The Secretary of Labor, Hilda Solis, visited Capitol Hill last week and claimed that the unemployment rate will increase if Congress fails to extend the eligibility period for federal unemployment benefits. My first reaction to this Orwellian assertion was a quiet chuckle. Then it dawned on me that most Democrats will believe this nonsense. These are, after all, people who believed that health care would be made cheaper by a law that increases demand for medical services while reducing the supply of health care providers. Most would agree with the claim, made by journalist-cum-cheerleader Jonathan Alter, that Obama’s economic stimulus package “prevented another Great Depression.” I realized, in other words, that ignorance about economics is so pervasive among Democrats that it is less funny than dangerous.
That Democrats are generally illiterate about basic economics is not a matter of mere conjecture. In 2010, Daniel B. Klein and Zeljka Buturovic analyzed answers provided by a random sample of 4,835 Americans to a list of eight questions about economics. The results, which noted the party affiliation of the respondents, were not flattering to our friends on the left. “Those responding Democratic averaged 4.59 incorrect answers. Republicans averaged 1.61 incorrect, and Libertarians 1.26 incorrect.” And these were not arcane questions. They involved elementary concepts, like the effect of price controls, covered in any Econ 101 course taught at the lowliest community college and even some of the better high schools. Yet the average Democrat respondent got nearly 60 percent of the answers wrong.
Democrat cluelessness notwithstanding, the laws of supply and demand continue to operate. In fact, even the Obama administration has produced a report showing that “reform” will increase health care costs faster than would have been the case in its absence. The Centers for Medicare & Medicaid Services (CMS) recently forecast that “Total spending is projected to grow annually by 5.8 percent under Mr. Obama’s Affordable Care Act…. Without the ACA, spending would grow at a slightly slower rate of 5.7 percent annually.” Survey after survey has shown that one of the primary benefits Americans wanted from health reform was lower costs. Due to Democrat illiteracy in economics, however, Congress has produced a “reform” law that actually makes medical care moreexpensive.
Even if Obamacare didn’t ignore the laws of supply and demand, a rudimentary understanding of economics should have alerted any educated observer that it was going to be disastrous for the country because it creates perverse incentives that discourage job growth. The law arbitrarily increases the cost of hiring and keeping employees. George Will recently provided an example of how this works, citing a California-based business called CKE Restaurants. Obamacare will add about $18 million to its costs: “Obamacare must mean fewer restaurants. And therefore fewer jobs. Each restaurant creates, on average, 25 jobs — and as much as 3.5 times that number of jobs in the community (CKE spends about $1 billion a year on food and paper products, $175 million on advertising, $33 million on maintenance, etc.).”