Disrupting the Conservative Platform

Conservative ideology has long deemed the social safety net an impediment to prosperity. Indeed, conservative efforts to dismantle the welfare state have been a constant in our national politics. In this respect President Trump is towing the party line.

It is currently rumored, for example, that Trump will issue an executive order to weaken the welfare system. Meanwhile his budget calls for severe cuts to basic safety net programs, which the administration says depress growth and job creation. This stance enjoys support among House Republicans whose budget resolution has proposed even deeper reductions in order to “expand freedom and opportunity for American entrepreneurs.”

Put these moves together and the latest blueprints seem to affirm the classic conservative vision on social insurance—a vision that, in the words of anti-welfare activist Peter Cove, seeks “to eliminate all forms of public support” because “too many Americans who could be available to help fuel robust economic growth are instead sitting on the sidelines.”

And yet, what if that standard tenet of conservative ideology is beginning to fray? For all of the GOP’s continuing hostility towards the welfare state, a new view of the relationship between economic growth and social spending has been gaining strength, most notably in smart precincts of center-right and libertarian thought. In these quarters, the old doctrine that the safety net is always and everywhere antithetical to growth is beginning to be reassessed. Emerging as a result is the dawning recognition that a high-tech economy fueled by dynamic innovation actually requires a stronger safety net if only to maintain the public's tolerance for its inherent dislocations. While the emerging view of baseline social insurance as a platform for growth won’t immediately prevail, more and more evidence and arguments are suggesting it should. And it may yet. 

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In 1988 Ronald Reagan praised entrepreneurs as “responsible for almost all the economic growth in the United States.” At the time he worried that social spending would sap “the courage to take risks.” The safety net, in his telling, undercut the creative destruction necessary to grow the economy.

This formulation—now a pillar of modern conservatism—led Reagan to crack down on the Trade Adjustment Assistance program; it shaped Newt Gingrich’s efforts to cut entitlement spending; it inspired Paul Ryan’s reference to the safety net as “a hammock” that “lulls able-bodied people to lives of dependency and complacency”; and it informed conservative icon Allen West’s remark that President Obama’s efforts to create a universal program for all dislocated workers was a “bribe” to the “American public.”

But while conservative leaders have spent the past three decades railing against programs they insisted would hurt the economy, they failed to actually help workers manage the forces of technological change and globalization that have resulted in pervasive insecurity among U.S. workers. The GOP’s years of inaction on this front may be weakening the appeal of the old Reaganite formula, whose failure is underscored by the rise of Trumpism. While Reagan employed race-baiting tactics—such as the infamous indictment of black social insurance recipients as “welfare queens”—to build political support for dismantling the welfare state, it was those same efforts that came home to roost in 2016. The successful rollback of the welfare state helped sow the seeds of white working class discontent that fueled Trump’s rise. It was just last year, for instance, that candidate Trump was promising to unleash economic growth and protect Social Security and Medicare. And shortly thereafter that then Vice President elect Mike Pence put the first nail in the coffin of Reaganomics. “The free market has been sorting it out,” he said, “and America’s been losing.”

Of course the “disruptive innovation” that drives a dynamic, competitive market system brings growth and opportunity to some, if not all, Americans. But those disruptions have also destabilized industries and displaced workers. From the replacement of coal with natural gas in the power industry (with sharp ramifications for coal miners), to broader issues such as trade policy, to all-encompassing megatrends such as globalization, automation, and the spread of “contingent” work, today’s economic disruptions have left millions to toil without adequate income or benefits. In today’s post-recession era, that means that “creative destruction” has often come in the form of offshoring, automation, and Task Rabbit—trends that are frequently unappealing to many workers.

“Dislocation,” in this regard, is no longer an incidental “bug” of the system but a “feature” of it, one that is generating widespread flux in the labor market. Forthcoming Brookings research shows that the share of the nation’s employment that now requires high or medium digital skills encompasses more than 70 percent of workers—a figure that has more than doubled since 2002. And for that matter McKinsey & Co. concludes that 60 percent of all occupations are at risk of partial or full automation in the next decades given current technology.

