TCS Daily


Wonks vs. Revolutionaries: The Biggest Division Within the Democratic Party

By Arnold Kling - June 26, 2007 12:00 AM

"Sens. Hillary Rodham Clinton of New York and Barack Obama of Illinois and former Sen. John Edwards of South Carolina all have staked out positions sharply at odds with [documentary film director Michael] Moore's approach. But none of them is eager to have that fact dragged into the spotlight...

In "Sicko," the filmmaker calls for abolishing the insurance industry, putting a tight regulatory collar on pharmaceutical companies and embracing a Canadian-style government-run system.
--Ricardo Alonso-Zaldivar, The Los Angeles Times, June 22, 2007

Assuming that the Democrats win in a rout in 2008, those of us who are libertarians will be on the sidelines. I wish that I could swallow Brink Lindsey's liberaltarian Kool-Aid, but the blend between liberalism and libertarianism just won't go down. And the Democrats themselves don't seem to want to touch it.

Of course, being on the sidelines is not exactly a new position for libertarians. I would say that's where we've been pretty much with the Republicans as well.

The purpose of this essay will be to focus on divisions within the Democratic Party on health care, fiscal discipline, energy and the environment, and foreign policy. Out of the factional infighting in these areas, which policies are likely to emerge? Which ones should we be rooting for as libertarians?

Wonks vs. Revolutionaries

The biggest division within the Democratic Party is between the wonks and the revolutionaries. The wonks want to expand government's role in health care in a number of ways. They want to increase coverage to reduce or eliminate the phenomenon of families going uninsured. They want government to set standards of care and to introduce "pay for performance" for health care providers to help enforce those standards. They want to impose new rules on health insurance companies that will make it harder for them to deny coverage.

The revolutionaries want a more comprehensive government takeover in health care. At the least, they would like a system where government pays for everyone's health insurance, as in France. At most, they would like a system where doctors and other suppliers of health care services are paid and managed by the government, as in Canada or the UK.

The revolutionaries need to overcome several sources of opposition within the Democratic Party.

First, labor unions traditionally have pointed to employer-provided health insurance as something that they wrested from corporations on behalf of their members. Anything that disrupts the current employer-provided system takes away a source of prestige for union leaders. This is even true for public-sector unions, although from an economic perspective it makes no difference whether you call a public-sector worker's taxpayer-funded benefits "employer-provided health insurance" or "single-payer health care."

Second, notwithstanding all of the talk of "crisis," many Americans are satisfied with their current health care. Risk-averse politicians want to avoid fixing something that people don't consider broke.

Third, it will be difficult enough to find the tax revenue to provide health insurance for those who currently are not paying for it themselves. Increasing taxes to pay for health insurance for the much larger segment of the population that currently does have employer-provided benefits is a really tall order.

Ironically, economic ignorance works to support the current system. Most people with employer-provided health insurance are under the illusion that they get it "free" from their employers. If they lose their employer-provided health insurance and their taxes go up to pay for government-provided health insurance, they will view this as having to pay for something that they thought was free. In that sense, supporters of single-payer should have supported President Bush's proposal to have employer-provided health benefits documented as income on tax returns, in order to help dispel the illusion that employer-provided health care is free.

As a libertarian, I am not sure whether to root for the revolutionaries or for the wonks. Of course, I do not want to wind up with single-payer health care. On the other hand, I once wrote that "The original sin of America's health care system is employer-provided health insurance." The best outcome might be for America to abolish employer-provided health insurance, try single-payer, have it fail, and then experiment with the sorts of policies that I talk about in my book.

Hamilton vs. LBJ

President Clinton once joked that if there is reincarnation, he would like to come back as the bond market, so that he could have real power. His advisers told him that without exercising fiscal discipline, he would find that the bond market would cause problems with interest rates and the economy. He listened to these advisers, who counseled restraint on spending, rather than attempting to push the progressive agenda.

The Democratic Party base does not want to see a rerun of President Clinton's budget-balancing approach. They are looking instead at Franklin Roosevelt and Lyndon B. Johnson as models for the next Administration. In addition to socialized medicine, they want major new initiatives and dramatic spending increases in anti-poverty programs, education, and so on. They are not willing to be thwarted by questions about where the money might come from to pay for this.

