The Three-Headed Republican Party


One of my favorite political and economic writers is the Brookings Institute’s William Galston who writes a regular weekly column in the Wall Street Journal.   Most recently his article, “The Three-Headed GOP After Trump, “ is particularly lucid.

Mr. Galston sees three factions in today’s Republican party:

  • Establishment conservatives who favor free trade, immigration reform, are broadly internationalist, believe in climate change, want corporate and individual tax reform, and also support entitlement reform. They would accept tax increases as part of a “grand bargain” to address our debt problem.
  • Small government conservatives ala House Speaker Paul Ryan and his “A Better Way” plan for American renewal. They believe that government is the principal obstacle to growth, especially with excessive regulation. They want major tax cuts and reductions in domestic spending as well as structural changes in Medicare and Medicaid. They are more nationalist than internationalist in outlook and oppose corporate welfare such as the Export-Import Bank.
  • Populist conservatives ala Donald Trump, many of them working class. They distrust all large institutions but do not have an ideological preference for small government. They strongly support Social Security, Medicare and Disability Insurance. They view the world outside the U.S. as more of a threat than an opportunity, and therefore oppose trade agreements and large scale immigration. “America First” is their demand.

Can these three groups coalesce into a single working majority? As I see it, Mr. Trump might have been able to accomplish this but has fallen short because he is such a sleazy individual.  Mr. Galston thinks that, after Trump, the second and third groups will be able to come together but only without the first group. I see the challenge as the traditional Republican Party, consisting of the first two groups, figuring out how to join forces with the third group.
Conclusion. A prosperous and secure future for our country depends on having a strong and viable (fiscally) conservative party.  How will this be achieved?

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Poverty, Inequality and the Minimum Wage II. Cities Are Expensive!


Poverty and inequality are getting worse in the United States.  The question is what to do about it.  One proposal is to raise the minimum wage from its current value of $7.25 per hour to $10.10 per hour.  The Congressional Budget Office has studied the tradeoffs in doing this.  Approximately 16 million people, at the bottom end of the wage scale, would see their incomes go up.  But 500,000 people would see their incomes go down because they’d lose their jobs!  Does the positive outweigh the negative?  It’s not clear!
CaptureBut here is another aspect of the problem.  The Brookings Institution has just published a new study “All Cities Are Not Created Unequal”, pointing out that the 50 largest cities in the U.S. have higher rates of inequality than does the country as a whole.  Brookings looks at the so-called 95/20 ratio between the 95th percentile of wage earners compared to the 20th percentile.  The national average for this ratio is 9.1 with the 95th percentile earning (in 2012) $191,770 and the 20th percentile earning $20,968.  But many large cities such as San Francisco (16.6), Boston (15.3) and New York City (13.2) have much higher ratios.  The midsized city of Omaha has a ratio of 8.2 which is below the national average.
In other words the problems of poverty and inequality are much worse in some parts of the country than in others.  This suggests that at least part of the solution to addressing this problem should come at the state and local level.  It makes sense for California, Massachusetts and New York, for example, or at least San Francisco, Boston and New York City, to establish their own higher minimum wages.
This is not to say that a higher minimum wage at the national level is not also needed (more coming).  But the whole country cannot be expected to bail out a few major cities where the problem is much worse than elsewhere.