We are not facing mass unemployment any time soon—in fact, unemployment is reaching new lows—but we are facing an epidemic of labor market anxiety because today’s world of work is characterized by change and insecurity. While academics are engaged in an ongoing empirical debate about the ultimate effects of such disruptions on the labor market, many workers on the ground worry we are heading towards a future in which ordinary people will have even less control over their economic lives than they do now. No wonder a recent survey found that 41 percent of U.S. workers fear they will soon be replaced by artificial intelligence, automation, and digitization—a fear that is particularly acute among poorer and less-educated Americans.

All of which suggests why a better safety net is beginning to look good; it is one way to save the best of the disruptive economy from its worst side effects. An array of voices, including from the right, are making this connection and recognizing that basic social supports can make the United States more prosperous and entrepreneurial, in part by assuaging some of the anxiety now pervasive in the economy.

Conservative commentator Reihan Salam, for example, has noted the addition of working class populists dependent on a strong social safety net to the GOP’s changing coalition and implored the party to accommodate these voters' demands or suffer the political costs. Similarly, the conservative New York Times columnist Ross Douthat has argued strenuously that any Obamacare repeal needed to be paired with new forms of working class insurance such as an expanded earned income tax credit and refundable child tax credits. The venerable American Enterprise Institute even declared in a recent policy brief on improving antipoverty programs that “society must maintain a safety net that reduces material hardship.” And some of the most enthusiastic supporters of a Universal Basic Income—a contentious form of social support, but a social support nonetheless—have been prominent conservative figures such as Charles Murray and Milton Friedman.

In this regard, while GOP policies have yet to catch up, it is clear that something is stirring among their thought leaders. As Peter Kolozi notes in his new book Conservatives Against Capitalism (2017), the recession led “conservative thinkers to begin reexamining the ‘deep structural problems’ in the new capitalist economy, in order to pull the conservative discourse out of the static dualism between economic laissez-faire or welfare-state serfdom.” These thinkers, Kolozi adds, know that “if the Republican Party is to remain electorally competitive, it must offer a new, positive agenda that does not reject an activist government.”  

Which is exactly the kind of agenda Will Wilkinson, a vice president at the libertarian Niskanen Center, has been working out in recent months. A robust system of social insurance, Wilkinson argues, has the power to keep people from becoming collateral damage of creative destruction, and a much stronger, modernized safety net is thus a necessity to offset the kind of frustration and anger that spawned the 2016 backlash.

“A sound and generous system of social insurance,” Wilkinson wrote in Vox, “offers a certain peace of mind that makes the very real risks of increased economic dynamism seem tolerable to the democratic public, opening up the political possibility of stabilizing a big-government welfare state with growth-promoting economic liberalization.”

Wilkinson has boldly and brilliantly detailed why the United States’ weak social insurance system may now be a threat to prosperity. Crucial to Wilkinson is the recognition that the welfare state that provides a modicum of social insurance to millions of Americans is not the same thing as the regulatory state that sets the rules and speed limits for innovation, business formation, job creation, and economic mobility. In Wilkinson’s view conservative ideologues err when they conflate the two aspects of the state and cast them as equal enemies of a dynamic economy. In contrast, he argues, regulatory problems or bloat are far more harmful to growth than appropriate social supports, which are in fact prerequisites to sustaining economic progress.

“Grasping that government spending is compatible with high levels of freedom and economic vitality,” Wilkinson wrote in the New York Times, “would give Republicans space actually to govern.”

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Of course the case for this ideological shift has been cohering mostly in theory and not yet in Congress. But there is increasing evidence that the insight bears out in the real world—that a stronger safety net really can support prosperity by supporting entrepreneurship, in which case, it would behoove Capitol Hill to pay attention.

Intriguing academic findings based on real-world analysis since the Great Recession, for example, have shown the clear benefit of government safety net programs including the earned income tax credit, child care subsidies, and food stamps on important economic outcomes such as employment rates and higher incomes. These findings show in broad terms that certain social welfare policies may actually encourage more people to work and enable them to do so more productively.

