toxic relationship that had developed between the Big Three Detroit automakers and the United Auto Workers. Balancing a pro-growth economic policy with a pro-work social policy and shaping (or trying to shape) trade relations to advantage American workers might be the formula for a successful limited-government politics.

Pete Spiliakos is a columnist for First Things.

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