Revising the Republican Party

Vance after Trump

Vance is almost forty years younger than Trump, handsome, intelligent, with a beautiful and intelligent wife. If Trump wins the election, Vance is likely to be the Republican nominee in 2028 and to play a large, possibly a dominant, role in the Republican party and the conservative movement thereafter. That makes it important to figure out what he wants, believes, intends. Pretty clearly one thing he intends is to reshape the Republican party.

the most patriotic people, the best and most devoted to the country, whether they’re black, white, whatever, whatever party that they’re in, it’s almost consistently those without a college education.

The quote almost certainly  exaggerates his position — Vance himself has not only a college education but a degree from Yale law school, as does his wife. Trump is a Wharton graduate. But it reflects an important element in Vance’s world view, the rejection of the status of academics. The conservative movement he wants to build is not one dominated by professors, even conservative professors.

but I also don’t believe it [America’s wealth] was built by what folks often call neoliberalism, or classic liberalism, or whatever term you want to provide. I know those are different things.

Nor is it one based in part on classical liberalism. Vance rejects the elements of post-war conservatism that favor free markets, small government, low levels of regulation. Economically he looks more like Lyndon Johnson than Barry Goldwater. He is pro-union:

Take another example: we have known for some time that members of unions are less likely to drink and more likely to maintain their familial commitments. We have also learned that these benefits appear independent of the (obviously important) wage benefits of union membership.

It is, judging by the rhetoric, a conservative position in the literal sense of support for views popular in the past:

But I believe America’s wealth was built by an American system. By a recognition that we needed to build our own industries, protect our own technology and industries. And that system, from Alexander Hamilton, to Abraham Lincoln, Henry Clay, to Teddy Roosevelt, and Dwight Eisenhower, is part of why we’re the most powerful country in the world.

The conservative movement of Bill Buckley rejected the New Deal. Vance does not. The past he wants to return to is an idealized version of America in the fifties, perhaps the sixties. The movement he wants to build rejects both the pro-market economics of the pre-Trump conservative movement and the cultural program of current progressives. He wants an America of stable marriages, views parents as more reliably committed to the future than the childless — hence the much-quoted line about childless cat ladies. One of his more intriguing proposals is that children should get votes, cast by their parents, giving a family with three children five votes.

His position raises, for me, two questions. The first is whether the policies he supports would produce the results he wants. The second is whether he believes they would.

In my previous post I described Vance’s objective as making things better for his people. I suspect that it has by now broadened into not only making things better for the culture he came out of but helping the layer above that, flyover country, working class and middle class people not part of the coastal elite.

Protectionism

Conventional economics of trade implies that, except in a few special cases, tariffs make the country that imposes them poorer even if its trade partners do not retaliate. Vance appears to realize that. His response is not that the theory is wrong but that, while making the country richer is a good thing it is not the only good thing, or the most important:

… Western Civilization was, in fact, built by figures—one in particular whose resurrection we just celebrated—who recognized that material consumption, while necessary and important, was hardly the only good worth pursuing.

That is a legitimate reason not to consider the standard arguments for free trade decisive but not a sufficient reason to reject them. For that he needs to show that the gains in material consumption from free trade comes at the cost of other and more important things. In explaining his rejection of classical liberalism, he writes:

… “Yes,” I found myself saying, “Oren’s preferred policies might reduce per-capita consumption. But that’s precisely the point: our society is more than the sum of its economic statistics. If people die sooner in the midst of historic levels of consumption, then perhaps our focus on consumption is misguided.”

The economic efficiency maximized by free market institutions includes not only material consumption but whatever else people value, including a long life. His argument could, however, be reformulated in terms of external effects, which might include effects on culture, could even include the feeling of pride an American gets from seeing “made in America” on goods other Americans buy.

But to do that, he needs an argument to show that trade restrictions would make Americans better off, in some sense broader than economic efficiency. His argument seems to be that policy makers followed the advice of free market economists and the results were bad:

“At least since the late 1970s, a relatively consistent domestic policy agenda has guided the Republican Party. GOP leaders, drawing on thinkers such as the brilliant economist Milton Friedman, pushed a combination of tax cuts, regulatory reform and open trade. …Whatever you might think of these policies, evidence slowly accumulated that they failed to address a very real social crisis among the Republican base. The factories that formed the base of the blue-collar economy shed jobs or ceased operating altogether. Median wages stagnated, and white working-class voters began telling pollsters that they believed their children’s future would be worse than their own. Divorce rates crept steadily upward, and a frightening drug epidemic took hold. Last year, in the medium-sized Ohio county where I was born, deaths from drug overdoses outnumbered deaths from natural causes.” “Hey Democrats, Do More Than Talk,” USA Today, 7/28/16)

There are two problems with the argument. The first is that policies for the past four or five decades did not follow all that much of the pro-market agenda. Regulation increased rather than decreasing. Government got bigger, not smaller. Trade became more open but not fully open. Whether or not what happened is evidence of bad policies, it is not evidence that the policies advocated by the pro-market elements of the Republican party were bad.