The fiscal responsibility chorus is still around, however. For example, there is The Hamilton Projects, where sober economists worry about tax reform, putting entitlements on a sustainable path, and other issues that are not so dear to the hearts of the LBJ crowd.

My prediction is that we will see tax increases on estates, high incomes, and other popular targets. We probably will see some middle-class tax reforms, particularly with regard to the Alternative Minimum Tax, which was aimed at Republican constituencies when it was enacted but today is probably causing more pain for Democratic constituencies, including residents of high-tax states like New York and users of middle-class tax breaks for education.

If the economy remains strong, so that tax revenues are healthy, then the big spenders probably will get a lot of their wish list, such as government day-care programs, more money to throw down the public school drain, and job training programs. The only thing that can stop the next wave of taxpayer-funded feel-goodism would be a recession in 2008-2009.

It is unlikely that the Hamiltonians will be able to put entitlement reform on the agenda. Libertarians may wish to join with Hamiltonians in efforts to bring about sensible tax reforms and budget cuts (perhaps agricultural subsidies can be trimmed) and to try to keep marginal tax rates from reaching punitive levels. But I expect the descendents of LBJ to overwhelm the descendents of Hamilton.

Economists vs. Avenging Angels

With regard to energy and the environment, there are economists and there are avenging angels. The economists would like to see higher taxes on carbon emissions. The avenging angels want to punish the evil corporations that they blame for everything wrong with energy and the environment.

My prediction is that the avenging angels will triumph. They will attempt to reduce carbon emissions through regulation. A Democratic economist who favors carbon taxes will have to keep his mouth shut, or else it will be shut for him.

One potential compromise between economists and avenging angels could be a permit-trading system for carbon emissions. In such a system, industries that have carbon emissions as a by-product would have to buy permits or face stiff fines. The cost of these permits acts as a tax on carbon emissions. A really pure permit-trading system, in which the permits are initially allocated by auction without special preferences, could work as well or better than a carbon tax. In practice, these systems are never pure. On the contrary, where they have been enacted, in the European Union, they have become favor factories, with politicians doling out permits to favored constituents. If the Democrats go in the direction of a permit-trading system, then libertarians might play a role in trying to ward off or expose the favor-factory outcome.

Carter vs. Truman

Among Democratic Presidents, Jimmy Carter represents a moralistic outlook, in which, for example, Palestinians are innocent victims and Israelis are cruel oppressors. Harry Truman represents a more realistic world view. Many Democratic policy wonks are closer to Truman, but many Democratic activists are closer to Carter.

I should not fail to point out that when it comes to foreign policy, libertarians are at least as divided as Democrats. Many libertarians, including Presidential candidate Ron Paul, are dovish and anti-interventionist. Those of us who are libertarian hawks support the use of force to try to contain radical Islam.

For any libertarian, the biggest concern about Democratic foreign policy ought to be what I call the phenonenon of The UN party. Both the Democratic base and the party wonks would like to strengthen the United Nations and other international bodies, notwithstanding that these organizations are rife with corruption, rabidly anti-American, and heavily under the influence of regimes headed by tyrants. The closer we get to world government, the farther we get from libertarian ideals.

Moving the Ball

If politics were football, then I would say that the Clinton and Bush years saw little forward progress for either side. Clinton might have moved the ball toward the progressives' goal line, but only a few yards. I would say the same about President Bush--he moved the ball a few yards in the direction of the progressives' goal line.

I would not necessarily extrapolate the recent past into the future. My concern is that in 2009 the progressives will pick up really big yardage. In that case, the state will take another quantum leap in size.


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20 Comments

Arnold The Non-Libertarian Warmonger Criticizes The Demo's For Being Less Into Murder Than He
Libertarians don't support the racist occupation of Iraq.
Arnold does, not to mention he'd support occupying Canada, France, Great Britain (now that Blair's gone) and any other liberal humanist country, right Benedict Arnold?

Libertarians, vote socialist
Unfortunately, nearly everyone wants to control someone else's life other than their own.

Frogs supposidly will try to jump out of boiling water, but will let himself cook if you slowly raise the temperature.

Libertarians should vote for the most socialists candidates they can elect.

When the socialists are a majority, people will experience the sharp increase in socialism and may try to jump. (Some countries are returning from the brink.)

