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Some Republicans Don’t Believe Austerity Is Enough Some Republicans Don’t Believe Austerity Is Enough Some Republicans Don’t Believe Austerity Is Enough Some Republicans Don’t ...

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Some Republicans Don’t Believe Austerity Is Enough

Strategists and wonks are urging House leaders to refocus their economic message on ideas that the middle class actually care about.

Wonk triumvirate: Wehner, Levin, and Capretta(Richard A. Bloom)

In a nondescript office building on M Street in downtown Washington, three Republican policy wonks have spent the past three months debating how to revive their party. One of them worked on Mitt Romney’s campaign—the bid that failed even though the incumbent botched his first debate and presided over a weak economy with unemployment around 8 percent—and no one wants to repeat the bitterness of that defeat.

After the GOP postelection ritual of grieving and recrimination, this trio decided that much of the problem lies not with voters or pollsters or the timing of conventions, as some Republicans have suggested, but with the party itself. “This is probably the most serious threat to the Republican Party since I’ve been involved with it,” says Peter Wehner, one of the thinkers and a former top official in the past three GOP administrations. And if Republicans can’t address it, strategists fear, they’ll fail to retake the Senate in 2014, lose the presidential race in 2016, and consign themselves to rule only the House of Representatives, sparring endlessly with Democrats in power.

Much of the difficulty, as Wehner and his colleagues see it, boils down to Republican economic beliefs that have moved too far away from what most people care about. “We’re not talking enough about the problems that affect the lives of everyday Americans,” says Yuval Levin, a fellow at the Ethics and Public Policy Center alongside Wehner and their colleague James Capretta. “What do our ideas have to do to address this moment?”

 

Addressing voters’ financial worries will be key to Republicans’ future electoral success. In the 2012 election, President Obama beat Romney, in part, by promoting policies that voters overwhelmingly thought would boost the fortunes of the middle class. In battleground states, Obama’s plans were seen as more middle-class-friendly by a margin of 17 points, 56 percent to 39 percent, according to an analysis of exit polling by the group Resurgent Republicans.

But party intellectuals fear that Republicans in power have not introduced enough ideas that middle-class people like, such as ways to reform education, boost wages, shrink the high cost of a college degree, or create more jobs in a weak labor market. That’s because another faction of the Republican Party, represented by the majority of House Republicans, believes that the party’s problem is just bad messaging, not a policy failure. By that logic, there’s no reason not to focus on reducing the size of government, overhauling the tax code, drastically shoring up Medicare, or taming the deficit—all of which the House Republicans’ budget blueprints have proposed. But those ideas at first glance aren’t the ones that drive average voters, says Republican pollster Whit Ayres. “Fiscal responsibility has to be couched in terms of which policies are better for the great American middle class,” he says. Only then will voters be able to hear the way the philosophical core of the GOP relates to their everyday lives. “Most Americans, not just Republicans, believe that America should not just spend money it does not have,” Ayres adds.

Ultimately, the goals of smaller government and middle-class support may be in conflict. How can the Republican Party show middle-class voters it cares about them and push solutions that may take away some of the government benefits they receive through tax breaks or Medicare? This is the core dispute inside the party as it looks toward 2016. Do Republicans need to introduce new economic policies to appeal to a broader swath of voters, as the party intellectuals propose? Or do they simply need to tweak their message while GOP lawmakers in power stick to their traditional issues: cutting government spending, shrinking the federal government, and reforming the tax code?

This conflict was prominently on display recently at the annual Conservative Political Action Conference. Former Florida Gov. Jeb Bush’s speech, about innovation, energy, and education, received a polite reception. But Rep. Paul Ryan’s impassioned address about the debt won over the crowd—an indication that the party still favors an approach that many voters don’t.

