Smith Faculty Opinion Article
August 19, 2009
Democrats Are Heading for a Train Wreck
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
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
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.
Peter Morici is a professor at the University
of Maryland School of Business and former Chief Economist at the U.S. International