Oh, The Changes We'll See
The Age of Obama, low pay, and tiny cars.
12:00 AM, Apr 24, 2009 • By IRWIN M. STELZER
Barack Obama is unhappy with much that preceded his occupation of the White House, and not only his predecessors conduct of foreign policy, for which he is a serial apologizer. Pre-Obama domestic policy also displeases him: any prosperity the nation enjoyed, he says, was built on a foundation of sand. That won't happen again: the trillions of debt he is loading on the nation's books will enable us to erect our post-recession house on solid rock, he says. Our world will never be the same again.
Of course, it never has been: the march of technology has enabled us to travel faster, age more slowly, entertain ourselves differently, and build air-conditioned homes in the miserably hot South and Southwest, and in our steamy nation's capitol. But the President has something more in mind and, with control of both Houses of Congress, the power to change the way we live. Let's make a few guesses as to where those changes will take us.
At the top of the President's change list is the way we consume energy. The President believes that our use of carbon-based fuels is causing the globe to heat up, with all the dire consequences conjured up by Al Gore as he sits in the library of his home, probably the largest single consumer of energy of any private residence in America. By one means or another, the President will make the use of oil, natural gas, and most especially coal so expensive that consumers will be forced to use less energy, and rely more heavily for the electrical energy we do use on more costly wind and solar power, paid for with tax-funded subsidies or higher utility bills. There might be a place for nuclear power in the mix, but that is uncertain since the President cannot persuade the senate majority leader to allow the Yucca Mountain nuclear waste repository, located in Harry Reid's home state of Nevada, to be put into operation.
Also, the day of spacious, safe cars is to end, with the exception of the limousines favored by congressional leaders and White House appointees. Given the financial dependence of GM and Chrysler on government handouts, and regulations setting fuel efficiency standards, these companies will be forced to produce and attempt to sell the small, preferably battery-powered vehicles beloved of environmentalists and congressmen from urban areas who rarely take to the open road. This will encourage more and more Americans to migrate to mass transit, as fewer will want to endure cramped, no-longer comfortable car rides to and from work.
Which is only one reason that sub- and exurban living will become less popular. Another will be the new regulations that will be imposed on banks, preventing them from the excessive leveraging that has brought so many to Washington, begging bowls rattling. They will need more capital, which means their costs will be higher, which in turn means they will have to charge borrowers more for money. Higher interest rates make home ownership less attractive relative to renting (even if the interest costs of builders of apartment flats also rise), and large homes more difficult to afford. So more and more Americans will be unable to pursue the dream of home ownership, and fewer of the homes that so offend egalitarians and greens -- with multiple-car garages and walk-in refrigerators -- will be built. Call it a decline in the American standard of living, made necessary not only the ideology of liberal Democrats, but in order to divert resources and wealth from the private to the public sectors.
The President will also change the way Americans receive their health care. Under the mistaken assumption that the uninsured do not receive proper health care -- many without insurance are too young and healthy to need it, and the poor are treated without charge at local hospitals -- the President will raise taxes or force businesses to pay for insurance coverage for all Americans. The result will be a system closer to that in, say Canada, with all its disadvantages (bureaucracy, rationing, waiting lists and a slower rate of innovation), which should stanch the flow of Canadians into America for the health care that is unavailable to them at home in a timely fashion.
In the end, Americans will live in smaller houses, drive cars more like those to which Europeans are accustomed, and will rely on European-style health care. In short, we will be more like countries using the social democratic model to which Obama wants to convert America.
The President also intends to change the way our children are educated. He says that he wants teachers compensated on a merit basis, and parents freer to select schools they deem best for their children. But his teachers' union allies won't go along, and in the one test of his rhetoric so far he has allowed his party to kill a program that provided funds to allow a few thousand poor, mostly black children to escape the horrors of the Washington, D.C school system and instead attend swanky private schools of the sort in which he has enrolled his daughters.
There is no doubt about one thing: the President intends to increase the number of students financially able to attend college. America will, in the end, have more degree-wielding students and fewer horny-handed sons of toil. That will produce another result the President has in mind as he rebuilds the American house on his rock. The earnings premium paid to highly educated workers will decline as the number of men and women competing for those jobs increases, and the relative wages of the fewer blue-collar -- by then, green-collar -- workers will increase.
This greater equality of income distribution is, for Obama, the summun bonum. He is redesigning the tax system to narrow the after-tax gap between "the rich" (family incomes above $250,000 per year) and lower earners, even if the economic cost of such a move-- reduced risk-taking--is quite high. Equity, not economic efficiency, is his goal. Which is why he favors raising the rate at which capital gains are taxed even if the result is a reduction, rather than an increase, in the Treasury's net receipts.
There will be more changes pushed through by a man who regards himself as a "transformational" President, in the tradition of Abraham Lincoln and Franklin Roosevelt. Women will be "empowered" to bring more law suits if they feel discriminated against, either currently or in years gone by; more Americans will work in the public sector as it expands relative to the private sector, and as Washington displaces New York as the nation's financial capital. Love him or loathe him, Barack Obama will leave an America vastly different from the one he inherited. Unless, of course, sooner rather than later, voters decide they rather liked the older model.
Irwin M. Stelzer is a contributing editor to THE WEEKLY STANDARD, director of economic policy studies at the Hudson Institute, and a columnist for the Sunday Times (London).