The Republican Party of the USA has been defeated, discredited, trounced, and rejected. After promising a “new contract for America” and smaller, more effective governance, the Republicans, after taking control, became the party of war, corruption, incompetence, a doubling the federal debt, environmental negligence, and the failure to solve problems such as social security and medical care. Republicans are also being blamed for the Crash of 2008, although the Democrats also did nothing to prevent it, as the policies that caused the financial collapse were bipartisan.
But the Republicans have a strong asset: the coming squandering of hope by the Democratic Party. The Democrats promise change, but the changes will be minor alterations within the statist status quo. They will not make the radical changes needed to solve our economic problems. An increase in the minimum wage is small change. Greater governmental medical coverage is a minor alteration within the status quo. The abolition of taxes on wages would be the radical change that would provide labor with the wealth and clout it deserves.
Contrary to what some officials are saying, the American economy is not sound. There was no resilience during the Great Depression. There are deep cracks in the fragile structure of the American and most other economies. The current downturn is only a hint of the much greater catastrophes that could make the whole structure collapse into rubble. That is because the foundations of the world’s economies have a faulty blueprint. This provides an opportunity for the Republicans to rebuild their party on a platform of sound policies.
The fundamental economic problem is that markets have not been allowed to operate freely. Propagandists mask this by labeling the economy a “free market.” This is like telling slaves that they are free because they can think whatever they want; they are just not allowed to express their thoughts. Interventions are the fundamental problem because of the First Fundamental Theorem of Welfare Economics: we get maximum prosperity with pure free markets. Government cannot possibly improve on the outcome of a pure free market.
There should be a caucus within the Republican Party that would lead the resurrection of the Grand Old Party. They would first apologize to the American people for the failures of their fellow party chiefs, for the corruption, incompetence, negligence, deception, and for breaking their contract with America. Then they would present a brave new platform for America.
1. Abolish all market-hampering taxes. Eliminate the personal and corporate income tax and all excise taxes. Replace these with public revenues that promote efficiency: levies on land value, pollution, congestion, as well as user fees. This was the policy advocated by the great, late, conservative William F. Buckley. Republicans can call this the Buckley policy. The ultimate tax cut is a marginal tax rate of zero. We can get this with a tax on land value that is independent of wages, entrepreneurship, and trade.
2. Replace American imperialism with a policy of peace and respect for foreign states. Apologize for the past overthrow of governments such as in Iran and Guatemala.
3. Restore the Constitutional sovereignty of the states. End the federal war on drugs and federal censorship. Put criminal law back in the hands of the states. Change the Republican policy position on abortion to allow it during the first three months. Emphasize the family values of loyalty, honesty, and responsibility.
4. Replace Social Security with private accounts which are at first funded with US bonds. Phase out federal medicare by shifting responsibility to the states and to private medical plans. Phase out pension guarantees. Completely privatize Fannie Mae and Freddie Mac, and eliminate all guarantees and subsidies.
At one time, Republicans blamed the Democrats for wars such as in Vietnam, and they favored free enterprise and smaller government. Republicans can resurrect their party by going back to these libertarian roots. Hyper-nationalist Republicans will reject this reform, but they are probably outnumbered by those who truly seek liberty, peace, and prosperity.
The challenger parties have failed in their role as advocates for radical change. The Libertarian Party candidates rejected the radical slogan “Taxation is Theft.” They rejected free trade by favoring excise and sales taxes. The Green Party candidates favored ineffective regulations and resource-wasting taxes on production. Only the Free Earth party has promoted efficient public finance and pure liberty, but most reformists pinned their hopes on the establishment parties, which always end up disappointing the followers, and yet they never learn.
With the failure of challenger parties to be truly radical and exciting, and the coming failure of Democrats to deliver on hope, the field is left open to the Republicans. But most probably they will fail to take advantage of this opportunity. They will continue to favor nationalism and traditionalism at the expense of liberty. That’s too bad for we the people, since we will have to once again ride the 18-year boom-bust cycle, next time to the even greater Crash of 2026, as by that time the federal government will be all tapped out. You heard it here first.
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FRED E. FOLDVARY, Ph.D., is an economist and has been writing weekly editorials for Progress.org since 1997. Foldvary's commentaries are well respected for their currency, sound logic, wit, and consistent devotion to human freedom. He received his B.A. in economics from the University of California at Berkeley, and his M.A. and Ph.D. in economics from George Mason University. He has taught economics at Virginia Tech, John F. Kennedy University, Santa Clara University, and currently teaches at San Jose State University.
Foldvary is the author of The Soul of Liberty, Public Goods and Private Communities, and Dictionary of Free Market Economics. He edited and contributed to Beyond Neoclassical Economics and, with Dan Klein, The Half-Life of Policy Rationales. Foldvary's areas of research include public finance, governance, ethical philosophy, and land economics.
Foldvary is notably known for going on record in the American Journal of Economics and Sociology in 1997 to predict the exact timing of the 2008 economic depression—eleven years before the event occurred. He was able to do so due to his extensive knowledge of the real-estate cycle.