Grand New Party: How Republicans Can Win the Working Class and Save the American Dream
Ross Douthat and Reihan Salam
Doubleday $23.95 (hardcover)

On the morning of his inauguration in 1981, Ronald Reagan had Harry Truman’s portrait removed from the White House Cabinet Room and replaced it with Calvin Coolidge’s. Commenting on the obvious symbolism of the exchange—the fiery, cussing populist put out by the dour business icon—Reagan dismissed “Silent Cal’s” reputation for sleeping a lot and not doing very much, pointing out that “he cut taxes four times.” Indeed, the cuts, which apparently resulted in “the greatest growth and prosperity record we’ve ever known,” held an important lesson for us. According to Reagan, the lesson was that prosperity came “because [Coolidge] did nothing,” and so “maybe that’s the answer for the federal government.”

It was a perverse thing to say for the former New Deal Democrat, who knew full well that only massive government intervention saved America from the economic catastrophe left in the wake of Coolidge- and Hoover-era prosperity. And like much of the Reagan Revolution’s attack on the welfare state, it was mostly counterfactual: by any definition of “prosperity” that includes a large and comfortable middle class, no such prosperity has ever existed in the absence of an active welfare state commanding a large fraction of national income for social purposes. Ultimately, Reagan did a very good job of emulating Coolidge’s far narrower version of prosperity. In both the 1920s and the 1980s, virtually all of the economic growth was captured by the wealthiest households, as average wages stagnated or fell, lagging far behind productivity gains. After a brief hiatus of slightly more equal prosperity in the late 1990s, George W. Bush wrenched things apart again with massive tax cuts for the wealthy and an economic performance that ranks with the worst in the last half-century, marked by falling wages, anemic job growth, rising poverty, record bankruptcies and foreclosures, and trillions added to the federal debt.

Grand New Party, by Ross Douthat and Reihan Salam—both editors at The Atlantic—is one of several recent books attempting to provide a blueprint to save Republican politics from wholesale collapse after a quarter century of dominance, and, needless to say, it could not be better timed. It may also be the only such book whose authors were in diapers when the Reagan Revolution began, a fact that might partly explain why they are so “blazingly original,” filling “a cavernous void of new thinking,” as noted in the endorsements. But if Grand New Party is not hobbled by the kind of ideological baggage many older conservatives are carrying around today, it does get the politics of the moment completely wrong. The authors put their hopes in what amounts to a massive role reversal for the Republican Party, something far less likely to happen than the opposite scenario: a new Democratic politics that restores the party’s natural working-class majority, as economic security and even living standards continue to deteriorate for all but the richest households.

Well-conceived and craftily written, the central argument of Grand New Party is quite simple. Since the late 1960s, the Republican Party has pulled the working class away from the Democrats on social issues like crime, welfare, and affirmative action, but it has failed to deliver on bread-and-butter issues like wage growth and affordable health care, even as the social issues have receded from the political stage due to conservative success in those areas. According to the formulation in Douthat and Salam’s introduction, this inability to address economic needs has prevented Reagan- and Bush-era Republicanism from consolidating an enduring political majority:

"Having turned class politics to its advantage on cultural matters, by highlighting the gulf between Middle American values and the mores of the liberal overclass, the conservative movement has missed opportunity after opportunity to do the same on the economic front—by confusing being pro-market with being pro-business, by failing to distinguish between spending that fosters dependency and spending that fosters independence and upward mobility, and by shrinking from the admittedly difficult task of reforming the welfare state so that it serves the interests of the working class rather than the affluent. In the process, the Right has (thus far) squandered the chance to forge a conservative class consciousness among working-class voters, a unity of political allegiance and socioeconomic identity that, in its liberal form, made the Roosevelt coalition so potent and enduring."

