A Plan to Save the Republican Party

Breaking up may be hard to do, but it's the GOP's best chance for survival.

The United States no longer has a two-party political system. As the events of the past few weeks have shown, the Republican Party has split into at least two groups that are no longer just factions. Though it may be hard to believe, this division has created an enormous opportunity for the GOP's leadership. But don't worry -- they'll probably blow it.                         

A common narrative holds that the rift in the GOP had its roots in the vice presidential candidacy of Sarah Palin and the subsequent blossoming of the Tea Party. The archconservative, ideological wing of the party finally coalesced, posing a threat to the more pragmatic and centrist elements. The first big symptom of this change was a bulge in primary challenges against apparently safe Republican incumbents by far-right members of their own party.

In the midst of this infighting, the Republican establishment was slowly losing control of its congressional caucus. In the fight against fiscal stimulus after the 2010 election, John Boehner, Mitch McConnell, and their cohorts were happy to exploit the energy of the Tea Party, since they shared its goals. Now, however, the two factions have come into open conflict over legislative issues, namely funding the government and the debt ceiling. Boehner's colleagues say he may even abandon the Hastert Rule by putting a bill to a vote in the House without the support of a Republican majority.

Unofficially, the GOP today is a coalition of two parties. One party constitutes a majority of Republicans in the House and Senate, but not a majority of votes in either chamber. The other party includes perhaps 50 or more members of the House and a handful of senators. Despite its much smaller size, this second party appears to wield just as much power as the first.

Why is that? As anyone who follows politics in Israel, Italy, or more recently the United Kingdom can tell you, the votes at the margin make all the difference to a coalition; they can tip the balance when bigger parties lack majorities but still vote uniformly. When a fringe party does decide to join a coalition, it's usually for reasons of power: positions on committees and in the ruling cabinet. This is particularly prevalent in parliamentary systems, where a legislative majority comes with executive powers as well.

Yet this is not the case in the United States. On the contrary, far-right Republicans have little to gain by kowtowing to the party's official leadership. Seats on committees might allow the far-right members to bring more pork to their states and districts, but open opposition to the Republican establishment grants them the spotlight of the national media and a chance at even higher office. Ted Cruz may not have won over his colleagues with his recent grandstanding in the Senate, but his name recognition across the country has certainly grown.

In fact, Boehner and other Republican leaders in the House now have to worry about their own posts, thanks to the rising threat of a revolt by Cruz's allies. If the far-right group had their own official party, they would have little hope of forcing Boehner to resign before the next Congress begins in January 2015. But because they are still nominally Republicans, the far-right group still has a say over who holds the gavel.

Herein lies the first hint of a counterintuitive conclusion: In the long term, establishment Republicans in Congress might wield more power if they expelled the far-right group from the party. This would be especially true if, after doing so, they seized the opportunity to move their party closer to the center.

Democrats have long dreamed of just such a schism in the GOP, on the assumption that it would cement their own party's domination of the national electorate. But they could easily be wrong. The expulsions would be a political earthquake, a dramatic move whose repercussions would capture the attention of Americans for weeks on end. A reinvigorated Republican Party, under the banner of centrists like Chris Christie and Rob Portman, would no longer have its low-tax and small-government messages polluted by anti-gay, anti-immigrant, and anti-poor rhetoric. Such a party might even gain enough seats in swing and Democrat-held districts to replace the far-right votes it had lost.

Yet none of this is likely to happen, because Boehner, McConnell, and the rest of the formal Republican leadership are far too concerned about their own power. Their narrow focus on maintaining their posts in the current Congress has made them incapable of taking a long-term view of the strategies that might benefit their party. And an official split would almost certainly put them in a weaker position for the remainder of the Obama presidency.

That's too bad, because the moment is now. The distorting and extorting tactics of the far right are on display for all Americans to see. Approval ratings for Congress and the Tea Party are at all-time lows, and the public is desperate for an end to the logjam in Washington. There's still a year before the next midterm election, and there are three years to plan for the presidency. For all of these reasons, the showdown that should be happening today is not between Republicans and Democrats, but between Republicans and Republicans.


Daniel Altman

Competitive Chic

The World Economic Forum's big report isn't all it's cracked up to be.

What is competitiveness? The World Economic Forum thinks it knows. Every year, it publishes the Global Competitiveness Report, which purports to measure "the set of institutions, policies, and factors that determine the level of productivity of a country." Understandably, countries eager to attract investment and tout their economic progress take notice of the report. But is the WEF actually onto something?

Judging by the global media's reaction to the 2013-14 report, which came out last month, the WEF has caught lightning in a bottle. The Wall Street Journal mocked Argentina for its slide in the rankings, and the Indian Express bemoaned India's lowest-ever position in the competitiveness table. African countries including Namibia and Ghana were dissected in depth by their local outlets, and even in Bhutan, where the government ostensibly pursues "gross national happiness" rather than material living standards, the report made national news.

