In recent weeks, Illinois Sen. Barack Obama has done something few Democratic presidential candidates have ever done: point out the fiscal nightmare that looms when 78 million baby boomers begin to retire in 2008, inevitably causing Social Security and Medicare costs to explode.
Obama's initial specific reform proposal was to subject all annual individual income to the 6 percent Social Security tax instead of only the first $97,500. But he also said “everything was on the table” – presumably including gradually raising the retirement age, tweaking the formula that usually increases Social Security payments by more than inflation and limiting payments to the wealthy.
We think it's premature to endorse any specifics and we are leery of the fact that Obama's first impulse is to sharply raise taxes. We also regret that President George W. Bush's plan for a partial privatization of Social Security is considered politically radioactive.
Nevertheless, Obama's willingness to admit the system is broken could not be more welcome. Democrats' denial on entitlements has made it impossible to cut the sort of grand bipartisan bargain the nation desperately needs.
Unfortunately, with Obama we see candor one day, pander the next. His comments on free trade this week went from his previous skepticism to something bordering on demagoguery.
In a speech in Iowa to a group of auto workers, Obama trashed the Democratic front-runner – New York Sen. Hillary Clinton – because her husband shepherded the North American Free Trade Agreement to passage in 1993. Obama repeated union claims that the treaty had caused a net loss of U.S. jobs and depressed wages – claims virtually all mainstream economists dismiss out of hand.
In fact, U.S. unemployment has been relatively low since 1993, and U.S. manufacturing – often cited as NAFTA victim No. 1 – is healthier than ever. “The United States makes more manufactured goods today than at any time in history, as measured by the dollar value of production adjusted for inflation – three times as much as in the mid-1950s, the supposed heyday of American industry,” The Washington Post reported in September. “The United States is the largest manufacturing economy by far.”
So why are there only 14 million U.S. manufacturing jobs now versus 19 million in the late 1970s? Because U.S. firms are more efficient than ever – not because of competition from Mexico.
An honest Democrat would point this out. (Two who used to do so were Bill Clinton and Al Gore.) Instead, the Democrats who would be president would all rather just go along with two union fantasies: that globalization can be reversed and that protectionism is good for the economy.
Thanks in great part to burgeoning global trade, the United States is completing a quarter-century of nearly continuous economic gains – a span of success with few precedents. Given this fact, the rhetoric of Obama and other Democrats isn't just baffling. It's scary. Fear for the future – and your 401(k) – if it ever is translated into policy.
