What is Libertarian Populism?

After multi-millionaire financier Mitt Romney badly lost the presidential election while writing off the 47 percent of the population that pays only Social Security tax, Medicare tax, sales tax, probably state income tax, and maybe property tax, a few of us on the right started saying more loudly what we’ve been saying for years: Conservatives need to turn to the working class as the swing population that can deliver elections.

Offer populist policies that mesh with free-market principles, and don’t be afraid to admit that the game is rigged in favor of the wealthy and the well-connected. As I put it in June:

The game is rigged against the regular guy in America today. And it’s rigged in favor of big business, the politically connected, and the wealthy. If Republicans and conservatives want to reform themselves, they need to begin with this fact. Admit it. Understand it. Declare it. Decry it. And start fixing it.

Recent election analysis by Sean Trende has added weight to that judgment.

Here’s the way I framed the politics back in November:

The GOP is out of power and it needs to play to the disaffected. The disaffected are not the wealthy, an obvious point that conservatives can’t seem to understand. The wealthy got wealthier under Obama, and corporations earned record profits while median family earnings fell. Obama uses these facts to defuse the charges he’s a socialist. Republicans should use them to show that Obama’s big government expands the privileges of the privileged class.

So, what are the policies that a libertarian populist would pursue? My colleague Conn Carroll lists some. Here are some more:

» Break up the big banks, and/or place stricter safety and soundness rules on them: Large banks profit from the presumption of a government bailout and the moat created by regulation. They are creatures of government, and they are insured by government, and so laissez-faire talk here is misplaced.

Free-market types making this argument include Sen. David Vitter in legislation, the Fed’s Richard Fisher at CPAC, and many others.

» Cut or eliminate the payroll tax: A tax on your first dollar means you are paying for Warren Buffett’s retirement before you even buy groceries for your children. Richer people live longer, and so they’re more likely to enjoy Social Security for longer. Also, the tax is capped at about $115,000 in income, meaning it’s regressive. Since it’s not really funding Social Security or Medicare — on the margin, they’re both funded by general revenues now — let’s quit pretending and scrap this tax or scale it back.

» End corporate welfare: Republicans are basically the only ones who voted against reauthorizing the Export-Import Bank. Conservative, free-market lawmakers Mike Lee and Justin Amash have introduced bills to abolish it. The agency puts taxpayer money at risk to subsidize Boeing sales.

Conservative Republicans have also pushed to end the indefensible sugar program, which drives up the cost of sugar for Americans, puts taxpayer money at risk, and kills U.S. jobs.

Some Republicans are trying to kill the ethanol mandate, which subsidizes ethanol giants, puts upward pressure on food prices, hurts ranchers.

There’s plenty of other corporate welfare out there — Robin Hood in Reverse stuff that libertarians can and should kill.

» Cleaner tax code: Tax code complexity helps those who can afford to tweak and game the tax code. GE can hire a thousand tax experts and mostly avoid corporate income taxes. You can’t.

Tax complexity also helps those who can lobby for special tax carveouts for their products (think realtors, home builders, and insurance companies). For the regular guy, the consequence is a headache and higher rates.

Second homes shouldn’t get a mortgage deduction. Cap the deduction at $500,000 mortgages, and start slowly working it downward.

I don’t think the tax rate has to be flat. The whole thing just has to be cleaner.

» Health-care reform: Health insurers have been protected from competitive forces by the employer-based system which candidate Obama so loyally defended back in the 2008 election. End the policies that protect the employer-based system, and you begin to introduce competitive forces into the industry.

Also, unlike Obama, I would allow reimportation of prescription drugs, and get rid of the Obamacare policy that gives biotech drugs 12 years of a government-granted monopoly.

Means-test Medicare, and provide more universal catastrophic coverage for families whose health-care costs rise to a certain level of their AGI.

» Kill anticompetitive regulations: Long live the food trucks, the raw-milk dairy farmers, the hair braiders, the Mom & Pop tax preparers. Death to the collusion of regulators and incumbent businesses that protect the big guys from competitive forces.

» Address political privilege: Crack down on the revolving door. Ban congressmen and senators from becoming lobbyists. More drastically limit revolving-door rules on staffers-turned-lobbyists. Introduce more radical transparency on politicians, especially current office holders.

These are acute libertarian populist policies. In the long run, a freer market means more competition, means higher wages.

Footnote: Liberal blogger Paul Krugman declared libertarian populism to be “bunk” in a column that doesn’t address a single policy advocated in the name of libertarian populism. This is unsurprising, because Krugman has proudly and repeatedly declared that he doesn’t read people on the right.

What’s upsetting is that some smart liberals ( Joe Weisenthal and Sahil Kapur for instance), who probably really respect Krugman for his economics work, seem to have taken Krugman’s word for it, and adopted his understanding of libertarian populism — even though they know he doesn’t read libertarians or conservatives.

This is a problem that arises in a political movement when one of its more revered thinkers has little respect for civilized debate and no respect for the other side. It’s not good for robust political debate.