fresh voices from the front lines of change







Last week, three Republican senators expected to run for president, Ted Cruz of Texas, Rand Paul of Kentucky and Marco Rubio of Florida, sat for an extended roundtable discussion with ABC's Jonathan Karl. While it was hosted by the Koch brothers organization Freedom Partners, Karl's questioning was pointed and the answers were revealing. The full transcript shows in stark relief how Republicans are trying, and failing, to be seen as the party of the middle class.

All three are eager to catch the populist wave and blame income inequality on President Obama. But all three were incapable of reckoning with how Republicans have long failed the middle class and proving that they had learned lessons from the past.

Karl began on the right note:

"The last time we had a Republican in the White House spending was rising, deficits were rising and we had the greatest recession since the Great Depression. So ... why should voters trust the Republicans with the economy again?"

Cruz immediately dodged to pin all current ills on Obama: "Look, for one thing what we're doing now, it isn't working ... For those with resources they're doing great right now. The top 1 percent, the millionaires and billionaires that this president loves to demagogue, one or two of whom are here with us today – the top 1 percent earn a higher share of our income nationally than any year since 1928. The simple truth is with big government those with resources are doing well. The people who have been hammered for the last six years are working men and women."

After offering no defense of the past Republican record, Karl turned to Paul to press the point: "what I asked was why voters would trust Republicans again, right? I mean, wage stagnation's been a fact for about 30 years in this country. But, again, last time Republicans had the keys we had the greatest financial crisis since the '30s."

Paul dodged as well, saying, "It is okay if I object to the premise of the question?" But he didn't object to the premise, he ignored it, opting to prattle on about how Obama shouldn't get credit for reducing deficits when debt is still accumulating, and shouldn't tout oil production increases when the drilling is on private land.

Karl then shifted, putting Rubio on the spot for predicting in 2010 that Obama's policies had put America on a "path to ruin." Karl asked:

"Can we acknowledge at least that four years later with the unemployment now 5.6 percent ... Economic growth [is up]. The stock market ... doubled since he took office. Can we at least acknowledge that [Obama] didn't bring us to the point of ruin?"

Rubio conceded nothing, attributing all of the lower unemployment rate to "less people are looking for work" and ignoring the 10 million new private sector jobs since the end of the recession.

He then argued for ignoring the stats altogether, since "these traditional markers of economic growth and prosperity don't work like they once did because there has been a structural change in the nature of our economy." For one, "it's no longer just a national economy, it is truly a global one" – though why that makes GDP and unemployment numbers irrelevant was not made clear.

Rubio then claims Obama had made America "less globally competitive for investment and for innovation because of taxes, because of regulation and, quite frankly, because of anti-business rhetoric from Washington."

But the charge that America is "less globally competitive for investment" is quantitatively wrong. In 2013, America was by far the number one country for foreign direct investment. Furthermore, we increased our investment inflow over the prior year by 17 percent, more than most of the other nations in the top 20.

Rubio goes on to blame Obama for failing to grapple with the rise of automation: "Many of the jobs that one sustained our middle case have been outsourced or eliminated. They've been replaced by automation or machines. There are better jobs that could potentially take their place. But they're either not being created in this country because of tax policy, regulatory policy, the national debt, Obamacare, or too many of our people don't have the 21st-century skills they need for that."

The pressure on job creation from automation is certainly real. But considering that under George W. Bush's lower taxes and light regulation, America suffered a net loss of private sector jobs, it doesn't make sense to blame Obama's higher taxes and stronger regulation when we're experiencing job growth that's accelerating.

Later Karl sought to flesh out what they would actually do to reduce inequality. After all, if they all stick to the conservative view that opposes government intervention in the economy, what else would they propose to do?

So Karl asked:

"With the increasing gap between rich and poor ... is it the job of government to try to lessen that gap?"

Cruz doesn't answer directly, but effectively says no. "I think we need to move back to a dynamic where you have Schumpeter's creative destruction, where you have small businesses that are creating opportunities. We should be fighting for the little guy who has dreams and hopes and desires. And what has happened under Barack Obama – look, when government takes over the economy what it does, what it's done in the European socialist nations is it freezes everything in place. And it exacerbates income inequality."

Actually in recent decades income inequality worsened when we had boom times, under both Reagan and Clinton. Inequality declined slightly under the presidents who ended their terms with recessions: the last two Bushes. Bad economic times hold down incomes for the top 1 percent, whereas in good times their wealth soars. The challenge is how to make the good times more prosperous for the 99 percent, in an era of weak unions.

Paul then actually tries to answer yes, and then suggests that Democrats just run government badly: "Government does have a role in enhancing and enabling the general welfare. The general welfare is everyone equally. It's not really the sense of where the wealth should be distributed but that we should enhance the general welfare. There are problems with income inequality. Interestingly, worse in states led by Democrats..."

Unsurprisingly, this is not true. The top 10 unequal states are a mix of red and blue, including Texas, Wyoming, Nevada and Florida.

Karl tried to get them on record regarding the minimum wage:

"Do you think there should be a federal minimum wage at all? Just a simple yes or no answer."

None was capable of offering one, while all expressing negative feelings towards having a minimum.

Finally, when Karl asked about expanding the Earned Income Tax Credit, we did see some actual policy ideas. However, none of them embraced the credit, even though Rep. Paul Ryan (R-Wis.), now chairman of the House Ways and Means Committee, is talking about an expansion of the Reagan-era program.

Paul slammed the entire program as corrupt: "When you look at the earned income tax credit, it has about a 25 percent fraud rate. We’re looking at $20 billion to $30 billion. And this is from estimates from the GAO [Government Accountability Office], from the government themselves."

Actually, as reported, Paul misstated the GAO report. There was an "improper payment error rate" of 24 percent, but that's not necessarily due to fraud. The GAO chiefly blamed honest mistakes due to the law's complexity, and pegged the cost at half of what Paul said. Still, despite imperfections, EITC has been a proven poverty-fighter.

Yet Rubio echoed the "fraud" claim to tout his own proposal to replace the EITC with a "wage enhancement" strategy, a bump in your paycheck for people earning between $15,000 and $40,000. Putting aside criticisms that this would only give companies incentive to hold down wages, all he's proposing is replacing one subsidy program with another, not offering to increase payouts. Rubio gets a point for at least offering an idea, but it's hard to see how this would be a game-changer.

Paul had his own idea for replacing the EITC: "I think the better way, rather than giving something that's refundable is to give them a deduction against their Social Security tax so they're working and you get the deduction for work. I don't really like the refundable nature [of EITC.]"

Of course, when a government program is "refundable" it means a person can still get money even if they don't owe net federal income tax – they get it as a tax refund. Taking that away means taking away money from the poorest workers.

Overall, the discussion exposed how far Republicans have to go in order to gain credibility when discussing poverty and inequality. They may be aware that the economic anxieties of the middle class demand fresh answers from the Republican Party, but they have no response to the successes that have occurred on Obama's watch, and they've yet to reveal any ideas that acknowledge the tax-cutting, deregulation failures of conservatism.

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