The war for your wallet
Bush and Kerry get ready to rumble over the health of the economy
And then there's oil. Last week, the price of crude topped $53 a barrel, owing to increased global demand plus worries about Iraq and other geopolitical hot spots. The 56 percent price increase since the start of the year cuts against Bush, "not because voters follow it in the news but because it hits them in the face every time they go to the pump," says Carroll Doherty, editor at the Pew Research Center.
With Bush's approval rating on the economy hovering around 43 percent for months, Kerry is trying to capitalize on these negative perceptions. He blames the incumbent's policies for jobs moving offshore, though it's been going on for decades and is a byproduct of the free trade that both candidates espouse. Kerry has been a staunch supporter of free trade during his two decades in the Senate. Yet he now calls for environmental and labor standards in trade pacts, language that Gary Hufbauer, senior fellow at the Institute for International Economics, calls "the pleasant face of protectionism."
The kindest cut? It's on taxes where the divide between the two is widest. Under Bush's tax cuts, the top 20 percent of income earners received 73 percent of the cuts. Kerry argues that a tax cut plan targeting middle-class Americans would have yielded more economic gain. But doling out dough is not free of cost. The Congressional Budget Office projects a budget deficit equal to 3.6 percent of GDP this year, compared with a 2.4 percent surplus in 2000. Such a swing of 6 percentage points is not only remarkable, says Richard Kogan of the Center on Budget and Policy Priorities, "it is unprecedented in the postwar period."
With the baby boom generation set to start retiring in 2008, the deficit problem will be greatly magnified by major Social Security and Medicare shortfalls. "We do think chronic deficits have consequences leading to less investment, less capital deepening, and slower productivity growth over time," says Goldman Sachs chief economist Bill Dudley.
Neither candidate has articulated a plan for trimming the deficit that wins plaudits from economists. "On the deficit issue I give them both a grade in the D range," says Robert Bixby, executive director at the Concord Coalition, which advocates a fiscally responsible federal government, "perhaps a gentleman's C minus."
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