The argument that conservative “success” on social issues has set the Republican Party up for failure as working-class anxiety shifts from social to economic issues is a sensible heuristic for Republican strategists, even if the premise of conservative social success is quite speculative. The sources of positive social change in recent years, such as lower crime and declining teen pregnancy, are not well understood. The drop in crime is particularly complicated. Right on the surface, however, it is a little odd to interpret the rise in crime that began in the 1960s as a “liberal Democrat” problem. After all, the trends that emerged under President Johnson continued unabated for the next 30 years, a “tough-on-crime” Republican in the White House for 20 of them. More to the point, there is no scholarly consensus on what caused the steep national decline that began in the early-to-mid-1990s.

It seems clear, however, that among the many causal factors, whatever might fit the description of a distinctly conservative or Republican-created crime policy (Democrats led the way in some areas, for example tougher sentencing) played only a small role. When Rudy Giuliani became mayor of New York City in 1994, and the legend of his crime-fighting heroics began, the city’s crime rate had already been falling for thirty-six straight months. Statistically, in fact, one of the stronger candidates for understanding the great crime-rate decline of the last fifteen years not only has nothing to do with Republicans being tough on crime, but is itself a product of Great Society liberalism: the Clean Air Act, passed in 1963 and substantially revised in 1970. Rules reducing the lead content of gasoline, beginning in the 1970s, produced significantly decreased lead levels in young children. Lead in the body can cause aggressive behavior and various mental impairments associated with deviant activity and crime. In careful statistical studies, researchers (most notably the economists Jessica Reyes and Rick Nevin) have found evidence that reduced crime in the United States accompanies falling lead levels. In fact, similar correlations between lead reduction and later crime reduction in other countries suggest a distinctive causal pattern.

Nevertheless, even if the most important factors in crime reduction are environmental and economic, politically, of course, Republicans did gain a sharp edge over Democrats (at least liberal Democrats) on controversial policy questions, such as the rights of criminals and the death penalty. And by focusing working-class attention on social issues, Republican leaders, drawing heavily on the work of conservative think tanks and writers, got much of the credit for social improvements, even for strongly bipartisan developments like welfare reform. Ultimately, whatever their share of the credit for positive change, it would be foolish to deny that the Republican Party of Ronald Reagan, Newt Gingrich, and George W. Bush won working-class votes, if not loyalty, by identifying social problems and working tirelessly to give voice to the anxiety many felt over issues of safety, family breakdown, racial conflict, and so on.

In emphasizing the role of social and cultural factors in national politics over the last thirty years, the authors’ narrative shares an obvious kinship with Thomas Frank’s much-discussed argument in What’s the Matter with Kansas. Naturally, Douthat and Salam disagree with Frank’s basically Marxian analysis of the culture war as an electoral diversion strategy designed to mobilize the working class against its own economic self-interest. Unfortunately, their counterargument is underdeveloped and only superficially engages with what they correctly describe as the main cultural battleground of the last thirty years: family and community stability in a violent, greed-filled, permissive age.

Like most Beltway conservatives, then, Douthat and Salam remain fully invested in a liberal worldview where it hurts families the most—in the marketplace.

Broken marriages, informal coupling, and single parenthood, all on the rise since the late 1960s, certainly reflect a type of cultural shift that one could interpret narrowly in terms of religion and morality, as the religious right has done. But, in fact, where these problems are most common, in lower income regions and communities, they are extremely destabilizing economically. Contrary to Frank’s view that red-state cultural conservatism is irrational and self-defeating, a politics centered on family, neighborhood, and faith-based initiatives, one that “promises to shore up the institutions that provide stability,” makes perfect sense in places where said institutitions are weak or seem like all that stands in the way of total collapse.

To their credit, Douthat and Salam fully recognize how economic pressures due to globalization and changing business models and norms contribute to family breakdown in ways that cannot be remedied by one-dimensional “cultural” approaches such as marriage promotion or fatherhood support groups, helpful as these may be on a case-by-case basis. This acknowledgment of the structural sources of social disarray is quite a leap forward from the Republicans’ behaviorist “family values” agenda of the 1990s. Yet, in contrast to European-influenced American conservatives such as Robert Nisbet and Christopher Lasch, Douthat and Salam only dimly recognize the deep interdependence of social liberalism and market rationality—the former working to erode the legal and political standing of families and communities as the latter drives business to commodify and wring a profit from every last vestige and function of traditional life and from every last productive person.

