Fact Finders

by Jonathan Chait | February 28, 2005

Imagine that God were to appear on Earth for the unlikely purpose of settling, once and for all, our disputes over economic policy. And suppose that, to my enormous surprise, he announced that every empirical claim advanced by conservatives was correct. Cutting taxes produces such great economic growth that even the poor benefit. Privatizing or eliminating social programs like Medicare and Social Security will cause the elderly to save more money and enjoy higher living standards. Slashing regulations, by eliminating unintended side effects, actually does a better job helping those whom the regulations were intended to help than the regulations themselves. Suppose that God presented these conclusions so convincingly--if his stature alone did not suffice--that everybody immediately accepted them as truth.

How would liberals respond? No doubt by rethinking and abandoning nearly all their long-held positions. Liberalism, after all, claims to produce certain outcomes: more prosperity and security, especially for the poor and middle classes; a cleaner environment; safer foods and drugs; and so on. If it were proved beyond a doubt that liberal policies fail to produce those outcomes--or even, as conservatives often claim, that such policies hurt their intended beneficiaries--then their rationale would disappear. It may be hard to imagine liberals advocating capital gains tax cuts as a way to lift up the working stiff. But that's just because there's no evidence to show they do. If the evidence were to change, so would the liberal mindset. The point is that liberalism has no justification other than the belief that liberal policies produce beneficial outcomes.

Now imagine the opposite were to happen. God appears in order to affirm liberal precepts: Current tax levels barely affect economic incentives, social programs provide tremendous economic security at modest cost to growth, and most regulations achieve their intended effects without producing undue distortions. Would economic conservatives likewise abandon their views? Some certainly would, but a great many would not. Economic conservatism, unlike liberalism, would survive having all its empirical underpinnings knocked out from beneath it.

And not because conservatives are necessarily more stubborn. (Indeed, on an individual level, liberals may well be just as stubborn as conservatives.) Rather, conservatism, unlike liberalism, overlays a deeper set of philosophical principles. Conservatives believe that big government impinges upon freedom. They may also believe that big government imposes large costs on the economy. But, for a true conservative, whatever ends they think smaller government may bring about--greater prosperity, economic mobility for the non-rich--are almost beside the point. As Milton Friedman wrote, "[F]reedom in economic arrangements is itself a component of freedom broadly understood, so economic freedom is an end in itself."

We're accustomed to thinking of liberalism and conservatism as parallel ideologies, with conservatives preferring less government and liberals preferring more. The equivalency breaks down, though, when you consider that liberals never claim that increasing the size of government is an end in itself. Liberals only support larger government if they have some reason to believe that it will lead to material improvement in people's lives. Conservatives also want material improvement in people's lives, of course, but proving that their policies can produce such an outcome is a luxury, not a necessity.

The contrast between economic liberalism and economic conservatism, then, ultimately lies not only in different values or preferences but in different epistemologies. Liberalism is a more deeply pragmatic governing philosophy--more open to change, more receptive to empiricism, and ultimately better at producing policies that improve the human condition--than conservatism.

Now, liberalism's pragmatic superiority wouldn't matter to a true ideological conservative any more than news about the medical benefits of pork (to pick an imaginary example) would cause a strictly observant Jew to begin eating ham sandwiches. But, if you have no particular a priori preference about the size of government and care only about tangible outcomes, then liberalism's aversion to dogma makes it superior as a practical governing philosophy.

Conservatives don't always dwell on their first principles because those principles have little use in converting unbelievers. But they pop up from time to time, especially when conservative factual claims come under stress.

Take, for instance, the current debate over privatizing Social Security. Los Angeles Times Editorial Page Editor Michael Kinsley has argued that privatization cannot increase national wealth--an argument that, if true, would undermine the idea's central rationale. A recent National Review editorial implicitly accepted the thrust of Kinsley's argument and proceeded to gamely offer up some possible second- and third-order benefits that privatization could produce. (People might be induced to save a bit more, and maybe higher debt would discourage spending.) Seemingly unpersuaded by its own reasoning, the editorial righted itself by declaring that "reducing dependence on Washington is a worthy goal in its own right."

Likewise, conservative columnist George F. Will conceded not long ago that, contrary to the claims of privatization advocates, Social Security does not face a financing crisis. But Will declared his support for privatization anyway. "[T]he best reasons rise from the philosophy of freedom: Voluntary personal accounts will allow competing fund managers, rather than a government monopoly on income transfers from workers to retirees, to allocate a large pool of money."

