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Kerry Among The Inmates
The senator is all over the map on the economy and more.


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Larry Kudlow

“We’re not really liberals and we don’t hate George Bush all that much, even though we gave Michael Moore a floor pass to our convention in Boston.” That’s what Democratic politicians want you to believe right now: that the inmates may be on the convention floor, but they’ll never run the prison.

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Truth is, the inmates have been running the Democratic party penitentiary for quite some time. Just look at the man of the hour.

John Kerry was for the war, but he voted against the $87 billion appropriation to fund the troops. He wants to internationalize the war on terror, which means bringing France and Germany into the fold. But Bush now has a 15 to 0 U.N. resolution endorsing the transition to the Allawi government in Iraq. Isn’t that internationalizing? In 2002, Kerry argued against the double taxation of investor stock dividends, but in 2004 he wants to raise dividend taxes. He voted for free trade, but now he’s a protectionist. He voted against the defense of marriage act, but now insists that he opposes gay marriage. He now says that life begins at conception, but he votes against every measure that will stop or slow abortions — including bills banning partial-birth abortion and even parental consent.

Flip-flopping is a tough business. With the economy growing at its fastest rate in 20 years, Kerry has been forced to stop discussing a “jobless recovery.” So instead, he’s talking about a “middle-class squeeze” and a glut of low-wage jobs within the 1.5 million new jobs of the past ten months. But a new Bureau of Labor Statistics study shows that more white-collar managerial and professional jobs, with relatively fewer low-wage jobs, are being created today.

The Kerryites conveniently focus on non-supervisory production jobs, the very low end of the wage spectrum. But this is a labor-union fantasy circa 1955. It has no meaning in the 21st century high-tech information age.

The broadest income measures published by the U.S. government actually paint a very optimistic picture. Personal income has grown nearly 6 percent over the past year, with wage and salary income up 5 percent. After-tax spendable income adjusted for inflation has increased by nearly 4 percent, with median weekly earnings among managerial, professional, and related occupations also up 4 percent.

A sensible person might ask, If incomes are down, why is there so much spending? Inflation-adjusted consumer spending has risen 4.3 percent in the past year and 3.4 percent annually since the end of 2000. The Annenberg Center at the University of Pennsylvania notes that average weekly earnings, after inflation, have increased 1.08 percent per year since Bush took office. That period includes terrorist attacks and wars, and came on the heels of a busted stock market bubble, a recession, and unprecedented corporate scandals, all of which began on the Clinton-Gore watch.

The last guy who tried to finesse a strong economy with a phony middle-class-squeeze label was Bob Dole. Remember him? Like a dog chasing his own tail, Dole ran in circles around his rhetoric while Clinton breezed to victory.

Which brings us to taxes. The Kerry campaign has decided to help middle-class earners by putting the screws to upper-end earners. Huh? It’s just class warfare. Kerry’s plan to raise dividend and capital-gains taxes is nothing but a big tax on the stock market and capital formation, which provide the crucial funding to expand job-producing businesses. Tax investment more, and you simply get less investment. How does that promote prosperity? Kerry’s tax on the so-called rich is really a tax on 90 million investors, most of whom are not rich.

There’s a good reason why Bush’s pro-investor tax cuts have been a huge success. Saving and investing is the seed corn the U.S. economy requires to grow. Since the Bush tax cuts went into effect a year ago, the stock market is up from the depths, the value of mutual funds is at a record high of $3.4 trillion, and family net worth (homes, stocks, and small businesses) has hit a record $45 trillion.

In similar tax-hiking fashion, Kerry wants to repeal NAFTA and other trade-liberalizing agreements, measures that have lowered the import tax on American consumers and boosted business export sales overseas. How can a presidential candidate be for internationalizing a war and isolating an economy? Today’s 135 million Wal-Mart shoppers, regular Americans who enjoy high-quality, low-cost imports, shouldn’t stand for it.

Another great Kerry contradiction is health reform. He wants to bring down the cost of health care, even though his trillion-dollar subsidy plan will do precisely the opposite. And with John Edwards — Washington’s top class-action tort-man — on the Democratic ticket, runaway malpractice lawsuits and sky-high insurance premiums will only get worse.

Stock market taxes, import taxes, and tort taxes will only grow the economy more slowly. Punishing the rich, protecting outdated unionism, and bashing businesses won’t create more jobs. Appeasing our terrorist enemies will never lead to victory.

The inmates aren’t just on the convention floor in Boston. They’re running the show.

— Larry Kudlow, NRO’s Economics Editor, is CEO of Kudlow & Co. and host with Jim Cramer of CNBC’s Kudlow & Cramer.



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