John Kerry’s choice of North Carolina Senator John Edwards as his running mate sets in motion a classic economic-populist, class-warfare, trade-protectionism assault on the free-market principles that have made the American economy the most prosperous of any industrialized nation over the past 25 years.
Edwards may be an attractive personality and an effective communicator, but on policy substance — namely torts, trade, and taxes — he’s resoundingly anti-growth and prosperity. (Just like Kerry.)
In a January primary speech in Des Moines, Edwards said, “There are two Americas — one for the powerful insiders, and another for everyone else.” This became his signature line. He would also say, “One America that is struggling to get by, another America that can buy anything it wants — even a Congress and a president.”
Or a political party. After all, with Edwards — the tort bar’s man in Washington — on the ticket, the takeover of the Democratic party by the 60,000 member Association of Trial Lawyers of America is now complete.
Trial lawyers are clever and crafty — make no mistake about it. Through aggressive venue shopping, tort lawyers like Edwards bring national cases to favored local courts and squeeze out ridiculous settlements, making millions for their firms and frequently providing little or nothing to consumers.
Here’s but one infamous case: In a settlement of a class-action suit filed in Texas against the Blockbuster movie-rental company, plaintiff lawyers received $9.25 million while each class-action member received two coupons for movie rentals and one $1 off coupon. The case was about late movie return charges. The lawyers made enough money to produce their own movie, but Blockbuster customers couldn’t even use their coupons to buy a bag of popcorn. Their coupons were for non-food items.
Edwards is also on the wrong side of the fence on trade. He is a devout protectionist. During the Iowa primary debate last January he proclaimed, “I didn’t vote for NAFTA. I campaigned against NAFTA. I voted against the Chilean trade agreement, against the Caribbean trade agreement, and against the Singapore trade agreement.”
Both Edwards and Kerry (the latter now saying he will vote against NAFTA should it come up again) are more than happy to buck the world tide and go it alone on trade — even though steep tariffs will hurt ordinary Americans who shop low-cost imports at the giant chain stores. By protecting a small handful of unionized and inefficient companies in North Carolina and elsewhere, trade protectionism undermines the living standards of the near 135 million Americans who shop at Wal-Mart, Kmart, Costco, Target, Home Depot, and Best Buy.
On taxes, Edwards is a strong class-warrior. Criticizing President Bush during the primaries, he said, “By the time he’s done, the only people who pay taxes in America will be the millions of middle class and poor Americans who do all the work.”
Here, the North Carolinian runs into some factual problems. The top 1 percent of taxpayers pay over one-third of income-tax collections. The top 10 percent pay two-thirds. The bottom 50 percent pay only 4 percent of income taxes. And those making under $30,000 a year essentially pay no income taxes at all.
By the time Kerry and Edwards get finished with their proposed $900 billion tab on higher health-care spending, you can bet their tax-hiking proposals will reach much deeper into the American pocket book than their publicly stated $200,000 DMZ line.
Of course, this sort of thinking argues that successful earners and investors are never entitled to reap the fruits of their labor — even though the rest of the population is entitled to massive health-care subsidies and central-planning price-control schemes. But the politics of envy misses a key point: Higher tax rates on success blunt incentives for the non-rich who are working hard to climb the American ladder of prosperity. Study after study shows that the middle class is shrinking — not because more are becoming poor, but because more are getting richer.
Repealing tax cuts on investment would also do great damage to economic recovery. It was the decimated investment sector that brought the economy down between 2000 and 2002. The Kerry-Edwards tax-the-rich proposals would in effect prevent the investment seed corn from reinvigorating the very businesses that create jobs in the first place. The so-called rich won’t suffer — they’re already rich. Instead, the middle class will face a higher toll-gate barrier as they try to move up the ladder.
On torts, trade, and taxes, the Kerry-Edwards vision will do enormous damage to the welfare of consumers and businesses. Opposing tort reform, raising taxes, erecting new trade barriers, and confiscating the rewards for personal effort and investment is a prescription for economic demoralization — not growth.
A big question remains, however. Will Messrs. Bush and Cheney be successful in making this case?
— Larry Kudlow, NRO’s Economics Editor, is CEO of Kudlow & Co. and host with Jim Cramer of CNBC’s Kudlow & Cramer.