Despite all his talk of “change,” Sen. Barack Obama’s policy proposals are hardly new. Many are a blast from the past, coming right out of the disco era.
A prime example is his plan to raise taxes. Obama has expressed support for rolling back part of the Bush tax cuts, increasing the rate on capital gains, and instituting a windfall profit tax on large companies.
Democrats were largely responsible for the absurdly high tax rates of the 1970s, including a 70 percent rate on the top income bracket. What’d taxpayers back then get for their money? A recession. Unemployment got as high as 8.8 percent — four points higher than the current rate. And inflation peaked at 13.3 percent.
Retro-thinking is also evident in Obama’s embrace of protectionism as a solution to unemployment. Obama blames trade with foreign countries for the economy’s decline, and promises to scale back international trade agreements like NAFTA and CAFTA.
In his 1979 State of the Union, President Jimmy Carter expressed just such a sentiment when he called on Congress “protect American jobs threatened by unfair trade.”
The truth is that, at most, increased foreign trade has a marginal effect on unemployment. Bureau of Labor Statistics data show that there has been an average net gain of two million jobs every year over the last 15 years, and that foreign trade is responsible for less than three percent of American job losses.
So, like lava lamps and leisure suits, blaming free trade for job losses is nothing more than a tasteless throwback to the 1970s.
It gets worse. Another policy idea from the 1970s that’s regaining popularity is price controls.
Throughout the 1970s — first in response to the OPEC oil embargo, and later in response to the Iranian Revolution — the U.S. government instituted price controls on oil. The result? Severe rationing and long lines at gas stations.
Despite these realities, Obama is pushing for price controls — this time for prescription drugs.
If elected, Obama has pledged that he’ll legalize the importation of prescription drugs from countries where price controls are imposed. Unfortunately, such a move would also import foreign price controls.
Worldwide, there is only a limited amount of drugs that can be supplied at price-controlled levels. Europeans and Canadians are able to get quality drugs at lower prices only because the wallets of American consumers fuel research and development.
It can take over a billion dollars and years of testing to produce a viable new drug. Pharmaceutical companies set prices to ensure they can recoup that cost. Requiring artificially lower prices will put many into the red, and discourage additional investment into new cures. Tomorrow’s life-saving medicines won’t just be scarce. They simply won’t exist.
If Obama really wants to deliver “change” he should stop touting proposals already proven to fail. Nostalgia for the 1970s makes for a good Halloween costume — not sound public policy.
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