Not Yet Ready for a Welfare State

Roadblocks. That's what Barack Obama has been encountering on the audacious path toward a European-style welfare state he has set out in his budget and other proposals.

He continues to insist that America cannot enjoy real prosperity again without higher taxes on high earners, a government health insurance program, a cap-and-trade program that amounts to a tax on energy and the effective abolition of secret ballots in unionization elections. The fact that there are large Democratic majorities in both houses of Congress made it seem that the path was open. But roadblocks have started to appear.

One has been set up by the Senate Budget Committee. Chairman Kent Conrad of North Dakota, whose concern about budget deficits has persisted even though we no longer have a Republican president, has apparently decided that cap-and-trade is off the table for this year. But calculation as well as conviction probably lay behind his decision.

Cap-and-trade would impose higher costs on coal-fired electric power plants. In states where most electricity is produced from coal, this would mean higher utility bills for consumers and industrial users. By my count, there are 25 Democratic senators from states that get 60 percent or more of their electricity from coal (in North Dakota, the figure is 93 percent). Conrad needs to hold all but eight of those senators to be sure of the 50 votes he needs for the budget resolution. So you can see why he was ready to ditch cap-and-trade, which, in any case, addresses a problem--climate change--whose purported evil effects are decades away.

Ditching cap-and-trade, however, may set up another roadblock, since the money the government was going to take out of the private-sector economy was slated for Obama's middle-class tax cut.

Setting up a welfare state is easier in European political systems, with their centralized governments and rigid parliamentary party discipline.

Another roadblock was erected, in concrete, by Republican Sen. Arlen Specter when he announced this week that he would not vote, as he did in the last Congress, to advance the unions' card check bill. It was easy enough to support it and bask in approval from Pennsylvania union leaders when it was clear George W. Bush would veto the measure. But now that we have a president who would sign it, Specter took another look.

Card check would effectively abolish the secret ballot in unionization elections and impose unions on employers when union thugs--er, activists--persuaded a majority of workers to sign cards backing the union. And it would impose mandatory federal arbitration after 120 days of bargaining, so that for the first time federal arbitrators would set wages and working conditions without any guidelines.

With Specter firmly committed, Republicans now have 41 Senate votes against card check, enough to maintain a filibuster.

Moreover, many Democratic senators--as many as 15, according to one count--have expressed qualms about card check. They've been hearing loud and clear from small and large businesses in their states that card check would be a disaster. And for any Democrat, it's a little hard to explain what's wrong about the secret ballot.

Other parts of the Obama program have, so far, not encountered resistance. Higher taxes on high earners are scheduled to come into effect in 2010 without a vote, though high-ranking Democrats like House Majority Leader Steny Hoyer and Ways and Means Chairman Charles Rangel have expressed doubts about the Obama proposal to reduce the charitable deduction for high earners. If you're a university president courting big donors, you don't want to see part of their contributions diverted to the U.S. Treasury.

The prospects for national health insurance look pretty favorable. The various healthcare lobbies that would be affected are sitting at the bargaining table, seeking to avoid destruction of their business models and advancing provisions that would give them an advantage over competitors. But then at this stage in Bill Clinton's first term, the healthcare lobbies were sidling up to the table, too--or as close to it as Hillary Clinton would let them get.

The problem on healthcare, as on cap-and-trade and card check, is that this is a big and complicated country. America doesn't have one energy system, one employee relations system, one healthcare insurance and delivery system--it has many. Members of Congress from different states and congressional districts have constituents who are very differently situated, and those differences cut across party lines.

Democrats from coal states like North Dakota see energy issues differently from Democrats from coal-free states like California. Democrats from heavily unionized Michigan see labor issues differently from Democrats from nonunionized Arkansas. And let's not get started setting out the regional differences in healthcare.

Setting up a welfare state is easier in European political systems, with their centralized governments and rigid parliamentary party discipline. American welfare state programs like Social Security and Medicare were set up and expanded step by step by very shrewd strategists operating over many years. Obama has the audacity to hope that he can jam things through with sizeable Democratic majorities at a time of economic crisis and uncertainty. But he has quickly encountered some roadblocks--and may yet encounter some more.

Michael Barone is a resident fellow at AEI.

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