WASHINGTON, May 26 (UPI) -- Though Bush and Kerry claim to be on opposite sides of the economic fence, participants in a discussion at Libertarian think tank Cato Institute indicated that both candidates have made some of the same mistakes.
Panelists at a Cato forum Tuesday bashed both Bush and Kerry for overspending and trade foibles, but Bush fared far better on tax policy than Kerry.
Chris Edwards, tax analyst at Cato, said during Tuesday's discussion that the next president will have an important influence on fiscal policy. For one thing, "He will be the last president before the gigantic entitlement-cost explosion begins starting around 2008."
Medicare and Medicaid costs are rising by $50 billion a year now but will be rising by about $100 billion a year after 2008, he said. Also, the next president will decide whether to keep the Bush tax cuts or keep them permanent, and also control spending or create a bigger financial burden for whoever takes over the presidency in 2009.
Edwards' outlook on either candidate's spending competency was hardly optimistic.
"Like Bush, John Kerry doesn't seem that interested in fiscal budget issues," Edwards said. "Senator Kerry is not a Democratic spending hawk." The National Journal scored Kerry as the most liberal senator in 2003.
"The risk if he's elected is that he wouldn't listen to the boring Bob Rubin, 'reduce the deficit' advice -- he'd want a big legislative achievement and it would be something to make the liberal base of his party happy such as universal health care," Edwards said.
However, with a Republican Congress he may well govern from a centrist position like Clinton did, Edwards said.
Edwards had no kind words for the incumbent's spending either. "Bush has a terrible overspending record."
Edwards criticized Bush for not vetoing a bill Congress passed in January of this year that included 8000 pork barrel projects, as well as Bush's proposals for a mission to Mars and extra funding he's requesting for Iraq.
Edwards criticized Bush as using up his valuable campaign time touting "bite-size" spending proposals instead of talking about ways to cut the deficit.
Based on spending issues, "The Republican party basically seems to be running Bill Clinton for their White House candidate this year," he said.
Edwards also slammed inconsistencies and shortfalls in Kerry's spending proposals. He noted that Kerry wants to cut taxes for the middle class, restore pay-go budget rules, restrain spending for certain programs and cut corporate welfare. However, Kerry only wants to curb spending for programs other than defense, entitlements and education, but that leaves only 16 percent of the budget. Kerry is also proposing several new corporate welfare programs, Edwards said. In fact, on Kerry's Web site it lists 79 new programs or spending increases, including several big-ticket items like $650 billion for universal health care over 10 years, as well as several smaller "micromanaged" programs, like canceling student loans for engineering and computer science students if they get jobs in manufacturing.
Edwards cited a laundry list of unfortunate spending similarities. Neither candidate identifies any substantial programs they'd like to cut; their campaign speeches are filled with demands for more money; they both support large intrusions into state and local policies" like K-12 school spending; Bush's proposed health-care program would cost $90 billion, and Kerry's $650 billion; both support more business subsidies.
"On spending they're both pretty well indistinguishable," Edwards said.
Edwards was more receptive to Bush's tax policy.
Kerry wants to repeal Bush's tax cuts for those who make more than $200,000 annually -- the top 2 percent of household incomes.
Edwards said Kerry's plan to repeal tax cuts for wealthy is problematic for several reasons. For one thing, he said, increasing taxes on wealthy Americans is bad economics. "They're not just rich people -- about two-thirds of them are small business owners," Edwards said. "Academic research clearly shows that increasing taxes on small business reduces job creation and reduces small business investment."
It's also not fair, Edwards said, since those who make more than $200,000 per year pay about 26 percent of their income in taxes, compared to middle-income residents that only pay 10 to 15 percent, he said.
The clearest difference between the two is how they view social security, he said, noting that Kerry said he would "never never never" privatize social security.
"Social Security is a huge issue. I hope young Americans take note of Senator Kerry's position on the issue," he said.
Gary Hufbauer, Reginald Jones Senior Fellow at the Institute for International Economics, also expressed concern about the burgeoning costs of entitlements.
"Neither candidate has addressed or will they address the dominant fiscal problem of our times and for the next several decades, which is the rising burden of entitlements."
