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The Clinton-Hastert Wedge
Bush should exploit it.


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Larry Kudlow

Senator Hillary Clinton and House Speaker Dennis Hastert surely make strange political bedfellows. A recent New York Post story, bouncing off Hastert’s new book “Speaker,” recounted Hastert’s mini-gripe that Clinton and her colleague Sen. Chuck Schumer were obsessed with bringing home the bacon for New York right after the 9/11 terrorist attack. Hastert, however, never opposed the $20 billion aid package. What he reconfirmed for the Post was that “All the tragedy was converted into dollars and cents. People kind of lost the sense of the depth of the tragedy itself.”

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He could have added that some have lost the true meaning of 9/11, which formerly launched the U.S. war against radical Islamism. As Norman Podhoretz recently wrote in Commentary magazine, we are now in World War IV. Do the Kerry Democrats completely grasp this essential point? Vietnam is over.

But there’s a more compelling disagreement between Hastert and Clinton.

Back in 1994, when Clinton was pushing her grandiose plan to nationalize health care, Hastert suggested that medical savings accounts were a much better approach to reform. Sen. Clinton disagreed, arguing instead for a “Europeanized” America where people are inherently greedy and can’t be trusted to make decisions for themselves. In Hastert’s words, “She went on to say that she felt if money goes to individuals and they have control over it, then that is money government doesn’t have. People wouldn’t spend their money as wisely as the federal government would.”

Well now. The difference between liberal and conservative couldn’t be clearer. Liberals believe that tax dollars are the property of the federal government, and that the nanny state will spend more wisely than ordinary folks who are uninformed, stupid, or irresponsible. Conservatives, on the other hand, believing in economic liberty, think that tax dollars are the people’s money. Government works for them; they don’t work for the government.

What we have here is a wedge issue in domestic policy — one that President Bush will hopefully exploit in his Republican convention speech next week. The president believes that people should take personal responsibility and ownership for retirement, health care, and education — reinforcing the point that he’s a believer in individual choice, free-market competition, and economic freedom. The Democrats, however, believe in government planning monopolies; a dependency society that celebrates economic “equality” rather than economic growth, to paraphrase former House Majority Leader Dick Armey.

Like Hillary Clinton, John Kerry opposes health savings accounts that would give consumers their own pre-tax cash to buy health care. These HSAs would create an incentive for Americans to be parsimonious health-care shoppers, and would cause a transfer of power from the federal government to individuals and families. Money not used in an HSA in a given year can be channeled into a market-investment nest egg that will create wealth over time. Kerry and Clinton call this elitist, thinking that only rich people invest in the market. Of course, the 95 million strong investor class, where the majority of shareholders make less than $75,000 a year, would strongly disagree. HSAs are similar to 401(k)s, which over a period of 30 years exploded from zero to 42 million funds.

Kerry is also opposed to personal savings accounts as an alternative to the moribund Social Security system. He prefers that Social Security tax dollars still be used to finance federal spending, while Social Security beneficiaries make do with a sub-market investment return of less than 1 percent yearly. He’s saying, Let them eat cake, while we smart Ivy Leaguers run the country. Bush, however, knows that investment markets, not government, create retirement wealth.

The Democratic vision of Kerry and Clinton is one of state-coerced equality of results, a short stone’s throw away from Karl Marx’s original vision of 150 years ago. The Republican vision of Bush and Hastert is that equality of opportunity allows free people to make their own decisions and exercise their God-given talents in a competitive free-market economy. History suggests that this is the best way to make the economic pie grow larger. Some will inevitably do better than others, but the level of prosperity and wealth will steadily rise for everyone.

Bush’s ownership society includes personal savings accounts for Social Security, health savings accounts for medical care, new savings opportunities through the creation of retirement savings accounts (RSAs) and lifetime savings accounts (LSAs), and education savings accounts to propel school choice and vouchers. This moves us down the road toward real tax reform. These tax-free savings accounts will lead to a consumed-income-tax system that ends the multiple taxation of saving and investment — the seed corn of economic growth. This is a Republican agenda that bespeaks of economic liberty and rejects the Democrats’ heavy boot print of government control.

It’s a battle of clashing ideas that should be front and center in this year’s election debate.

— 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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