Bush, Kerry battle over economics

Beneath campaign barbs lie stark contrasts on health insurance, deficits, and tax rates.

With less than seven weeks to go before election day, and trailing President Bush by a few points in most polls, John Kerry is taking the offensive on a central issue: the economy.

It represents a point of vulnerability for the president, particularly in some Midwestern battleground states. Bush has many positives in his economic record, including an unemployment rate that has declined to 5.4 percent, a 3 percent economic growth rate, and low inflation and interest rates. But recent job growth has not made up for major losses early in Bush's tenure; wages have been stagnant; healthcare costs have soared; gas prices are high; poverty is up; and the budget deficit has ballooned.

Senator Kerry and the Democrats have done a good job framing discussion around job creation and losses, and away from an unemployment rate that favors Bush, analysts say. But the Massachusetts Democrat has not been as aggressive as some party strategists would like in going after Bush's entire record.

That changed Wednesday. In a speech at the Detroit Economic Club, Kerry scored the president for what he called "wrong choices" in tax cuts and spending decisions that have driven up the deficit and hurt the middle class.

"This president has created more excuses than jobs," Kerry said, alluding to the recession early in Bush's term, then the 9/11 attacks and the wars that followed. "His is the excuse presidency - never wrong, never responsible, never to blame."

Bush campaign manager Ken Mehlman fired back: "John Kerry offered more pessimism about an economy that has created over 1.7 million jobs over the past year and he rehashed old, tired ideas of higher taxes, of more regulation, and of more government control of people's lives that his own advisors say will not work."

Whatever the merits of the charges, economists generally agree that Bush and Kerry offer profound policy contrasts.

"The overall level of debate is sharper, louder," says William Beach, an economist at the conservative Heritage Foundation. "I don't believe politics should be quiet. The issues facing the country are important."

On taxes, for instance, Bank of America economist Mickey Levy describes Kerry as a traditional Democrat who would raise taxes and spending. Kerry has said he would restore the income tax rate on those making more than $200,000 a year to the level they were before the Bush tax cuts, putting the money into healthcare reforms.

Kerry would also raise taxes on dividends and capital gains. In addition, the Kerry staff is exploring raising the cap on earnings subject to payroll taxes above their present level of about $88,000 a year.

The latter, says Mr. Levy, would be a "gigantic tax increase" hitting business as well as individuals, and thereby eventually affecting all workers.

In comparison, President Bush proposes making his temporary tax cut permanent, including ending the estate tax.

Kerry talks of raising the minimum wage. That's not on Bush's agenda.

Bush calls for partial privatization of Social Security. Kerry does not.

Bush came into office four years ago on a platform of free trade. But he has given in to protectionist pressures in several business areas of political concern, such as steel and lumber.

Kerry, maintains Levy, has "protectionist" instincts but has been pushed to the middle on the issue by his advisers.

On the massive trade deficit, neither candidate can do much.

The main issue dividing the candidates is "ownership," Mr. Beach says. Bush calls for people to have greater control of their healthcare and their retirement plans through changes in these areas. As Beach sees it, Bush is a "supply sider" - a proponent of tax policies intended to increase the supply of goods, services and work, while Kerry is a "demand sider" - trying to boost demand using government policies.

But Beach is concerned with the growth in spending under Bush.

Robert Reich, an adviser to Kerry and Secretary of Labor under President Clinton, says two candidates are "like night and day" on economics. Bush, he charges, "has no solid plan to reduce the deficit and provide more healthcare," only a plan to make permanent his tax breaks "that go mostly to wealthy Americans."

Mr. Reich also points to the Kerry proposal to eliminate any tax incentives for American companies to move jobs or production abroad. Such a tax change, he says, would not affect a firm's ability to invest abroad if that made "enormous sense" without tax considerations.

Privatization of a part of Social Security, Reich says, makes "absolutely no sense...I thought that idea was dead after the implosion of the stock market in 2000." Social Security is a "social insurance" program which will need the revenues from payroll taxes for future recipients, and not have those diverted into private accounts.

For both sides, such topics will fuel the campaign debate from now until Nov. 2.

Bush versus Kerry on jobs, taxes, and the economy


• Passed $1.7 trillion in broad-based tax cuts to stimulate economic growth. Wants to make the cuts permanent and review how to simplify the tax code.

• Calls for $3,000 accounts to help the unemployed with job-search expenses.

• Says he will cut the federal deficit in half in five years.

• Supports more free-trade agreements. Says the benefits of economic openness outweigh costs of jobs lost through offshore outsourcing.

• Would bolster an "ownership society" by letting people set up health savings accounts and putting part of their Social Security tax into personal accounts.


• Says he would restore 1990s tax rates for those earning over $200,000, but make other tax cuts permanent. Would cut taxes on businesses by 5 percent.

• Would raise minimum wage to $7 and index it to inflation. Says spending on schools and non-oil energy sources will help create 3 million jobs in 500 days.

• Says he'll halve the deficit in his first term.

• Would balance free trade with protecting jobs. Would alter corporate taxes to discourage offshore outsourcing.

• Calls for expanding the middle class by helping 27 million more Americans get health insurance. Opposes partial privatization of Social Security.

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