Beyond tax cuts: to win, the GOP must comprehensively address the cost of middle-class living.(SPECIAL POST-ELECTION ISSUE)

MICHAEL POLLAN, best known for his polemics against the food-industrial complex, has made a minor villain out of Earl Butz, Richard Nixon's secretary of agriculture. Faced with a sharp spike in inflation, the Nixon White House sought to win the political allegiance of housewives by taking sweeping steps to lower agricultural prices. Butz slashed regulations and trade barriers while increasing subsidies. The result: Family farms closed down, huge agribusiness concerns expanded mightily, production soared, and domestic food prices fell dramatically. For Pollan, Butz's machinations lie behind the current obesity epidemic and a broader coarsening of American life. But there is a very real sense in which Butz ended the specter of hunger in the United States. Apart from the subsidies, there is much to admire in his approach: His package of reforms delivered a better quality of life to millions of Americans.

Now, Richard Nixon is hardly a model for Republican domestic policy. His crude Keynesianism and his embrace of wage and price controls are rightly condemned by conservatives, not least because such recklessness helped set the stage for stagflation. But Earl Butz's approach deserves another look.

We sometimes forget that strengthening the free market often requires policy activism. Standing pat has its place, but anti-market forces can turn the inaction of the other side to their advantage. This will become very clear in the first few months of an Obama White House. Aided by his shrewd enforcer, Rahm Emanuel, Obama looks set to reshape the American state in ways that will permanently ratchet up the size of government and the cost of living. And until the bill comes due, it is a safe bet that a majority of voters will cheer him on. For now, Republicans can only react to what Obama does. Over the longer term, the party needs to develop a strategy that, like Butz's agricultural reforms, will have a significant impact on the quality of life of working-class and middle-class voters.

American workers are, as we all know, feeling anxious and vulnerable. And when we think of the political implications of this souring of the American mood, we tend to think, correctly, that it helps the Democrats. Barack Obama's victory is not, as some self-described progressives dearly hope, a mandate for robust social democracy. Just as Bush did not win in 2000 and 2004 because of his supposed commitment to free markets, there's no reason to believe that voters carefully evaluated Obama's economic program and found it persuasive. Rather, Democrats won because recent developments have sharply reduced the number of Americans who are optimistic about their economic prospects. As the Pew Research Center has found over the years, economic optimists tend to be Republicans. That is, people who believe that they control their own economic fate, and that the future will likely be brighter than the past, tend to vote Republican by overwhelming margins. This is true among blue-collar workers as well as affluent professionals.

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As Thomas B. Edsall noted in his ill-timed Building Red America, published just in time for the massive Republican congressional defeat of 2006, blue-collar Re publicans differ from blue-collar Democrats in a number of respects: They are more likely to be in intact families, they are less likely to belong to labor unions, and they generally believe market competition is a good thing. To put it crudely, blue-collar Republicans see themselves as economic winners--which is why the current downturn is bad for Republicans beyond the important fact that it has happened on a Republican president's watch. Remember the old saw that FDR made working-class voters rich enough to vote Republican? In a similar vein, the broad prosperity of the 1990s, a shared legacy of Clinton and a Republican Congress, buoyed Republican fortunes.

As economic optimism erodes, there is a danger that we'll fall into a vicious circle in which ...