For 30 years, the Republican Party dominated American political life, winning five of the seven presidential elections before 2008. But the GOP has taken its lumps of late, culminating in its loss of Congress in 2006 and the White House last November. As the party suffers not just from a leadership vacuum but from considerable internal division, its future direction is unclear. This much, however, is certain: as America struggles to emerge from a financial crisis, any renewal of the Right will require the Republicans to rethink their approach to the economy. An agenda focused chiefly on tax cuts, as the Republicans’ has been since Ronald Reagan’s presidency, is no longer enough.
In 1980, Reagan won the election by attracting a substantial portion of Democrats with three simple ideas. First was the fight against the Soviet Union. Second, the battle against the excesses of the state: “Government is the problem, not the solution,” Reagan famously said. Third, and most relevant to this discussion, was an overarching faith in economic growth. Growth improves everyone’s well-being, lifting the underprivileged from poverty and eliminating the need for costly fiscal redistribution. With growth as the objective, a deep cut in tax rates for higher-income people was not only justifiable but necessary, because it would increase the incentive to work and thus foster productive activity.
Lower taxes became a winning political weapon for the Republican Party—all the more so, perhaps, because the cuts weren’t accompanied by painful reductions in public spending. Fiscal deficits, traditionally unacceptable to conservatives, had even become welcome to the Right, which regarded them as a way to “starve the beast.” By burdening the state with debts, the thinking went, we could reduce its ability to expand and thus the danger that it could suffocate the economy.
