The Reagan Consensus - Part 5

The Reagan Consensus and its Enemies -

The next great threat to the Reagan Consensus is Dependency. No, I do not refer to the danger of being turned into a colony by some foreign power (though that is more likely when the population is taking more than it gives) nor the possibility of substance abuse (although, addiction to alcohol and/or drugs is often a result of such a life). I refer to the increasing dependency of Americans and peoples of other nations on state aid. This dependency is most classically manifested in welfarism. A person lives no life but that that is supported by government assistance of some kind. The most obvious examples of public welfare in the US and which increased all of their client loads dangerously during the Obama presidency, are welfare ("Temporary Assistance for Needy Families), food stamps and Medicaid. 

After the historic bipartisan Welfare Reform in 1996, surely one of the best examples of building on the Consensus, tens of millions were lifted out of poverty, including some 20 million children. But, over the years, just as medicaid was expanded to cover more and more children and adults and pharmacare given to even the wealthiest aged, the program was chipped away. The Federal Govt., rather than encouraging the States to make people work for welfare from an "envelope" of Federal funding, the core concept behind the reform, turned this on its head as now the US encouraged states to drop work requirements and gave incentives for bureaucrats to get more people on food stamps.

This aggressive effort to roll back (or ratchet back?) welfare reform created a new, growing and dangerous dependency on government which stifled enterprise, hard work and the incentive to retrain to get into the workforce again. For instance, jobless benefits given out in the Stimuli of 2008 and 2009 were often more lucrative than working at even a job above the minimum wage. We are now seeing this phenomenon again with the ill considered, profligate, badly aimed and largely unnecessary COVID stimuli. 

Worse, so-called "industrial policy" also known as Corporate Welfare is also apparently making a comeback. Through myriad tariffs, loan programs, deductions, monopolies, regulations and subsidies, companies at all levels, but most conspicuously and shamefully big business, are receiving state support. This has the same effect on the corporation as it does on the individual - it crushes the incentive or need for competitiveness, innovation, efficiency, service and fair pricing. This effect of dependency on both company and individual is fatal to the magic circle of work ethic, creativity and opportunity married to labour and capital that the Consensus needs to continue to grow and sustain.

The loss to a society's morale of such a constant institutionalized and general dependency in a population and its commercial sector can be witnessed in Europe. There, especially France, Spain and Italy but to some extent most of the rest of Western Europe, the Reagan and Thatcher revolutions never really took complete hold. Large sectors of their economies, aided, abetted and compounded by the bureaucratic monstrosity known as the EU, are still much more regulated by the State in great detail, particularly labour but also in quid pro quo heavy subsidy and trade protections for the corporate sector. France especially never privatized large parts of its economy such as banks. The result - horrific economic stagnation, lack of innovation and modernization as well as chronic joblessness and underemployment. 

This, too, almost took hold in the US under Obama, who was openly hostile to business, re-regulated large parts of the economy especially health care and health insurance, interfered in the auto industry, launched welfare expansion and discouraged or outright shut down energy exploration and exploitation. The result was an historically slow recovery despite massive deficit spending that doubled the national debt and repeated stimulus and monetary quantitative easings. This was only arrested by the coming of Trump's presidency and his economic and tax reforms, deregulations and determination to again "roll back" the attempt of Obama to turn back the ratchet on welfare reform. It remains to be seen whether COVID will provide a new excuse and opportunity for welfare theorists and advocates to get their way and apply this deadly opiate of the Consensus again as they did in 2008-2013 (when an estimated 47% of Americans were taking some state benefit).  The Trump Tax Reform also eliminated the ludicrous state and local tax deduction for the rich and the Obamacare mandate while Trump tried to allow consumers to have some ability to buy health insurance across state lines, among other practical, free market and cost control steps for health care.)

Conservatives must fight this first by listening to and advocating for the warnings of economists like Arthur Laffer (and a key architect of the Consensus) that government dependency coming in the form of so-called "stimulus" is wolf bane for the dynamic economy of the Consensus. Then the conservative, if successful in delaying, hobbling or at least blunting the impact of such dependency-fostering programs, must then offer an alternative - self-reliance and choice. A good example of this was the proposal by conservatives to grant a payroll tax holiday and the Bush scheme to allow young people to invest their Social Insurance premiums. 

The problem with these ideas on both occasions was follow through and the simple political will to do what they proposed. At the first sign of political trouble, the conservative political parties backed down on ideas like this. Yet, the tax reform by Trump, which amongst other things allowed American parents to invest for their child's primary and secondary education tax-free, welfare reform and the Harris Ontario government's abolition of corporate subsidies and "workfare program" all show that, when conservatives are united and strong and remain committed to tangible reform of entitlements and welfare despite the often absurd and demagogic opposition to patently sensible policies, they can win.

If the Reagan Consensus is to dodge the insidious bullet of welfare dependency on the state, conservatives must not just talk about programs of more freedom and independence for people, they must do the hard work of researching about, presenting and arguing for these ideas and stick to them through thick and thin. Ideas like auto-investment of government benefits or premiums, school choice and vouchers, broadly lower taxes and regulations to get business off the government bread line and lower and tougher welfare in return for on the job training, daycare and other benefits (not least of which is the dignity of working or building a business of your own under your own direction) are all ideas that can reduce state dependency, restore the work ethic and business ethics and build on the Reagan Consensus.