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Like most Beltway conservatives, then, Douthat and Salam remain fully invested in a liberal worldview where it hurts families the most—in the marketplace. But their robust disregard of Republican orthodoxy on the role of government, expressed in an ambitious and expensive plan for improving working-class economic security, strikes a new political note that should be music to Democrats’ ears. Drawing mainly on others’ work, this plan is laid out in part two of Grand New Party, under the theme of “Putting Families First.”

To begin with, they endorse Ramesh Ponnuru’s tax reform plan, which eliminates the majority of itemized deductions in favor of a greatly expanded child tax credit, rising from $1,000 to $5,000 per child. A credit of this scale is likely to take many parents off the tax rolls entirely (during child-rearing), but by targeting the credit essentially as an offset for the cost of raising children, an investment in child-rearing, the tax code is performing an important social function in an area of substantial need, they argue. Related to this, they also endorse welfare-policy scholar Neil Gilbert’s assessment of the need for a new set of policies on work-family balance. Although they stick closely to the conservative script in ignoring or underestimating the fact that virtually all gains in working-class family income over the last twenty-five years resulted from more working-hours per household (mostly added by working wives and mothers), not higher wages, they at least acknowledge that the dual-income solution to wage stagnation has exacted significant costs in terms of family well-being, particularly among lower-income households. Citing survey data revealing increasing disillusion among working mothers, they endorse the European idea of a “life-course perspective” on employment and family needs, with measures to support parental childcare by replacing lost wages and pension payments with government grants. Another avenue is to provide tuition credits (i.e. educational opportunity) in exchange for child-rearing—a policy modeled on veterans’ benefits, they suggest.

Other expensive items on their families-first menu include increasing the stock of affordable housing in cities, which means “fighting development policies that privilege childless singles and wealthy rentiers.” On health care, they suggest many possibilities but lean toward Berkeley economist Brad DeLong’s idea of mandatory health savings accounts set at 15 percent of household income, with the government paying all medical costs above the 15 percent and unspent funds either rolling over into retirement plans or being refunded directly to the taxpayer. With the higher taxes needed to fund such a system mostly offset by higher take-home pay (due to eliminating insurance premiums), the most important effect of this arrangement, they argue, is to eliminate (or minimize) the market-distorting role of private insurance companies, reducing costs and improving service quality by restoring a consumer-based system for all but catastrophic or long-term care.

Also in regard to the tax code, the authors embrace several radical ideas designed to shift the tax burden almost completely away from working families. They advocate reducing or eliminating the payroll tax for households below the median income. This could be paid for by raising the income cap at the top or establishing a progressive rate-structure, or through “means testing” that reduces benefits for the wealthy. Douthat and Salam also embrace the idea of replacing the entire current tax code with a progressive consumption tax, a favorite of the most innovative thinkers on the left as well because, among other virtues, it heavily penalizes high-income spending, shoring up social solidarity and reducing the upward pressure on housing markets that is transforming urban centers like Manhattan and San Francisco into monochrome citadels of the rich.

As to the problem of low-income work, they take what is increasingly the favored liberal approach, arguing, without evidence, that raising the minimum wage will not help the working poor and that increasing union density is counterproductive in a globalized competitive marketplace. Essentially, they see no solution in the idea of increasing worker bargaining power or using a public wage-floor to command a larger share of business revenues for workers. In classical liberal fashion, they seem to believe that even as executive pay skyrockets—at rates far greater than earnings in many cases—low wages and declining job security are set by the market, not by corporate-written public policies on trade, labor rights, pensions, and so on. In deference to the assumed natural workings of the market, they prefer a redistributive approach centered on wage subsidies provided by the government. Although an expanded Earned Income Tax Credit could play a similar role, direct wages subsidies will be more effective, they sensibly argue, because they avoid the many information problems that prevent people from taking advantage of the EITC and other tax benefits for which they are eligible. In particular, they endorse Columbia University economist Edmund Phelps’s wage-subsidy plan, which is targeted at low-wage working men (with the important collateral effect, perhaps, of helping those with children be better fathers) at a cost of up to $85 billion a year.

