In Iowa, Republicans need to find a coherent economic policy

Digs at President Barack Obama, appeals to religious conservatives and attacks on Obamacare — we know tonight’s Iowa debate among the Republican presidential candidates will feature these staples of the GOP diet. But will any leading candidate articulate a coherent and plausible economic policy? On the eve of the Iowa straw poll, any Republican looking to the top-tier presidential candidates for an actual economic plan is left with thin gruel.

Former Massachusetts Gov. Mitt Romney, instead of offering a real economic vision, points to his very successful record in the private sector. This isn’t as impressive to conservative voters as Romney seems to think. George Soros, after all, has also made a lot of money.

Texas Gov. Rick Perry argues that his record in Texas is enough. This might be true. After all, Texas has boomed relative to the rest of the country and Perry deserves some credit for this, but it’s not as if Texas’ low regulations and zero income tax were Perry’s inventions. Maybe Perry could spread Texas’ prosperity to the other 49 states, but the burden of proof is on him to show how. Skipping this week’s debate amid growing economic turmoil deprives Perry of an ideal chance to do that.

Rep. Michele Bachmann, like Romney, offers up some red meat, but nothing specific. We know she thinks government is too big, but which taxes would she cut? Is there any spending she’d protect? What monetary policy and trade policy does she favor? We don’t know.

Former Minnesota Gov. Tim Pawlenty, on the other hand, has fairly detailed economic plans, but he’s also shown that he hasn’t necessarily done his homework. Liberal blogger Matt Yglesias gave Pawlenty some well-deserved mockery this week for Pawlenty’s incorrect description of monetary policy. In Iowa last weekend, Pawlenty falsely said, “The Treasury was buying our own debt. So they were paying off their Visa card with their Discover card.”

In truth, the Federal Reserve was buying Treasurys. In this instance, the potential problem is not that we’re rotating debt, it’s that we’re creating free money out of thin air, which could cause inflation. Unfortunately, most conservative politicians are trying to walk two divergent lines when it comes to money and the Fed.

There are competing schools of conservative economics on the question of money printing. The Milton Friedman teaching, held by most Beltway free-market economic thinkers, is that while economic activity remains slow and prices remain steady, the Fed ought to be inflating the money supply in order to prevent economic contraction.

While liberals have a different analysis, their prescription is the same on this score: Print more money.

The only Republican presidential candidate who shows a coherent economic policy is Rep. Ron Paul of Texas, who rejects Friedman’s teachings in favor of the Austrian School of economics, grounded in the writings of F.A. Hayek and Ludwig von Mises. Austrian economics prescribes a gold standard and rejects money-printing as an economic cure. In fact, it blames this for the boom-and-bust cycle that has been so apparent for the past 15 years.

Paul’s arguments appeal more to the conservative base, but Friedman holds sway among Republican elites.

Another systemic problem hurts the GOP’s ability to put forth solid economic policy.

For too long, Republicans have outsourced their economic policy to business lobbyists (who often reject free-market policies). The U.S. Chamber of Commerce supported TARP, stimulus and Cash for Clunkers, and today they’re getting behind Obama’s idea of an infrastructure subsidy bank.

Wall Street loved TARP, of course, and rallies every time Ben Bernanke makes new money out of thin air.

So when Republicans go to the well for campaign contributions and outside support, they’re palling around with guys who have more in common with Barney Frank than Ron Paul. How can you convincingly lay out an argument for free markets after bailing out Wall Street? What do your donors at Boeing think of your call to cut federal spending and subsidies?

Perhaps in Iowa this week, some true economic philosophy can take root among the Republican candidates.

Timothy P. Carney is The Washington Examiner’s senior political columnist.

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