There’s little indication the GOP will resolve this dispute about economic branding until it settles on its next presidential candidate. Until then, most House Republicans are jonesing for fights over the debt ceiling and tax reform. Party strategists, intellectuals, and some members such as Majority Leader Eric Cantor, meanwhile, want to paint a softer side to the party and speak to a wider constituency. “The core Republican conservative principles of a small, contained government and a reliance on private markets is not going to change and shouldn’t be discarded,” says Douglas Holtz-Eakin, a former director of the Congressional Budget Office and president of American Action Forum, a conservative think tank. “The missing part of the Republican argument now is, what do you want that smaller, contained government to do on behalf of people? Rather than just telling them what it shouldn’t do, you need to also tell them what the government stands for.”

A DISUSED TRADITION

In the modern era, economic policy has united the different brands of Republicans. The GOP’s basic theory holds that lower taxes, less regulation, and a smaller government footprint can unleash economic growth and productivity.

Ronald Reagan found a way to make this appeal to the lower and working classes. At the signing of the 1986 tax-reform bill, for instance, he described the expanded earned-income tax credit—a refund that benefits millions of Americans—as a boon to lower-income families. “This tax bill is less a freedom—or a reform, I should say—than a revolution,” Reagan said that October day. “Millions of working poor will be dropped from the tax rolls altogether. And that’s why I’m certain that the bill I’m signing today is not only an historic overhaul of our tax code and a sweeping victory for fairness; it’s also the best antipoverty bill, the best pro-family measure, and the best job-creation program ever to come out of the Congress of the United States.”

“Reform that cleans up the tax code ... will help both families and employers.”

George W. Bush earned the same type of credibility by avowing in his first presidential campaign that the budget should not be balanced “on the backs of the poor.” Once in office, he championed the Medicare prescription-drug benefit and emphasized education reform—a staple for middle-class voters—through the No Child Left Behind Act. His second term hit a snag when he tried to privatize Social Security, an entitlement program that remains overwhelmingly popular, though he did push through two major tax cuts.

Republicans in power today do not generally tout policies to help the poor. On the contrary, they focus on slicing the budget, turning Medicaid into a block grant, and holding down the cost of food stamps. Romney famously described 47 percent of Americans as government dependents unlikely to vote for Republicans anyway. All of which makes some of the party’s sages nostalgic. “That was the genius of Reagan,” says Ken Duberstein, the president’s former chief of staff. “It wasn’t just tax reform for the sake of tax reform. He explained it to all Americans, so that the white working-class in Macomb County, Michigan, which were known as the Reagan Democrats, was rooting for him. He could appeal to them. It was not an exclusive country club.”

The GOP posture under Romney allowed Obama to paint his challenger as an out-of-touch plutocrat, while the president focused his campaign on the idea that the wealthy needed to pay their “fair share” of taxes. And it worked. According to the 2012 exit polls, Obama captured the majority of voters who earn less than $50,000. (The median annual household income in 2011 was $50,054, according to the Census Bureau.) Roughly 60 percent of voters also approved of Obama’s pledge to raise taxes on the wealthy—which foreshadowed the president’s victory on the fiscal-cliff deal that increased income taxes on households earning more than $450,000.

In its autopsy of that race, the Republican National Committee argued that the GOP needed to do a better job of not appearing to be the party of and for the rich. “The Republican Party must be the champion of those who seek to climb the economic ladder of life…. We need to help everyone make it in America,” the RNC report said. The implication was clear: Party leaders no longer prioritize this notion.

Months later, congressional Republicans have not really moved to absorb those lessons. Their policies still don’t explicitly put the middle class front and center, and as a rule they haven’t worked to connect their budget ideas with assistance to the average American. So far in 2013, the House GOP agenda has been dominated by passing another version of the Ryan budget; allowing the sequester cuts to kick in; passing an appropriations package; marketing the idea of tax reform; and toying with a bill that would allow the federal government to prioritize its payments and obligations to protect Social Security recipients, if and when the fight emerges over raising the debt ceiling. Not coincidentally, Americans’ top critique of the Republican Party is that it is “too inflexible” or “unwilling to compromise,” according to a Gallup Poll from late March. Twenty-one percent of adults listed this as the chief issue with the GOP, followed by 12 percent who said Republicans protect the wealthy more than the middle class.

