- - Thursday, December 21, 2017


The Republican establishment — plus one populist president — are betting the nation’s economic fortunes and their party’s chances of holding on to power can be greatly enhanced by some good old-fashioned supply-side economics.

Cutting taxes and deregulation worked for President Reagan — an economic boom that accomplished 3.9 percent growth and lasted more than 8 years. Now, just anticipated relief from Washington’s acquisitive hand and meddling in everything from wage setting to restroom policies has inspired new business and consumer confidence and 3 consecutive quarters of 3 percent growth.

That’s something 8 years of Democrats’ obsession with income, gender and racial inequality could not accomplish — not to mention their blame America first internationalism in trade and climate change negotiations.

Truth be known, the Gipper did not unlock a miracle potion — the Kennedy-Johnson tax cut had similar motivations. Both were premised on letting ordinary folks keep more of the money they earn and getting Washington off the backs of business, because private citizens can solve the nation’s economic problems more effectively than a bunch of self-absorbed Ivy League social engineers.

Sadly though, Reaganomics won’t work as well this time around unless Republicans radically alter federal and state approaches to small cities and rural communities too often left behind by the promises of globalization and the digital age.

America’s interior is beset by inadequate health care, rampant drug addiction, hidebound public schools, distant access to vocational training, poor internet and wireless service, a wholesale breakdown of families and civic institutions, and cultural alienation from the faster growing cities on the two coasts, which are more effectively exploiting globalization and the technologies that define the 21st century.

Over the last two decades, as factories in the interior shuttered — unable to cope with the onslaught of competition from Chinese imports and realigning global supply chains — aging baby boomers and millennials in those places were stranded in opportunity deserts.

Employees won’t invest in such disenfranchised locales, and many young people can’t leave.

Rural and small town workers without a family support system or training and apprenticeship experience in coastal states simply can’t access decent entry- and mid-level jobs in their big cities. Carrying all the handicaps imposed by rural economic desolation and cultural disaffection, many have simply given up and dropped out of the labor force.

Often white, religiously conservative and patriotic — these places contribute to the disproportional shares of the enlisted service personnel and casualties in the Middle East and elsewhere — they have become America’s new ghettos. Places where Dollar General stores thrive, because WalMart has abandoned them.

Not surprising, these folks took advantage of President Obama’s solutions — easier access to social security disability pensions, food stamps, Medicaid and so forth.

Much of the decline in labor force participation among adults without small children or elderly relatives to care for stems from the resulting disincentives to work, but in the 2016 election the heartland sent the message that it wants a hand up more than a handout.

The Republican tax reforms will increase investment, but their initial success in raising growth to 3 percent could well prove transitory. Most economic forecasters and Federal Reserve policymakers are predicting economic growth will fall back to about 2 percent a year after another brief surge in 2018 because of labor shortages.

Entitlements and infrastructure are next on the agenda for Congress and the White House. Republicans will come up short if they merely cut benefits and do not attack federal and state approaches to health care, education, labor market, broadband, land use and occupational licensing policies that have so badly abused the economic and social fabric of small town America and left their inhabitants so disabled and isolated.

Peter Morici is an economist and business professor at the University of Maryland, and a national columnist.

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