VIEWPOINT: On the issues - Economy

Published: October 28, 2004

The fifth in the Editorial Board's continuing series on election issues deals with the economy. This series is meant to engage voters on a variety of topics, as well as provide insight for the presidential election on Nov. 2.

Although national security is the hot-button issue of this campaign, the economy, as is usually the case, is the single most important consideration for voters. A YouGov poll from Oct. 18-20 found that over 30 percent of registered voters consider the economy the most important issue of the election, up over 20 points from the war in Iraq and 15 points above the war on terror.

President Bush has introduced some of the biggest tax cuts in decades - he recently signed his fifth major cut on Oct. 22, consisting of $143 billion in tax breaks to small and big businesses. All the while, the administration has increased discretionary spending - to the military and several other domestic projects including Medicare - from 6.3 percent of the GDP in 2000 to nearly 8 percent of the GDP this year. The president has also promised to cut the deficit in half over the next five years, keeping his tax cuts permanent while doing so. Bush also often notes that a record 68 percent of Americans own their own homes, although around 600,000 jobs have been lost during his administration. The president often says that most of his tax cuts go to lower- and middle-class families, but a study by the Urban-Brookings Tax Policy Center prepared this year found that 52.9 percent of the cuts went to those in the top 10 percent income bracket, whereas less than 14 percent of the cuts have gone to the bottom 60 percent of Americans.

Sen. John Kerry promises to roll back the president's tax cuts for Americans making over $200,000 a year. He says he will cut taxes for 99 percent of taxpaying corporations as well as lower the corporate tax rate by 5 percent. The senator promises to cut the deficit in half in four years by reinstating the former policy of "pay as you go" spending, where Congress must lay out a plan to find funds before spending them. Kerry also proposes to raise the minimum wage from $5.15 to $7 by 2007. The senator plans to push the McCain-Kerry Corporate Welfare Commission if elected, which seeks to reduce unnecessary corporate welfare, including a chunk of the $40 billion funneled through tax shelters in Bermuda. Kerry has come out against giving tax breaks to companies that outsource and looks to implement a "Buy American" incentive for keeping federal defense manufacturing contracts in America.

Small businesses stand at the forefront of the economic policies of either candidate. Both have been small business owners themselves at one time or another: Bush is currently the grantor of Lone Star Trust, and the company's $84 in profits in 2003 qualify him as a small business owner under his administration; Kerry owned and operated a cookie and muffin shop in Boston's Quincy Markey called Kilvert and Forbes starting in 1979. In that regard, Kerry's plans to reduce contract bundling (which often shuts small businesses out of bidding on federal contracts by making the deals larger and harder to compete for) offers a step in the best direction.

Republicans have noted that the cost for Kerry to balance the budget coupled with his broad domestic plans will top $2.2 trillion in new spending, and rolling back the tax cuts will only net $600 to $800 billion. Bush insists that the tax gap will be filled by the middle class with a raise in taxes. However, neither candidate has plans that go further than to say that the budget will be balanced. Bush has shown reckless spending in his four years in office, Kerry and the Democrats have a recent history of success in balancing the budget, but both candidates offer little more than empty promises as to pulling the current deficit out of the red.