PA GOP at Crossroads

Member Group : Lincoln Institute

In what was perhaps one of the most famous speeches in American political history Ronald Reagan’s national career was launched in the closing days of the 1964 presidential campaign with his "A Time for Choosing" speech on behalf of Barry Goldwater. It failed to turn the electoral tide, but did become the rhetorical foundation of the Republican Party for the decades which followed.

Pennsylvania Republicans now find themselves at their own "time for choosing." While the situation may not be as grandiose as the "rendezvous with destiny" the party and the nation faced at the time of Reagan’s speech, the next few weeks will give definition to – or perhaps make it impossible to tell – what it means to be a Republican in Penn’s Woods.

At issue is the annual state budget which is constitutionally required to be in place by the close of business on June 30th. Election year spending pressures and a revenue shortfall are complicating the process. For six straight months the state has failed to achieve its revenue projections creating a $532.5 million deficit. Add in proposed additional spending, and the deficit facing the governor and lawmakers climbs to over $1 billion.

The revenue shortfall should come as no surprise. The national economy continues to lag as the "great recession" drags on. The Lincoln Institute’s Keystone Business Climate Survey taken in April found 26% of business owners and CEOs reporting the state’s business climate continues to get worse, while only 14% saw improvement. Uncertainty caused by the Affordable Health Care Act, and massive new regulations are cited as key reasons for the pessimism.

Republicans control the three budgetary levers of power: the governor’s office, the state House and state Senate. To the unsuspecting this should amount to easy sailing for the new budget. But the actual situation is quite the opposite. The party is divided on how to proceed. The governor and a majority of the conservative House are opposed to higher taxes, a faction in the GOP caucus in the state Senate are open to additional revenue.

Much has been made in the media over the intra-party competition between so-called "establishment" Republicans and "tea party" conservatives. Closer inspection shows the policy differences between those factions are small. It is more accurate to say the Pennsylvania GOP is divided along geographic rather than ideological lines.

A number of legislators from southeastern Pennsylvania – the Philadelphia suburbs – are labor union-supported tax and spend liberals. Those hailing from the balance of the state, particularly the central Pennsylvania "T" and southwestern Pennsylvania are economically conservative. It is this divide over which the battle for the soul of the state GOP is being fought.

In trying to improve the state’s business climate, Governor Tom Corbett has steadfastly opposed adding an extraction tax on Marcellus Shale companies. That is because those businesses already pay all the same taxes as every other Pennsylvania business – plus an impact tax enacted several years ago. An extraction tax would be piling on.

Moderate southeastern Republicans, led by State Representative Gene DiGirolamo of Bucks County, are advocating for an extraction tax. They also want to halt the phase-out of the Capitol Stock & Franchise Tax, an arcane bit of double taxation on businesses found in no other state in the nation that instantly makes Pennsylvania less competitive in attracting investment and jobs. Mr. DiGirolamo has gone so far as to offer his own version of the state budget, which appears to be little more than the Democratic budget on new letterhead.

The "time for choosing" for the GOP is this: will the party stay the course by holding the line on taxes and continue to enact policies that will encourage business growth and job creation, or will it allow the southeastern tail to wag the dog and become Democrat lite?

Ronald Reagan once warned the GOP that "A party cannot be all things to all people. It must represent certain fundamental beliefs . . . (it must) raise a banner of bold colors, not pale pastels." If the Republicans in control of state government settle for "pale pastels" there will be little to distinguish it from the Democrats and voters will opt for the real thing. The time has come for the GOP to act on its pro-growth principles. Because otherwise, what is the point of even having principles?

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal. His e-mail address is [email protected])

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