Rivals weigh a hands-off ideal vs. action on economy

A generation after Ronald Reagan declared that the only thing wrong with the American economy was government attempts to manage it, GOP presidential candidates are struggling with that central tenet of conservative orthodoxy as they confront the nation’s current financial turmoil.

Although most of the major GOP rivals entered the 2008 race claiming to be Reagan’s rightful heir, their allegiance to the idea that government should get out of the way and leave the economy to the private sector is colliding with widespread demands for government action.

Some GOP contenders, most notably former Massachusetts Gov. Mitt Romney and former New York Mayor Rudolph W. Giuliani, have pushed for the kind of direct government intervention long anathema to Republicans. And while most continue to sound their party’s traditional call for new and deeper tax cuts, they face wide agreement among economists and policymakers that lowering taxes is too slow-acting to help now.

Underlying the GOP candidates’ problem is an apparent change in what Americans want from the government and therefore what voters expect from the next president: vigorous action to rescue the economy from a possible recession.

“What you’re seeing these Republican candidates wrestling with is reflective of a sea change in public attitudes toward government and what government should do for people,” said Neil Newhouse, a partner with the GOP polling firm Public Opinion Strategies. After Republicans won control of Congress in 1994, polls found that strong majorities favored the idea of shrinking government’s role in the nation’s affairs, he said, whereas now a large majority wants more government action.

Like the Republicans, Democratic presidential hopefuls have scrambled to respond to voters’ concern; but Democrats have long advocated government action to deal with economic problems.

Among the leading GOP contenders, Romney has been the most sweeping in his response to the public’s desire for government action. While campaigning in Michigan, he promised to take steps to restore the deeply troubled auto industry.

Along with tax cuts, a rollback in auto emissions standards, and other industry relief, he promised major new federal support for auto-related research. Rivals immediately labeled it a $100-billion promise to the auto industry.

“Here you have Gov. Romney talking about launching a huge new government subsidy for a particular industry,” said Pat Toomey, president of the Club for Growth, a conservative advocacy group. “It’s so completely antithetical to free markets, it makes economic conservatives despair.”

In South Carolina, Romney suggested federal aid to the furniture and textiles industries.

Giuliani, hoping to salvage his candidacy in the run-up to Tuesday’s Florida primary, called for federal backstopping of the homeowners-insurance industry. The idea -- which critics say could cost Washington tens or hundreds of billions of dollars -- is popular in Florida, where the private insurance market came unhinged after big hurricanes in 2004 and 2005.

Still, Giuliani finished third Tuesday and now looks all but certain to end his candidacy.

Sen. John McCain (R-Ariz.) has voted twice against President Bush’s trademark tax cuts. He has also expressed opposition to permanent elimination of the estate tax, a priority on conservatives’ agenda.

Under pressure to polish his credentials as a conservative, McCain now says he supports making the Bush tax cuts permanent. He also proposes to slash the corporate tax rate from its current 35% to 25%.

Campaigning in New Hampshire, however, McCain raised doubt about the depth of his interest in a subject central to conservative ideology. “The issue of economics is not something I’ve understood as well as I should,” he said.

Former Arkansas Gov. Mike Huckabee’s position on trade is closer to labor unions’ than to most Republicans’. Huckabee says he supports trade agreements that are free but fair -- that is, agreements that protect U.S. jobs. Republicans traditionally oppose such intervention in markets.

Huckabee’s candidacy is flagging -- he finished fourth in Florida and has won only in Iowa -- but his support of government action may put him more in line with many voters than it does with conservative principles.

In 1995, after the GOP takeover of Congress, voters were asked whether “government should do more to solve problems and help meet the needs of people” or “government is doing too many things better left to businesses and individuals,” pollster Newhouse said. About a third agreed with the first statement, whereas 62% picked the second, he said -- but when asked last fall, 55% of voters picked the first statement, whereas only 38% backed the second.

peter.gosselin@latimes.com

Times staff writer Maura Reynolds contributed to this report.