Contrary to the dire warnings of Democrats, Republican-backed tax reform has not brought about the end of the republic. Instead, most voters are discovering that their take home pay is on the rise, as the government is withholding less from working Americans.
Even better, corporations—flush with cash from tax reform—are sharing the bounty with their employees. Strategas, a global institutional brokerage and advisory firm, estimates that more than 300 companies have announced benefits for more than 3 million employees, including $3 billion in bonuses. That includes companies as varied as Anthem, a health-insurance company, Chipotle, a Mexican-themed chain restaurant, and tech giants Apple and AT&T. Corporations are also upping their investments in their domestic endeavors, to the tune of $130 billion to date.
This is good news for the economy and a welcome relief for the Republican party—and not just for the obvious reason that the GOP can take sole credit for tax reform. For over 100 years, the Republican party has been identified as the party of business. The more Americans gain confidence that the success of businesses will be good for their own bottom lines, the more persuasive an argument the GOP can make to the electorate.
Founded in the 1850s to halt the spread of slavery, the Republican party achieved its objectives, and more, during the Civil War. A victim of its own success, the party did not have an ideological raison d’être that united all factions thereafter.
Eventually, the party came to represent the interests of American businesses. It found itself the heir to the view articulated long before by Alexander Hamilton in his time as secretary of the Treasury. Hamilton believed that jump-starting commerce, finance, and manufacturing—via policies that favored the moneyed interests in the short term—would eventually help all Americans, by creating a more diversified economy that facilitated general prosperity. Hamilton had mostly been forgotten by subsequent generations, under the sway of Jeffersonian and Jacksonian ideologies, but by the end of the 19th century he seemed the most prescient of the Founding Fathers, at least for pro-business Republicans. Henry Cabot Lodge Sr., who went on to become the leader of the Senate GOP, wrote a biography of Hamilton in 1882—and in so doing captured the ideological spirit of his party.
Pro-business Hamiltonianism was not sufficient to build an electoral majority, so Republicans joined it with other issues, like generous pensions for Union veterans and a commitment to Protestant morality against Catholic immigrants. Pro-industrial policies were also marketed as good for workers, the protective tariff in particular. Republicans argued that high taxes on imports kept wages for workers high. William McKinley’s campaign marketed this as “the full dinner pail” in the 1896 presidential election.
Until the Great Depression, Republicans were often able to hold their own with workers in the big cities because of the argument that what was good for business was good for the people. As Calvin Coolidge put it in 1925:
Of course, the salability of this view is highly dependent on how the economy is doing, which is a big reason the GOP’s reputation collapsed during the Great Depression. Corporate greed and irresponsibility were thought to have brought on economic carnage, and protective tariffs seemed to worsen the crisis. Progressives advocated regulation and labor unions to spread the wealth, and voters were prepared to try a more oppositional attitude toward corporate America.
The next Republican leader to argue successfully for the “full dinner pail” was Ronald Reagan in the 1980s. By that point, the main policy lever was not tariffs but income taxes. Reagan proposed slashing taxes on capital owners as a way to stimulate economic growth, and though liberals decried this as “trickle-down economics,” it seemed to work. Economic growth returned in 1982 and continued more or less unabated until the Great Recession of 2008.
That economic collapse presented a profound challenge for the ancient Republican ideology. It was not simply that once again a Republican president was in office when the crisis began. But more broadly, corporate greed and recklessness seemed to be the cause of the downturn. Worse, the slow recovery, particularly in wages, did not pair well with a booming stock market and corporate cash-hoarding. In 2004, Gallup found that 53 percent of Americans had a great deal of confidence in banks, the financial heart of American capitalism. But by 2012, that number had collapsed to 21 percent. All of this weakened the GOP case that the success of business was good for all Americans. In 2012 Mitt Romney pulled out the old Republican playbook, calling for greater support of job creators. But the “full dinner pail” seemed awfully empty that year.
Little wonder that last year voters doubted they would see many gains from Republican tax cuts. That old Coolidge sentiment—that the business of America is business—seemed outmoded and inapt for America in 2017. And though the GOP has enjoyed enormous political success over the last decade or so, the American people didn’t necessarily buy the core economic argument of the party.
This is why these bonuses and investments are doubly good political news for the Republican party. It is not simply that voters will credit Republicans for their greater take-home pay, it is also that they will begin, once again, seeing the success of corporate America as part and parcel of their own rising fortunes. The more voters perceive a connection between business success and their own personal success, the greater resonance the GOP message will have for them politically.
The smart play for Republicans moving forward is to reinforce the connection between business and the people. Tax reform was a good first step, but education should also be a priority of the GOP. Enabling people to acquire skills that businesses demand will forge a connection between corporate American and average voters, helping boost the GOP’s standing in the long term.
Jay Cost is a contributing editor to The Weekly Standard.
