What do Republicans want on the economy? They're not sure anymore

Analysis: The party’s entire way of thinking about fundamental principles is changing.

President Donald Trump at a rally at Wilkes-Barre Scranton International Airport in Pennsylvania on Nov. 2.Brendan Smialowski / AFP - Getty Images file

WASHINGTON — Senate Minority Leader Mitch McConnell was not a supporter of former President Donald Trump’s quest to overturn the election. But he has declined to weigh in on the party’s ongoing purge of anti-Trump Republicans, because it distracts from the issue he thinks should unite the party: opposing President Joe Biden’s economic agenda.

In fact, these two issues are linked. Part of the story of Republicans' continued post-2020 drift back into Trump’s orbit is the failure of GOP leaders to keep their party's focus on budget fights going on in Congress.

As a result, traditional conservative arguments against Biden’s proposals on taxes and spending have so far failed to connect with Trump voters, who polls show are divided over the president's plans or express no opinion either way.

And there’s little sign of Tea Party-style resistance, as growing evidence suggests that the Reagan-era framework for opposing Biden’s plans is under severe strain.

A changing policy landscape

Until recently, it would be easy to assume what reasons a rank-and-file Republican would give for opposing a $5 trillion-plus Democratic plan to finance dozens of public programs with a mix of tax hikes and debt.

Those reasons would include concerns about the threat of inflation, tax increases and likely fears that Biden's proposals would undermine conservative free market theories holding that higher taxes constrain economic growth, public programs crowd out private sector innovations, and picking specific industries to prop up hurts everyone.

In addition, they might argue that the plans violate principles of fairness — why should so many people get checks and handouts while the most productive Americans pay more in taxes?

These arguments are still out there among Republican politicians. But the GOP consensus has frayed on all those positions in the Trump era, and the party remains divided over how (or whether) to stitch it together.

On inflation, few voters under 50 have any memory of the last time runaway prices were a top national concern, in the 1970s. Republicans warned throughout Barack Obama’s presidency that his stimulus spending would bring inflation back, but it never came and the political and policy landscape shifted in response.

Trump showed little concern about deficits leading to inflation, and Trump-appointed Fed Chair Jerome Powell isn’t very worried now after the pandemic forced every country to push past their comfort zone on spending. The politics could change this year if an expected post-vaccine spike in prices this month proves more than temporary, but there are still a lot of unknowns.

On taxes, Republicans are in some ways victims of their own success. They lowered tax rates on incomes and business for over 40 years and politically scared Democrats off from trying to raise them on the middle class.

Now, it’s getting harder to cut them further in ways that benefit the typical American without essentially sending them checks in the form of refundable credits. This is one reason polls found most voters didn’t even notice the 2017 tax cuts in their returns. The lower rates reduced most tax bills on average, but not enough for the middle class to feel it, and barely benefitted the poorest Americans at all. And the GOP tax cuts for the top now provide Democrats with an easy target.

Trump caught onto this over time, and by 2020 he was pushing for $2,000 stimulus checks over conservative objections. But Democrats were already moving toward cash benefits and are now using them to outflank the right while promising not to raise taxes on households making under $400,000. Some social conservatives think the GOP should ditch the fiscal hawks and hand out huge tax credits of their own, but the idea still has limited traction among elected Republicans.

Finally, on free market philosophy, Trump completely upended the way Republicans talk about the relationship between government and the economy.

Prior to Trump, the party’s closest thing to a guiding light among members were then-Rep. Paul Ryan’s budgets, which called for partially privatizing Medicare, lowering tax rates and slashing overall spending. Tea party grassroots activists often took their cue from more libertarian-minded thinkers like Ron Paul, the former Republican congressman from Texas, who played up the beauty of the free market. They opposed barriers to trade, hated bailouts and subsidies, and looked down on the “takers'' who wanted the government to finance their lifestyle.

In fact, just one cycle before Trump’s first run, a popular conservative take was that the working class paid too little in taxes relative to the rich — a position illustrated by the party's 2012 presidential nominee, Mitt Romney, and his famous “47 percent” comment.

While Trump’s administration tended toward conservative orthodoxy, his message to voters frequently undermined it. He promised not to mess with entitlements. He threatened individual companies whose CEOs crossed him and slapped tariffs on imports. He boosted spending and said it was a good time to borrow.

And if working-class Americans were struggling, it wasn’t because they were addicted to handouts. It was because some villain was holding them back: China, Mexico, immigrants, trade deals, elites — you name it. The solution wasn’t to get the government out of the way; it was to empower him to run it.

The confused Republican voter

These moves helped bring millions of working-class independents and nonvoters into the Republican fold, and the party badly needs them to win. But Republicans are starting to realize how much the tradeoff has affected their traditional message.

An Economist/YouGov poll this month found that 71 percent of Republicans under 45 favored more government spending to create jobs, even if it required higher taxes. Among Republicans over 45, the numbers were almost perfectly reversed: 74 percent favored prioritizing lower taxes. The split between older voters who came of age under Ronald Reagan and younger voters defined by Trump reflects two different lived experiences as to what conservatism means.

Let’s go back to that hypothetical Republican voter looking at Biden’s plans. Is the problem that leaps out that they tax big corporations and unfairly penalize the hardworking elite? Aren’t those the people Republicans are complaining about 24/7 right now?

Are they against them because Republicans oppose big spending? Didn’t Trump want to spend $2 trillion on infrastructure, too? Are they against things like child tax credits or health care subsidies because they don’t like handouts?

It’s not just Trump either. Sen. Ted Cruz, R-Texas, who keeps his finger on the pulse of the right’s grassroots, used to rail against the government picking “winners and losers'' in the tea party era.

Now he’s one of several Republicans threatening corporations with mostly unspecified punishment if they get too “woke.” What does this mean in policy terms (if anything), and how does it mesh with the party’s traditional stance on taxes, regulations, campaign finance and labor? Nobody’s quite sure yet.

Republicans have violated conservative orthodoxy on economic issues plenty of times in the past, especially when they held the White House. But the basic argument of a small government approach offered a North Star on the economy to which they could always return.

More traditional Republicans are hoping this break is temporary and that Biden will overreach, underperform and remind their voters why they were wary of his approach in the first place. But it also may be several election cycles before Republicans can find a coherent economic philosophy they can rally around.