The debt-ceiling fight this summer and early fall will be another test for Republicans in power, since it may feed the perceptions about the party ahead of the 2014 and 2016 races. House Speaker John Boehner has promised to fight for a 1-1 ratio: For every dollar the ceiling is raised, he wants a dollar in spending cuts. On the other hand, House Ways and Means Committee Chairman Dave Camp, R-Mich., is starting his own push to rewrite the tax code, which may be part of a debt-ceiling compromise. In neither case has the party explicitly laid out how these ideas would help the middle class.

A CHANCE FOR INTROSPECTION

In the months just after the election, House Republicans seemed on the verge of self-reinvention. In a much-watched speech at the American Enterprise Institute in early February, Cantor said fiscal concerns were part of the party’s DNA but they couldn’t be the only agenda item. “Today, I’d like to focus our attention on what lies beyond these fiscal debates,” he told the crowd. “Over the next two years, the House majority will pursue an agenda based on a shared vision of creating the conditions for health, happiness, and prosperity for more Americans and their families.” He talked about affordable housing, health care, education, and jobs.

Cantor seemed to be urging the party to put on a different face in 2013. “My sense right now is that public officials and members of Congress recognize that there is a problem and a lot of them are groping for something, but they don’t quite know what it is,” Wehner says. But then none of Cantor’s policy proposals became GOP priorities in Congress. “I thought the Eric Cantor speech was revealing. In some respects, his analysis was right. But then, when you lifted up the hood and said, ‘What was different?,’ you don’t really get too much.”

Reagan cast the 1986 tax reform—and the earned-income tax credit included in that package—as a salve for working families.

Around the same time, Wehner, Levin, and Capretta—the wonk trio—published papers in conservative journals such as Commentary and National Affairs outlining new ideas for Republicans in power, or those who sought it. Wehner urged Republicans, in the manner of Teddy Roosevelt, to go after corporate tax breaks and big banks. “Republicans could begin by becoming visible and persistent critics of corporate welfare: the vast network of subsidies and tax breaks extended by Democratic and Republican administrations alike to wealthy and well-connected corporations,” he wrote in Commentary.

Other ideas included expanding the child tax credit that offers a rebate to families with kids, better and cheaper loans for higher education, and new ways for students to learn online without having to paying hundreds of thousands of dollars for a bachelor’s degree. The Republicans should also propose an alternative system to the Affordable Care Act and its health exchanges, instead of just tearing it down, Wehner and Levin have both argued. Or the party could propose a permanent payroll-tax cut for middle-class families, as Capretta would like. The two-year-long payroll-tax holiday, originally championed by Obama, gave workers as much as $2,200 more a year in their pockets and was thought to boost consumer spending.

These are all social-engineering ideas that reward values that Republicans typically espouse: families having children; access to health care and higher education; and increased money in people’s bank accounts. In that light, they fit comfortably into the Republican economic and political cannon. They just haven’t played a starring role in recent years, as both parties have been mired in fiscal battles over the best way to rein in the deficit over the long term. “Republicans need to embrace innovation and education policy, not just say, ‘I love small business,’ ” says Alex Brill, a fellow at the American Enterprise Institute and a former chief economist for the House Ways and Means Committee. “Conservative economists need to do their job and link, for example, good education outcomes to budget outcomes. The party needs to be about all of these policies, and then the consequence of those policies should be reduced deficits.”

This spring, the most noticeable change in the Republican-dominated House was the way Ryan and Camp talked about their budget blueprint and tax reform. The Ryan budget became about helping people achieve the American Dream by ensuring that entitlement programs would still be around for future generations, even if the substance of its proposals had barely changed. “Fiscal responsibility and economic opportunity are but means to a more critical end: the rebuilding of broken communities and the empowerment of families and citizens,” Ryan wrote in his budget blueprint.

