WASHINGTON, Jan. 20 (UPI) -- As the 2004 election race gets properly under way after the Iowa caucuses, it's worth looking at the economic ideas put forward by the seven remaining Democrat candidates and see where they differ, and where there's enough consensus that we can expect a policy change should a Democrat win next November.
As an ardent capitalist who normally votes Republican, I don't expect to agree with most of the plans, but I expect to find many features that I can live with, some ideas that are well worth trying, and, inevitably, some ideas that are either economically damaging or just plain whacko.
Starting with the least likely to win majority support from the American people, the Rev. Al Sharpton does not appear to have an economic platform; indeed his campaign, when questioned by a United Press International colleague, seemed to think it slightly eccentric that we might be interested in such a thing. One can respect this; economics is presumably not the civil rights activist's strength, and if his campaign gains traction there will be an overwhelming flood of eager young minds from the left-leaning think tanks to give him all the economic ideas he can possibly need.
Dennis Kucinich has an economic resume that is in some ways impressive; having presided over the bankruptcy of Cleveland as its mayor in the 1970s, he is the only candidate with real hands-on experience if the budget deficit spirals totally out of control. In his platform, Kucinich is nothing if not radical; he would shift healthcare to a system of universal coverage but private provision, reverse the 1982 increase in the Social Security retirement age, bringing it back to 65 for everybody, withdraw from the North American Free Trade Agreement and the World Trade Organization, reverse all the Bush tax cuts, and increase the minimum wage by 26 percent.
While well to the right of many European socialists, Kucinich is well out of the U.S. mainstream on many of his ideas. Solving the Social Security crisis by reversing the only reform the system has had, thus worsening the actuarial deficit, is the kind of thing he did in Cleveland. Maybe not!
Sen. John Edwards, D-N.C., promises to create jobs by enforcing existing trade agreements with China, by enacting a REACH fund to bring entrepreneurial capital to small towns, by creating economic revitalization zones and by supporting the conversion of cornhusks, rice straw and wood chips into energy. He would also increase the minimum wage by $1.50 per hour, extend unemployment benefits and tighten workplace safety standards.
Edwards would pass an "American Dream Tax Credit" to give a $5,000 matching tax credit for the down payment on a first home, a $1,000 exclusion from capital gains taxes, lower the long-term capital gains rate for middle-class families but increase it on high earners, and give a one-for-one tax credit up to $1,000 for retirement savings for those with incomes up to $50,000. He would repeal both the tax rate cuts and the dividend tax cuts for incomes above $240,000 and use attrition to reduce the number of government employees, closing some agencies such as the Office of Thrift Supervision. He would eliminate subsidies for banks making student loans, oil companies and millionaires owning farms, and end corporate tax deduction for "janitor's insurance."
Edwards claims his proposals will save more than $2 trillion over 20 years. He believes expensing stock options should be required, and would reform pension accounting in companies such as General Electric Co. that report earnings when their pension funds lose value. He would insist that shareholders be able to nominate board members, limit sales of initial public offerings to insiders, bring in regulations to ensure that executive pensions are in line with workers' and increase penalties for abusive tax shelters.
Edwards' proposals are pretty modest, and would mostly be worth trying, except the "American Dream Tax Credit" -- yet more subsidies for unproductive housing -- and the abolition of the dividend tax credit for incomes more than $240,000 which would hit stock prices hard. The attacks on corporate subsidies and stock option and pension scams would be particularly welcome.
Retired Gen. Wesley Clark wants to spend $40 billion extra over two years on homeland security, rebate an additional $40 billion to state and local governments and provide a $5,000 tax credit to business for each new full-time employee. To pay for this $100 billion over two years, Clark would repeal the Bush tax cuts for families earning over $200,000 per annum. Over 10 years, Clark would improve efficiency in government ($225 billion) end corporate welfare and close loopholes ($300 billion) promote a more effective Iraq policy ($125 billion) and recapture $1.1 trillion in revenue from repealing the Bush tax cuts for those earning over $200,000.