This preference for removing power from Washington is simply something that either you accept or you don't. It's neither right nor wrong in an absolute sense. It does, however, make empirical reasoning pointless. Viewed pragmatically, Social Security raises questions about which economics has a lot to say: balancing the tradeoffs between retiree incomes and costs to workers, allocating risk, and so on. Liberal thinking, unlike conservative thinking, actually hinges on the outcome of those questions.

This doesn't mean that conservatives don't believe their own empirical arguments. Nor does it mean that ideologically driven thinking can't lead to empirically sound outcomes. In many cases--conservative opposition to tariffs, price controls, and farm subsidies--it does. But empirical reasoning simply does not drive their thinking. What appears to be conservative economic reasoning is actually a kind of backward reasoning. It begins with the conclusion and marches back through the premises.

Consider the conservative view of health care. Conservatives repeat the mantra that the United States has "the best health care system in the world"--a formulation used endlessly by President Bush. That isn't true by almost any objective measure. The United States devotes a far higher share of its economy to health care than any other country. Yet, according to the most recent World Health Organization study, the United States ranks just 37th in overall health care performance. These massive inefficiencies derive in part from our huge numbers of uninsured. The uninsured end up forgoing treatment until they arrive at the emergency room. Basic preventive care, of the sort universally available in every other advanced country, would avert such disasters--at less cost to the economy and with less suffering and fatality for patients.

The only way to deem the U.S. system the "best" is if you substitute ideological criteria for pragmatic criteria. Our health care system is indeed the best at minimizing the role of government. France, on the other hand, produces better measurable health outcomes at a vastly lower cost. Yet conservatives would consider the notion that France has a better health care system than the United States to be self-evidently false.

The conundrum is that the remedy of smaller government is particularly ill-suited for the problem of health care. The market for medical services does not resemble the market for blue jeans. Among other problems, health insurance firms have every incentive to deny coverage to those most likely to get sick, which makes the individual health insurance market inefficient and prohibitively expensive. Economists call this phenomenon "adverse selection," and it is inherent in the private health care market. It cannot be solved without some kind of government intervention.

For this reason, conservatives have almost nothing to say about adverse selection. When they do write about the topic, they tend to call for bromides like (to take an example from a David Brooks New York Times Magazine essay last year) "reforming the health care system so competition works as it does in every other sphere--to improve value, spur innovation and reduce costs." This is classic backward reasoning: Start with a solution (competition) and then proceed to make it fit the problem. In this case, the author doesn't even explain how to make the solution fit the problem. He simply assumes that it can be done because market forces work everywhere and always. If liberalism is not the mirror image of conservatism, what is? The more apt parallel is probably socialism. True socialists believe that allowing capitalists to keep some of the fruits of workers' labor is inherently immoral. They also tend to believe that free enterprise does not work very well. But, like the conservative belief that big government doesn't work well, this empirical belief merely sits atop a deeper normative belief. For committed socialists, doing away with "exploitation" is an end in itself.

Contemporary economic liberalism is less of an ideology than the absence of one--a rejection both of dogmatic fealty and hostility to the free market. Franklin Roosevelt famously called for "bold, persistent experimentation." The New Dealers vacillated wildly between promoting competition and squelching it, fiscal tightening and fiscal loosening, putting people to work and pulling workers out of the labor pool. They were accused, correctly, of incoherence.

But incoherence is simply the natural byproduct of a philosophy rooted in experimentation and the rejection of ideological certainty. In an open letter to Roosevelt, John Maynard Keynes called him "the Trustee for those in every country who seek to mend the evils of our condition by reasoned experiment within the framework of the existing social system. If you fail, rational change will be gravely prejudiced throughout the world, leaving orthodoxy and revolution to fight it out." Note how Keynes defined his and Roosevelt's shared ideology as "reasoned experiment" and "rational change" and contrasted it with orthodoxy (meaning the conservative dogma that market economics were self-correcting) and revolution.

That definition of liberal obviously leaves a very wide berth. It's wide enough, in fact, to encompass every president from FDR until at least Ronald Reagan. At the time, of course, liberals did not consider Republicans like Dwight Eisenhower and Richard Nixon their ideological kin. But, in historical retrospect, that is only because the underlying assumptions of the New Deal were so broadly shared. It was impossible to imagine a president who stood outside that consensus, so all the fights took place within it. While those on the right wing of this ideological consensus were more cautious about government activism than those on the left wing, they did not challenge the underlying assumptions.

