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September 15, 2004

Kerry's Economic Policy

Yes, it's more issues today. John Kerry released a piece detailing his economic policy on Opinion Journal this morning, so I thought I'd take a look and see what he's offering.

According to Kerry, his plan will accomplish four key tasks: "(1) Create good jobs, (2) cut middle-class taxes and health-care costs, (3) restore America's competitive edge, and (4) cut the deficit and restore economic confidence." Those certainly sound good, but I'll say up front that I'm skeptical, as I agree with Kerry's earlier statement: "...the private sector will always be America's engine for innovation and job creation...," so it seems that his plan can't possibly do what he claims. But he could certainly remove some government roadblocks from the path of economic recovery.

Kerry says he will redirect $12 billion that he claims subsidizes outsourcing into a corporate tax cut of 5%. If he is correct that there are government policies that subsidize outsourcing, than I'd say he's certainly got a good idea here. Cutting corporate taxes is one of the smartest things government could do to spur the economy, since a tax on a business is simply a hidden tax on consumers. I suspect this could play very well for Kerry. More importantly, it's good sense that would be good for the economy.

Next he's going to cut middle-class taxes and health care costs. This certainly sounds good, but it all depends on the definition of middle-class, doesn't it? Even if he does enact his various middle-class tax breaks (apparently further complicating the tax code into the bargain, but that's hardly a flaw limited to one side of the political register), his plan to trim medical costs is questionable at best. He wants to modernize the health care industry's information technology, but he doesn't explain how. Is he planning on using public funds to pay for the modernization (in which case we'd trade health care costs for higher taxes or increased debt), or does he want to simply mandate that health care providers come up to speed (in which case health care costs will go up in the short term, although they could then drop if the inefficiencies Kerry cites are eliminated). Kerry also endorses reimportation of prescription drugs, a very bad idea. As many observers have pointed out, if the U.S. legalizes reimportation, drug companies will just stop selling those drugs overseas, because they make almost all of their profits in the U.S. He talks about going after medical malpractice suits as well, but with John Edwards as his running mate, I have to question how seriously he'll push that issue.

Next Kerry proposes dumping more public funds into research. Personally, I'd prefer to keep my tax dollars and let the market determine where research dollars would best be spent, as there are fewer inefficiencies in the market than in government. I'm confident I'm in the minority on this, however, so I suspect this could help Kerry as well (although it does raise the question of how he plans to pay for all this, but candidates always get a pass on that).

Last but not least, Kerry plans to "[c]ut the deficit and restore economic confidence." How he can do the former given all of the programs he wants to put money in I don't know, and I suspect he doesn't either. Cutting the deficit might help with economic confidence, as it could help to keep long-term interest rates low, but I suspect sustained economic growth is far more important to economic confidence than the deficit.

These are good proposals politically. I don't agree with all of them personally, but then I'm not going to vote for Kerry anyhow, and I'm in a small minority when it comes to economic policies. If Kerry pushes this agenda, it could go far in helping to establish what his candidacy is about and giving voters a feasible alternative to President Bush.

I'd argue that Kerry would be wise to move his candidacy onto these grounds while attacking President Bush from the right on the war and never saying another word about Vietnam or the National Guard. After President Clinton, the Democrats earned some credibility on economics that President Bush's profligate presidency has further enhanced. If Kerry could neutralize President Bush on the war, he could win on the economy.