The second problem with his argument is that it depends on Post hoc ergo propter hoc, “after therefor because”. Even to the extent that pro-market policies were adopted, lots of other things were happening over those decades. In order to blame those policies for declines in the welfare of white working-class workers, one needs a causal link.

The answer that Vance offers is the conventional defense of tariffs as protecting industries from the unfair competition of low wage countries. That argument depends on not understanding the relevant economics, not realizing that trade is trade. An auto tariff protects Detroit auto-workers from the competition not of Chinese auto workers but of the American farmers whose wheat is being sent to China and coming back as Chinese cars. Doing that is profitable only if growing cars is cheaper, in American resources, than building them.¹

Free trade changes what things it is profitable to produce in the U.S., in my example more wheat and fewer cars, so tariffs benefit some people, auto workers and holders of stock in auto companies, at the greater cost of others, producers of and investors in export goods and consumers. It is possible that the people benefited are people Vance cares about and the people harmed are not, perhaps not Midwestern farmers but Silicon Valley programmers and stockholders in high tech stocks. But Vance never presents an argument to show that, merely takes it for granted that bad things happening to the people he cares about are consequences of freer trade.

There is a sense in which trade always balances; if an American sells a dollar for Chinese Yuan to buy Chinese goods, someone must be buying that dollar with Yuan to buy something that sells for dollars. But what he buys may not be American export goods to ship to China; he could instead use the dollars to buy US securities or stock in US companies. Doing that either lets the American investor the security is bought from spend more money or, in the case of new securities, lets the government or company spend more. It also increases the total capital invested in the US, which tends to push interest rates down and wages up, a benefit for poor people who are selling their labor, a cost for rich people living off their capital, hence a change Vance should approve of.

The only situation in which the result of importing goods from abroad is a lower demand for goods produced in the US is if the dollars spent on those goods stay abroad. Since dollars pay a zero interest rate they are unlikely to stay abroad; foreigners with surplus dollars can convert them into interest-bearing securities. If they do stay abroad, we can always print more.

The obvious explanation for Vance’s support of protectionism, the one based on what he says, is that he does not understand the relevant economics and so mistakenly believes that protectionism has, by his values, good consequences.  A second possibility is that he does understand the economics, realizes that the effects are bad, and supports them for political reasons. A third possibility is that he understands the economics and believes that, by his values, their effects are good. He could be right, since his maximand is not economic efficiency. I spent one earlier post on possible reasons why someone who correctly understood the economics of trade might still favor protectionism. All three explanations are consistent with what he writes since, even if he does understand the economics, he is writing for people who don’t. Absolute advantage is easier to understand than comparative advantage so more persuasive, which explains why it continues to be popular two centuries after the correct analysis of trade was worked out.

Immigration

Whether the immigration restrictions Vance supports are in the interest of the people he cares about depends in part on who the immigrants are. If they are people who do the same kinds of jobs, their competition will tend to push down wages for those jobs, making his people worse off. If they are people who do different sorts of jobs their competition will push down wages for those jobs, making his people, consumers of the services they are selling, better off. That suggests that Vance should want less low and medium skill immigration, more high skill, fewer factory workers and more physicians. Trump seems inclined in that direction. I do not know if Vance is.

Immigration may have cultural as well as economic effects. It is not clear whether that should be, for Vance, an argument for or against. As a nationalist he favors American culture over foreign culture. As a cultural conservative in favor of religion and married couples producing children he might see cultural benefits to immigration from countries more culturally conservative than the US has become.

Foreign Policy

Vance’s stated position is for leaving the Ukraine war for the Europeans to deal with and focus America’s attention on China;  much of his rhetoric is anti-Chinese. Concern with China is a politically popular position so I do not know to what extent his policy views reflect an anti-interventionist approach (Ukraine) or an interventionist approach (China). Both have been elements of conservatism, the latter more in the post-war period.

Everything Else

I have focused on trade because it is the area where Vance is most clearly rejecting the pro-market approach that was for a long time an element in Republican policy. If the only reason for that position is the need to get along with Trump, he might drop it in the future. If he believes, for good or bad reasons, that it benefits the people he wants for his base, he won’t.

There are other areas where he rejects past Republican policy, such as his support for unions. Other parts of his program, such as his opposition to woke policies, reflect positions popular with conservatives.

Conclusion

The Republican party Vance wants to build looks, economically, like the Democratic party of the fifties and sixties, culturally like the inverse of the progressive, aka woke, movement.

One final question, which I may return to in a later post, is to what degree the Right of Vance mirrors the increasingly popular European right wing parties.

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1. For a more detailed explanation see an earlier post.