This is called rippling, and it's how the program is designed to work. In fact, most of the time it's how you want the program to work. You don't want to overlap clips when you add new video to your timeline, do you?
As I show you in my book on Amazon, there are a number of ways to control how the timeline ripples.
If you'd like to insert the clip into the Video 1 track but you don't want to split any other tracks for instance, hold down the Alt key as you drag the new clip to the timeline.
Actually, if you want to replace one clip with another, or simply fill in a gap in your timeline, and your video is already pretty structured and well synced to the soundtrack at beginning and end of your video, you don't want it to ripple. How does ripping a hole in your soundtrack ever help anyone? You want that "music" track unbroken through your whole video. The help page on this issue is so poorly written it is practically useless. Using Alt helps a bit, but if your new track is slightly bigger than your gap, it overwrite AND deletes any clip in its way.
In premier pro, you can put any sized clip into any sized gap without a ripple, and the clip gets automatically resized to the gap.
And this problem exists even when placing your clip in the second or third video track.
The only workaround, which is a pain, is to Alt insert into a new track, then resize to match your space, and then Alt drag it down to the main video track. This is an absurd workflow. It seriously limits the usefulness of this software, despite all the other features it has. Seriously, even Windows movie maker doesn't do this to you audio track.
Once again, it's not a problem. It's part of the design.
As I said, there are a number of ways to turn rippling on and off for individual tracks or for your entire timeline.
Premiere Pro has more options, however, with regard to using rippling and/or filling gaps.
Have you tried the shortcut I suggested?
In Premiere Elements, you can not fit a clip into a gap. However, if you drag the clip into the Monitor rather than the timeline, you'll find half a dozen options for how the clip is added to the timeline.
Saying "its part of the design" does not make it any easier to work with.
As I already mentioned, holding down the ctrl key overwrites your other clips and the alt key shoves them down the line, destroying your audio sync. And you then shorten your inserted clip to the original size you cannot "delete and close space" on the empty space in the timeline.
How does this help if, let's say, you have a sequence of stills, set to the music. You cannot replace one still or fill in a gap, unless the replacement is already exactly the right size (or smaller) than your gap.
This happens all the time. It is not a rare occurrence. Why would you design a program to not allow the user to easily insert a clip or still without destroying all their previous work. It doesn't make sense.
Why would you want your insertion of a video on one track to affect the audio on another track unless you previously linked them together?
I'm not going to debate the program with you. Either it meets your needs or it doesn't.
All I can do is tell you how the program works.
If it doesn't fit your workflow, you should move on to another program. And ALWAYS download the free trial first so you can give the program a good test drive.