Reform Conservatism Won't End the Liberal Welfare State, It'll Reinvent it

Policy prescriptions that offer a rewarmed mix of old and new liberal ideas


Julia's Neighborhood

Having spent the last six years in the political wilderness, it is  understandable that conservatives are eager to reclaim the reins of power. It's also understandable that they want to play to their strengths—and Democratic weakness—in tailoring an agenda to their core constituency: middle-class Americans.

What is less understandable is why many conservatives have ended up with a mix of old and new liberal ideas that thoroughly scale back the right's long-running commitment to free markets and limited government. But that is exactly what reform conservatism—a hot new movement powered by about 50 of the brainiest young conservatives—does.

Reformicons, as they are called, deny that of course. But if one looks at reform conservatives' economic proposals—some of them laid out in National Affairs' editor Yuval Levin's edited volume Room to Grow and fleshed out by National Review's Reihan Salam, The New York Times' Ross Douthat, and some analysts at the American Enterprise Institute—it is hard to escape the conclusion that these are liberal policy prescriptions. Although reform conservatives start from very different philosophical premises than entitlement liberals, when it comes to specific programs, they land at an almost identical spot.

Middle-class Americans are very focused on the economy, and politicians of all stripes are increasingly focused on middle-class Americans. Republicans had an 11-point edge in the midterms with voters earning between $50,000 and $100,000. Democrats want to cut into that lead. But their talk about income inequality doesn't have much traction. According to a January CBS/New York Times poll, only 3 percent of Americans cite the income gap as a top concern, well below the 18 percent who stress the economy and jobs. Likewise, 74 percent of respondents to a Reason-Rupe poll last August wanted Congress to prioritize growth compared with the 20 percent who wanted to reduce income inequality.

Given such sentiments, you'd think it would be a perfect time for conservative reformers to double down on a growth agenda that spurs entrepreneurship and job creation through broad-based tax cuts, deregulation, and entitlement reform. But that's not what they're doing.

There are certainly growth-oriented aspects to their new proposals. For example, Michael Strain of the American Enterprise Institute pleads in Room to Grow that we ought to slash occupational licensing laws that require cosmetologists to spend 372 hours in training before they can obtain a license to practice, a huge barrier to upward mobility.

But reform conservatives don't want to simply hack off the heavy hand of government when it thwarts individual aspirations. "Not everyone is John Galt," Senate Majority Leader Mitch McConnell noted at a reformicon retreat last year. Reformicons also want to use the hand of government to actively promote middle-class interests.

Levin eloquently notes that what matters most about society "happens in the space between the individual and the state occupied by families, communities, civil and religious institutions, and the economy." I agree. But libertarians (like me) would argue that we ought to expand that space by keeping the government at bay.

That is not the reformicon conclusion. They believe that to limit the demand for government, one has to first use the government to strengthen these institutions, especially in the face of the instability and uncertainty produced by a dynamic capitalistic system. And just as George W. Bush's compassionate conservatism proffered a series of special tax incentives to prop up religious institutions, reformicons want targeted tax breaks to strengthen middle-class families. Some want to restrict immigration and trade, just like unions of yore.

To accomplish the tax goals, Robert Stein, former U.S. Treasury deputy assistant secretary, hammers out a fiscal policy framework that has since become the reformicon lodestar.

Stein begins with a powerful critique of the entitlement state. He notes that Social Security and Medicare have simultaneously increased society's need for children (to maintain a balance of workers and retirees) while diminishing the individual incentive to have them. Why bother raising children if Uncle Sam will take care of you in your old age? Worse, parents who do have children face double jeopardy in that they have to bear the expense of raising them while paying for current retirees. However, those who forego children get all the benefits without bearing the full costs. All of this discourages family formation, insists Stein.

However, Stein notes, the old Reagan-era solution, cutting marginal income tax rates for middle-class families, won't do. Among other things, their rates aren't high enough for cuts to result in meaningful savings.

Instead, Stein proposes upping middle-income families' annual tax relief from the current $1,600 to $9,000 per child to offset the perverse incentives of the entitlement state against having children.

This may sound reasonable on its face. But it is a giant exercise in cost shifting that does nothing to actually scale back the welfare state. In fact, it deliberately leaves the welfare state intact so as to coopt it for conservative ends. "We should move away from arguing about how much we should spend for the liberal welfare state to arguing about how to replace it with a conservative approach to government," Levin explains.

And indeed, Sen. Mike Lee (R-Utah), a darling of reformicons, has worked up a bold plan to rejigger the tax code with an eye toward rewarding family formation. He has also proposed the Working Family Flexibility Act, which would let private employers offer employees a choice in taking overtime compensation or time off, something that they can't do under current law. That's fair. However, it will also require that this option be included in private sector collective bargaining agreements. Others have proposed tax credits for stay-at-home moms and the expansion of the Earned Income Tax Credit from the poor to middle-income families.

Even liberals could not have imagined going this far.

And how will we pay for all this? The national debt is already $18 trillion. Stein recommends raising marginal rates on incomes that are currently taxed at 25 percent to 35 percent, marking the end of Reaganomics. But that won't be enough to fund the more ambitious versions of his plan.

Reformicons are flirting with eliminating corporate welfare and crony capitalism (which is great), dumping talk about balancing the budget to free up borrowing (which is not so great), and good old-fashioned class warfare to soak not just the super-rich, but also the merely affluent (which is really disappointing).

There are many things to like in the reformicon proposals. But the big picture looks like this: Broad-based, neutral tax cuts to stimulate growth are out, markets are optional tools, the welfare state is cool, redistributive social engineering is the way forward, and class warfare is in.

Reform conservatives are trying to outbid liberals for the spoils of the welfare state, shifting dependence on the state from single moms and minorities (a liberal constituency) to parents and families (a conservative constituency). This may or may not be a workable vision. How conservatives will avoid the unintended consequences that have bedeviled the liberal welfare sate, they have yet to explain.

Either way, it represents the ultimate triumph of liberalism.

Editor's note: This article originally inaccurately described the details of the Working Family Flexibility Act. It has since been corrected. We regret the error.

This column originally appeared in The Week