This attention undoubtedly pleases the WEF, whose intended audience includes leaders from government, business, and civil society. "We are aiming to have all of these groups be interested in the results, because all of them have a stake in the prosperity of their economies," WEF chief economist Jennifer Blanke said in an interview last week. "We want it to be used. We want it to be a reference document." In fact, Blanke added, some governments already use the report this way. "It particularly focuses attention among the policymakers," she said. "There's a number of countries that integrate it into their own strategies."

Clearly, a lot of people think competitiveness is an important goal. But what exactly is the WEF measuring? It uses a complex formula devised under the leadership of Xavier Sala-i-Martin, a professor of economics at Columbia University, to weigh dozens of factors, from the extent of marketing in business to Internet access in schools. For all of its complexity, however, the WEF's definition of competitiveness sounds rather like the definition of "total factor productivity," or TFP, a term that economists have used for decades to refer to aspects of growth not explained by changes in capital and labor.

I asked Blanke if the WEF's concept of competitiveness was indeed the same as TFP. "Yes, basically," she said. "I mean, how well are you doing things." But later in the interview, she gave a slightly different spin. "We're not only interested in TFP," she said. "The things that we've seen that matter for driving prosperity over time are numerous and interlinked. We're not so dogmatic about ensuring that it is mapping any particular indicator, because we're interested in economic development. I don't think we want to get more specific than that."

It all sounded a bit nebulous to me, and I said so. "Nebulous, perhaps," Blanke responded, "but that's why we had to define an entirely new concept which we're calling competitiveness."

New or not, there is a fairly straightforward way to test whether this concept is indeed an important factor driving economic growth in the same way as TFP. In the Neoclassical Growth Model, taught to students of macroeconomics around the globe, TFP has a very special role. All countries in the model are growing toward limits in their material living standards. To make progress, the countries give their workers more capital, which makes the workers more productive. Poorer countries tend to grow faster, since even a tiny bit of capital can go a long way for workers who start with very little.

In the model, TFP captures everything that goes into production besides capital and labor: technology, economic institutions, exchange of ideas, etc. So all other things equal, countries with similar TFP tend to converge on the same living standards, with the poorer ones catching up to the richer ones. Economists say countries that converge like this are in the same "convergence club." To get into a new club with a higher limit for living standards, a country needs to raise its TFP.

If the WEF's notion of competitiveness has similar relevance to growth, then we should be able to use it to divide countries into convergence clubs. In each convergence club, per capita income should be negatively correlated with economic growth.

To check this, I compared the WEF's 2011-12 competitiveness scores for 139 countries and regions to the International Monetary Fund's 2011 estimates of economic growth (adjusted for changes in prices) and per capita income (adjusted for differences in purchasing power). The IMF doesn't keep figures for Puerto Rico, so I dropped it.

Going down the rankings in order, there were 35 groups of 10 countries that differed by at most 0.1 points on the WEF's overall metric for competitiveness, which ranged from 2.87 for Chad to 5.74 for Switzerland. Among these groups of 10, some of which overlapped, the average correlation between growth and per capita income was -0.46. That was a pretty good sign for convergence, considering that the correlation among all the countries in the sample was just -0.13.

For a more refined selection of convergence clubs, I looked at the WEF's three main subindexes: basic requirements, efficiency enhancers, and innovation and sophistication factors. This time I chose groups where no country differed from another by more than 0.5 points in any of the subindexes. I managed to find three groups of eight countries. In each group, the countries were also within 0.16 points of each other in the overall metric.

In the group containing Armenia, Egypt, El Salvador, Georgia, Greece, Lebanon, Moldova, and Serbia, the correlation between growth and per capita incomes was -0.92. This was driven to a great degree by Greece's extraordinary downturn; even if Greece had grown by a couple of percentage points, though, the correlation still would have been about -0.55. In a group of wealthier countries -- Australia, Austria, Belgium France, Malaysia, Norway, Qatar, and Saudi Arabia -- the correlation was strongly positive at 0.58, a sign of divergence rather than convergence. The poorer group of East Timor, Ivory Coast, Lesotho, Madagascar, Mali, Mozambique, Swaziland, and Zimbabwe showed a correlation of 0.22, positive and divergent again.

Taken as a whole, this rudimentary evidence neither supports nor negates a central role for the WEF's concept of competitiveness in convergence. The fact that convergence is not present at a more granular level suggests that the results for the overall metric may be partly due to chance. To be sure, the metric is highly correlated with living standards, and economists have indeed found causal relationships between some of its components and living standards. Yet the metric itself seems to have a connection that is, well, nebulous. That may be exactly what the WEF intended, but it may also give pause to those leaders who would use the report as a reference.