- The Washington Times - Wednesday, February 18, 2004

Sen. John Edwards’ last-minute business investment plan tells us all we need to know about the confused state of Democrats’ economic policy.

Think I’m exaggerating? Well, if the pivotal political issue in this year’s presidential campaign boils down to the mantra “it’s the economy, stupid,” as I think it will, then the freshman North Carolina senator’s offering must rank as one of the dopiest ideas to come down the pike.

Mr. Edwards’ plan didn’t get much attention this week because he tossed out the idea with little fanfare, but he essentially wants taxpayers to cough up $3 billion “to fund new businesses and expand existing ones,” to create jobs, according to one source. The money would ostensibly be used to leverage other investment funds from the private sector.

In short, his big idea would result in having the feds pick the winners and losers in the economy rather than letting the competitive, free market, along with millions of individual investors, decide such things.

Mr. Edwards’ brand of politics has been termed “populism” by the traveling campaign press corps, a term that indicates a distrust of businesspeople, especially rich big businesses — the people he was fond of suing in court (resulting in himself becoming a very wealthy man).

Having the government use tax dollars to invest billions in the private sector, rather than encouraging businesses and investors to invest in new enterprises by letting them — in President Bush’s words — “keep more of their own money,” is not a new idea. Nor is it one with much of a success rate. Would you trust the government to invest your money?

If Mr. Edwards’ pitch strikes you as a silly, not to mention anemic, proposal that would have little or no job-creating impact in a massive $11 trillion economy, consider Sen. John Kerry’s equally confused idea to repeal the Bush tax cuts for people making more than $200,000 a year.

Mr. Kerry’s repeal proposal, a core idea in the Democrats’ economic plan, would in effect raise taxes on the wealthiest Americans. There are people in this country who respond positively, even viscerally to the Democrats’ class-warfare appeals, but how can raising taxes on people who invest the most help the economy grow stronger?

After all, if Mr. Edwards is right that we need to encourage more capital investment in existing and in new start-up businesses — and we certainly do, because that is the wellspring of most new jobs — taxing the source of such capital will reduce its availability for job creation. Besides, the people in the top income tax bracket are in mostly small, unincorporated businesses that create a wealth of the jobs in this country. Mr. Kerry would raise taxes on the central job-creating sector of our economy.

But there is no consistency to Mr. Kerry’s economic thinking, let alone any well-thought-out strategy to stimulate faster growth.

Back in 1986, Mr. Kerry voted for Ronald Reagan’s tax reform plan, which reduced the top rate on America’s richest income earners to 28 percent — a level he was perfectly comfortable with. Mr. Bush’s tax cuts lowered the top rate to 35 percent, down from Bill Clinton’s nearly 40 percent top rate, but now Mr. Kerry says even 35 percent is too low.

How would going back to a nearly 40 percent top tax rate help the economy? Mr. Kerry says it would reduce the deficit, which would bring down interest rates (already at record lows), a discredited school of economic thought promoted by Herbert Hoover during the Great Depression.

Democratic leaders and strategists believe Mr. Bush is vulnerable on the economy because of the large number of jobs — about 3 million — lost over the past three years. But timing is everything in politics, as it is in economics, and this economy has been in recovery for more than a year now, with no sign of slowing down.

There has never been an instance in the modern presidential era when an incumbent has lost re-election with the economy growing at 4 percent or better. Jobs are coming back (albeit slowly) home sales are booming, the stock market has turned bullish again, retail sales are brisk, and the global economy shows new signs of vigor.

Last week, the big economic story was a huge leap in the trade deficit, a meaningless government statistic that overlooked the real news in the Commerce Department’s trade figures: U.S. exports topped $1 trillion last year. America is making and selling more stuff abroad than ever before, another sign of stronger economic growth ahead.

Meanwhile, the Democratic presidential contenders are struggling to pull something out of their economic bag of tricks they can peddle in the coming campaign. So far, their proposals are all bluff and bluster, signifying nothing.

Donald Lambro is chief political correspondent of The Washington Times and a nationally syndicated columnist.

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