Bush versus Kerry on Economics

Dear Friends,

Just this week my students asked me why all Professors of Economics under whom they had studied agree with me on major issues, while most non-economists do not. My reply was that professors of economics are economists; they realize that the full impact of economic issues is often the opposite of what seems to be the immediate. The easiest example of this is the minimum wage, which, while intended to raise wages, ends up by increasing unemployment and promoting prejudice against minorities. See TQE #18 for the reasons.

Taxes: I would approve of Bush's tax cuts if he were not overwhelming the budget for his war. I believe the economy would be far better off (more employment, lower prices, etc.) if it were left to the private sector, which operates on the laws of supply and demand, rather than manipulated by the government, which makes oodles of mistakes trying to appease the many voters who do not understand economics. However, Bush lowers taxes at the same time that he increases government borrowing – the latter more than offsets the former, thus causing a net increase in government financing and a net decrease in private. Rather than create jobs at home, Bush prefers to send workers to Iraq to risk being slaughtered.

Bush would decrease the tax on corporate profits. I would go farther than Bush. I believe there should be NO tax on corporate profits. Fairness requires that similar persons (i.e., who have the same income, from any source) should pay similar taxes. Corporate profits are taxed twice, once when they are earned and again when they are paid in dividends. If you wish to tax the rich more than the poor, do it overtly: just raise the income tax paid by the rich. (I do not favor that, by the way, for the same reasons cited by Bush: higher taxes discourage investment, and therefore discourage job-creation.) I don't know whether Bush wants to coddle his colleagues, but I at any rate do not have rich colleagues; rather, I am an economist.

Kerry would charge the same taxes on all American companies, whether they are located abroad or at home. (No other country does this.) American and foreign companies may both locate in (say) Africa for the same reasons, but under the Kerry plan the American company would pay higher taxes than the foreign. Kerry's purpose is to stem the loss of American jobs to foreigners. At the same time he would decrease taxes on all American companies, whether they are located at home or abroad.  But putting American companies (wherever they are located) at a competitive disadvantage would only encourage Americans to import from the foreign competitors.

Tariffs: Both Bush and Kerry nominally favor freer trade. Kerry has not been tested on this, but Bush has shown that he wobbles. While espousing free trade in general, he brought about higher duties on steel, blatantly to get votes in swing states. He was forced to retract by the World Trade Organization, which ruled in favor of Europe on this point. (Those who believe the W.T.O. is "run" by American corporate power, take note!)

Outsourcing: Kerry has accused corporate C.E.O.s who outsource jobs of being "Benedict Arnolds." Yet ever since World War II we have been urging less developed countries to lift their poor out of poverty; now the very way most likely to accomplish this is opposed by Kerry. Kerry yields to mass opinion, which does not know that studies have shown that the very firms that outsource bring more jobs into the country than they outsource. They allow telephone-operator jobs to move to India, but they bring higher-level technicians from India. This is the way the world works, and has worked for centuries. America would not be the rich country it is had it not been for skilled-job immigration from Europe. The way to increase employment in America or Britain is to train more locals to occupy skilled positions. (We can do this; even the poor aren't dumb).

Health care: I wouldn't vote for either candidate on the basis of health care. Kerry seems to be tending toward a Canadian-type single-payer plan. In an interview, he said "I will send to Congress a health care plan that stops spiraling costs, covers every child in America, and makes it possible for every American to get the same health care as any member of Congress. Making health care a right and not a privilege is something worth fighting for." These are fine words, and I agree with their principle. But Kerry implies that health care shall be a government responsibility. I believe he should study the failures of the Canadian plan (e.g., longer waits, poorer care) before he tries to introduce anything. Bush on the other hand has been more vague. His office said he would give "Medicare recipients more health care choices. The President’s plan gives seniors more health care choices and helps them with the high costs of health care and prescription drugs."  This (and other statements he has made) tell me nothing.

Deception: My overwhelming reason for opposing Bush is that, after reading many articles in The Economist, The New York Times, The Wall Street Journal, and the Washington Post, and after watching both Bush speak to the press and Condi Rice testify before the 9/11 Commission, I have come to the opinion that Bush deliberately lied to the American public about weapons of mass destruction in Iraq, in order to bring us into a war that would glorify him in history. I believe he wanted to be the historical peer of   Washington, Lincoln, and Roosevelt.

Other negatives: I also agree with negative characteristics of Bush, on the cover of The Economist of 4/3/04: "backs unequal rights for homosexuals; strong, but not humble; no cojones on Palestine and Israel; all hat and no plans for post-war Iraq; miscommunicator; too close to vested interests; budget belt far too loose; week-kneed on trade: farms, steel, sugar, cotton; tramples on civil liberties." Having lived in Latin America, I think I know what cojones are, though the word does not appear in my Spanish or English dictionary. But I am sickened by Bush's toadying to Sharon, to seduce the Jewish vote in the United States.

