Death by Obamanomics?
The president's policies on energy, unions, and health care won't help an ailing economy.
12:00 AM, Jun 26, 2009 • By IRWIN M. STELZER
Energy is not the only sector that is likely to be less efficient than in the past. It is no coincidence that America's superior productivity performance has coincided with the decline of trade unions. We have seen how union compensation scales and work rules contributed to the bankruptcy of General Motors and Chrysler -- a fate the non-union car manufacturers have avoided. Yet Congress and the president are preparing to spur union growth by eliminating the secret ballot in union-recognition elections and, rumor has it, by writing advantages for union members into the tax laws, perhaps by exempting them from taxes on their employer-sponsored health-care benefits while imposing such taxes on non-union employees.
There is worse. The president is about to engineer the takeover of the health care sector. Unless Congress refuses to go along with the establishment of a government insurer -- voter enthusiasm for this "reform" is minimal -- competition from an entity that has no need to make a profit and can count on taxpayer funding if premiums prove inadequate will surely doom private insurers. Estimated cost over ten years: $1.3-$1.6 trillion, adding to the upward pressure on taxes, especially on wealth-creating entrepreneurs, created by the administration's runaway deficits.
The administration simply has no credible plan to reduce those deficits, and instead talks vaguely of cutting entitlements or the savings from universal health care coverage -- never mind that more coverage means higher costs, and the proclaimed goal of prolonging live, however admirable, will drive costs up, not down. Obama's huge deficits already have purchasers of Treasury IOUs worried that they will be repaid in devalued dollars, which will eventually force wary investors to price the risk of inflation into the price they are prepared to pay for government IOUs. Interest rates rise, economic growth slows.
Two thoughts pierce the gloom. The first is that the American economy might be large enough, and resilient enough, to remain competitive even bearing the weight of the new inefficiencies. The second is that voters will demand a change of course before Obamanomics is permanently embedded in our system. Voters worry that they are leaving their children a mountain of debt. Already Obama's approval rating among independent voters, whom Wall Street Journal analyst Gerald Seib calls "the canaries in the coal mine of American politics", has fallen from 60 percent to 45 percent. Even if the president doesn't get the message, Congress, faced with an election next year, just might.
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).