Eisenhower used the federal government, rather than states and localities, to build the Federal Highway System, and he made no effort to reduce a top tax rate that stood at an absurdly high 91 percent. Nixon declared, "We are all Keynesians now." He raised Social Security benefits and proposed an ambitious national health care plan. Conservatives have since renounced Nixon's economic record, and no wonder. Today it would place him on the left edge of the Democratic Party.

It's not a coincidence that the two most economically liberal Republican presidents--Nixon and his successor, Gerald Ford--also displayed the most serious interest in empiricism. Both required their assistants to produce detailed "Brandeis briefs" outlining the essential arguments on both sides of any policy debate. Ford invited Milton Friedman and John Kenneth Galbraith into the Oval Office for a free-ranging debate on economic policy.

Since the mid-'70s, the GOP has grown steadily more conservative, and therefore less pragmatic. Genuine ideological conservatives, banished to minority status since Eisenhower, briefly resurfaced under Barry Goldwater, and, after falling back again, began to take control of the Republican Party. Conservatives correctly see George W. Bush as one of their own. Bush does frequently depart from conservative orthodoxy, as with his tariffs, farm subsidies, and Medicare drug benefit. Yet conservatives understand that Bush sees these compromises as politically expedient, not a genuinely felt embrace of expansive government. His signature proposals--massive tax cuts and Social Security privatization--both reflect a belief that reducing government is an end in itself. Outside events exert not even the slightest influence on his policy goals. Bush steadfastly embraced his tax cuts as the economy veered from boom and surplus to slowdown to wartime to recovery and deficit.

Meanwhile, Democrats have continuously reexamined their policies in light of changing conditions. Bill Clinton came to office planning to spur the economy with a Keynesian stimulus, but abandoned those plans after fierce debate among his staff economists. Instead he embraced the novel goal of sparking recovery by slashing the deficit in the hopes that lower interest rates would enable sustainable growth. As that policy seemed to work, moderate liberals continued to embrace the credo of fiscal restraint. But, after the economy slid toward a recession in 2001, liberal economists abandoned short-term restraint in favor of temporary tax cuts to encourage spending.

Clinton also recognized the failure of welfare, previously a cherished liberal goal, to accomplish its stated purpose, and he enacted a sweeping overhaul. Many liberals complained, but the main objections centered around the details--certain punitive provisions and the lack of adequate job-creation measures--not the concept of welfare reform.

That Clinton's economic policymakers had great use for empirical inquiry, and Bush's do not, is hardly a secret. One way to see the contrast is to compare the economic summits each president has held. Clinton's 1992 Little Rock economic summit featured a vigorous and open-ended debate between diverse participants, and it helped persuade the Clinton team to alter the economic blueprint developed during the campaign. Bush's summits have been tightly scripted affairs in which supporters testify to the virtues of his policies.

Or compare two memoirs: Robert Reich's Locked in the Cabinet and Paul O'Neill's The Price of Loyalty. Both books chronicle the disillusionment of a former Cabinet member. Reich, the former Clinton labor secretary, bemoans the triumph of cautious deficit-cutting over public investment, but his tale is larded with academic policy debates he simply happened to lose. O'Neill, the former Bush Treasury secretary, mourns that administration's hostility to expertise and fact-driven debate. "You don't have to know anything or search for anything," he says of the ideologues in the administration. "You already know the answer to everything. It's not penetrable by facts. It's absolutism."

Part of this difference reflects the cultural predilections of the last two presidents--Bush is the instinctive anti-intellectual who likes to go with his gut, and Clinton is the former Rhodes scholar who relished academic debates. But it also reflects the natural tendencies of conservatism and liberalism. Bush's administration gives primacy to political advisers over policy wonks in large part because they have no need to debate their ends, only the means of achieving them.

The next liberal administration, whenever it happens, will not be nearly so certain. Aside from rolling back conservative excesses, its economic agenda will take its cue from external events, and the decisions it arrives at could, in time, be cast aside through experimentation. Ultimately, those policies, whether they move left or right, will be measured against their effect on people's lives, not the degree to which they bring the government closer to some long-ago agreed-upon vision. In time, those policies will be altered yet again to suit a changing world. This is known as progress.

Jonathan Chait is a senior editor at The New Republic.

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