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Democrats Are Heading for a Train Wreck

Prof. Peter Morici - 8/20/2009

Intolerance has captured the Democratic Party, and arrogance will destroy its grip on power. On marquee issues—health care, cap and trade, and the recession—Democratic leaders are unwilling to listen to the legitimate concerns of center-leaning voters and business leaders who made possible their victories in 2008.

Many Americans support universal health care but want a system like the Netherlands built on private insurers. Yet, many Democrats insist on a public entity or government-like nonprofit, and an 8 percent payroll tax on businesses that don’t provide health insurance.

Retailers, small manufacturers and other businesses paying workers less than $80,000 annually will find it cheaper to drop their plans and push folks into the public option.

Clinton Labor Secretary Robert Reich recently claimed private insurers don’t compete, because of antitrust exemptions. Anyone who chooses from an employer list of plans knows private insurers offer competing ranges of coverage and cost. Anyone who took Econ 101 knows the number of competitors, not the strong arm of government, determines the opportunity to fix prices and collude.

Cap-and-trade legislation moving through Congress would reduce U.S. C02 emissions by imposing a system of purchasable permits, but raise costs in energy-intensive industries like petrochemicals, aluminum and automaking.

China is not implementing a similar system, and cap-and trade would cause U.S. manufacturing jobs to move across the Pacific where CO2 use restrictions would not apply, increasing global pollution.

Businesses and moderate senators have petitioned the President to endorse a cost equalization tax on imports from countries that do not restrict CO2 emissions. This would better protect the global environment and be consistent with World Trade Organization Law, but the President calls such a policy protectionist.

China has a $400 billion stimulus package, and its economy is firing on all cylinders. President Obama has an $800 stimulus but prospects for the U.S. economic recovery are fragile.

Obama’s stimulus was focused on tax cuts, which went into saving, not spending, and shoring up employment in state and local government budgets, which was not needed and had little effect.

The private sector has shed nearly seven million jobs since December 2007. Through February 2009, state and local governments added 128 thousand jobs, and since the stimulus was enacted, those have shed 7 thousand jobs.

The Bush Administration was not any better. Bent on tax cuts, it did nothing to fix health care—its prescription drug plan drove up costs for most Americans—and it ignored pressing environmental issues.

When those who govern view those who disagree with them as “evil mongers,” in the words of Senate Majority Leader Harry Reid, they become blind to facts and deaf to reason.

Democrats appear to be girding to push through health care reform without the features moderate voters want. After that, perhaps cap and trade and more stimulus spending.

Moderate voters won’t be happy. Factor in unemployment around 10 percent, and the Democrats’ grip on Congress may fall sooner than pundits believe possible.