Quick question: What is John Kerry's economic plan? Can anyone reading this column name even one key element of it?
With the economy being a central issue in the election, one would think that any reasonably well-informed voter could easily answer these questions. But, in fact, I doubt that more than a tiny handful of professional economists or economic journalists could do so. The reason is pretty simple - there really is no plan.
Kerry has policies, of course - lots of them. The problem is that they don't hang together in any logical way that could even loosely be called a plan. They look like items chosen from a menu - one from column A, one from column B, etc. Viewed in isolation, any one of them might be defensible. But when you put them together, they often contradict each other and don't really add up to very much. Having a plan implies that some thought went into creating a coherent set of policies that are linked together philosophically. It is on this basis that I say that John Kerry has no plan.
Kerry clearly recognizes that he has failed to articulate an economic message that goes beyond attacking George W. Bush for every ill of the economy. But even if people are inclined to agree that Bush's economic policies have been lacking, they are still unlikely to replace him unless they have reason to believe Kerry will do better. After all, he might do worse.
Last week, Kerry made an effort to present a coherent economic plan. In a Wall Street Journal article titled, "My Economic Policy," he made his case. It has four key elements: create good jobs, cut middle class taxes and health care costs, restore America's competitive edge, and cut the deficit and restore economic confidence.
Kerry's proposal to create jobs involves reducing outsourcing by closing a tax provision that he believes encourages U.S. companies to invest abroad. The $12 billion per year that this would raise would be used to reduce the corporate tax rate slightly. He would also reinstate a failed tax credit for new jobs and crack down on imports from China and elsewhere.
Economy.com, a respected independent forecasting service, looked at these tax provisions and concluded that their net impact on job creation would be "very modest." On the other hand, Kerry's implied protectionism could be very damaging to economic growth. Renowned Columbia University economist Jagdish Bhagwati calls Kerry's trade policy "muddled and maddening" and "the voodoo economics of our time."
Kerry's tax plan basically involves extending all of Bush's tax cuts except those affecting the top 2 percent of taxpayers, whose taxes would be raised to their pre-2001 level. The revenue raised by this tax increase on America's principal job creators would pay for a $1 trillion expansion of federal health insurance. However, Kerry says it will only cost $650 billion because he will cut $350 billion worth of waste and red tape from the health system.
Economy.com calls Kerry health savings "questionable." This is a polite way of saying that they are non-existent. More than likely they would require additional spending in order to begin to achieve them. This means that the Kerry plan will add substantially to the deficit.
Kerry's plan for restoring America's competitive edge involves increased government spending for research and development, tax credits to expand broadband service to rural areas, and encouraging more women and minorities to study math and science. His only proposal that might actually accomplish something is elimination of the capital gains tax for long-term investments in small business startups.
Finally, we get to Kerry's plan to cut the deficit, and all that he offers is his word that he will do it. "Americans can trust my promise to cut the deficit because my record backs up my word," he says. This is like Dan Rather telling us that we can trust him when he says that obviously forged documents are actually genuine.
Even Kerry's own allies don't believe him. A Washington Post editorial called his deficit reduction plan "flawed" and "undercut by his fine print." A New York Times editorial said, "It's hard to imagine how he could combat the deficit, expand health care benefits, increase spending on education and grant middle class Americans more tax breaks simply by rescinding the Bush tax cuts for those earning more than $200,000."
In the end, all Kerry has is the charge that everything Bush has done on the economy has been wrong. This may be enough for hard-core Democrats and Bush-haters. But anyone who is remotely open-minded is going to have a hard time believing that Kerry will do better. He would have helped himself by proposing something bolder and more interesting. You can't beat something with nothing.
