With the populism of President-elect Donald Trump taking the Republican Party by storm and overwhelming Hillary Clinton in the race for president, those in the policy-thinking field are working through some of the policy implications.
A changing, advancing economy can leave us with vast populations displaced from the way of life that they’d known. Basic morality should dictate that we address their plight, and even when it doesn’t, in a democracy, they won’t remain acquiescent for long.
In the December 5 edition of National Review magazine, American Enterprise Institute Scholar Edward Conard takes on the intersection of immigration, trade, and investment. He states that our productivity doesn’t now depend as much on capital investment these days (as many economic policies implicitly assume), but rather, that the limits on growth depend upon “properly trained talent and the economy’s capacity and willingness to bear risk.”
Importantly, that means not just innovative entrepreneurs and high-skilled workers, but also “talented supervision.” Even where low-skilled workers are useful, modern business and manufacturing techniques require more sophistication among their managers. Adding workers doesn’t increase productivity, therefore, because there are only so many people capable of guiding their labor efficiently.
The paragraph of Conard’s that caught my eye, though, was this one:
… low-skilled workers bear 100 percent of the cost of lower wages, while high-wage workers, retirees, and the non-working poor capture a large portion of the value of cheaper goods [resulting from free trade]. Given this imbalance, it’s unclear whether trade benefits low-skilled workers. Anyone claiming to know is either naive or disingenuous. But given the value of trade, it would be wise for blue-collar Republicans to accept compensatory income redistribution through progressive taxation rather than demanding heavy protectionist restrictions.
In this line of thinking, establishment Republicans and small-government conservatives have been too inclined to take on faith that low-skilled workers would benefit from economic advancement per se. Putting racial considerations aside, this has left them vulnerable as Democrats have attempted to appeal to these constituencies with redistribution and, now, Trump has appealed to them with protectionism. What is the conservative answer?
A big piece of it is obvious: Reduce taxes so that workers don’t have to earn as much money to live comfortably (and have more to invest in themselves and their helpers), and decrease regulations to effectively increase the number of highly skilled supervisors. A key consideration that pro-regulation advocates simply never address is that people who are brilliant at occupation X or highly capable managers of people and capital may find the dance of forms and bureaucracies uncomfortable, frustrating, and even disqualifying.
As wise as the typical small-government suggestion may be, however, it is not a sufficient answer to the real economic hardship of low-skilled workers, particularly in the short term, during which it requires a degree of faith that struggling families may not be willing to invest in politicians who seem overly friendly with the rich and comfortable. Finding this missing piece will be critical if conservatives are going to help the incoming Trump Administration navigate its populist mandate in a way that doesn’t leave the right vulnerable to both failure and progressive attack.
The recent work of the RI Center for Freedom & Prosperity in Rhode Island might point the way. We don’t have to follow Conard in seeming to endorse progressive income taxes, which rightly makes many of us uncomfortable, if we shift our tax-cutting emphasis to more-regressive forms of taxation, like the sales tax. To be sure, sales taxes implicate less a federal reform than a federalist one, but that’s to the better, and there is no reason the Trump Administration can’t use its bully pulpit (as well as more-compulsory levers of the federal government) to make it an intrinsic component of a national economic policy.