As President Obama unveils new ideas in his State of the Union Tuesday night, congressional Republicans are sticking to their script: no new spending. Both sides can take lessons from President Reagan's experience to the upcoming fight. It's OK for Congress to miss specific targets for cuts for now - but only if lawmakers prod Mr. Obama to rearrangespending so that smarter investment helps companies to grow.
Mr. Obama should learn a lesson from 2009: Americans don't support spending for the sake of spending. The president should remember that when he first announced his "stimulus," people supported him. They favored the concept, though, because the president billed the stimulus as an infrastructure renewal project.
Eighty-five percent of people thought that "repairing roads and bridges" was a "good idea," according to a Wall Street Journal poll back then. Voters grew disenchanted when it turned out that the stimulus bill wasn't an infrastructure bill, but rather a mish-mash of random spending.
The president may make the same mistake now. Early reports have him announcing plans for transportation, education and high-tech energy.
The president should choose one thing - the first. People can see that their roads, bridges, airports and transit systems are stillcrumbling. Mr. Obama should say that he wants to do now what he should have done two years ago - fix and build that stuff so that we can compete with the rest of the world.
Moreover, the president should say that we're starting this effort not to create public jobs - but because companies need a firm backbone if they are to create private jobs.
In doing this, Mr. Obama could take a page from Ronald Reagan's playbook. In his first term, Reagan vastly hiked defense spending. Americans supported the president, but not because they wanted higher spending in a recession or because they wanted the government to create jobs. It was because we knew that we needed to assure the nation's security so that our private sector could thrive here and in the world.
George Shultz, Reagan's secretary of state, says that Reagan might have similarly prioritized infrastructure spending today. But the Gipper would have done so only in an organized fashion to achieve a clear goal, as President Eisenhower did in the 1950s in building the highway system.
In that respect, Republicans can help by insisting that the president spend any new money wisely. In return for increasing the dollar amount of the six-year federal transportation bill, which is up for renewal, Congress could revamp the bill to a create a competition for funds among the states.
How? Congress could design the bill to reward governors who finish their projects quickly and cheaply. To spur innovation, Congress could offer a six-year holiday from onerous federal rules, from environmental to wage requirements. States then could design their own programs under their own such rules and figure out what works best (and worst).
And let's forget Washington grandstanding for and against high-speed rail and bike lanes. Instead, let states spend the money the way they see fit. If they make bad decisions, they'll lose population. The freedom to compete, state by state, includes the freedom to screw up.
Of course, Republicans should insist that if we want to increase spending in one area, we have to cut it back elsewhere. It's unlikely, though, that we can achieve this goal right away.
Here, Republicans can learn their own lesson from Reagan: Draconian cuts to the current budget may be too bloody - even with the best leadership. As one young congressman, Dick Cheney, said at an early Reagan budget meeting, "People are shell-shocked and angry. You're not going to get a consensus for anything very big or meaningful" during a time of economic trauma.
Indeed, Republicans should remember that one of Reagan's first-term goals was to balance the budget. But as the president soon discovered, every line item had a cheering section. Urban congressmen were happy to save their rural colleagues' farm subsidies, as long as the farmers helped save their transit subsidies.The same thing will happen this spring.
Republicans should not stake their agenda on something that may turn out to be impossible - especially when victories could turn out to be short-lived. Reagan persuaded Congress to cut grants to state and local governments by nearly 4 percent in real terms during his first year. But by 1988, those grants were 26 percent higher than they had been when Reagan took office.
Gradual victories are what the nation needs, anyway. Over the next few months, Republicans should work on fixing Medicaid. Congress should change the program over time so that Washington sends a fixed amount of money to states every year, adjusted for population and inflation, rather than match wasteful state spending, often dollar for dollar.
Then, too, Congress should consider the best way to approach boondoggles such as farm subsidies, "clean" energy and the home-mortgage interest deduction. Most important, Republicans should start work on entitlements, including expensive drug benefits for wealthier seniors. That way, we'll be able to afford the public investments that the president wants without raising taxes.
If Republicans can't instantly wring $100 billion out of the budget, they shouldn't consider it a failure. The money will be there next year - when, hopefully, a healthier economy will numb the pain of root-canal economics and early Republican progress on infrastructure will give voters confidence that they can do other stuff right, too.
Nicole Gelinas is a fellow at the Manhattan Institute and her most recent book is "After the Fall: Saving Capitalism From Wall Street - and Washington" (Encounter, 2009). This article is adapted from the winter issue of the Manhattan Institute's City Journal.
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