Bundling: We have run into the principal problem of democracy: bundling. We have to vote for the bundle of policies of a candidate, when we might like some of his or her policies and others of his or her opponent. Our society would behave better (more jobs, lower prices, etc.) if it were left to private businesses like supermarkets and Sears Roebuck, which operate through supply and demand. We would vote with our feet, favoring products individually, sometimes one supplier and sometimes another, instead of having to accept the entire bundle.

Summary: I will vote for Kerry, not because he shines in his campaign, but because he is the best hope for driving out a dishonest president. I would vote for Mickey Mouse if he could defeat Bush. I hope that Kerry will understand reality when he faces it as president. This is how President Lula da Silva of Brazil turned out. He was elected as a populist, but then discovered he could not do for his constituents all he had promised. So he cut back.

Sincerely your friend,

Jack Powelson

P.S. At age 83 I have finally, fully retired from teaching. The arthritis in my back became too painful for me to walk from parking lot to classroom. I have also ordered an electric scooter. My doctor says this may help me return to teaching, but there are other reasons than mobility why I must retire. I have already taught my last class ever.  I am distraught because teaching has been my life, and I am just as intellectually capable as I was last year. Maybe I'll have more time for The Quaker Economist.

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Readers' Comments

I just want to remind you that you teach every time you send out an issue of TQE. I have learned a great deal from you about economics, and I sometimes forward your newsletters to my family. I'm sending this issue on to my brothers, for example, who are both very politically active. So don't ever think you aren't teaching any more. All those books you have written will be teaching for years into the future.

— Margaret Wallace, Boulder (CO) Meeting of Friends.

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Lying is simply part of their view of their job description.

— J.D. von Pischke, a Friend from Reston VA.

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Bravo on #101. It would take three volumes to document Bush's lies. In fact, there are numerous websites — and even books — which purport to document them. To put them in proper context, however, one must add in Cheney, Ashcroft, Rice and, yes, even Powell lies. They are all part of the most insidious, amoral, brilliantly focused public relations and media management team we have ever seen in the White House.

— Norval Reece, Newtown (PA) Friends Meeting

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I still do not know what to think of your writing. But I do know that you are much more experienced and studied in economics than I, and more knowledgeable about being a Quaker than I. So I have decided to read intently your letters and not commit myself for or against your ideas. Though I don't especially like everything you say, I do begin to recognize the difference between unrealistic idealism and reality.

— Zac Wedemeyer, Iowa City Friends Meeting, Iowa

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I think it would be interesting for the reader to hear why/how you think Bush lied when he "led us into a war to create his own place in history". Specifics, such as, perhaps, details/facts backing your opinion that Bush knew there were no weapons of mass destruction in advance of not finding any despite advice from many experts including Clinton that there were those weapons, etc., but lied about it in order to make his case for the war in Iraq, would be interesting to read; or knew that there would be looting and terrorist attacks in Iraq before those things happened and misled citizens in order to proceed with the Iraq war to create his own place in history; or knew beforehand that many of the unfortunate things that have happened there would happen and lied about those things that he saw coming, etc., etc... Bush is later described in the last paragraph as a "dishonest president." Any detailed specifics on his dishonesty would be interesting to read.

— John Spears, Princeton (NJ) Friends Meeting.

The Author Replies:

I never said TQE is the "truth." It is just my opinion, usually based on oodles of evidence. — Jack

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I'm with you on most of this one, but I wonder about the charge of lying. Is a man, however mistaken, lying if he firmly believes he is telling the truth? I think Bush lives is such a black and white world that he would be capable of reinstating an Inquisition if he had the power to do so. Can he get it done in four more years?

— Allen Treadway, Illinois YM, Attending Yellow Springs (OH) Meeting .

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Great Letter! I'm sorry retirement is so hard on you. I will hold you in the Light.

— Janet Minshall, Anneewakee Creek Friends Worship Group, Douglasvillle (GA).

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I haven't followed Kerry's campaign closely, so I found this informative. Thank you.

— Virginia Flagg, San Diego (CA) Friends Meeting.

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Sorry about your back. Maybe it's from carrying the weight of the world. I find it notable that there were no comments from the last TQE. My opinion is that you have been a trouble maker for so long (you call it controversial...that's nice) that when you wax biographical, many of us wipe a tear from our eye, go "aaawww.." and write you a note.

— Valerie Ireland, Boulder (CO) Meeting of Friends.

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There is one part I agree with very strongly — that is the passage on "bundling." Just the other day I used your metaphor of having to buy all our goods from one store (and one brand within the store). I would urge you to move that up front, and use it as the jumping off point for a very short note on the difference between voting in markets (by purchases) and voting in elections.

— Steve Williams, Bethesda (MD) Friends Meeting.

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Thank you for your interesting, provocative newsletters. I find myself agreeing and disagreeing with you in equal measure; you always give me reason to think.

— Scott Sauyet, Middletown (CT) Meeting.