Sen. John Kerry has begun to elaborate on the economic agenda that he presented in just a few lines during his speech at the Democratic National Convention. However, he fails to realize that the burden of a tax increase on the "upper 2 percent" will fall disproportionately on the small businessmen and women who create more than two-thirds of all new jobs.
Moreover, as Steve Forbes recently observed, it seems Democrats "are afflicted with the curse of Robert Rubin." He wrote that Democrats actually think that the 1993 tax hikes "cut the deficit, which, in turn, reduced the 'crowding out' of private investment by government borrowing, which, in turn, drove down interest rates. Result: a golden age of prosperity. The lesson: Raising taxes works!" This is utter nonsense, indeed.
Given Kerry's anti-growth agenda, it is not surprising that a recent Investor's Business Daily/TIPP survey shows that he lost 9 percentage points from the shareholder vote following his speech at the DNC. And given the fact that Kerry is up in most polls, it is not surprising the major stock indexes are down from early year peaks. The only thing markets like less than uncertainty over policy is certainty that policy is going to get worse. The longer Kerry remains ahead in the polls, the more certain markets will become that their investments will decline over the long run.
Kerry made a strategic error by gambling his election hopes by almost exclusively wrapping himself in the flag at the convention, leaving an economic vision deficit and opportunity for President Bush and Republicans to exploit during the Republican National Convention and throughout the fall campaign.
Bush grabbed hold of the so-called third rail of politics and campaigned in 2000 successfully on transforming Social Security with personal retirement accounts. He successfully enacted pro-growth tax-rate reductions, including marginal tax-rate reductions, for the first time in 15 years, slashed the capital gains and dividend tax rates, accelerated depreciation allowances for businesses and made an effort to eliminate the death tax.
Given recent speculation that Bush's soon-to-be-unveiled second-term economic agenda will include both fundamental tax reform and reforming Social Security with personal retirement accounts, some have suggested that he must choose one or the other. With all due respect, he should do no such thing. Tax reform and personal accounts are not mutually exclusive; they are mutually reinforcing, indeed mutually dependent.
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