Editor’s note: This is the second of two columns on the presidential candidates. The first column is Candidates failing Econ 101.
Neither President Bush nor Sen. John Kerry inspires much enthusiasm among economists. But, as noted in last week’s column, a majority within the discipline probably would give somewhat higher marks to Bush on such issues as trade and health care.
Kerry would be rated slightly higher on environmental policy. Social Security reform is a tie because both are weak on reforming it.
These issues are of secondary importance when compared to the knottiest economic problem facing our nation today: how to pay for the sharply increased federal spending during the past few years.
Do we really want to go on borrowing nearly one dollar out of every three we spend — Social Security excepted — and to increase the national debt by 4 percent of gross domestic product each year? If not, what changes are we willing to make? Will we increase taxes, and for whom? Will we reduce spending or even the rate of growth of spending?
Superficially, there is not a lot of difference between Bush and Kerry on these issues. Both say they will cut the deficit in half during the next four years. Kerry says he would raise taxes on the 2 percent or so of all households earning more than $200,000, but would spare all others.
Bush promises still more tax cuts, arguing that as yet unidentified spending cuts and that increased tax revenues from a burgeoning economy will close much of the gap.
Neither candidate is being honest with the American people about the issue.
Kerry implies that the growing deficit is solely the result of Bush administration tax cuts and that the gap can be closed by restoring higher taxes on the wealthy.
But Bush’s disconnection from reality is in a realm by itself. As with the administration’s reasons for going to war in Iraq, its rationales for tax cuts evolve over time, but are never particularly convincing. Given a four-year track record of high increases in overall federal spending, Bush’s promises ring hollow that his administration will somehow turn over a new leaf the second time around.
Voters who care about what happens to the economy over the long run must look beyond what the candidates say they will do. Instead, citizens must judge the outcomes that would be likely if either candidate wins.
On those grounds, it is likely that deficits would be smaller with Kerry than with Bush. Don’t expect a Kerry administration to achieve much, however. The candidate has already made the stupid pledge of no higher taxes for all but a few households. Higher taxes on the richest 2 percent will increase revenues somewhat, but not enough to close gaps of more than $400 billion.
Moreover, with the current makeup in the U.S. House of Representatives, where economic lunatics took over the asylum some time ago, getting any substantial tax increases through Congress will be extremely difficult. The most likely outcome for a Kerry presidency would be a repeat of the George H.W. Bush administration of 1988-1992 — much rhetoric for lower deficits, but little concrete progress.
Such stagnation, however, would be better than the likely outcomes if Bush is re-elected. Once the president takes a position, he is steadfast — or stubborn — and does not change course. Don’t expect this president to call for higher taxes no matter how bad the deficit gets.
Nor is there any track record of Bush willingness to limit spending. Some argue that, freed of the need to pander to voters for a second term, George W. will turn into a spending control hawk, reversing the fiscal liberality that marked his first term. Don’t bet on it. This president is the first in decades to complete an entire term without vetoing a single bill. Expecting a dramatic 180-degree turn is dangerous.
In summary, if Kerry is elected, the deficits are not likely to shrink much. If, however, Bush is re-elected, deficits could get much worse. The second outcome poses far greater danger to the U.S. economy than the first.
This dilemma — that one can expect the candidates of both major parties to increase the national debt — says much about the American public. We apparently are unwilling to demand change. Deficits reduce national savings along with investment in new plants, equipment and technology. Deficits raise interest rates. A larger national debt means that a higher proportion of our children’s taxes will go toward paying interest.
All of these are bad outcomes, yet the choices that lead to such bad results have bipartisan support. As cartoonist Walt Kelly’s Pogo once said, “We have met the enemy and he is us.”
© 2004 Edward Lotterman
Chanarambie Consulting, Inc.