Clark's arithmetic may be suspect -- well over half the Bush tax increases were targeted toward the middle classes, and with less than 2 percent of Americans earning over $200,000, his savings from cutting their tax breaks look much too high. In addition, there is little evidence that the government isn't paying enough attention to homeland security.
Sen. John Kerry, D-Mass., like several other candidates, started by blaming George W. Bush at length for the recession -- although the bubble happened on Bill Clinton's watch. But anything bad from here on out is Bush's fault, to the extent government can be held responsible. Kerry proposes a number of tax breaks for manufacturing industry, including for the next generation of automobiles. On trade, he wants to use the WTO to punish currency under-valuation.
He would reduce the cost of healthcare by rebating to insurance companies 75 percent of every catastrophic claim more than $50,000. He proposes a college opportunity tax credit on the first $4,000 paid in tuition, and a public service program that will give students two years free tuition. He would keep the "middle class" Bush tax cuts, but repeal those on the "rich," including the 2003 dividend tax cuts. He plans to bring down government spending to its level (as a percentage of gross domestic product) under president Clinton, ending fraud and abuse and reducing administrative costs.
Kerry's tax plans are moderate; his public spending goal is admirable but unachievable without serious painful cuts he doesn't propose. His government cap on every catastrophic claim over $50,000 looks attractive, but would almost certainly lead either to huge bureaucracy or huge fraud or both (but such a scheme offered directly to consumers, allowing them to opt out of health insurance altogether, might well be a good idea.) As for his education plan, pushing more marginal students into community colleges may not be desirable -- the gains from such programs at the intellectual low end are far less than from providing opportunities for re-training in middle life.
Sen. Joe Lieberman, D-Conn., unlike some other contenders, is a full supporter of the "knowledge-based economy," opposing the expensing of stock options, which he would broaden. He would enact a 20-percent investment tax credit, make the research and development tax credit permanent, double the budget of the National Science Foundation, and increase government funding for nanotechnology, all with an aim to increase the long-run rate of productivity growth to 3 percent per annum (depending on how you measure it, it was 2.1 percent in 1995-2001.)
In trade, Lieberman would push for market access for services, prevent taxation on Internet transactions and pursue foreign copyright violators. He would expand college enrolment in science and engineering, invest in educational research and development, accelerate the development of the broadband Internet and promote an e-society. In energy, he would adopt a market-based approach to fuel efficiency, invest $15 billion in coal's potential and $6.5 billion in fuel cells. He would remove the Bush tax reductions on the top two brackets, repeal the dividend tax cut, add a further 5-percent surtax on the top income tax payers, and reduce the deficit by eliminating fraud and abuse and increasing productivity growth.
Lieberman's obsession with high technology may not work. Economic growth is not always turbo-charged by the government investing in high tech; government is incapable of picking tech winners accurately and allowing extraordinary gains from stock options merely results in more greed, not more innovation. Lieberman's policies may play well with the big donors of Silicon Valley, particularly his affection for stock options, but questionable.
Former Vermont Gov. Howard Dean would create a two-year $100 billion Fund to Restore America that will be distributed to state and local governments, primarily for homeland security, infrastructure and special education. He wants to establish a Small Business Capital Corporation to improve the secondary market for small business loans, but will increase the minimum wage to $6.65 per hour. On trade, he would pursue labor and environmental standards, but is relatively anti-protectionist -- he still favors NAFTA, but would sign a "New Deal" pact to revitalize Mexico's economy.
He would repeal all the Bush tax cuts (including the "middle-class" ones) and balance the budget by closing loopholes and eliminating corporate welfare. He would extend Medicaid to everyone under 25 with a family income less than three times the poverty level, and deny tax benefits to big corporations that didn't provide health benefits and support a prescription drugs benefit for seniors. He would make a major investment in preschool, and offer a new higher-education subsidy to reward public service. He also wants to create a formless tax filing system.