Meanwhile, Camp now talks about tax reform as a way to generate jobs and lessen the middle class’s burden of having to deal with an unwieldy tax system. “Tax reform that cleans up the tax code and closes wasteful loopholes and lowers tax rates will help both families and employers,” Camp said in a recent statement. “Instead of spending time and money trying to comply with the tax code, families will have more control over their lives, and employers will have more opportunities to create more jobs and provide higher wages for American workers.” This is a subtle addition to the way tax reform is being marketed—alongside streamlining the tax code and making American businesses more competitive.

Still, in recent weeks the gap between Republican thinkers and lawmakers has only grown. Republicans passed a budget very similar to the one from previous years. The Republican Study Committee presented an alternate budget, billed as the “antithesis of austerity,” that freezes all discretionary spending through 2017 and turns Medicare into a voucher program even faster than Ryan would. More recently, Cantor wanted to bring a health reform alternative to the floor to extend insurance to people with preexisting conditions, but party leadership had to pull it when it did not have enough votes. It was an embarrassing repeat of December’s failed “Plan B” vote, when Boehner could not get his caucus behind an alternative bill to avert the fiscal cliff. And, it was a setback for Cantor’s goal of being friendlier to people outside of D.C.

The party intellectuals’ pleas do not appear to have seeped into this legislative agenda—especially now that the debt-ceiling deadline looms. (The Bipartisan Policy Center estimates that Congress and the White House will have until September or October to reach an agreement to raise the debt ceiling.) For House Republicans, the ceiling represents too tempting a chance to extract the serious reforms they’ve been hankering for—and, anyway, they see the party’s problems as stemming from message tactics rather that the message itself. Rep. Peter Roskam, R-Ill., the House chief deputy majority whip, describes the former viewpoint this way: “It’s just about taking the next step in translating and closing in on the argument. If you take something as esoteric as moving from an international tax regime to a territorial tax system, you have to explain why that is a winner to normal people. It puts worldwide American companies on a more competitive footing. It is literally putting the fifth paragraph on a single-page essay and focusing on the benefits.”

New polling from a conservative group, Independent Women’s Voices, suggests that Republicans can get away with tweaking the message instead of the policies. The polling shows that Republican pitches about the debt and deficit were most successful when they were about holding the line on spending in the future, instead of cutting. Respondents (and especially women, a voting group coveted by the GOP) also liked the message of reforming entitlements through means-testing, or asking wealthy people to pay more for benefits. That message caused women to shift 15 points away from Democrats to Republicans. “This taps into a real desire on the part of the public to deal with the major problems with entitlements and spending,” says Adam Schaeffer, of the Republican firm Evolving Strategies, who conducted the research. “Progressives seem like they are not offering enough to deal with this.”

The trick for the GOP, Schaeffer says, is to talk about entitlements in this way instead of focusing on a message of cut, cut, cut. “A general discussion about the debt and deficit seems to be positive as long as you don’t run around and talk about the way you’re going to slash the budget to the bone. That could frighten people.”

TURNING INWARD?

Just days after the RNC released its election postmortem urging its members to pay more heed to the middle class, a group of tea-party Republicans hosted a lunch forum on Capitol Hill to outline their views on the budget process, immigration reform, and the debt ceiling. It was one of a series of occasional lunches this group hosts, called Conversations With Conservatives. Instead of discussing how they might appeal to everyday Americans—say, a nurse in Chicago, a mechanic in South Carolina, or a family in Nevada—the all-male, primarily white members at that Wednesday meeting sat in a horseshoe arrangement, ate Chick-fil-A sandwiches, and wound themselves up for the debt-ceiling fight this summer. A stern young man from the Heritage Foundation acted as the moderator and minder of the group.

