What Should Conservatives Do About Obamanomics?

When the smartest Republican governor, Louisiana’s Bobby Jindal, sounds dumb in responding to the administration’s economic plan, something is drastically wrong. On the face of it the Obama plan is the most easily ridiculed policy vehicle to stumble down Pennsylvania Avenue since Gerald Ford handed out WIN buttons (“Whip Inflation Now”—but I’m dating myself). Hundreds of billions of dollars of revenues from higher capital gains taxes? From what capital gains? No one has capital gains on U.S. equities bought after 1996!

But people are hurting, and it’s not enough to poke more holes in the Swiss cheese of the administration program. Why is this so hard? There are several reasons:

1) The Republicans were so eager to take credit for the twenty-five-year boom launched by Reagan that they were loathe to admit that the economy was in serious danger of depression,

2) The Republicans never quite understood the key role that the government played in launching the Reagan boom in the first place and preferred simple-minded appeals to economic freedom, and

3) The Republican party has been reluctant to take on the moral issues that separate conservative libertarians and religious conservatives. These are decisive in the present crisis, for reasons I have tried to make clear in a number of essays on the subject at Asia Times Online and elsewhere.

The first thing that conservatives have to tell Americans is: “You are poorer because you failed to bring up enough children. The decline of the traditional family is undermining the American economy.”

Housing prices are collapsing because single-person households are replacing families with children. As Brookings Institution economist Christopher Leinberger wrote in the March 2008 Atlantic Monthly ,

When the Baby Boomers were young, families with children made up more than half of all households; by 2000, they were only a third of households; and by 2025, they will be closer to a quarter. Young people are starting families later than earlier generations did, and having fewer children. The Boomers themselves are becoming empty-nesters, and many have voiced a preference for urban living. By 2025, the U.S. will contain about as many single-person households as families with children.

The consequence of this is a coming 40 percent surplus of large homes:

Arthur C. Nelson, director of the Metropolitan Institute at Virginia Tech, has looked carefully at trends in American demographics, construction, house prices, and consumer preferences. In 2006, using recent consumer research, housing supply data, and population growth rates, he modeled future demand for various types of housing. The results were bracing: Nelson forecasts a likely surplus of 22 million large-lot homes (houses built on a sixth of an acre or more) by 2025—that’s roughly 40 percent of the large-lot homes in existence today.

There never will be a housing price recovery in many parts of the country. Huge tracts will become uninhabited except by vandals and rodents.

Conservatives have to cast the blame for the crisis at the culture of death. It isn’t only home prices, of course. If the labor force shrinks because the next generation simply fails to appear, who will pay taxes to support pensions and medical care for the elderly? Unlike Japan or most of Europe, America still has a fertility rate close to replacement. It isn’t past the point of demographic no return.

There are a few things that economic policy can do right away to make things better. Big tax cuts (in the form of a per-child exemption) that help families with children will do more to revive the economy than infrastructure boondoggles. Young families spend; empty-nesters save. That’s elementary. If you want to get more spending, put more money into the hands of the demographic cohort that has the greatest propensity to spend.

But conservatives also must tell Americans the bitter truth that the deterioration of family formation has made them poorer and that it will take more than economic policy to correct. The culture of death will not be overcome by tax incentives, useful as such incentives are. Our children are our wealth. If we cease to have children, we die. Nothing has contributed more our impoverishment than Roe v. Wade . I do not propose to attack Roe on economic grounds—it is intrinsically evil—but it is indispensable to make clear that the culture of death has economic consequences.

Conservatives have to reach out to blue-collar Democrats, particularly Catholics and evangelicals who voted for Obama, with a pro-family message. They must be willing to offend libertarians. A new kind of coalition is required. It will take a good deal of experimentation and debate to find the right mix, but the principle is clear: The economic crisis stems from the culture of death and the only solution to the crisis is to restore a culture of life.