A Real Choice
John Kerry and George W. Bush offer voters two very distinct economic futures for America.
11:00 PM, Mar 8, 2004 • By IRWIN M. STELZER
HERE WE CAN EXPECT profoundly different reactions. Bush is wedded to preserving the tax cuts he quite properly introduced to stimulate a slowing economy. White House sources say that, if reelected, the president will give no ground on such issues as eliminating inheritance taxes and preserving child credits. No change there. But a major reform of the tax system is already being designed by White House staffers, with the goal of removing disincentives to work and invest. Such changes as lowering the corporate income tax rate are seen by the president's economists as essential to the rapid economic growth that will increase the flow of cash into the Treasury. So it is to supply-side reform that Bush will turn in his hunt for money to fund his tax cuts, the war, the prescription drug program, and even the first steps on the long road to Mars.
Kerry sees things differently. He has promised to raise taxes on "the rich," which probably means all those earning $200,000 per year or more. That will produce a bit more revenue, but hardly what is needed to stanch the flood of red ink and prepare the government to meet its enormous unfunded obligations to the army of retirees--especially since Kerry plans to spend some of that new-found cash on expanding the welfare state. A portion of the budget gap will be filled by cuts in military expenditures, especially if Kerry is as successful as he claims he will be in transferring some of America's burden as world policeman to the United Nations and other multilateral organizations. Remember: Republicans are already joining Democrats in calling for a cut in Bush's proposed Pentagon budget. The remaining shortfall will be covered by tax increases.
If you doubt that, recall that even the first president Bush, he of the famous, "Watch my lips, no new taxes," finally succumbed to the pressures of the Washington tax-raisers, as did Bill Clinton in the early days of his administration. Kerry, who is advised by Clinton's Treasury secretary, Bob Rubin, and a host of other Clintonistas who pride themselves on having delivered repeated budget surpluses, will not shy from a tax rise, especially one that he can blame on the mess he inherited from his predecessor.
WHICH LEAVES ANOTHER POLICY AREA that will be affected in a major way by the new occupant of the White House: Bush is by instinct a free trader who has been forced to give ground to agricultural and industrial protectionists in key electoral states. Having been reelected, unable to run again, and with no need to prepare the ground for a 2008 run by his vice president, Dick Cheney, Bush can push his program of negotiating bilateral trade agreements and a new worldwide trade-opening agreement. Indeed, if rumors that Bush's Trade representative, Bob Zoellick, will become Treasury secretary are true, free trade may be the signature policy of a second Bush term.
Not so for Kerry. In order to fend off a primary challenge by protectionist John Edwards, and to win trade union support, Kerry abandoned his long-held support for free trade. He plans a skeptical review of the North American Free Trade Agreement (for which he once voted), to end negotiations for bilateral agreements, to tax companies that invest in factories abroad, and to treat severely the "unpatriotic" companies and their traitorous, "Benedict Arnold" executives who outsource and otherwise seek the efficiencies available in an open, globalized market.
There you have it: Bush with his war-on-terror priorities, Kerry more interested in funding his domestic agenda. Bush to press for supply-side reforms of the tax system, Kerry to raise taxes. Bush to press ahead with his free-trade agenda, Kerry to rein in trade-opening deals.
Some presidential campaigns have presented voters with an echo rather than a choice. Not this one.
Irwin M. Stelzer is director of economic policy studies at the Hudson Institute, a columnist for the Sunday Times (London), a contributing editor to The Weekly Standard, and a contributing writer to The Daily Standard.