Kerry's flawed economics

• Article
• Comments ()
• Click-2-Listen
• Videos

By

Throughout his political career in Washington, Massachusetts Democratic Sen. John Kerry has had a difficult time pursuing a principles-based economic policy. That's because his principles constantly change.

In 1986, his sophomore year in the Senate, Mr. Kerry voted for bipartisan tax reform, which reduced the top federal personal-income-tax rate to 28 percent. That rate also became the highest rate for dividend income. Last December, when he was widely considered the frontrunner for the 2004 Democratic presidential nomination, Mr. Kerry delivered a bold speech in Cleveland calling for "ending the double taxation of dividends." Five weeks later, President Bush echoed Mr. Kerry's call to eliminate the personal income tax applied to stock dividends. Mr. Kerry promptly flip-flopped. Having long ago rejected the low tax rates he embraced early in his career, Mr. Kerry quickly reversed his provocative position on dividends and made a strategic decision to continue playing the class-warfare card among the Democratic electorate. He's been doing so ever since.

Following the tax relief enacted under Mr. Bush, the top dividend tax rate is now 15 percent (i.e., 15 percentage points higher than what Mr. Kerry endorsed in December); and the top personal-income-tax rate is now 35 percent, 7 percentage points higher than the top rate Mr. Kerry supported in 1986. Yet, Mr. Kerry now demands that both rates be raised to nearly 40 percent, calling their reduction "special tax breaks." He claims that his economic policy would unleash the entrepreneurship of small businesses, which he rightly calls "America's economic engine." But he doesn't explain how raising the effective taxation of small-business S Corporations to nearly 40 percent would achieve this goal.

Once a stalwart free-trader who voted for NAFTA, Mr. Kerry has sacrificed that principle as well. He now uses widely understood code words. These include his promise to "appoint a U.S. Trade Representative who is an American patriot"; his pledge to enforce "strong labor and environmental standards" against America's developing-nation trading partners; and his get-tough declaration that a President Kerry would "order an immediate 120-day top-to-bottom review of all trade agreements." His trade flip-flop is a desperate attempt to appease the protectionists who dominate Democratic primaries.

Mr. Kerry asserts that "our manufacturing base is under siege." Evidently, he is unaware that business equipment manufactured in the United States has increased by more than 50 percent over the past 10 years. He apparently doesn't know that U.S.-manufactured durable and nondurable consumer goods have increased since 1993 by nearly 60 percent and more than 12 percent, respectively. These output increases have been achieved because of great advances in productivity. Those advances have contributed to the reduced demand for labor in manufacturing, which Mr. Kerry now seeks to exploit politically.

To his credit, Mr. Kerry promises to retain the middle-class tax cuts. But he dissembles by claiming that he "fought to expand the child credit" when he twice voted against doing so. He claims he won't reinstate the marriage tax penalty, but he voted against its elimination in 2000, 2001 and 2003. Perhaps most hypocritically, Mr. Kerry claims to have a "plan for energy independence [that] would create 500,000 good-paying energy-sector jobs" and "clean up polluted areas." However, while embracing a goal of producing 20 percent of all electricity by renewable energy sources by 2020, he has steadfastly refused to endorse the $700-million project to build a 130-to-170-turbine windmill farm between Cape Cod and Nantucket island, where he and his wife spend much of their summers in a multimillion-dollar mansion.