John Kerry’s promises for his first 100 days in office and beyond are so grandiose that we must examine his method of paying for them. As his “first major legislative initiative,” Mr. Kerry promises to make it “possible for every American to get the same health care as any member of Congress.” Then, he’ll reverse the Bush administration’s refusal to sign the Kyoto Protocol — a global climate-change agreement that would cost our economy billions of dollars and hundreds of thousands of jobs (while delaying a 1.2-degree celsius rise in temperature by a mere six years). Then, he will create a “National Education Trust Fund,” provide targeted tax breaks for small businesses that provide health care for their employees and increase the size of the military. All told, the Congressional Budget Office estimates that Mr. Kerry’s promises will amount to at least $1.9 trillion in new federal spending. And here’s the kicker: Mr. Kerry says he can do it all while cutting the deficit in half in four years and creating 3 million new jobs in his first 500 days and 10 million in his first term. If only it were true.
It’s all made possible, Mr. Kerry says, by rolling back the Bush tax cuts for the wealthiest Americans. The rich will just have to cut back on their cognac and caviar, Mr. Kerry seems to think, and we’ll get universal health care, quality education for all and millions of new jobs. But the way it will actually play out is not quite so simple.
Contrary to Mr. Kerry’s apparent belief, the top 1 percent of income earners in America tend not to spend their time lounging by the pool on luxury cruises in the Mediterranean. In fact, although Mr. Kerry may not know it, two-thirds of them are actually small businesses, the backbone of our economy. They don’t file as corporations because they’re not incorporated. They run the local coffee shops, the comfortable little bookstores and the family farms. They account for approximately 75 percent of the net new jobs added to the economy, 99.7 percent of all employers and 97 percent of exporters. Many of them have invested their lives and their fortunes into their enterprises, work upward of 60 hours a week and employ dozens of aspiring young Americans. They are the American Dream. But these are the people who will shoulder the burden of Mr. Kerry’s spending programs.
To see what would happen to America if Mr. Kerry implements his tax plan, just play the Bush tax cuts in reverse. Instead of investing in new capital, hiring employees and providing better services — the windfalls provided by the Bush tax cuts — small businesses would have to fork it all back over to the government. The implications are painfully obvious: higher unemployment and stifled growth, precisely the problems Mr. Kerry claims he will alleviate.