Kerry's Fuzzy Economics
By Ryan Walsh (04/07/04)
Last week’s economic news deflated Kerry’s angry "Jobs, Jobs, Jobs" mantra. The Bureau for Labor Statistics (BLS) not only reported that an inconceivable 308,000 jobs were created in March but also revised the last two months’ reports. It turns out they had underreported job gains in January and February.
Until Friday, Democrats had been arguing that the economy wasn’t creating jobs. They relied exclusively on data from one of the two BLS surveys used to gauge national employment: the establishment or "payroll" survey, which counts workers only on payrolls. The more comprehensive household survey, from which the government procures the official unemployment rate, counts payroll workers and independent contractors, the self-employed, and those running subchapter businesses. The household survey has reported over a half a million jobs created since Bush took office; thus, it is largely discredited on the left.
It seems Kerry and the Democrats have been stripped of their last economic talking point. The job report for March, which exceeded even economists’ predictions, relied entirely on data from the payroll survey. Ouch.
This is no surprise to some. Economist Jerry Bower pointed out that, historically, the household survey and the payroll survey follow the same trend; if one goes up, so does the other. Since the household survey is more comprehensive, it only makes sense that it detects job growth before the payroll survey.
It is also funny that the biggest job report in four years came out the same week the Kerry campaign revealed its economic plan -- call it bad luck, or maybe divine justice. As for the actual details of Kerry’s "plan," economist Larry Kudlow summed it up like this: "Politically, not bad. Economically, it hardly offsets his tax hikes."
Like Kerry himself, the plan is "multifaceted." First, he would lower the corporate tax rate from 35 percent to 33.25. While this may sound like something a Ronald Reagan or a Jack Kemp would have proposed, it is misleading at best and disingenuous at worst. The slight lowering of the corporate tax rate would hardly counterbalance Kerry’s plan to raise the dividend, capital gain, and marginal tax rates to pre-Bush levels.
Kerry would also eliminate any tax credits for U.S.-based multinational corporations that run operations overseas. Our country is one of the few industrialized nations that taxes a corporation’s domestic and foreign profits. For example, a corporation based in Chicago sets up a location in Dublin, Ireland. That subsidiary generates profit. Thus, the profit is subjected to both a U.S. tax and an Irish tax. If the company had its headquarters in another country, it would most likely pay only the Irish tax. Under Kerry’s plan, no multinational corporation would receive any tax credit for its foreign earnings. A likely consequence of this policy is corporations packing their briefcases and relocating to more tax-friendly countries, depriving America of jobs, capital, and tax revenue.
Kerry is in a fiscal conundrum. On one hand, he says he wants to reduce the size of the federal government. On the other hand, he has proposed about $2.76 trillion in new federal spending. On another (third?) hand, he has claimed that he won’t "raise taxes," he will only dismantle the Bush tax cuts -- i.e., raise taxes.
One thing is for certain: the more people realize the healthy and vibrant state of the economy, the faster John Kerry will become "John who?"
(Printer friendly version) Email: Ryan Walsh
