Bye, Bye, Economic Pie

I’ve often likened the Wall Street Journal’s editorial board to the Japanese soldiers holding out on remote islands, unaware the war has ended or sworn to fight on regardless. Since 2015, it has remained 2015 on that magical opinion page where time stands still, market fundamentalism reigns, and Speaker Paul Ryan has a budget-busting tax cut queued for passage. But Ryan has moved on to launching SPACs and submitting op-eds with titles like “Crypto Could Stave Off a U.S. Debt Crisis.” And as an inside-baseball complement to the return of conservative economics on display at the Republican National Convention this week, a remarkable column appeared yesterday from Glenn Hubbard, dean emeritus of the Columbia Business School and chair of President George W. Bush’s council of economic advisers.

ONE THING TO READ

Your one thing to read this week is from Glenn Hubbard at the Wall Street Journal: “The Economic Populists Have a Point.”

Hubbard is a top-notch economist and perhaps the most influential economic policy advisor on the Old Right. While he and I disagree constantly, I would put him alongside AEI’s Michael Strain as one of the most generous, good-faith, and substantive interlocutors on the debates raging within the right-of-center. He hosted me at Columbia last year for a really interesting discussion on “Rethinking Capitalism: Is the Current System Working for Americans?” Point being, what he is saying about economic policy matters a lot.

Note three things in particular.

1. His definition of human flourishing: “A conservative economic platform should recall why conservatives have stressed the benefits of markets. The goal, as my Columbia colleague and Nobel laureate Edmund Phelps puts it, is ‘mass flourishing.’ That is why we want markets to work—to advance innovation and productivity and allow communities to make that flourishing possible.”

One of the cardinal sins of market fundamentalism has been analyzing people as atomized individuals and focusing only on maximizing their welfare as consumers. The key starting point for a return to conservative economics is to reconceive the economic component of flourishing in terms of innovation and productivity within communities, as Hubbard does here.

2. His forthright acknowledgment that a rising tide has not been lifting all ships: “There’s more to the populist conservatives’ skepticism than traditional conservatives acknowledge,” he writes, and the Old Right should “agree[] with populist conservatives that markets don’t always work perfectly and that a hands-off approach isn’t always the solution.” I particularly enjoyed his observation that, “while competition at home and abroad expands the economic pie, it says little about the relative sizes of the slices, a point noted by populist conservatives,” which echoes my own long-running critique of “economic piety.”

This acknowledgment also echoes the recent paper from AEI’s Scott Winship, Understanding Trends in Worker Pay Over the Past 50 Years. I write in-depth about the paper here, but its key point is that “the productivity of the median worker has risen by less than overall productivity” owing to factors including “the shift to a lower-productivity service economy.”

3. His policy wish list: “A conservative economic agenda should include policies that advance economic growth and living standards. That means supporting research and development, maintaining pro-investment business tax provisions in the Tax Cuts and Jobs Act of 2017, and making regulations that benefit everyone.” I agree with all of this.

No mention of free trade or more immigration. No call for “getting government out of the way.” To the contrary, he is calling for higher R&D spending—what he goes on later to call “a limited measure of successful industrial policy.” No call for making permanent the entire, budget-busting TCJA, let alone cutting taxes further. The “pro-investment business tax provisions” in TCJA (by which he presumably means immediate expensing in particular) are the ones I consider most useful as well. And rather than a generic call for “cutting red tape,” he is focused on “making regulations that benefit everyone.”

The three themes—what flourishing means, what has gone wrong, what to do—flow naturally from one to the next. If one thinks broadly and in conservative terms about flourishing, one quickly notes that the economy has not delivered as it needs to, and the traditional free-market policy agenda then gives way to one focused more practically on what is needed for markets to work well.

American Compass’s mission is to restore an economic consensus that emphasizes the importance of family, community, and industry to the nation’s liberty and prosperity. A consensus is a difficult thing to define, operating often through unchallenged assumptions, topics avoided, and subtle cues that convey within a coalition what members in good standing should believe. So we mark carefully the fixed positions where the subtext bubbles to the surface and gets plainly said, allowing us to see where we have been and how far we have come. Pieces like Hubbard’s are a very good sign.