“If you can remove one speaker,” says Rep. Tim Huelskamp, R-Kan., “the next speaker knows he can be removed.”

The gist of the conversation was this: Tea-party members up till now have abided by the House Republican playbook put forward by their leadership. They voted for the Ryan budget and managed to put the White House on the defensive about the sequester cuts. Speaker Boehner had held onto his power. Everyone seemed psyched about tax reform. But this unity was not going to last forever, they warned, unless they got what they wanted in the coming debt-ceiling fight. “To many of us, the debt ceiling represents a symptom of a bigger problem,” said Rep. Steve Scalise, R-La., chairman of the Republican Study Committee, referring to out-of-control spending and the need to balance the budget in 10 years. That was the reason, many of them felt, their constituents had sent them to Congress.

And the sequester is just the beginning. “We’ll fight the next battle and hope to take more ground. Americans have been looking for Congress to show some leadership,” says Rep. Jeff Duncan of South Carolina. “We have got to start addressing the mandatory side of the spending equation, and I think we will probably do that in the debt-ceiling debate.”

After the hour-long meeting, I talked to Rep. Tim Huelskamp of Kansas, one of the tea party’s most vocal members. As a relative newcomer in Congress, elected in 2010, he has become a conservative favorite for defying his party’s leadership (and for his colorful shirts and ties). Immediately after the fiscal-cliff deal, he flayed the legislation in TV appearances—even as Wall Street and the American public seemed relieved that a deal had been reached. He also led the unsuccessful effort in January to oust Boehner from the speakership. The debt ceiling, he thinks, is the time for the most conservative House Republican members to shine.

Huelskamp does not worry about the country defaulting this summer. (He’s more concerned with a potential credit downgrade if the fight drags on too long.) Even so, he sees the debt ceiling as a chance to undo government programs such as food stamps, Medicaid, the Affordable Care Act, and Medicare. I kept pressing for more specifics—such as which program he would need to see cut before he could move to compromise. “There is a potpourri of ideas that would get us there,” he said.

Huelskamp and a handful of other tea-party members at the lunch derided the RNC report and the advice of party intellectuals. To them, this is just the chatter of overpaid Washington consultants—people out of touch with everyday conservative Republicans. If the tea-party members do not get their way this summer, Huelskamp warns of an internal revolt that would remove Boehner from his post and replace him with someone more sympathetic to House Republicans from red states. “If you can remove one speaker,” he says, “the next speaker knows he can be removed.”

Over the next month or so, House Republicans must decide what they want in exchange for a debt-ceiling hike—a tax-reform agreement or a push for deeper spending cuts. Either scenario leaves them in the same place the Republican Party found itself in November 2012, relegated to one chamber and arguing over fiscal policy instead of putting forward new and different economic ideas. “You can’t just keep repeating [the] no-new-taxes, no-new-taxes, no-new-taxes mantra,” says former Rep. Steve LaTourette, R-Ohio, who retired in January. “All of our polling indicates that the perception of the public, by large numbers—and including people in the Republican Party—is that we’re the party of the rich. You’re not going to win elections by being the party of the rich.”

Polling of the kind Schaeffer did shows how Republicans can shape their deficit and tax messages to make them more palatable to middle-class Americans. And if they can pivot in that sense, then they may be fine.

But as the deficit shrinks over the next few years (as it’s slated to); as tax revenue increases, because of the fiscal-cliff deal; as unemployment drops by the year 2017; and if the rate of health care spending continues to slow, Republicans will have a tougher time pumping up their message of austerity and overhauling the tax code. The trends won’t support their sense of urgency the same way they did after the financial crisis, and Americans broadly may not feel that urgency again for a decade, when health care costs are expected to dramatically rise again. In a recovering yet still weak economy, voters may want a more diverse set of messages from House Republicans—and especially from a Republican presidential candidate.

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