Transcript
Economy: Kerry Economic Adviser
Friday, August 6, 2004; 3:00 PM
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To address the first question, the right economic strategy to create jobs and foster long-term economic growth is a crucial issue in this election.
The President and his top advisers claim that the President's tax cuts have worked because they are increasing economic growth. We are simply pointing out that job growth continues to be extraordinarily weak by historic standards and that the tax cuts have been a failure.
John Kerry and John Edwards were out there in 2001, 2002, and 2003 arguing for better bang-for-the buck stimulus that would create jobs without increasing the long-run deficit. So this is not just after-the-fact wisdom.
It used to be that the American public could depend on the numbers coming out of the President's Council of Economic Advisers, Treasury, etc. In fact, during the Clinton years, the figures seemed to be intentionally conservative, so that the economy often out-performed the forecasts. In the last couple years, we have routinely seen forecasts coming out of the Administration that appear quite rosy in hindsight (jobs created, revenues raised, even tax refund projections). Do you think the economic forecasts have become politicized under the Bush Administration?
You are right that the economy has fallen far short of the Bush Administration's forecasts. In February 2002 they projected the economy would create 6 million jobs. Instead we've lost over a million jobs. As a result, today we are 7 million jobs short of the CEA forecast.
Last year they promised that the stimulus would create 306,000 jobs per month. We've fallen well short in 12 of the last 14 months, including creating only 32,000.
CEA still has a very serious and capable economic staff. The bigger problem is not with their forecasts but with the Bush Administration's economic policies which have undermined confidence, increased the deficit, while not having the proper stimulus to create jobs.
In the long run, the best strategy to address outsourcing is to make America a more attractive place to invest. The Kerry-Edwards plan does this by cutting taxes for 99 percent of companies, reining in spiralling health costs, moving towards energy independence, cutting the deficit, and investing in education and technology.
95 percent of small businesses would be unaffected by this tax change.
Under the Kerry-Edwards plan small businesses will get additional tax cuts if they create jobs or provide health insurance to their low- and moderate-income workers. In addition, millions of small businesses paying corporate taxes would get a tax cut.
That's a difference in philosophy: John Kerry believes tax cuts should provide an incentive for job creation, George Bush believes they should reward the wealth of the most fortunate.
--First, jumpstart the economy. Kerry proposes a payroll tax holiday for new jobs created in manufacturing, other businesses affected by outsourcing, and small businesses. In addition, Kerry would provide a one-time fiscal relief of $25 billion to help states avoid contractionary economic policies like raising tuition or property taxes.
--Second, make America more competitive. Kerry will end tax breaks for companies that create jobs overseas and use the savings to create jobs in America by cutting corporate taxes by 5 percent. His plan will rein in the spiralling costs of health care, contributing to more jobs at higher wages. The Kerry plan will also help make America energy independent of Middle East oil.
--Third, John Kerry believes we need to invest in our economic future. He would fund research at places like the National Science Foundation and the Advanced Technology Program. And he would invest in education and provide tax cuts to make college accessible to all Americans.
As an economist, I think the single tax that most cripples our economy is the payroll tax. Rather than keeping any of the Bush tax cuts, I would like to see a President Kerry repeal the payroll tax. (The Social Security and General Fund are already comingled anyway). This would put $255 a month in the average ($40K per year) worker's pocket which would undoubtedly go to consumer spending (70 percent of the economy) and generate lots of taxable events. In addition a small firm with about 12 employees could afford to buy them all health insurance or hire another worker (both of which would create more general revenue taxes). I think the ripple effect would be a tremendous boon for the economy--what are your thoughts?
But John Kerry does support a temporary, two-year payroll tax holiday for manufacters, other businesses affected by outsourcing, and small businesses -- this would encourage job creation and help jump-start the economy.
John Kerry believes we need a major change in the way we conduct fiscal policy in Washington. In the 1990s, there was a bipartisan consensus with everyone from Bill Clinton to Newt Gingrich agreeing that we should pay for all of our proposals. President Bush shattered this consensus, passing or proposing more than $6 trillion of unpaid for initiatives.
John Kerry would restore the simple principle of paying for all of his proposals, in fact he is doing it right now on the campaign trail. His plan would simply rollback the Bush tax cuts for families making over $200,000. At the same time, he will restrain the growth of spending and crack down on corporate welfare in order to cut the deficit in half in four years.
