Dueling economic agendas: Clinton and Dole face off over divergent economic platforms.
Bob Dole was never much of a tax-cutting supply-sider. But sensing a weakness in the Democratic armor as a result of economic insecurity, he's suddenly become a prophet of the philosophy. Dole now promises that it is both the path to "soaring prosperity" and a balanced budget.
The idea behind supply-side economics is simple: If high taxes discourage savings and capital investment, and if these are the keys to economic growth, then one can Cut taxes, accelerate economic growth and generate new revenue for the government, all at the same time.
In theory, no one can dispute the concept. However, supporters and critics part company when it comes to determining how much savings, investment and government revenues are generated by a reduction in taxes. More importantly, skeptics ask whether the gain is ever likely to be great enough to balance a large budget deficit.
Dole's plan centers on a tax CUt package of $548 billion. This would be achieved by an across-the-board 15% cut in federal taxes, reducing the top rate on capital gains by one-half and offering a $500 tax credit for children up to 18 years of age. Individual retirement accounts would be allowed for wives of wage earners and a similar account would be allowed as a means of accumulating tax-free money for educational purposes. Finally, the portion of income subject to social security taxes would be lowered.
Clinton offers a different philosophy. Rather than propose a new economic agenda, the President defends his policies of the last four years. His tax plan was embodied in his 1993 economic package, which saw government spending cut, taxes on the wealthiest 1.2% raised, earned-income tax credits expanded and the federal deficit reduced. The President now proposes an additional $110 billion cut in taxes, along with a $1,500 tuition tax credit and up to a $10,000 college tuition IRA-type account for educational purposes.
At the same time that he has pushed for an increase in the minimum wage, Clinton has adopted a position on welfare similar to that of the Republicans. In fact, with only minor modifications, the welfare bill he signed into law is a Republican one. His philosophy for economic growth centers on opportunity, responsibility and reinventing government.
Once the campaign rhetoric ends and the dust settles, we are likely to be worse off in the long run if Dole's tax cut becomes a reality. With the economy growing at 4.8%, there is hardly room for tax cuts to stimulate growth any faster without uncovering an inflationary monster. The net result would be higher interest rates, nervous markets, slower growth and a much bigger deficit. A recent report by the Census Bureau says that children compose 48% of the chronically poor. The harsh welfare reform legislation written by Republicans and signed by Clinton is likely to make this situation worse. It's unfortunate that a portion of the nation's future is being sacrificed for political expediency.
Who's Got the Plan? Economic Policy Dole's Policy Objectives Clinton's Policy Objectives Federal Taxes Proposes a $548 billion 1993 economic plan cut tax cut. Cut federal taxes government spending by $250 15% across-the-board. billion and raised taxes on Three-year phase in Estimated wealthiest individuals, cost: $406 billion. expanded earned income-tax credit. Proposes a $110 billion tax cut aimed at education and child care. Family Tax Credit $500 per child up to age 18. Expanded earned-income tax Estimated cost: $75 billion. credit for 15 million families, increased taxes on wealthiest 1.2%. Proposes $500 per child. Education Tax Allow tax-free investment of $1,500 tuition tax credit Breaks family tax credit in IRA-type first two years $10,000 educational account. Estimated IRA-type at educational cost: $13 billion. account. Formula for Economic Cut taxes, reduce regulations, Create greater opportunity, Growth reduce share of government responsibility and in economy. Increase savings community. Reinvent rate. Balanced budget and government, make it work lower taxes go hand-in-hand. better, focus on creating opportunity. Lower trade barriers, invest in education.
Thomas D. Boston, a professor of economics at the Georgia Institute of Technology, is a member of the B.E. Board of Economists
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|Title Annotation:||presidential contenders, Bill Clinton and Bob Dole|
|Author:||Boston, Thomas D.|
|Date:||Nov 1, 1996|
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