THE KEYS TO UNLOCK THE AMERICAN ECONOMY

  • The Wall Street Journal
    • NOVEMBER 3, 2010, 7:45 P.M. ET

    GOP: Unlock the American

    Economy

    A genuine pro-growth economic agenda requires more than spending restraint.

    • By DANIEL HENNINGER

      If the new GOP Congress doesn’t do something fast to unlock the American economy, its most vulnerable members are going to be defeated in 2012. The consensus among economists is that unemployment will remain at 9% through 2011. A GOP with a 65-seat House majority and 47 Senate seats will not be immune to the surliest public mood any of us has seen.

      It is conventional wisdom that what voters, tea partiers and talkers want the Republican Party to do is cut the spending. Yes, but . . . Republicans—into whose waiting laps control of Congress has fallen—are mistaken if they think the federal budget is what drove this historic upheaval.

      Getting the spending under control matters a lot. John Boehner and Mitch McConnell want to push spending back to the 2008 baseline. It’s a good idea. But that alone won’t revive the economy.

      It is important to place the matter of Washington’s spending inside the broader context of the political upheaval we’ve just witnessed.

      Congressional spending is the locus of Washington’s power. They decide who gets reprocessed taxpayer money and who doesn’t. This sustains the regulatory bureaucracies and all those orbiting Washington lobbyists. That is the solar system known as Inside the Beltway.

      This is a crucial aspect of the tea party complaint, maybe its central insight. What voters are looking for is a party—and the GOP has the chance now to be that party—to reorder its relationship with the country in a way different than the 50-year-old Washington status quo. Not just a reversion to the norm. Something new.

      The new GOP has to find an identity beyond the Beltway power game, a way to make the nation’s most important activity not what is going on in Washington, as now, but what is done out in the country, among the nation’s daily producers and workers. 

      The simplest way for the Republican Party to free itself and the economy from this unending Beltway hell is by reviving a core belief of one of the country’s most successful presidents: If the government will get out of the way, Ronald Reagan argued, there’s no limit to what the American people can achieve.

      In his mini-apology news conference yesterday President Obama also said something about the wonders of the American people at work. But it is impossible to overstate the difference between whatever official Washington imagines “the economy” to be and life as it is really lived inside that economy.

      You cannot understand the way any business functions and then pass a 2,000-page law to regulate the health economy and then a 2,000 page law to re-regulate the entire financial economy. You cannot—in one year—load 4,000 pages of limitless uncertainty on the back of the economy and expect it to grow without Washington life support.

      The president stood there yesterday perplexed that so many voters didn’t understand what he was trying to do. The Federal Reserve purports to be perplexed that the private economy isn’t emerging from the recession as it should, so it decided yesterday to throw another $600 billion at it.

      Rather than wait for Barack Obama or Ben Bernanke to figure this out, Congress’s new Republicans should look to do whatever they can to unlock and liberate the American economy. If this means tossing over some cherished provision in the famously titled “Dodd-Frank bill,” such as the Consumer Financial Protection Bureau, so be it. Whatever is causing the uncertainty crisis, get rid of it. One of Ronald Reagan’s lasting insights (in truth it began under Jimmy Carter) is that federal regulatory intrusion can kill the economy. We are there.

      This will be spun as “going back to the dangerous deregulatory era of the Bush years.” In reply, Mr. McConnell should ask his rookie senator from Wisconsin, Ron Johnson, the Senate’s only genuine manufacturer (how far we’ve come from the first Congress), to give his maiden speech explaining to faraway Washington the real world of the private economy.

      At his news conference, Mr. Obama said something about compromising on the health-care plan’s 1099 reporting requirement. That destructive 1099 provision is a perfect metaphor for how the new Republicans should be thinking about every corner of government—from EPA to HHS to Energy.

      The GOP as been handed a rare chance to be the Party of Growth, instead of just another party in Washington. From its choice of committee chairmen to directors of its study groups, the GOP has to make clear its commitment to being the party of sustained, long-term economic growth. The Democrats’ alienation from the real economy is an opportunity but also, if one may use this word in our politics without blushing, a responsibility. If the GOP doesn’t get this right, no one else will.

      Let’s end on a note in tune with the mood of the country this week: If the GOP blows this, one would just as soon not go where a volatile and angry electorate will take the United States.

      Write to henninger@wsj.com

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