Monday, February 25, 2008

The Problem With Clinton and Obama

The Democratic presidential primary is down to two leading candidates, Hillary Clinton and Barack Obama. The party is split almost evenly between the two and the competition for the nomination is fierce. The nation is focused on who would be better for the party and who would be better for the country.

The two candidates are remarkably similar. They both lack experience in leadership roles and both have short resumes when it comes to government service. Both were elected to the senate in 2000 and re-elected in 2006. More importantly, the platforms of both candidates share many of the same ill-advised planks.

There are several areas in which the proposed policies of Clinton and Obama would be disastrous for the United States. The most obvious is that both candidates have repeatedly voiced their intention to end the war in Iraq.

The Iraq War can end in only one of two ways. The first possibility is that the United States can defeat the terrorists and create a free and stable Iraq. The second is that the United States can unilaterally withdraw and leave Iraq at the mercy of Al Qaeda and Iranian backed Shiite extremists.

If US troops leave Iraq, the war would not end immediately. The terrorist groups, which today are largely defeated and demoralized, would regroup. Fighting would erupt between Sunni terrorists and Shiite militias for control of the country. The war would most likely spread throughout the region as Saudi Arabian forces intervene to protect Iraqi Sunnis, Iranian forces assist Shiites and Turkish troops attack Kurds. The probable outcome would be that Al Qaeda or Iran would gain control of Iraq and it huge oil reserves. This would put the United States economy at the mercy of Muslim extremists as well as providing financing for either terrorist attacks against US targets or Iranian nuclear ambitions.

Clinton and Obama’s second problem area is with their proposals for government mandated health care. A government takeover of the healthcare industry would mean that the government is taking control of 17% of the gross national product. This is an unprecedented government foray into the marketplace.

The plans for federalized healthcare are based on the mistaken assumption that the government can solve the problem when in reality, as Ronald Reagan said, the government is the problem. Government mandates for health insurers have been a prime reason that health insurance costs have increased. If insurers were given the freedom to tailor policies to consumer demands, prices would drop and more consumers would choose to buy health insurance. Instead, state governments pass laws that force costs to rise. Some of these laws require that Viagra be covered, that insurance pay for chiropractors and massages, and that pregnancy coverage be provided regardless of whether the consumer wants it. Simple policies with high deductibles for major medical coverage are increasingly hard to find.

Similarly, current tort law makes it extremely expensive to practice medicine. Rising malpractice insurance premiums and large punitive judgments have driven many doctors into other fields and have discouraged many students from pursuing medical careers. In several states, OB/GYNs have almost been driven completely out of business. Even if a doctor stays in business, they often choose to run more tests than necessary to cover themselves in the event of a lawsuit.

People who see government action as a panacea usually do not think about the unintended consequences of government actions. To control healthcare costs, the government would have to impose price controls on the industry. When price controls are imposed, people will realize that they won’t be able to make as much money as a doctor and decide that the years of college and residency are not worth the low pay. When the supply of doctors decreases, it will inevitably lead to the rationing of healthcare and long waits for treatment. This scenario has occurred repeatedly in countries where the government provides free healthcare.

Nothing that the federal government does suggests that it would be able to provide healthcare more efficiently or more cheaply than private business. Instead, the opposite is true. Veteran’s Administration hospitals have been plagued by scandals of poor conditions and long waits for treatment. Other government organizations, from the post office to the DMV, are equally poor examples of customer service and efficiency.

The Democratic plans for the repairing the economy have a similarly utopian view of government action. There have been proposals for a freeze on mortgage interest rates, a moratorium on foreclosures, and a government bailout of homeowners and mortgage companies coupled with strict new regulations on lending. These plans again fail to realize that relaxed lending rules are partly the result of government desires to make home ownership available for more people.

The current economic problems are the result of a free economy in which mortgage companies made loans to people who were not likely to be able to repay them. The consumers who accepted the loans are equally at fault because they did not reconcile the terms of their mortgages with their ability to repay. In many cases, the mortgage problems are the end result of years of financing a lifestyle with debt. Both the mortgage companies and the consumers made bad decisions, but neither was forced to become a party to the mortgage.

This is what the free market is all about. If people and companies are given the freedom to choose, some will make bad choices. People and companies who make bad choices need to suffer the consequences of those choices so that they will learn not to make the same mistake in the future. To teach that the government will use the money taxed from people who made good choices to bail out people who made choices sends the wrong message. Such policies perpetuate bad behavior and cause problems in the economy rather than alleviating them.

Finally, Clinton and Obama are also alike in their desire to pay for their programs by instituting new taxes ostensibly on the rich. The problem here is that taxes hurt the economy as well. Over the past hundred years, taxes have been cut by Presidents Coolidge, Kennedy, Reagan and Bush. Each time tax revenues increased in spite of the fact that tax rates were reduced. When taxes are increased, the opposite is true. The reason is simple. Tax cuts allow people and companies to keep more of their earnings and encourage productivity and investment, while tax hikes remove money from the economy.

Countries around the world are moving toward free economies and lower tax rates so it is ironic that one of the major parties of the United States is advocating a move toward the types of polices that have been proven failures in numerous communist and socialist countries. Many former Soviet bloc nations in Eastern Europe are experiencing booming economies due to their low flat taxes. The difference can even be seen from state to state in the US among states with high tax rates, such as Michigan, California, and New York, when compared with states that have no income tax, such as Tennessee, Texas, South Dakota, and Nevada. The high tax states have sluggish economies, high costs of living, and many are experiencing a decline in population.

When Americans go to the polls, they should remember that change in itself is not a worthy goal. Democratic policies can lead to higher gas costs, global insecurity, rising healthcare costs and declining benefits, higher taxes, and a shrinking economy. The United States should not repeat the mistakes that communist and socialist countries have made over the last hundred years. Instead, we should renew our commitment to free markets, lower taxes, and personal freedom, including the freedom to make your own mistakes, The best thing that the government can do for the economy is to get out of the way.

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