Instead of proselytizing about "worst job losses since Hoover," isn't it intellectually honest to preach that employment rates are at or below historical "full employment" rates, GDP is growing, inflation is low, and the only apt comparison of the economy over the last 4 years is to an economy over the last 4 years if alternative steps were taken?
President Bush could have taken a different course. He could have supported Democratic proposals to have even more up-front stimulus without the same increases in the long-term deficit. Instead, he chose to push for tax cuts like capital gains and dividends that provide little economic stimulus while increasing the long-run deficit.
Kerry's economic plan is built around incentives to create jobs, restraining spiralling health costs, and effective stimulus through state fiscal relief. These would help jobs today without increasing the long-run deficit.
Second, John Kerry would like Congress to pass a constitutionally-acceptable form of the line-item veto so he can use it to control pork barrell spending.
Third, Kerry has proposed many more speciic spending cuts, including eliminating the Office of Thrift Supervision, eliminating several statistical agencies and replacing them with a single Statistics USA, and cutting the number of federal contractors. You can read about all of these at www.johnkerry.com.
The Kerry campaign has been very consistent about this. In March, the payroll survey showed 353,000 new jobs but the household survey showed 3,000 jobs lost. We never pointed to the household survey or tried to argue that March was a bad month for jobs. Instead we said that we were pleased with the job growth in March, but that one month was not enough to make up for years of lost jobs.
The Bush Administration, in contrast, has been extremely political in its discussions of the jobs numbers, raising serious questions about their credibility on economic issues. Today Secretary Snow was out talking about how strong the household numbers were. But I didn't hear him mention the household survey in February or March when the household numbers showed 268,000 lost jobs.
The best step we can take to reduce our dependence on foreign borrowing is to cut the budget deficit. If our government borrows less, America will have to borrow less. The flip side is that the trade deficit will fall.
In addition, John Kerry believes we have to stop China's undervaluation of its currency -- something that has contributed to the record bilateral trade deficit with China.
Senator Kerry has a long history of working on technology issues. He played an important role in the extension of broadband Internet to rural areas in western Massachusetts.
As President, he would build on this experience. You should read his detailed plan at www.johnkerry.com. Some highlights: increase investments in Federal research and technology; make broadband universally accessible; and encourage more students, particularly girls and minorities, to study science and engineering.
In addition, John Kerry will respect science and take scientific advice seriously when formulating his policies, including lifting the ban on stem cell research.
It's important to think about the state and local picture. Some of President Bush's tax cuts exacerbated the state and local fiscal crisis, forcing them to take steps like raising college tuition and property taxes while cutting health care for children.
This has resulted in a stealth tax increase -- and helped contract the economy. John Kerry supports a one-time $25 billion in state fiscal relief to help restrain tuition growth, help states avoid property tax increases and help states make the investments they need in homeland security
What is a greater concern to me is that since the recovery began we have continued to see anemic job growth and wages not keeping up with inflation.
As discussed earlier in this thread, there was another path: larger and more effective short-term stimulus and smaller long-term deficits. The President chose not to take that path. This has contributed to the weak jobs performance.
Much of the costs in the health care system are being driven by a few of the highest-cost patients. The Kerry-Edwards plan would include "government reinsurance" to pay a large share of these catastrophic costs, amounting to about 10 percent of total premiums. In exchange, the company would have to implement disease management and offer high-quality health insurance to all their workers.
This plan would cut premiums by up to $1,000 for a family. And it would make the health system more effective by reducing the incentives insurance companies have to cherry pick the healthiest patients. That would reduce red tape, bring more people into the health system, and ensure more efficient pooling of risk and management of diseases at an earlier stage.
In addition, Kerry supports allowing all Americans to buy into the same health plan as Members of Congress, the so-called FEHBP. This will be particularly beneficial to small businesses because it will allow them to join a larger risk pool with lower premiums and better-quality coverage.
Today, John Kerry and John Edwards released a detailed energy plan -- you should read it at www.johnkerry.com. The plan will help to encourage the use of alternative fuels and renewables and provide incentives for people to buy more fuel efficient cars and buildings. With a national energy strategy, we can move America towards energy independence.