And the opposition party will better focus on defeating the opposition than acquiring more power.

Socialism versus freedom
Great Britain was a basket case when Margaret Thatcher became prime minister. Her defeat of the all powerful unions and liberalization of the economy brought the country back from the abyss. In the sixties France had a much higher per capita income than Great Britain. Today the reverse is the case. Unfortunately the left still controls the educational and medical systems, which are, you guessed it, truly rotten.

The French and the Germans are finally waking up and smelling the coffee. Both those countries have elected leaders who promise some economic liberalization. But old habits die hard, and success is far from guaranteed.

Think of the enormous progress the world has made since Ronald Reagan became president. The Democrats want to throw all that away and go back to the economic stagnation and foreign policy paralysis of the 70's.

Civilizing the savage desert tribes of the Middle East is proving difficult. What do you expect? It's tedious, but it has to be done. Jefferson faced a similar situation when he sent the Navy after the Barbary pirates. The eradication of Muslim piracy took decades. The eradication of Islamic terrorism may take just as long.

The Democrats are like spoiled children. They expect everything good to come easily and at someone else’s expense. Spinoza’s observation that all things excellent are as difficult as they are rare is utterly foreign to them.


Beatles on a Broken Record
What a worn out routine...

Like?
The Democrats are like spoiled children.

Like?

Good for business
While it pains me to the core to see America slipping back into European-style welfare state socialism, the development will be good for the offshore wealth planning business as well as the Asian global financial hubs such as Singapore, Hong Kong and Dubai. Since it looks like American libertarians are already resigned to this fate, my advice is to get yourselves a piece of the flip-side action.

I know a European-style welfare state won't sit well with a lot of Americans, who aren't garden-variety narcissists like the liberals who champion big government. On the other hand, the idea that the feds can provide things like customer-friendly universal health care rests on the economic ignorance prevailing in the general populace. So maybe the article is correct that the folks will just have to discover the truth the hard way. However, unlike bulbman, the article misses a key truth: Government is easy to grow but nearly impossible to prune back.

liberals for a free lunch
O often ask liberals I meet why they think it's right and proper that all those people in the States with a net value of one million dollars(and there's lots of them)should have free medical care. Why the old man kennedy and warren buffet should too, and also social security to boot? Usually they just answer, well it's the right and just thing to do. I think Americans have been brain washed by all the left wing teachers, and profs, and politicians for so long that the fight for a free society is already lost. I advocate a council of dispair, and am even divesting more and more from my investments in the States. Good experiment at first, too bad they gave it up.

reminds of AGW activists
when the data doesn't match your model, the correct thing to do is to adjust the data.

Unfortunately, nearly everyone wants to control someone else's life other than their own.
"Unfortunately, nearly everyone wants to control someone else's life other than their own."


-- How true!, that rather than 'the love of money' seems to be the source of all that is evil in this world. Communists and socialists want to take away everyone's property, islamic terrorists want to force Allah down every one's throat. ... etc.,etc. When you think about it, money is only a means to control other people -- that's why people love it.


"Libertarians should vote for the most socialists candidates they can elect."


-- Very bad idea. Germans voted for the 'National Socialists' in 1932 and look what happened to them. I predict as soon as the 'progressives' take control, they will institute a new 'Fairness Doctrine' and outlaw the 1st Ammendment for everyone except themselves.

Medicine somtimes tastes bad.
How likely will Germany ever repeat its mistake?

It will probably take a few generations for them to forget and try again.

More people need to start calling out socialism when then see it.

Von Mises gave us a solid definition. Using that definition the USA is well on its way to socialism with the help of both parties.

Keep on the sunny side
Well, let's don't be too gloomy. Since Ronald Reagan got elected the economy has been de-regulated and taxes have been lowered*. Bill Clinton followed economic policies that were more Republican than Democratic. Clinton was the right kind of wonk. He threw sops to the left - he was a master of feeling folk's pain - but he had a healthy respect for the bond market, and he deserves a lot of credit for his support of free trade. The Cato Institute likes Clinton a lot better than it does Bush II.

Arnold Kling gives Dubya a passing grade on the economy. We recovered quickly from the dotcom bubble and the terrorist attacks. Call it supply-side or call it Keynes, the president and the Fed clearly did something right.

