Santa Claus has Left the Left

Monty Pelerin
In an editorial today entitled "The Dead Enders," the Wall Street Journal speculated about the Democrat's unwillingness to extend the Bush tax cuts:

... the President is still holding out against even a temporary extension of the 2001 and 2003 tax rates. Republicans won 63 House seats running against those tax increases, but Mr. Obama still seems under the spell of the dead enders led by soon-to-be-former House Speaker Nancy Pelosi.

In less than a month, failure to act will produce immediate and dramatic results seen in increased withholding. Furthermore:

Capital gains and dividend tax rates will climb to 20% and 39.6%, respectively, from 15%, and the top two income tax rates will climb to 38% and 41% (including deduction phaseouts), from 33% and 35%. The typical family with an income between $40,000 and $75,000 a year will pay as much as $2,000 more in 2011, as the 10% tax rate bracket and the $1,000 per child tax credit vanish.

This strategy seems to be short-sighted and somewhat suicidal, setting them up for another debacle in the 2012 election. Why is this issue so important that they would be willing to risk losing another election?

The simple answer is because the Democrats have no choice. This issue represents more than the next election; it represents the political survival of the party. As explained in Why the Democratic Party Cannot Survive, the party has no governing strategy:

Democrat principles are based on government being a force for good. Government is presumed necessary to help individuals and ensure "social justice" (a term impossible to reasonably define). This philosophy leads to bigger government, as in more spending, more taxes, and more regulatory control. For Democrats, the keyword is "more," as in more government.

The party developed successfully based on an election strategy of "buying votes," otherwise known as the "vote for me and I will give you free ice cream" strategy. Since the 1930s they have depended upon a growing government to enable them to pass out goodies to targeted voter groups assembled piecemeal based on their willingness to put Democrats into power. As a result:

They are dependent upon a diverse, disjointed collection of groups pieced together over the years by ad hoc, quid pro quo tactics. Holding a disparate coalition together was tenuous when benefits were available. Holding them together when benefits are being cut is unlikely.

Increased taxes and increased spending is the ice cream that enabled the Democrats to become a successful political party (successful in the sense that they could win/"buy" elections).

When viewed in this perspective, their apparent short-term stupidity appears less so. In reality, it is a last-stand fight for the continued existence of the party.

What is pathetic is the seeming inability for most Democrats to understand that the world and the country have changed. Governments based on the social welfare model grew for the past 80 years to the point where they are all insolvent. All are going to collapse or downsize over the next decade.

Such a future leaves nothing for a party that depends on a constantly increasing supply of goodies with which to hold together its motley base. In a world of shrinking government, there are only Grinches and no Santa Claus. To survive they will need a governing philosophy rather than a vote-buying strategy.


Monty Pelerin at www.economicnoise.com


In an editorial today entitled "The Dead Enders," the Wall Street Journal speculated about the Democrat's unwillingness to extend the Bush tax cuts:

... the President is still holding out against even a temporary extension of the 2001 and 2003 tax rates. Republicans won 63 House seats running against those tax increases, but Mr. Obama still seems under the spell of the dead enders led by soon-to-be-former House Speaker Nancy Pelosi.

In less than a month, failure to act will produce immediate and dramatic results seen in increased withholding. Furthermore:

Capital gains and dividend tax rates will climb to 20% and 39.6%, respectively, from 15%, and the top two income tax rates will climb to 38% and 41% (including deduction phaseouts), from 33% and 35%. The typical family with an income between $40,000 and $75,000 a year will pay as much as $2,000 more in 2011, as the 10% tax rate bracket and the $1,000 per child tax credit vanish.

This strategy seems to be short-sighted and somewhat suicidal, setting them up for another debacle in the 2012 election. Why is this issue so important that they would be willing to risk losing another election?

The simple answer is because the Democrats have no choice. This issue represents more than the next election; it represents the political survival of the party. As explained in Why the Democratic Party Cannot Survive, the party has no governing strategy:

Democrat principles are based on government being a force for good. Government is presumed necessary to help individuals and ensure "social justice" (a term impossible to reasonably define). This philosophy leads to bigger government, as in more spending, more taxes, and more regulatory control. For Democrats, the keyword is "more," as in more government.

The party developed successfully based on an election strategy of "buying votes," otherwise known as the "vote for me and I will give you free ice cream" strategy. Since the 1930s they have depended upon a growing government to enable them to pass out goodies to targeted voter groups assembled piecemeal based on their willingness to put Democrats into power. As a result:

They are dependent upon a diverse, disjointed collection of groups pieced together over the years by ad hoc, quid pro quo tactics. Holding a disparate coalition together was tenuous when benefits were available. Holding them together when benefits are being cut is unlikely.

Increased taxes and increased spending is the ice cream that enabled the Democrats to become a successful political party (successful in the sense that they could win/"buy" elections).

When viewed in this perspective, their apparent short-term stupidity appears less so. In reality, it is a last-stand fight for the continued existence of the party.

What is pathetic is the seeming inability for most Democrats to understand that the world and the country have changed. Governments based on the social welfare model grew for the past 80 years to the point where they are all insolvent. All are going to collapse or downsize over the next decade.

Such a future leaves nothing for a party that depends on a constantly increasing supply of goodies with which to hold together its motley base. In a world of shrinking government, there are only Grinches and no Santa Claus. To survive they will need a governing philosophy rather than a vote-buying strategy.


Monty Pelerin at www.economicnoise.com