John F. Kerry’s “Economic Policy” graced the editorial pages of the Wall Street Journal on September 15. Even though the Journal occasionally leans a little to the right, it was considerate of the editors to publish Kerry’s outline of his economic vision of America. One would expect that the candidate who has been accused of being indecisive, non-committal, and critical in his speeches would outline a positive and forceful view of how he sees America in the next four years under his leadership. Unfortunately, he didn’t take advantage of this unique opportunity.
Once again, Kerry relied on criticism as his central campaign technique. Even though the editorial itself implied a discussion of his economic policy, six out of the first seven paragraphs attacked the Bush administration for past economic circumstances.
For example, he blamed the Bush administration for the loss of 1.6 million jobs; yet he didn’t explain how these jobs were lost. In my previous column, I pointed out that no one less than Alan Greenspan stated that the majority of jobs lost in the last economic cycle derived from rising productivity. Rising productivity keeps inflation low, a benefit for all Americans. You certainly wouldn’t want to throw this baby out with the bathwater. But read Kerry’s first economic policy objective:
Create good jobs. “I strongly believe,” wrote Kerry, “that America must engage in the global economy, and I voted for trade opening from NAFTA to the WTO. But at the same time, I have always believed that we need to fight for a level playing field for American workers.”
Translation: If foreigners don’t do what I tell them to do, I will restrict free trade with the U.S. For all you guys and gals out there who work for a foreign car company or other “insourced job,” watch out, your job is in jeopardy.
Here’s some more from Kerry: “My plan … to end every single incentive that encourages companies to outsource … would take the entire $12 billion we save from closing these loopholes each year and use it to cut corporate tax rates by 5%.”
Prediction: Corporations will find other loopholes. The loss of foreign sources of manufacturing will also undermine the ability of companies to keep inflation low in this country. By raising the cost of imports and the cost of manufacturing, prices will rise.
Kerry continued that “when it comes to enforcing trade agreements, the Bush Administration refuses to show our competitors that we mean business.”
Translation: I will get tough on enforcing trade agreements, which means further animosity among our so-called trading partners.
Is this the same guy who is going to jawbone our allies into picking up some of the tab in Iraq? Not a chance with these anti-growth prescriptions.
On to Kerry-objective number two:
Cut middle-class taxes and health costs. “Under my plan,” Kerry wrote, “the tax cuts would be extended and made permanent for 98% of Americans.”
Question: I read in the Wall Street Journal that 50 percent of Americans don’t pay taxes. So how is Kerry going to cut taxes for 98 percent of Americans?
The candidate continued: “I support new tax cuts for college, child care and health care — in total, more than twice as large as the new tax cuts President Bush is proposing.”
Tax cuts aside, that sounds like a lot of government spending. How will he pay for it? He never said.
The candidate continued: “I have proposed a health plan.” (What is it? He never said.) “And I won’t be afraid to take on prescription drug or medical malpractice costs … and penalize lawyers who file frivolous suits with a tough ‘three strikes and you’re out’ rule.”
Question: Did anyone ever tell Kerry that his running mate is a trial lawyer?
On to Kerry-objective number three:
Restore America’s competitive edge. “America,” he wrote, “has fallen to 10th in the world in broadband technology.”
Insight: If Kerry wants to assign blame for that problem, he should point his wagging finger at his comrades in Congress.
Rebuttal: Outside of the isolated and flawed example of broadband, U.S. corporate productivity — i.e., our competitive edge — is rising dramatically. In the past quarter, the manufacturing sector posted a 5.8 percent increase in productivity, well above historic standards. We are simply the most productive country in the world. And you don’t restore a competitive edge by threatening your trading partners with trade barriers and workplace restrictions.
On to Kerry-objective number four:
Cut the Deficit and restore economic confidence. “Americans can trust my promise to cut the deficit,” wrote Kerry, “because my record backs up my word … In 1993, I cast a deciding vote to bring the deficit under control. And in 1997, I supported the bipartisan balanced budget agreement.”
Rebuttal: Budget deficits result from a shortfall in government revenues because of either too much spending or too little tax revenue. Kerry has proposed (1) big tax cuts for 98 percent of all Americans, (2) increased spending on a variety of social programs, and (3) a fight to punish outsourcing companies and cut taxes for corporations that play ball while alienating foreign trading partners. These policies will undoubtedly (1) lower tax revenues and (2) increase government spending.
You can fill in this next entry from Kerry: “I explain how I pay for all my proposals … By rolling back the recent Bush tax cuts for families making over $200,000 per year, we can pay for health care and education.”
Insight: To put Kerry better in touch with hard-working Americans who are supposedly going to pay for all his redistributionist gizmos, let’s turn to a recent commentary from one of those $200,000-a-year guys:
I grew up in a lower-middle-class household. I studied hard and put myself through a good college. Ten years ago, I started my own company and for the past four years my income has exceeded $200,000 a year. Last year, I paid 40% of my income for self-employment, state and federal income taxes. From the remaining, I support five people, pay for health insurance and save for retirement. Teresa Kerry, with assets exceeding $500 million, pays less than 2% (includes her foundation income). Instead of raising the taxes on the person flying around the world on the Gulfstream G5, John Kerry wants to put a bigger tax burden on the one driving the ‘97 Intrepid with more than 100,000 miles on it. While his rhetoric attacks the wealthy, his policies attack the middle class.
Dove Canyon, CA
[Courtesy of “Letters to the Editor,” Wall Street Journal]
If Kerrynomics looks to you like a prescription to give free-riders a better ride while hard-working Americans get the raw end of the deal through increased inflation, higher interest rates, and less free-choice, then you’re seeing things just the way I am.
– Thomas E. Nugent is executive vice president and chief investment officer of PlanMember Advisors, Inc. and chief investment officer for Victoria Capital Management, Inc.