Historically he said the United States has borne a tax burden of about 19 percent. When it rises above that, there's a tax cut. "We are either going to breach this historical 19 percent ceiling or these entitlements are going to have to be cut, or both, but ... the next president can postpone this to his successor because the crisis will likely not hit in the next four years," he said.
"I don't think the debt level to GDP ratio is high enough or the turmoil we might see in the exchange market is great enough [to cause a crisis in the next four years] ... but it is in the cards," he said.
There are few examples of countries reducing their entitlements gradually, Hufbauer said, but cited Britain as the best example.
Hufbauer said that the tax savings Kerry said he could achieve -- $850 billion over ten years -- would be offset by spending proposals that would cost at least that much over the same time period.
Hufbauer said pointed out that since Kerry said he's not going to raise retirement age, cut benefits or reduce premiums, "add that together with privatization and it's sort of what you've got now on Social Security is what you get in the future."
The only "wiggle room" Kerry would have is to raise the cap from about $88,000 on covered wages but not have a corresponding increase in benefits.
"But to do that he would have to have a Democratic majority in the House of Representatives, and that's a long shot."
As for Kerry's proposed reduction of the corporate tax rate, Hufbauer said it does address the fact that the United States is not as tax-competitive as it was 10-15 years ago compared to other countries, but "it isn't enough to make us competitive compared to Asia where the most of the new competition is coming from," Hufbauer said.
Dan Griswold, associate director of the Cato Institute's Center for Trade Policy Studies, called Bush's efforts to expand trade impressive, noting actions such as the upcoming signing of trade agreements with five Central American countries and the Dominican Republic, and supporting normal trade relations with China, now the United States' fourth-largest trade partner. But he said Bush also imposed 8 to 30 percent tariffs on foreign steel. The tariffs were lifted after 20 months, but "the economic and political damage had been done." He also signed the 2002 farm bill that locked in subsidies that were 80 percent higher than those under President Clinton.
"Besides being costly to taxpayers and consumers alike, the farm bill undercuts the U.S. government's position in global trade talks -- urging other countries to lower their trade barriers and make the tough choices when we are unable to make those same tough choices here."
Griswold also decried Bush for imposing tariffs on Canadian softwood and some Chinese products, and for continuing the travel and trade embargo on Cuba. "When it comes to Cuba the president seems to forget all the sound arguments he makes for trading with China -- but they don't seem to apply to Cuba when it comes to promoting human rights and democracy through trade expansion."
Ironically, Kerry's record on trade is a complete contradiction of his presidential campaign rhetoric, Griswold said. "Senator Kerry has employed rhetoric on the campaign trail that has been significantly less friendly toward trade than his actual record," Griswold said.
Kerry's record shows him supporting trade liberalization most of the time -- he voted for NAFTA in 1993, for the Uruguay Round agreements in 1994, for a version of fast-track trade legislation in 1997, for normal trade relations for China, and to lower trade barriers against imports from Africa and the Caribbean. He has also voted against sugar quotas and sugar subsidies, and against steel tariffs.
More recently though, he voted for the 2002 farm bill, and for more restrictive language on labor, environment and human rights standards in trade agreements.
"About two-thirds of the time Sen. Kerry's votes in Congress have been in the direction of trade liberalization. If I were grading the actual records of Sen. Kerry and President Bush by free trade standards I would give them both a B, maybe a B-." with farm subsidies chief among the worst mistakes, he said.
He added, "While paying lip service to the need to trade he's ratcheted up his calls for enforceable labor and environmental standards at the core of every trade agreement, never mind that he supported agreements in the past that didn't have that kind of restrictive language."
Griswold slammed Kerry for proposing that the United States reopen trade agreements, keep track of how many jobs are shipped overseas, require a 3-month notice before jobs go overseas, and restrict bidding for federal contracts.
"All of these proposals would add to the cost of doing business in the United States, driving up costs for consumers and taxpayers and inviting retaliation from our export markets abroad."
"The road to the White House is littered with the wreckage of campaigns based on a protectionist message ... not since Herbert Hoover have Americans elected a president who ran on a explicitly anti-trade platform," Griswold said.
