Kerry plan echoes 'Clintonomics' era

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Democratic presidential candidate John Kerry continued his effort to cast himself as a fiscal conservative in the mold of President Clinton Wednesday, promising a return to policies that he credited with powering the prosperity of the 1990s.

In a speech at Georgetown University detailing his fiscal plans, Kerry pledged to cut the federal budget deficit in half in four years while lowering taxes for “98 percent of Americans.” And the Massachusetts senator promised a return to the “pay as you go” budget rules that helped produce the first balanced budget in 40 years but were abandoned early in the Bush administration.

“In the blink of history’s eye, trillions in budget surpluses have been transformed into trillions in deficits over the next decade,” Kerry said. “(President Bush’s) record shows that we can’t trust what he says.  And no matter what he says now, the Bush policies will not reduce the deficit -- they will worsen the deficit.”

Kerry’s proposal to restore fiscal discipline was generally considered a welcome development after several years that have seen a breakdown of bipartisan cooperation on the federal budget, which has deteriorated from a record surplus in fiscal 2000 to a projected record deficit this year.

But analysts said it was unclear whether a promise to reduce the deficit and increase tax “fairness” would resonate with the uncommitted voters considered key to the expected November showdown between Kerry and President Bush.

“I think it probably pleases his base,” said Greg Valliere, chief strategist of Schwab Washington Research Group. “Does this issue get him traction among the 25 percent in the middle? I don’t know the answer to that.”

As part of the promise to restore a pay-as-you-go budget process, Kerry campaign officials Wednesday released details of how they would fund health care and education plans that would cost an estimated $853 billion over 10 years.

Campaign officials said the money could be raised by rolling back Bush tax cuts for the wealthiest including:

  • Restoring the top two federal income tax rates that were in effect under President Clinton.
  • Restoring the tax rates on capital gains and dividends on annual income over $200,000 annually.
  • Restoring the federal estate tax but with new higher exemptions of $2 million for an individual and $10 million for a family-owned business or farm.

In a conference call after the speech, Kerry’s top economic advisers – several of whom served in the Clinton administration -- offered no apologies for an economic program that closely resembles the “Clintonomics” of the 1990s.

“I think the principles are the same,” said Kerry adviser Roger Altman, deputy Treasury secretary under Clinton.

Gene Sperling, another top adviser to both Clinton and Kerry, said Kerry had “set a new tone” by acknowledging some of his own proposals for programs like universal preschool and national service might have to be set aside in the interest of a more balanced budget.

Chris Edwards, director of fiscal policy studies at the Cato Institute, praised Kerry for planning to cut spending, although he expressed some skepticism about the motives.

“It is kind of obvious politically what he is trying to do -- with the general election ahead, now he’s trying to move to the center,” Edwards said.

He said Kerry could have gone even further in his proposal for a system of automatic spending caps, which would exclude defense spending, education and mandatory programs like Social Security and Medicare.

“I think it’s a  big mistake for Kerry to run by saying the economy is bad because it’s not true, and it’s getting less true all the time,” Edwards said. “But most people feel pretty comfortable that the deficit is absolutely a legitimate issue.”

Kerry’s speech was the second of at least three laying down the planks of his economic platform after sweeping victories in the presidential primaries made him the de facto Democratic nominee. Last month, Kerry laid out his plan to create 10 million jobs over four years, in part by eliminating incentives for companies to send work overseas and by cutting corporate taxes.

Bush has been dogged by the economy’s worst record on job creation since the Hoover administration, although last week the government reported a sharp improvement as employers expended their payrolls in March at the fastest pace in four years.

Kerry pointed out that the unemployment rate actually edged up last month, and he said “millions of families are struggling” to pay higher health care costs and local taxes while inflation-adjusted wages are falling.

In coming weeks, Kerry said he would expand on his plans for health care coverage and energy policy.