Bush and Kerry on the Economy

Bush Equals Kerry On the Economy and War Costs

Economically, the most important issue in this election year is to convert the vast resources of the U.S. into a much higher living standard for everyone. Regrettably, Bush and Kerry do not focus on this.

Some economic statistics indicate a weakening in the economy, while others show some improvement. Each candidate selects from the vast stream of economic statistics whatever suits his purposes. Many statistics that reflect overall economic development are either neglected or not taken seriously. In Des Moines, for example, real estate tax forfeiture sales recently jumped in one year by 25 percent to above 5000. In sharp contrast, in other economies, they are negligible or do not exist at all.

Beyond this, a recent Minneapolis Federal Reserve District Bank publication, revealingly entitled "Community Dividend," applauds, in its front page article, the presumed economic virtues of reverse mortgages for Senior Citizens. These are growing significantly but are almost unknown abroad. Add to this the rising rate of home equity loans, liens on used cars, growing college, credit card and other debt, and one begins to wonder if policy makers believe that everyone dying penniless is a worthy goal and everyone dying heavily in debt is even better and, indeed, the ultimate economic goal of the presumed wealthiest economy of the globe. Mix in the fact that the average American worker labors up to a stunning two-and-a-half months more each year than foreign counterparts, while his net worth does not increase and his savings rate is the lowest of all advanced economies. Then consider that the U.S. has the highest percentage of adult labor force participation, the highest female participation, while it reverses--ever so gingerly and as the only modern economy to do so--protective child labor laws which were introduced generations ago, to allow teenagers to work more while in high school or college! After all, so it seems, to maximize again the inclusion of teenagers in the workforce means to maximize stimulating aggregate demand.

What is going on here? The answer resides, largely, in the fact that both candidates still adhere to the falsely conceptualized economic theory of John Maynard Keynes. Starting in the 1930s, he persuaded most politicians that stimulating aggregate demand is the route to everlasting economic progress. His theory was eagerly embraced by producers who confuse maximizing the selling of their products with a healthy economy, though, if driven to the ultimate conclusion, it may indeed cause all consumers to die not just penniless but also heavily indebted.

In other economic matters, too, both candidates are barking up the wrong tree. Both call for more jobs, and both are wrong, for more jobs have already materialized for many decades while family and household income and/or net worth frequently did not rise acceptably or actually declined for many decades relative to inflation! Both should focus on increasing family and household net worth so that genuine economic progress resides in working less while getting wealthier--a development from which America has not benefited for generations.

Myths or untruths about taxation or tax reduction also envelop both Bush and Kerry. Bush endlessly sells himself for having reduced tax rates while Kerry advocates restoring them. Yet, neither one grasps the fact that total taxation is what the federal government spends, regardless of revenues. Bush increased spending substantially, in fact, for a while at a rate three times faster than LBJ. Kerry also approves the increased spending. Since total federal spending is identical to total taxation, both candidates, in effect, have increased taxes and are advocating increased taxation. Both are for expanding military spending, and both approved the war in Iraq, which will burden workers and taxpayers with additional hundreds of billions. Yet, neither one has ever mentioned the fact that the U.S. is the world's largest debtor economy and, for this reason, cannot sustain global imperialism while it has to borrow huge amounts from abroad to finance the trade and budget deficits!

Both should remember the fact that the 60 to 70 billion dollar cost of the first Gulf War was totally paid by foreign governments. This is not the case with the current war. It will be paid by Americans, and it has not just direct costs that are many times higher but also indirect costs which neither Bush nor Kerry have mentioned. These reside in lower demand for U.S. products abroad resulting from spreading global boycotts of U.S. made products, but also in one of the most neglected but revealing economic statistics, namely: Foreign Direct Investment (FDI). In 2000, it was $ 321 billion. This dropped to about half to 167 billion in 2001, then dropped again to about half in 2002 and was again cut in half in 2003. So far in 2004, FDI in Russia, on the other hand, grew by 35 percent and favorable statistics showed up in many other economies. A global redirection of money and wealth is occurring. It appears that Bush and Kerry have given a generous boost to foreign economies.

While FDI was drying up in the America, U.S. corporations, through outsourcing, etc., substantially increased their investments in foreign economies. What it all means is that Bush and Kerry should disengage from the usual electioneering foibles and focus on those economic policies which serve all Americans.