Jewish World Review Sept. 28, 2004 / 13 Tishrei, 5765

Edward Morrissey

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Kerrynomics: Pandering paternalism


http://www.jewishworldreview.com | John Kerry penned his economic plan for the pages of the Wall Street Journal earlier this month after spending most of his campaign picking at the edges of George Bush's. His plan focuses on a series of targeted tax credits intended to bolster his standing among specific demographics, while promising class war on the top 2% of American earners — who already pay over half of all revenues from income tax.


Kerry starts out by trying to convince his readers that the economic expansion currently under way, fueled by the Bush tax cuts, is the worst in 50 years by focusing on job growth. However, the expansion itself as measured by GDP (the normal measurement) actually is the best in 20 years, almost outstripping the Reagan expansion in 1984. Even job growth, a lagging indicator, has improved remarkably this year, although buffeted by a summer of skyrocketing energy prices. One reason that Kerry can claim job growth as a problem is a continued reliance on the payroll statistics rather than the household survey, which shows a major shift towards self-employment and small business start-ups, which the Bureau of Labor Statistics payroll survey routinely underreports. That's the reason the unemployment rate has dropped to a level lower than the average during the Clinton administration.


But that's just the introduction. The plan itself raises eyebrows for the assumptions it makes and the parts it seems to be missing. For instance, Kerry claims that the government incentivizes outsourcing by providing $12 billion for jobs exportation, which he plans to close off. He will then cut corporate taxes by 5%, which he says will result in a tax cut for 99% of all corporations. But in a multitrillion-dollar economy, most of it generated by "corporations", $12 billion in revenue could not possibly sustain a 5% tax cut. Revenue to government is over $2 trillion per year, and if you say that half of it comes from corporations (which is probably a conservative estimate), then $12 billion is 1.2% of what corporations pay now.

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Kerry moves on to middle-class taxes and health care, which is where the wheels come off the wagon. Kerry claims that he will expand the tax cut to the middle class by scaling back Bush's tax cuts while returning the money in the form of credits for health care, child care, and college tuition. But those aren't middle-class tax cuts, those are government grants to selected constituencies — and represent another path to an even more complicated tax system as well. Kerry chooses paternalism over simply allowing the middle class to keep their own money up front. Besides, what if you don't have children? What if your children are out of college, or don't plan to go? You will subsidize everyone else's tuition with the money Kerry takes back out of your check.


His outlook on health care is similarly distorted. Rather than enact significant tort reform to lower costs to the health-care segment, Kerry instead talks about providing government assistance for "catastrophic costs" and promises that it will lower premiums by 10%. But that's just a shell game; the money will be paid by the taxpayers instead of the insurance companies, but either way the patient gets screwed. Nor does he explain how premiums will fall by that amount — he just tells us it will.


Kerry says he will oppose frivolous lawsuits by forcing plaintiffs to accept non-binding mediation, a laughable solution that only provides lawyers more billing time. Non-binding mediation means nothing in terms of attack lawsuits. Do you suppose for a moment that an attorney looking to cash in the legal equivalent of Lotto will voluntarily accept a mediator's decision that comes up empty for him? He also promises to "oppose" unjustified punitive damage awards, but that's simply another empty gesture. Who doesn't oppose unjustified punitive damage awards? It's like saying that you oppose robbery. Kerry, however, refuses to make the systemic changes needed to eliminate such awards.


Kerry also continues a canard regarding stem-cell research that should invite skepticism about his plan's grounding in reality. He claims he will end the "ban" on stem-cell research. However, no such ban exists. Anyone can do any kind of stem-cell research they desire. What Bush did was to deny federal funding to any embryonic stem-cell research on lines not already in existence in 2001. The fact that more embryonic stem-cell research is not being done is not because it's banned, it's because it's less promising than other lines of stem-cell research, such as those involving umbilical or adult stem cells. Kerry's attitude seems to be consistent with his overall philosophy of government supremacy — if the government doesn't do it, it doesn't exist.


Kerry saves his final point for his strongest case: deficit reduction. If Kerry's Senate record and rhetoric can be said to be consistent on anything, deficit reduction would be the only issue that comes to mind. However, Kerry's idea of deficit reduction is increasing revenues, not shrinking government, which the rest of his essay amply demonstrates. While George Bush may have been a poor performer on the deficit — keeping in mind that we are at war, had a devastating terror attack that cost billions in damage and lost revenue, and struggled with a recession for much of his term — his party represents more of the shrinking-government school than Kerry's Great Society aspirations.


Our current deficit represents about 4% of our GDP, which historically puts it above average but far from the highest we've seen over the past 20 years. It's a concern, but it shouldn't cause a panic. And all methods of deficit reduction are not equal, as the 1990s demonstrated. The dirty little secret of the 1990s was that the budget balanced itself based on the wild growth provided by the dot-com bubble and some questionable accounting practices that wound up causing a mini-crash on Wall Street.


Government spending did not decrease, nor did the rate of increase slow down appreciably. Yet, Kerry insists that the only way to balance the budget now is to raise taxes — or as he puts it, eliminate the tax cuts that have already been put in place. That's why his final statement about returning to the "fiscal sanity" of the 1990s is so ironic, and so concerning.


In the end, Kerry's economic plan consists of nothing but warmed-over populism, a few bones tossed to the middle class while tightening central control on our economy, an approach which we have learned over the past century does not work. And Kerry's essay begs one last, overriding question: if Kerry thinks all of this will help America, why didn't he do anything about it as Senator?



JWR contributor Edward Morrissey, aka "Captain Ed," is a customer-service manager and radio talk show host. He blogs at Captain's Quarters. Comment by clicking here.

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09/24/04: Kerry still sacrificing the freedom of the South Vietnamese


© 2004, Edward Morrissey