Other ideas such as redirecting the massive resources of our misguided farm-subsidy program toward developing new green technologies and industries in the farm belt, or subsidizing high-quality online systems that can provide needed learning and credentials much more cheaply than traditional campus-based higher education, are necessarily more experimental and unlikely to become priorities any time soon. In general, however, Grand New Party has much to offer less affluent Americans—far more, in fact, than even the Democratic Party is seriously contemplating, or has since the heyday of Great Society liberalism.

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Two major flaws, however, obscure the way forward for the book’s policy vision. They are closely related and, naturally, revolve around politics. The first is simply that Douthat and Salam overestimate the economic health of the working class and wrongly assume that the aspirational, class-blind worldview many embraced in the 1990s is somehow a permanent feature of American politics. This leads them, second, to misinterpret an emerging weakness of the Republican Party—its self-help rhetoric about economic problems—as a continuing strength, perhaps as Phil Gramm did in dismissing public anxiety about a “mental recession” as so much “whining.”

It is hard to describe what Douthat and Salam want from the Republican Party as anything less than a complete transformation, ex nihilo.

The American elite, thousands of millionaires chasing after hundreds of billionaires, make a good media spectacle, to be sure. But their extraordinary gains cannot hide the slow, wrenching decline of living standards facing so many with far humbler dreams—dreams paradoxically less realistic today than the gated fantasy worlds being created at the top. Most importantly tens of millions of households have become nearly worthless over the last quarter century. The average wealth or “net worth”—total assets minus total debts—of the bottom 40 percent of households fell nearly 60 percent between 1983 and 2004, according to research by New York University economist Edward Wolff. Starkly, the share of total gains in wealth that went to the bottom 40 percent in this period was less than zero because they lost wealth while others gained. Ninety percent of the gains went to the top 20 percent of households. In other words millions of people have been completely cut off from the appreciating wealth of our society. Or to take just one of many symptomatic statistics discussed in my colleague Robert Kuttner’s indispensable book The Squandering of America, from 2000 to 2006, the total gain in wages for all 124 million non-supervisory workers was less than $200 million—meaning that the average worker’s raise (her total raise over six years, not per hour) was $1.60. By comparison, over that same period the top five Wall Street firms paid out $38 billion in bonuses alone. Such vast discrepancies can no longer be papered over by discredited supply-side theories or silly talk of an expanding “shareholder middle class.” As Kuttner points out, less than 15 percent of households have direct stock holdings of $5,000 or more. “Shareholder wealth” remains the nearly exclusive domain of affluent Americans.

Back in the real world, American families are no longer willing to work more and sacrifice family just to stay afloat in an economy growing more unequal and less secure with each passing day. More work for lower pay, fewer benefits, and less security—what the Reagan- and Bush-era supply-side political economy has delivered for most American households—is politically unsustainable for any party that claims to be a protector of working families or ordinary Americans. The 2006 elections, a truly frightening spectacle for the denizens of conservative-dominated Washington, revealed a clear path forward for Democrats via the victorious swing-state Senate campaigns of Jim Webb, Sherrod Brown, and Jon Tester. As they demonstrated, economic populism mixed with a moderately conservative cultural outlook is a key trend in national politics and likely to grow in the near future.

