College students at the University and across the nation played a defining role in President Obama's 2008 electoral victory. Sixty-six percent of voters between the ages of 18 and 29 supported Obama in that election. Exit polls indicated that 45 percent of voters in that demographic identified themselves as Democrats, compared to the 26 percent who described themselves as Republican.
Unfortunately for that demographic, an analysis of recent Democratic policies revealed that Democratic legislation has and will continue to have a decidedly negative impact on young American adults. Profligate spending, the healthcare legislation and minimum wage enactments all harm, in the aggregate, the interests of citizens under 30 years old.
Deficit spending increases the nation's debt, which will ultimately be repaid by the younger generations. Democrat's entitlement expansion, stimulus expenditures and massive war spending all contribute to a federal debt expected to top 100 percent of U.S. GDP by 2012. Greece's current debt, in comparison, is 115 percent of its GDP.\nA significant percentage of debt expansion is driven by entitlement spending. Currently, social security and Medicare draw direct payments from young working individuals who are not yet entitled to these programs. And, in all likelihood, younger citizens will likely never enjoy the fruits of these programs; according to their trustees, Medicare will be insolvent by 2017 and social security by 2037.
The health care legislation poses a similar dilemma. Tenuous sources of funding suggest young adults will continue to pay for older generations' benefits but will never receive these same benefits once they reach that age demographic. Apart from this general debt issue, however, specific provisions of Obamacare will drastically increase health insurance premiums for young adults.
University Democrats President Adam Gillenwater said the healthcare legislation benefits young adults in several ways. It "allows individuals to remain on their parents' plan until age 26," he said, and "establishes health insurance exchanges which promise to increase competition and decrease costs, making it easier for young adults to choose an affordable policy that meets their individual needs once they turn 26." It is debatable, however, whether encouraging financial dependence among adults in their mid-20s is desirable.
A study conducted by the Rand Corporation casts doubt on the assertion that the legislation will decrease insurance costs. According to the study, young adults who purchase private insurance will see a 17-percent premium increase once the new healthcare provisions take effect in 2014.
Currently, insurers frequently charge older customers seven times that which they charge younger customers. These prices reflect the high cost of insuring the elderly compared to the relatively low cost of insuring the young and healthy. The healthcare legislation will limit this age-based cost ratio to 3-1 - in effect forcing younger consumers to directly subsidize older ones
In a free market, unhealthy individuals looking to purchase insurance typically pay higher rates than their healthy counterparts because it costs more to insure them. Section 2701 of the bill (H.R. 3590), however, prohibits insurers from varying rates on the basis of customer health.
Since older people tend to suffer serious illness more frequently than the young, prohibiting insurers from pricing accordingly shifts costs directly from the older to the younger generation. In addition to being unfair, the legislation imposes a tremendous financial liability on young people.
The third major Democratic program that directly harms the younger demographic is minimum wage legislation. The Democratic Congress (albeit with the support of President Bush) passed a bill in 2007 raising the minimum wage in stages from $5.15 per hour to $7.25 an hour. Obama has voiced his support to raise the minimum wage even more to $9.50 an hour.
When confronted with a minimum wage increase, businesses can either absorb the higher costs or lay off workers. Businesses only employ an individual if doing so will increase profits. In many cases (especially involving small businesses, which typically have tight operating margins), an increased minimum wage makes it unprofitable for a business to employ an individual. As a result, businesses desist from making new hires or lay off existing employees.
Even so, Democrats continue to support minimum wage legislation because union workers support it. Minimum wage legislation excludes potentially low-cost labor from the market, thus preventing such labor from undermining union wages. By contracting the market, the minimum wage also shields union jobs. Furthermore, layoffs resulting from the minimum wage typically affect union workers last because of institutional barriers preventing employers from firing union employees.
Unskilled laborers suffer the brunt of minimum-wage related layoffs and hiring stagnation. The young comprise a large proportion of the unskilled labor market. During the course of the most recent minimum wage increases, the teenage unemployment rate climbed from 15 percent to nearly 27 percent. The unemployment rate for people between the ages of 16 and 24 currently stands at 19 percent - a full 10 percentage points above the national average.
Deficit spending, unsustainable entitlement programs and minimum wage increases all directly harm young Americans. Youthful idealism, which was instrumental in fueling Obama's election, must be tempered by economic reality. America needs pragmatic policies grounded in more than mere sentiment. To protect both their own interests and those of the nation, young adults must reject Democrats at the polls in 2010.
Austin Raynor is a Viewpoint writer for The Cavalier Daily.
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