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21 November 2006

The Democrats' Agenda

Senator Schumer has announced his party's domestic legislative agenda. To take control of congress, the party's strategy (managed by Schumer and Rahm Emanuel) was to emphasize Iraq while being as un-scary as possible on other issues. This agenda continues that theme - nothing scary.

No. 1 is a revision to Medicare to allow the government to negotiate the prices for prescription drugs. This is a classic "common-sense" issue where Republicans were vulnerable since they obviously let the pharmaceutical industry call the shots in writing legislation. Sure, if drug companies can't make a fair profit then there will be little investment in R&D, but we're far from that point. The Medicare drug benefit provides a natural windfall for the industry by greatly expanding its market, so it's only sensible that the industry be asked to live with a smaller mark-up per unit.

The other big item is an increase in the national minimum wage. This is also pretty harmless. Conservatives always argue that this will cost some low-wage earners their jobs, and this is logically inescapable. Particularly now, with a very elastic low-end labor market due to immigration, reduced employment is likely (and then throw in the contraction of the home-construction business). But most people are willing to trade-off some employment for a better wage, and the Democrats are on the winning side of this argument.

Not so harmless is the proposal to expand tuition support. The cost of tuition is an outrage, granted, and I for one wouldn't mind some relief, but additional subsidies are only going to make things worse. Does anyone really think we have a problem in this country from too few young people going to college? I think the problem is that the quality of a college education has fallen, not that there aren't enough college grads. Tuition support will increase the number of college attendees (thus boosting tuitions by increasing demand) and lower the quality of education (due to increased supply strains).

What we need to do is figure out a way to reduce the demand for a college education. One way would be via the use of intelligence and personality testing, so that employers could identify worthy applicants without looking at a college transcript. Nowadays employers use college as a measure of the intelligence and maturity of prospective hires - no one really expects them to have actually learned anything of value in those 4 years. By the use of testing, we can all avoid the horrifically expensive charade we call a "college education".

At any rate, this is at least aimed at the middle class, and so I have to give the Dems credit for trying to directly reward the people who elected them (nationally, elections are all about the white middle class - if the Dems can win them, or come close, they win).

The final item on Schumer's list is setting goals for 25% of vehicles offered for sale to have flexible-fuel capabilities by 2010 and other "energy-independence" programs. Nothing too radical here - nice idea, devil's in the details, and all that.

Overall, Schumer is keeping to a core middle-class oriented agenda. We can only hope this holds, and the Democratic leadership doesn't fall for Bush's bi-partisan siren song of "compehensive immigration reform." For that will be the death knell of the middle class - and the Democratic congress.


Anonymous Anonymous said...

Negotiating for lower RX prices is a dangerous plan- it backfired in Italy and ruined the industry- companies pulled out- loss of employment, etc.
Price controls may not be the answer.

November 21, 2006 2:35 PM  
Blogger ziel said...

But we are not Italy. We're a very pro-business nation - I don't think there's much chance negotiated prices would get so tight as to endanger the industry. Wall Street will start screaming early, and the pressure will be tremendous to let prices remain strong. I just can't see subsidizing expenditures without exerting some control on what's paid.

Though I have to admit, regarding the college tuition issue, there's a place where price controls would be called for - it's hardly a real industry. But could you imagine the hue and cry if colleges were forced to cut their tuitions?

November 21, 2006 7:31 PM  
Blogger Tino_G said...


There is no magical threshold. There is a continuum of drugs that the companies can decide to research in or not. Making the profitability of drugs lower leads to fewer drugs.

The average profitabillity of the industry has NOTHING to do with wether or not we will get fewer drugs. What is frustraiting is that the bad effects are invisible.

Don’t use the word “common sense” when you are lacking in economic sense.

November 22, 2006 3:37 AM  
Anonymous Anonymous said...

The government is just another purchaser of goods from the drug companies. The real "restraint" on free trade is the artificial law preventing the government from bargaining.

The price of college tuition is scandalous, and the government is showing now signs of doing anything. In fact, they are protecting the college industry by recently exempting them from certain anti-trust laws.

November 22, 2006 3:36 PM  
Anonymous Anonymous said...

Problem with college is it's just a sorting mechanism for dividing people into tracks. Before the number of colleges blew up, a college degree meant Harvard or Yale and conferred a big advantage. Now Harvard and Yale mean Harvard and Yale, and still confer a big advantage, but the college diploma is what the high school diploma used to be...but the midle class has to blow loads of money on college to maintain their position.

Price controls aren't a bad idea here.

November 24, 2006 11:25 PM  

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