Sarah Palin's Economic Philosophy

Reuters has published a story that opens up a preview of what the economic philosophy of a hypothetical Sarah Palin administration might be. The one sentence description is that it is pro capitalism as opposed to pro big business.

This is not exactly a contradiction.

According to James Pethokoukis of Reuters:

"In her 2009 book, 'Going Rogue,' Palin offered a remix of 1980s-style Reaganomics - low taxes, less government spending, strong dollar. That's all perfectly sync with her recent Fed-bashing. But she also attacked 'corporatism' in which government and business conspire against entrepreneurs and consumers. This view fuels Palin's critique of Obama's financial reform plan, which she portrays as a creation of Wall Street designed to perpetuate bank bailouts."

As both an oil regulator and governor in Alaska, Palin more often than not clashed with big business interests which used connections with government to advance their interests. Palin had rebelled against a political culture in her beloved state that placed government and big business in arrangements that exchanged government favors for campaign contributions. The current fight between Senate candidate Joe Miller, a reformist small government politician in the Palin mode, and the current Senator Lisa Murkowski, who favors a more cooperative stance between government and business, should be seen against that backdrop.

Palin has recently cautioned against the fed's policy of quantitative easing that injects printed money into the economy with the hope of spurring economic growth, but at the risk of sparking inflation. She has won some grudging praise from conservative economists.

Pethokoukis continues :

"Palinomics, embryonic as it is, seems to be rooted in 'free-market populism,' a version of conservative thinking that is pro-market rather than pro-business. It says the role of government is to help markets function more fairly and efficiently for everyone, encouraging competition and "creative destruction" (which Palin specifically mentioned in her book). Pro-business policies, by contrast, can end up subsidizing favored companies, raising barriers to entry and otherwise entrenching the status quo."

If this sounds like 1980s style Reaganonmics, it is likely not by accident. Reagan came into office in 1981 in a country with economic problems similar to what might face a hypothetical President Palin in 2013. It is entirely possible that persistent economic malaise coupled with futile efforts by the Fed to jump start economic growth by inflating the money supply could result in 1970s style stagflation. The solution in 2013 might just be a repeat of Reagan's solution in 1981; cut taxes, spending, and regulation, and eschew the sort of subsidies, special favors, and breaks favored by the Obama administration.

Indeed Sarah Palin seems to have positioned herself neatly to fit the zeitgeist of the times. The Tea Party is, among much else, a revolt against big government and big business combining to acquire power and wealth at the expense of everyone else. Obama style crony capitalism, which has involved everything from bailouts of car companies to massive subsidies of nascent space rocket firms, is not popular. That in turn provides an issue for Sarah Palin to run against, should she choose to.

Sources: Why Wall Street should fear Sarah Palin, James Pethokoukis, Reuters, November 12th, 2010

Sarah Palin Warns the Federal Reserve on Quantitative Easing, Mark R. Whittington, Associated Content, November 8th, 2010