WASHINGTON � President Bush says his economic
policies, including billions of dollars in tax cuts,
are helping to create new jobs. But not the millions
he promised. Democratic challenger John Kerry (search)
says 10 million new jobs would be added in his first
term. Don't bet on that either.
Economists say both candidates' plans falls short in
combating the problems that are impeding job growth:
skyrocketing budget and trade deficits, and soaring
costs for health care, oil and gas.
The centerpiece of Bush's job creation plan is making
permanent his nearly $1.9 trillion, 10-year tax cuts.
He also says he wants to restructure and simplify the
tax code, give tax breaks to encourage private
investment in lower-income communities, reduce
government regulation on businesses, restrain federal
spending, limit frivolous lawsuits and expand energy
exploration, production and capacity.
Kerry wants to lower employers' health care costs
through tax credits and premium relief. He proposes
tax cuts for small businesses, middle- and
lower-income earners and businesses hurt by
outsourcing. He wants to reduce the federal deficit in
four years, pursue energy-efficient technology and end
tax breaks for companies that send Americans' jobs
overseas.
Jobs, the economy and other domestic issues are the
topics for Wednesday's third and final presidential
debate.
Many of the job creation proposals come with large
price tags, a concern to economists amid ballooning
federal budget deficits, which they say ultimately
will stifle job growth with rising interest rates that
limit business investment and slow production.
"The question is, who is going to pay for all of
this," said Ken Mayland, president of ClearView
Economics. Some businesses might get relief, "but the
fact is, somebody is going to have to shell out more
resources. There ain't no free lunch."
Kerry and Bush have pledged to slice the deficit in
half in four years. The deficit was estimated at $415
billion for the 2004 budget year that ended Sept. 30.
But if Congress enacted all of Bush's proposals, or
all of Kerry's, the deficit wouldn't shrink much.
Under Bush, it would be $375 billion by 2009, and $447
billion under Kerry, said economic research firm
Global Insight Inc.
"Despite a lot of lip service to cutting the deficit,
neither comes close," said Nariman Behravesh, Global
Insight's chief economist.
On tax proposals, a huge component of both candidates'
jobs plans, economists were skeptical. Bush's tax cuts
hadn't lived up to the millions of jobs promised,
while Kerry's tax-cut proposals were too small to fuel
the creation of 10 million jobs he promised in a first
term.
Mark Zandi, chief economist at Economy.com, said the
addition of 7.2 million jobs in the next four years is
more realistic than Kerry's 10 million goal.
Bush's tax cuts were structured to boost business
investment and provide a break to top earners � not to
create jobs, he said. "We can see that in the
results," said Zandi, who thinks that aid to states
and bigger tax cuts for lower-income earners would
have created more jobs.
In 2002, Bush's economic advisers predicted average
nonfarm business payrolls would rise to 138.3 million
in 2004, but they have continued to revise the
estimate downward since. September's payrolls were at
131.6 million, 821,000 fewer than when Bush took
office.
Among Bush's four rounds of tax cuts approved by
Congress, businesses got a temporary break on
equipment purchases, such as machinery and computers.
But it did not trigger big hiring.
"If pension costs are going up and health care costs
are going up, and interest rates are low and the cost
of capital is low, am I going to choose a person or a
machine?" Mayland said.
But the cuts helped revive the struggling
manufacturing sector, which lost 2.7 million jobs,
said Dave Huether, chief economist for the National
Association of Manufacturers. They were "the shot in
the arm and we needed it," he said. "It was one of the
critical things that got the manufacturing recovery on
track."
Huether said making the cuts permanent would make
manufacturers more competitive overseas. The corporate
tax rate in the United States is about 36 percent
higher than those of its main trading partners, he
said.
Balancing the expansion of global trade opportunities
and keeping jobs at home is a dilemma. Kerry said he
will raise taxes on employers who ship jobs overseas.
Economists aren't sure that will work.
"To the extent we can induce, but not mandate,
businesses to keep more jobs here, that's obviously a
laudable goal," said Sung Won Sohn, Wells Fargo chief
economist. "But how you do that, I'm not sure."
For Kerry, many of his tax plans to spur hiring, while
"laudable," are "much too small to make any difference
at all," Zandi said.
The benefits of Kerry's health care plan to employers
could be outweighed by its cost � $653 billion over 10
years, economists said. That plan and his deficit
reduction pledge "work against each other," said Jared
Bernstein, chief economist at the Economic Policy
Institute.
"I'm not convinced either candidate has the solution
to the health care problems" that are holding down
hiring, Sohn said.
Rising oil prices is a longer-term problem, economists
said. Bush's energy plan, emphasizing drilling,
exploration and production, will add jobs, as will
Kerry's plan, which is heavier on conservation and
developing new technology.
But the country must do a better job of finding
alternative energy sources and conserving: "We need to
wean away from OPEC oil for the economy and for
national security reasons," Sohn said.
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