Among major current presidential candidates Rudy Giuliani sounds the most libertarian on economics. For one thing he is boldly pro-free trade just as politicians on both sides of the aisle are playing to the public's misguided protectionist instincts.

*I hate to say it because I hate his guts, but Jimmy Carter deserves some credit for starting the ball rolling by de-regulating the airline and trucking industries.

As for the "revolutionaries" I think they are too incompetent to take over. I just can't take the Democratic leadership seriously, and the people to their left are America hating fools and knaves who have never done an honest day's work in their lives.

Crabs
Another aspect of human nature must be controlled by each individual if liberty is to progress.

I have heard that crabbers will cover the bucket for one crab but not for more. One crab will climb out. The second crab will pull the first down and vice verse. No cover needed.

Too many people try to climb on each other to get ahead or try to pull down others who are successful.

Socialist politicians exploit this envy to divide those who want to work hard and those who what a hand out.

In a previous article, many seem to believe Christianity is socialistic. There are those members of various Christian churches who believe they should use the state to do God's work. The inconsistency is, of course, is that force must be used to extract those resources.
A more sophisticated interpretation of Jesus's second commandment to love your neighbor as yourself is to show him respect by helping your neighbor out of the bucket and he will then pull you up as well.
This touches many aspects of modern US culture ridiculed by socialists such as standards of right and wrong.
So until enough individuals can achieve such a state of development, trying to follow the Golden Rule, and voluntarily collaborating for the benefits of both, (sounds like a free market?), socialists will continue to prevail.

u mentioned taxes
Here are the business tax rates in a few countries: Japan 40%; UK 30%; swiss 21%; Singapore 20%; Hongkong 17%; Irlend 12.5%. What's it in the US again about 35% I think. The agrument that there really are no business taxes because they just pass it on to consumers is also crap. If it were so, then new start-ups, and companies moving to low-tax places wouldn't be taking place. So how to remain on the sunny side when the US is making itself a less attrctive place to start and do business?

Business taxes
Good point Dietmar. They can't pass the tax along so easily in a global economy.

Sweden for crying out loud doesn't have a corporate tax or a capital gains tax. Even the Swedes understand that if you want a welfare state you have to have a cow to milk.

As Arnold K. has said, the struggle between individualism and collectivism is never-ending. The irony is that the reactionary party is called "progressive", while the party which is on the side of human progress is called "conservative".



Cows
With no or low captial gains taxes and tax free bonds, those in the USA who are wealthy can pay little or no taxes other than sales taxes.

Earned income taxs rates are for those suckers who sell their time.

Warren Buffet complaining his tax rate is lower than his secretary could fix that by donating to the government.

he's like a poorly written auto-bot
spews one of two or three messages when certain key-words are seen.

Tax-free bonds
Tax-free bonds are only partly tax-free. They pay a lower rate of interest than do regular bonds, so there is a sort of indirect tax (a tax worth paying for those in the higher income tax brackets).

Tax cuts have resulted in people in the lower part of the income scale paying little or no income tax. Most of the income tax is payed by the so-called rich. A problem with this is that people are always willing to vote for higher taxes for people better off than themselves. Eventually taxes get so high that capital formation is hindered. They seem to have that problem in France and Germany and some other countries.

Better would be a flat tax or a national sales tax with rebates for the poor. No?


taxes
Comsuption taxes are better than income, capitol, and dividend taxes. Some coutries actually lower their income tax rates, and raise the sales taxes. This way everybody pays something, instead of having all the exemptions for the income tax scams. But liberals will lament; where will all the guys at the IRS work then? What about all the tax lawyers, consultants, and accountants? Even if a country has any income taxes at all, the flat rate plan is better. Several countries have implemented it in recent years, with great success.

what about?
Why not just say that all interactions should be voluntary? Everything is covered under that already.

No Way
"Libertarians should vote for the most socialists [sic] candidates they can elect."
That's like saying a bullet in the head is a good cure for a headache.
Having socialists in office will hurt people for whatever length of time they are in office, and far into the future. There is no guarantee that they'll be voted out of office, no guarantee that they won't foment riots, declare martial law, and suspend elections permanently, as has happened in so many other countries.

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