Bubble, Oil, Dems In Trouble

With the Iraqi constitutional committee sitting out a sandstorm, it's a good time to look at the big economic picture back here in the United States. It's pretty grim for working Americans. We've got a housing bubble beginning to deflate, oil prices soaring, consumer savings at zero, commuting times expanding and massive deficits owed to the Chinese.

The bottom line is that economic conditions are so changed and so negative that to win in 2008, Dems will have to abandon the economic engine that defined the post-war American economy. The 2004 strategy of declaring massive problems while offering a smattering of half-measures only made Dems look insincere and confused. Now it is time for decisive action.

First off, Dems need a plan that can either divert the speculative excess of the housing bubble into a sustainable, equitable engine of growth, or a plan that can clean up after the economy collapses. Such a strategy will have to be based on a major new domestic market, and my leading contender is...housing. But not suburban housing and uncontrolled sprawl. That experiment failed and sprawl is rotting our communities; polluting our air, water and food; and sending our state governments into major deficits. The federal transportation and housing policies that underwrite sprawl need to be changed nationwide to facilitate smarter housing markets that build communities designed for people and families, not for auto sales.

Second, we need to deal with our dependence on oil. Oil hit another trading high today, approach $64 as I write this. Threats in the Middle East, ancient refining capacity in the United States and rising Asian demand for energy make this price an unnecessary tax on the American consumer. Here, we must be bolder than in 2004 where the Democratic Party offered to reduce oil consumption over 20 years by only 20 percent. As I've mentioned many times before, we can get completely off oil as a transportation fuel in 25 years and it is in our national security interest to do so. The faster America accepts this challenge, the faster innovative American technology, products and services can capture the enormous market in Asia for oil-free transportation.

Third, we need to end the post-war experiment with employer-sponsored health care. This experiment is already failing, with the U.S. government now the largest health care provider in the nation, covering tens of millions of Americans through Medicaid, Medicare and veterans' programs. General Motors and Ford have already announced they can no longer afford this system that adds $1,500 to the price of every vehicle they produce. Toyota chose to build its newest plant in Ontario rather than Alabama because they will not have to pay health care costs. Health care is not a marketplace, and the government is better suited to manage costs and spread risk.

Fourth, we need to create an entirely new global market by transforming our tax code. Right now, we tax income and wages for the vast majority of our federal revenue and subsidize resource extraction. By shifting the tax burden off wages and onto waste—the inefficient use of energy, material resources and natural capital—the United States can give birth to a new global market in what is known as ecosystem services. Already, the Kyoto Protocol has created the first version of such a market in the form of carbon trading, which could alone top $1 trillion per year. Hydrological service providers such as upstream forests and downstream wetlands are also being studied as it becomes clear that a sustainable global economy is fundamentally dependent on a healthy and stable environment.

Taken together, the result will be the long-sought after shift to the innovation economy. The post-war consumption economy, Democrats can leave to the GOP to defend.

Views expressed on this page are those of the authors and not necessarily those of Campaign for America's Future or Institute for America's Future