Tax increases. The Bush tax
cuts expire in 2010, and any chance that they'll be made permanent will
vanish with a Democratic Congress. The question is whether Democrats
will try to raise taxes even sooner. Most Democrats voted against the
Bush tax cuts, but this week Ms. Pelosi said on CNBC's "Kudlow &
Co." that "Democrats like tax cuts. We support middle-class tax cuts."
The same isn't true, however, for
the "investor" tax cuts of 2003 that coincided with the acceleration of
the current expansion. Ms. Pelosi says reversing these tax cuts "at the
high end" would be "an earlier resort." This would raise the top income
and dividend tax rate back to 39.6% from 35%, and the capital-gains
rate back to 20% from 15%, substantially raising the cost of new
investment in the United States. Economist John Rutledge estimates that
raising the dividend rate alone would reduce the value of the S&P
500 stocks by between 5% and 8.5%, roughly a $500 to $700 billion
decline in the wealth of the 52% of American households that own stock.
"Paygo budgeting."
President Bush would no doubt promise to veto any direct tax increase,
but having the power of the purse would give Democrats plenty of
leverage. What if they framed the political choice as a tax increase on
"the rich" versus funding the war on terror?
Democrats have also pledged to
restore so-called pay-as-you-go budget rules, which sound like a
restraint on budget deficits but in practice restrain only tax cuts.
They don't apply to the growth of current entitlement programs or to
domestic discretionary spending, only to tax cuts or new entitlements.
This formula would probably take us back to the 1980s, when Democrats
insisted on higher domestic spending while fighting Ronald Reagan's
increases in defense spending.
Health-care regulation. Big
Pharma and private insurers, watch out. Michigan's John Dingell, who
would run the Energy and Commerce Committee, has co-sponsored the
"Patients Before Profits Act" that would gut funding for the new
Medicare Advantage plans that are proving so popular with seniors.
Instead, he and the other Democrats who run health-care panels want to
direct all seniors into a single government-run Medicare drug plan.
Another proposal from top Democrats, the Medicare for All Act, would
make all Americans, of any age, eligible for Medicare and pay for it
with a new 1.7% payroll tax on workers and 7% on employers.
Ms. Pelosi has also pledged to
pass, in her first 100 hours as Speaker, legislation to require the
government to "negotiate lower drug prices." That's a euphemism for
imposing price controls on new medicines, which can take as much as
$800 million in research and development to bring to market. The actor
Michael J. Fox is getting headlines for his ads in favor of Democrats
who support stem-cell research, but price controls would do far more to
delay the introduction of new treatments for Alzheimer's, Parkinson's
or cancer.
The union label. AFL-CIO
headquarters would be rocking with hope once again. A job-killing hike
in the minimum wage, to $7.25 from $5.15, would whisk through Congress,
and we'd expect that Mr. Bush would sign it.
But another top priority for
Democrats is the Employee Free Choice Act, which has at least 215
co-sponsors in the House and 44 in the Senate. This would allow labor
to turn workplaces into union shops without an election or secret
ballot. Unions would merely have to gather signatures from a majority
of workers at a work site, which means labor organizers could
strong-arm employees who opposed such a petition. This would almost
surely pass the House.
Democrats have also moved well to
the left on trade since the Bill Clinton-Nafta era. Mr. Bush's
trade-promotion authority, allowing up-or-down votes on trade deals
without amendment, expires next July, and there's little chance House
Democrats would extend it. The entire Democratic leadership opposed
free trade with tiny Oman and with Central America, so deals now in the
works with Vietnam and other countries would also be long shots. Sorry,
Robert Rubin.
- Energy. The Pelosi
Democrats favor a "windfall" profits tax on oil companies and a virtual
moratorium on drilling for more domestic oil in Alaska and on the outer
continental shelf (where the U.S. may have more energy than Saudi
Arabia). These policies would make the U.S. more dependent on foreign
oil. There would also be an effort to pass new, and higher,
fuel-mileage mandates, which would make things tougher on what's left
of Detroit. And lobbying would begin for the U.S. to sign the Kyoto
Protocol on global warming and to subsidize, even more than Republicans
already have, ethanol and other "alternative" fuels.