More to the matter of the innovation economy, another growing body of quantitative work has shown that safety net protections can encourage productive risk-taking and dynamism. Most notably Harvard Business School economist Gareth Olds has found in a series of published papers that food stamp and Children's Health Insurance Program enrollment actually encourage greater entrepreneurship, as measured by new firm ownership. In both cases the availability of baseline economic security benefits increased entrepreneurship by making it less risky for benefit recipients to strike out on their own. No wonder the Kauffman Foundation, an organization dedicated to promoting entrepreneurship and self-sufficiency, recently released a set of policy recommendations advocating for a more robust safety net. Risk mitigation, it turns out, helps encourage productive risk-taking.

Or as Harvard Business Review editor Walter Frick has said about Olds’ studies: “We must revisit the idea that an expanded welfare state comes at the expense of entrepreneurs and innovation. The evidence simply does not support the idea of a consistent trade-off between bigger government and a more entrepreneurial economy. At least in some cases, the reverse is actually true. . . . Properly deployed, a robust social safety net encourages more Americans to attempt the high-wire act of entrepreneurship.” 

Nor is the link of a sounder safety net just an academic finding. Deploying a modicum of social insurance as a platform for growth has already brought superior results to other countries. Wilkinson and others note, for example, that the Nordic countries—Sweden, Denmark, Norway, and Finland—have been outperforming the United States on many growth measures in recent years, including on “economic freedom,” after they reinvented their economic models to combine hyper-competitive capitalism with well-designed safety nets and labor-market “adjustment” programs. 

By contrast the U.S. “model”—such as it is—has seemed threadbare of late. Relatively tepid growth in recent years has been accompanied by mounting apprehension about worker insecurity and technology’s effect on the future of work. Stories have circulated of bus drivers forced to sleep in their cars between shifts to accommodate unpredictable schedules. And for their part, the freelance workers participating in the new “gig” economy have started to push back: in November, Uber drivers nationwide took to the streets demanding minimal wages and benefits.

Of course not all social spending automatically encourages entrepreneurship and promotes growth. For example the United States currently spends 286 times more on disability payments than on Trade Adjustment Assistance, a disparity that has incentivized many work-capable Americans to exit the workforce entirely. A focus on the design of the safety net is thus crucial. But even then Sam Hammond, a policy analyst at the Niskanen Center, stresses that past ineffective social spending should not perpetuate the conclusion that social supports sap motivation. Rather than continuing to debate whether funding a social safety net makes economic sense, Hammond says conservatives should start from the premise that social spending is consistent with market logic and then move toward evaluating and modifying social programs to maximize their capacity to promote growth by providing a modicum of household stability.

Against this backdrop, recent state and federal policy skirmishes appear both encouraging and frustrating. Over the last year, for example, the nascent “auto-IRA” movement—a “bottom-up” effort of cities, counties, and states to provide portable, government-sponsored retirement plans to low-wage workers who lack access to employer-sponsored programs—has made admirable progress. The response from the GOP-controlled Congress, however, has been two Senate votes to repeal the Obama administration rule clarifications that had allowed both the local and state programs to proceed.

Similarly, while the collapse of GOP efforts to repeal Obamacare likely did reflect a welcome inkling among some moderates that the provision of backstop health care benefits might promote economic vitality, the sheer relentless commitment of the GOP over the past seven years to repeal the law remains disturbing. Their actions underscore how far the current Congress remains from the needed pro-growth, pro-safety net stance.

With that said, there is little doubt that a true ideological rethinking has begun. With an epidemic of workforce anxiety potentially undermining the venturesome spirit of U.S. capitalism, at least a few conservative thought leaders have recognized that the rejuvenation of a drifting U.S. economy won’t be served by devotion to outdated ideological commitments. For conservatism to survive the next era, it is going to need to pair reforms to spur growth with creative efforts to build a new social contract.