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Bush and Kerry's economic plans: Less difference than meets the eye
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President Bush and Democratic candidate John Kerry greet each other before their debate at Washington University in St. Louis. (Photo by LUKE FRAZZA/AFP/Getty Images)
Polls show the economy is a major concern for voters going into next month's presidential election. President George W. Bush and Sen. John Kerry have different views about what's happening with the economy and what should be done to bolster growth. Some economists say both candidates have unworkable deficit reduction plans, and that both are stretching the truth when they talk about being able to create more jobs over the next four years.

St. Paul, Minn. — President George W. Bush talks about the economy with confidence and optimism. And as he campaigns for another four years in the White House, the president often makes the case that his administration is not to blame for the nation's economic troubles.

"When you're out there gathering up the vote, remind people what we've been through," Bush said at a recent campaign event in the Twin Cities suburb of Chanhassen. He went on to list several factors which have hurt the economy. "Six months prior to our arrival in Washington D.C., the stock market was heading down. Then we had a recession," Bush said. "Then we had some corporate scandals which affected our economy. We passed laws to say to people, 'We will not tolerate dishonesty in the board rooms of this country.' And then the enemy hit us, and that attack cost us one million jobs in the three months after 9/11. We've been through a lot."

Bush insists the tax cuts he moved through Congress are the reason the economy is improving. He's adamant that cutting taxes stimulates business investment and job growth.

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Image Looking for union votes

When John Kerry talks about the economy, he almost always cites record job losses over the Bush administration's four years. Kerry often notes that not since the Great Depression has a president stood watch over so many job losses.

"This is the first president in 72 years to preside over an economy in America that has lost jobs -- 1.6 million jobs," said Kerry in the final debate between him and Bush. "Eleven other presidents -- six Democrats, five Republicans -- had wars, had recessions, had great difficulties. None of them lost jobs the way this president has."

The job loss numbers Kerry cites are misleading. It's true there are fewer jobs, but not the number Kerry claims.

The latest estimate by U.S. Department of Labor showed that from the time Bush took office through last month, the number of jobs in the U.S. dropped by more than 800,000. When the final numbers are calculated early next year, officials say job losses will probably be closer to 600,000. Kerry's larger number comes from counting only private sector jobs, and not taking into account that the public sector has seen job growth.

Bush's statements about job losses are misleading as well.

Bush often blames the Sept. 11, 2001 terrorist attacks for costing the economy one million jobs. But the Bureau of Labor Statistics says there's no such number -- that it's impossible to separate the effect of the attacks on jobs from what had already been a weakening economy.

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Image Wells Fargo's Sung Won Sohn

As the candidates argue over numbers, most economists say that it's business cycles -- not presidents -- that determine job levels.

"A president does not have a great deal of control on the economy in the short run," says Sung Won Sohn, chief economist at Wells Fargo, the nation's fifth largest bank.

"No one really has been able to control economic cycles well," Sohn says. "We have a tendency to blame the current president for economic problems, and praise the president for something that goes well. But in a lot of times that may turn out to be luck."

But listen to the candidates and you'll hear confident predictions that they can create jobs.

"I have a plan to put America back to work," Kerry often says. He promises to grow the economy by 10 million jobs over the next four years.

A good portion of Kerry's plan looks beyond the U.S. He frequently blames outsourcing of jobs to other countries for American job losses. He's promising to clamp down on trade partners, some of whom Kerry accuses of violating agreements to the detriment of American workers.

We have a tendency to blame the current president for economic problems, and praise the president for something that goes well. But in a lot of times that may turn out to be luck.
- Sung Won Sohn, Wells Fargo chief economist

"There have been markets shut to us that we haven't stood up and fought for," Kerry said during the last debate. "I'm going to fight for a fair trade playing field for the American worker."

Kerry says he would also work to change corporate tax laws to help prevent American jobs from going overseas. Kerry says U.S. companies should pay tax on their foreign operations as they earn money abroad. Currently companies pay U.S. taxes only when they bring profits home.

"I don't want American workers subsidizing the loss of their own job. When I'm president, we're going to shut that loophole in a nanosecond," said Kerry in the debate. "And we're going to use that money to lower corporate tax rates in America for all corporations by 5 percent, and we're going to have a manufacturing jobs credit, a job hiring credit so we actually help people be able to hire here."

While Kerry blames Bush for the tax advantages U.S. companies enjoy in other countries, it's nothing new. Such incentives have been available since the inception of the U.S. corporate tax code. The Kerry campaign acknowledges Kerry's outsourcing proposal is more sweeping than anything he ever supported in the Senate.

Some economists say Kerry's stump speeches on outsourcing and trade are little more than tough talk.

"It's always easy to blame foreigners, and that's why we get so much discussion about outsourcing," says University of Minnesota economist Tim Kehoe.

Kehoe specializes in trade policy. Kehoe says Kerry's pro-trade voting record, including his full support of the North American Free Trade Agreement, doesn't track with his speeches.

"The constant discussion of outsourcing and trade agreements -- that smacks of the kind of populist rhetoric that you often hear on both the right and the left in the United States, always trying to blame problems that we have on the foreigners," Kehoe says.

Recent outsourcing studies by the Labor Department and a private investment bank conclude about 2 percent of jobs lost in the U.S. are outsourced to foreign workers. Kerry has said he still supports NAFTA, but he doesn't agree with the way the president is enforcing it.

Asked in the final debate what he would say to an American who's lost a job to a worker in another country being paid a fraction of U.S. wages, Bush talked about the importance of education.

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Image U of M economist Tim Kehoe

"Perhaps the best way to keep jobs here in America and to keep this economy going is to make sure our education system works," President Bush responded.

Bush says the U.S. should increase foreign trade. And he says the nation needs to rely more heavily on community colleges to continually retrain America's workforce.

"So to the person you talk to, I say here's some help," Bush said. "Here's some trade adjustment assistance money for you to go to community college in your neighborhood, a community college which is providing the skills necessary to fill the jobs of the 21st century."

Bush and Kerry have competing proposals to reduce the cost of health care for businesses. Although Kerry is proposing cutting corporate taxes, Bush says Kerry's pledge to roll back tax cuts on wealthy Americans would hurt small business owners.

Bush also says the business climate would be stronger with fewer government regulations and "frivolous lawsuits."

Kerry says he would work to increase the minimum wage from its current $5.15 an hour to $7.

Bush and Kerry talk a lot about creating jobs and improving the economy, but neither has placed much emphasis on the growing budget deficit, which some economists say is threatening growth.

The non-partisan Congressional Budget Office estimates the recently-ended fiscal year 2004 will go down in the books with a record deficit of more than $415 billion. It's important to note that "record" number is a record only in dollars. Even at $415 billion, the deficit amounts to less than 5 percent of the nation's economy as a whole. During World War II, the deficit ran as high as 30 percent of the nation's gross domestic product.

Bush and Kerry each claim they'll cut the deficit in half by the end of the decade.

Economists say based on Bush's tax cuts, and Kerry's spending increases, those promises will be difficult to keep.

"It's bogus," says former Minnesota Democratic Congressman Tim Penny, who's on the board of the Concord Coalition, a non-partisan deficit watchdog group.

"The numbers just don't add up," Penny says. "They talk a good line about how they're going to reduce the deficit by 50 percent over five years in the case of Bush, and 50 percent in four years in the case of Kerry. But neither of them has a plan that looks like it will deliver that result." A Concord Coalition analysis concludes Bush's plan would add more than $1.3 trillion to the national debt over 10 years. It says Kerry's plan would add $1.27 trillion.

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