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The GOP’s Mid-life Crisis: Economic Divergence

Image: Republican Party Debate Stage

In recent years, figures within the Republican Party have broken from conservative economic orthodoxy to advocate for increasingly populist policies. This schism represents a growing threat to party unity heading into the 2022 midterms. While the Republican economic strategy will almost certainly begin by portraying Democrats as radical socialists, what to offer as an alternative is a matter of fierce debate. However, evaluating public opinion reveals that a complete return to traditional fiscal conservatism, while completely discarding populist “anti-elite” economic sentiment within the party, would be a mistake. While Republicans do love the idea of capitalism, reverting to Reagan-style neoliberalism won’t excite the Trump base, and in general, tax cuts for the wealthy are unpopular across the electorate. Rather, while they need to offer a strong capitalist opposition to perceived “socialism” in the Democratic Party, their pitch should focus more on families and jobs than deregulation. This article will first look at the growing economic divide within the Republican Party, then discuss how Republicans should approach the issue in 2022.

For decades, Republicans have endorsed fiscal conservatism in campaign rhetoric. Common principles include a commitment to unbridled capitalism, low taxes, minimal social spending, and free trade. Generally speaking, Republicans have advocated for limited government involvement in the economy, valuing the free market above all else. President Ronald Reagan, in office from 1980 to 1988, famously embraced this sentiment, and once quipped that the nine most terrifying words in the English language were “I’m from the Government, and I’m here to help.” Notably championed by members of the Tea Party caucus, free-market orthodoxy had continued as the prevailing sentiment within the Republican Party until recent years, when former President Trump embarked upon his norm-upending campaign for the presidency in 2015. Appealing to working-class Americans disaffected with the current economic system, Mr. Trump promised to bring back manufacturing jobs via protectionist policies. He attacked trade arrangements like the North American Free Trade Agreement and even criticized party icon Reagan, saying that he was “not great on the trade” issue. His pitch paid off: many of those who voted for President Obama in 2012 cited populist economic reasons for supporting Trump four years later. 

Since 2016, many Republican politicians have adopted and expanded upon Mr. Trump’s populist messaging. These leaders seek to reform the Republican Party into the “party of the working-class.” One budding member of this faction, Florida Senator Marco Rubio, frames his platform as “common-good capitalism.” While Mr. Rubio continues to generally support a free market, he believes the market must be designed to serve the interests of the American people, not vice versa. In this view, the government must be prepared to step in on behalf of citizens. “My loyalty is not to the market; my loyalty is to the American people,” he explains. Recently, he shocked the Republican establishment by endorsing an Amazon employee unionization effort in Arizona, deriding the tech-giant’s support for the “culture war against working-class values.” Others within the party have echoed this sentiment and have introduced legislation to back it up. Missouri Senator Josh Hawley, who forcefully criticized the Republican Party establishment for “handing out favors for corporations” and pursuing “ruinous trade policies,” has sponsored protectionist trade legislation and a bill to break up Big Tech companies (who have been the target of his attacks repeatedly throughout his Senate tenure). Further, Utah Senator Mitt Romney, who argues the “rising cost of living has made it harder to make ends meet” for average Americans, partnered with Arkansas Senator Tom Cotton to sponsor a bill to raise the national minimum wage to $10. Collectively, comparing Republican presidential election losses in 2008 and 2012 to Mr. Trump’s victory in 2016, these leaders have likely decided that traditional free-market capitalist rhetoric is no longer a winning political strategy. Thus, they seek to fundamentally transform the Republican Party into an advocate for workers, rather than businesses and the free market system.

Unsurprisingly, this populist momentum has drawn the ire of many devout capitalists within the GOP. Former South Carolina Governor Nikki Haley, a likely 2024 presidential candidate and a Trump supporter, has slammed the drift away from traditional fiscal conservatism, deriding “hyphenated capitalism” (an allusion to Mr. Rubio’s “common-good” approach) as “the slow path to socialism.” She has challenged the need for reforms, arguing that capitalism left alone is the best way to serve the common good. Pennsylvania Senator Pat Toomey, in a recent speech titled “In Defense of Capitalism,” affirmed the “tremendous utility of the free market system” and the need to protect it from “misguided government intervention.” Some conservative media voices have similarly criticized the populist shift; the Wall Street Journal Editorial Board dismissed an increased family tax credit proposal from Mr. Rubio and fellow Utah Senator Mike Lee as an “obvious political gambit with no economic growth payoff.

Thus the GOP is accelerating toward a looming intra-party showdown on economics. Yet when preparing for the 2022 midterm elections, it will be essential to incorporate parts of both factions into their strategy. It is likely that any Republican message will begin by branding the Democrats as radical socialists (regardless of the validity of that claim). This is effective: most Americans maintain strongly negative attitudes toward socialism as it is popularly understood and are wary of Democrats moving too far left. Glenn Youngkin’s recent landmark victory in the Virginia gubernatorial race demonstrates the potency of this strategy. Stoking parents’ fears of Critical Race Theory being taught in schools, he offered a conservative refuge from the perceived “radical woke Democrats.” Republicans are generally unified against Critical Race Theory in schools, dubbing it an unpatriotic teaching approach which threatens to further divide our country. Republicans will seek to do the same across all issues in 2022. However, employing this strategy on economics may prove to be more complex, as visions on how to proceed economically clearly vary widely within the party.

Because their pitch will be an alternative to the purported socialism of the Democratic Party, it will be important that Republicans holistically embrace the capitalist label. A majority of Americans continue to harbor strong positive attitudes toward capitalism, and it is imperative that Republicans be seen as a bastion of defense against the alleged evils of the radical left. However, while Republicans must continue to identify as protectors of capitalism as a concept, disregarding populist support for more worker-centric policies would be a miscalculation. While Republicans (and Americans at large) maintain their capitalist identity, the majority of them do not support tax cuts for corporations and the wealthy, feel Big Tech companies hold too much power, and support increases to the minimum wage. Perhaps most notably, the share of Republicans who hold a “great deal” or “quite a lot” of confidence in big business has declined to just 20 percent. Thus, adopting policies like these as part of a pro-worker capitalist alternative to dDemocratic socialism is likely to be successful. While policies like these haven’t traditionally been a part of the establishment capitalist message, Republicans have proven to be extremely ideologically flexible in the Trump era, and in general, while Americans have strong opinions on labels like capitalism, they don’t necessarily have a firm grasp on specific capitalist policies. Given that the party didn’t even adopt a new platform in 2020, instead opting to simply endorse the positions of then-President Trump, Republicans have a unique opportunity to combine policies and rhetoric in ways they have not done before. They should integrate the most popular proposals of the populist faction into their representation of what capitalism looks like. This might include arguing that granting workers higher wages gives them more of an ability to practice fundamentally capitalist freedoms, or that Big Tech companies are unfairly creating anti-capitalist monopolies. This way, Republicans will benefit from added working-class support, without sacrificing support from Republicans who might otherwise feel that some of the populist proposals are insufficiently capitalist.

Ultimately, Mr. Rubio and Mr. Hawley have popular ideas, but Ms. Haley understands the importance of staking a firm capitalist image against the alleged “socialist Democrats.” While traditional capitalist policies might not drive voters, the idea of capitalism certainly will. A successful Republican strategy in 2022 will be one that synthesizes the worker-oriented policies of the new populist faction with the strong capitalist dogma and ideals of the Republican establishment.