Given that likelihood, the question one is left with after reading Grand New Party is why anyone who cares about the struggles and insecurities of working class families would focus on the Republican Party at all. Particularly as expressed by young, moderate conservatives like Douthat and Salam, the whole idea is biographically puzzling to me. Unlike the majority of those who entered college during Bill Clinton’s second term, for some reason Douthat and Salam latched onto the Republican Party—at least their own private version of it. Neither author appears to be part of the religious right or a libertarian ideologue—two elements of the Republican Party that attracted a good number of smart younger people during the Clinton years. Absent these predilections, or a career in business, what was there to like about the Republican Party in the late 1990s when the authors became eligible to vote? By then the worst of the GOP had taken over. And by the summer of 2001 it was clear that these destructive elements had a sleeper in the White House. Now it seems possible that the Republican Party will suffer a collapse just as devastating as that which the Democrats experienced in the 1970s.

However, there is a huge difference in these two scenarios. The Democratic Party had an extraordinary legacy of success behind it before its travails of more recent times. It presided over the creation of a majority middle class and cut the poverty rate in half, not to mention tearing down the racial caste system in the South. Compared to that legacy, it is hard to describe what Douthat and Salam want from the Republican Party as anything less than a complete transformation, ex nihilo. Quite simply, Republican rule has no positive legacy by which to right itself today.

The modern Republican Party began as an anti-government stronghold for the rich, rising in reaction to the birth of federal (and progressive) taxation under Woodrow Wilson and permanently cutting off its progressive wing as galvanized by Teddy Roosevelt in 1912. (That arm of Republicanism was fully absorbed into the Democratic Party by the late 1920s.) From the 1920s until today, the Republicans’ core philosophy has been exactly the same: cut taxes and leave business and wealth alone, and the benefits will “trickle down” to everyone else, as Treasury Secretary Andrew Mellon first put it in the 1920s. Thus, while the 1924 Republican platform stated a single fundamental principle—“We demand and the people of the United States have a right to demand rigid economy in government”—its Democratic counterpart attacked the very idea that “national prosperity must originate with the special interests and seep down through the channels of trade to the less favored industries to the wage earners and small salaried employees,” an idea, they declared, which “has accordingly enthroned privilege and nurtured selfishness.” Against this wealth-centered vision of government retreat, the 1936 Democratic Platform gave top priority to “Protection of the family and the home,” which required, above all else, using “the powers of government to end the activities of the malefactors of great wealth who defraud and exploit the people.” In 1980 Reagan successfully turned populist anger against the government in a masterful and menacing work of political polarization that makes today’s burbling regrets about financial power and middle-class decline seem less than timid, if not positively feckless.

Grand New Party is no feckless dream for working families. To the contrary, it puts forward the kind of coherent, well-targeted policy vision that may be the last best hope for millions of American households left behind by the global economy. Yet the ultimate test of any such vision is the political test. Do the leaders who are entrusted with the vision have the will and understanding to carry it out? Judging by the 2008 Republican presidential campaign, Grand New Party fails the political test. Instead of responding to the new working-class anxiety, the GOP has set a lemming-like course of doubling down on failed ideas and corrupt politics for no other reason, it seems, than not knowing any better or simply being happy with how Washington has worked for them in the recent past. They are even selling religion short, nominating their version of a Howard Dean secularist for the presidency, leaving thousands of evangelicals, particularly young evangelicals, standing by for something better or quietly preparing to switch sides.

It is a common mistake to read the Reagan Revolution as something new in American politics. But its ideas and policies of monied freedom and government retreat were not new at all. Calvin Coolidge’s portrait in the White House Cabinet Room, circa 1981, was perfectly on the mark, not a faint echo of new academic heroes like Friedman and Hayek. The real change occurred, of course, in the Democratic Party, whose radicalization in the 1960s eroded its working class support, leaving the large and rich terrain of cultural conservatism completely unguarded against invasion from the economic right. But as Grand New Party correctly argues, the Republican Party cannot make good on its working class promises by culture alone. That they believe it can at all is really the wonder of this otherwise convincing book—a twenty-first century equivalent of Franklin Roosevelt’s hard-won fight for “protection of the family and the home.”