Think the Republicans were bad? Here's a preview of the Democrats' economic policies.
BY PETE DU PONT
Wednesday, December 20, 2006 12:01 a.m. EST
Sixty-one percent of Americans believe President Bush is not doing a satisfactory job. And more than 70% think the Republican Congress has failed to perform its job satisfactorily.
The continuing war on terror is one reason, but so are congressional spending, earmark excesses, and the corruption of House Republicans DeLay, Ney, Cunningham and Foley. In the six years of this administration overall spending has risen by 49%, and nondefense discretionary spending has increased by an average of 7.7% a year. The number of congressional spending earmarks totaled 10,656 in fiscal 2004 (costing $23 billion), 13,997 in 2005 ($27 billion) and just under 10,000 this past fiscal year ($29 billion). The Republican Party has become the party of big government.
But political supporters will take only so much contrarianism, so in the November election disgusted Republican voters allowed--even helped--both houses of the Congress to be taken over by the Democratic Party.
So will the Democratic Congress be any better than the Republican Congress was? A look at half a dozen likely policy proposals makes clear the answer will probably be no:
• Tax Increases. From the liberal perspective the good news is that the major Bush tax cuts will expire in 2010. So if the Democrats simply do nothing, the tax rates on lower-income individuals will rise to 15% from 10% and on higher incomes to 39.6% from 35%. Clinton Treasury Secretary Robert Rubin says that tax increases are the only way to solve the nation's fiscal problems, so that will be the Democratic strategy.
• Spending Increases. The incoming House leadership says it will hold spending flat for the remainder of the current fiscal year. Perhaps, but for liberal Democrats spending increases are political no-brainers: appropriate more and expand the government to make the country better. And if the deficit grows, well, that's because of the Bush tax cuts, not the Democratic spending increases. Historically Democratic Congresses have outspent Republican ones, and it will surely happen again.
• Alternative Minimum Tax. A 1969 tax increase that was enacted to soak the rich is suddenly going to seriously soak the middle class. Some 3.5 million taxpayers paid the AMT this year. But unlike the regular tax, the AMT is not indexed to inflation, which means the number of taxpayers the AMT hits is expected to balloon--by some estimates to as many as 23 million in 2007. Less than 5% of families with incomes between $100,000 and $200,000 are now paying the AMT, but more than 80% may pay it in 2008. Almost no families with incomes of $50,000 to $100,000 pays the AMT today; but as many as 35% of such families will in 2008.
To eliminate these very unpopular AMT increases would cost about $750 billion over the next 10 years. What taxes the new Congress will raise to solve this dilemma is unclear, but either AMT or other taxes will have to rise.
• Protectionism. Almost as passionate a liberal idea as spending more money is abandoning free trade and returning to protectionism. The AFL-CIO wants to limit lower priced goods from being imported into America even though it gives people a wider variety of products to choose from.
The truth is that the export of goods and services from America accounted for 10.4% of our gross domestic product in 2005 and created more than five million jobs over the previous 10 years. Imports have been increasing American trade deficits over the last quarter century, but U.S. employment simultaneously rose from 99 million to 145 million people. So trade has not cost us jobs; in fact it brings jobs into America--foreign auto manufacturers building cars here being the best example. Nevertheless, the Democrats will start by refusing to renew the president's trade authority, which expires next year.
• Energy. One of the last acts of the current Republican Congress was to pass legislation permitting more oil and natural gas exploration in the Gulf of Mexico. It will lead to the production of about 1.3 billion barrels of oil and 5.8 trillion cubic feet of natural gas, two things America badly needs.
But that will be the end of progress, for the Democrats have a very different set of energy goals. First, no more offshore drilling, even though there are 420 trillion cubic feet of natural gas on the Outer Continental Shelf--a 19-year supply at today's usage rate--and 102 billion barrels of oil in the OCS and Alaska. Next, Hillary Clinton's repeal of oil drilling tax deductions and another windfall profits tax on oil companies, just like Jimmy Carter's, which reduced domestic oil production between 3% and 6% and increased oil imports by about 10%.
No more nuclear power plants will be allowed either. We have 104 operating successfully--our cleanest source of energy. But liberals believe they need more regulation and are too risky.
• Social Security. Just 10 years from now Social Security benefits paid out will exceed taxes paid in, so something will have to be done to fix the system. Individually owned Social Security accounts would help by allowing workers to enjoy bigger returns. But Democrats are dead opposed to the idea of turning millions of Americans into owners of stocks and bonds, which will lead to the liberal solution of raising Social Security taxes and reducing benefits. The forthcoming plan will likely be to raise the cap on earnings subject to Social Security taxes ($97,500 in 2007). That would raise taxes on everyone earning more than this amount, especially the most productive wage earners. If the cap went up to $150,000, for example, it would mean a tax increase of $6,510 on a worker earning that amount.
With a closely divided Senate and a president with a veto pen, the 2007-08 Congress will be more about defining the principles of their party and winning the 2008 presidential election than making significant policy changes. But all of the above public policy ideas will be put forward in some form or another in order to energize the Democrats' liberal base and win the 2008 presidential election. And that will produce a fiery new Congress.
Mr. du Pont, a former governor of Delaware, is chairman of the Dallas-based National Center for Policy Analysis. His column appears once a month.
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