Gore, Bush reap benefits of booming economy on campaign trail
Candidates offer sharply different proposals to keep the good times rolling
WASHINGTON (CNN) -- Heading toward the final stretch of what could be the closest presidential race in decades, White House hopefuls George W. Bush and Al Gore have increasingly focused their efforts on the one issue that grabs the attention of the nation's often-fickle electorate --- the economy.
"It's the economy, stupid," was the rallying cry that Gore and Bill Clinton used to highlight President George Bush's economic shortcomings and defeat him in 1992. Eight years later, the slogan still rings true, particularly among middle-class voters whom Bush and Gore are most actively courting on the campaign trail.
While it is certainly true that the economic recession of the early 1990s played a hand in Bush's defeat, the unrivaled prosperity enjoyed during the Clinton administration's tenure has not given Gore a decided advantage in the 2000 race. Nationwide surveys currently indicate that voters are split on whether Gore or Bush would better handle the economy.
Ironically, it is the Republican nominee who appears most willing to take advantage of the unprecedented boom for which the Democratic administration has taken credit: offering a $1.3 billion tax cut plan as a reward of sorts for the nation's hard work.
"I think the economy has meant more for the Gore and Clinton folks than the Gore and Clinton folks have meant for the economy," Bush argued during his first presidential debate with Gore. "I think most of the economic growth that has taken place is a result of the ingenuity and hard work and entrepreneurship."
Not so, retorted Gore.
"I think that the American people deserve credit for the great economy. But you know, they were working pretty hard eight years ago and they had ingenuity eight years ago," said Gore, who credited administration policy for helping to foster the growth.
The argument reflects the vastly different economic visions the two candidates have for the nation's future. Although the two campaigns continue to quarrel over the true size and scope of their rival's proposals, there's no question that the dueling economic agendas represent the classic battle between Republican and Democrats over the role of the federal government.
Bush's devotion to broad tax cuts is matched by Gore's outlines for a more activist government. Both plans are based mainly on the massive $4.56 trillion surplus forecasted over the next 10 years by the White House Office of Management and Budget.
"The plans are quite different," said Robert Greenstein, executive director of the Washington-based Center on Budget and Policy Priorities. "They're different in how much of the surplus they would use, they're different in where those surplus dollars would go and they're different in which groups of the population would get the principal benefits."
'Fuzzy math' at play?
When the Texas governor announced his tax-cut proposal last December -- during the heated Republican primary season -- it was crafted to fit within the parameters of his "compassionate conservative" agenda. Missing from his long list of proposals were GOP favorites such as reductions in capital gains and business taxes.
But the mainstay of his plan -- an across-the-board reduction of income tax rates -- addresses the Republican Party's longtime aversion to the current tax code, decried as unfair and overly complex. The Texas governor's nine-year proposal would replace the current five income tax rates of 15, 28, 31, 36, and 39.6 percent with four lower rates of 10, 15, 25, and 33 percent --- at a cost of $637 billion in lost federal revenue.
Reducing the income-tax rates favors people with the highest incomes, because they pay the most taxes. How much is a matter of dispute between liberal and conservative leaning policy groups in Washington, not to mention the two campaigns. The Gore camp -- echoing an analysis of the Bush plan by the liberal-leaning Citizens for Tax Justice -- argued that 43 percent of the GOP nominee's tax cuts would go to the top 1 percent of taxpayers,or those making more than $319,000 a year.
Bush has argued that such assertions are based on "fuzzy math," but also has not entirely refuted their validity. Greenstein explained that there are a number of variables at play when determining who gets how much.
He said that differences on how much to factor in the estate tax -- which penalizes assets rather than yearly income -- or whether or not the candidates can follow through on promises to close corporate tax shelters or loopholes, are just a few of the many variables that budget analysts with different political leanings contend with.
A bipartisan analysis by the Joint Tax Committee of Congress shows that those making over $100,000 a year would get 51 percent of the money under the Bush plan.
"A $100,000 a year on either coast or in any big city in this country can be a cop and a school teacher, married and filing jointly," said former GOP Senate aide Carol Cox Wait, president of the Committee for a Responsible Budget. "These folks don't think of themselves as rich. In the Midwest, for example, such a couple would make far less money, but talking about average incomes in this country is like putting your head in the freezer and your feet in the oven: on average your okay."
Bush, however, has pitched the plan's benefits for people living on the "outskirts of poverty," contending that it would cut the marginal rate by more than 40 percent for low-income families with two children, and by nearly 50 percent for families with one child.
"We will take down the toll gate to the road to middle class in America," Bush pledged as his unveiled his plan last December.
The Republican nominee would also increase the existing child tax credit that families can claim from $500 to $1,000, as well as the earnings threshold to be eligible for the benefit from $110,000 to $200,000 for couples and $75,000 to $200,000 for single parents --- at a cost of $162 billion.
Following the lead of congressional Republicans, Bush also supports an $88 billion plan to eliminate the so-called "marriage penalty" tax, allowing two earner families to deduct up to $3,000 more than now permitted. Bush would also phase out the estate tax, which imposes rates between 37 percent and 55 percent on those who inherit assets worth more than $675,000 from individuals, family-run farms and businesses. The phase-out would cost $236 billion when fully implemented by 2009.
Rounding out Bush's long list of tax cut proposals: tax credits of up to $2,000 to help low-income families pay for healthcare; the expansion of tax-free education savings accounts from $500 to $5,000 per student; the creation of Individual Saving Accounts, which give banks tax credits to match contributions by low-income earners; and an increased deduction for those who make charitable donations.
But analysts wonder if Bush's generous tax cut plan is too much of a good thing.
"Bush's tax cut is $1.3 trillion in tax cuts, but its total cost is $1.6 trillion over the 10 years because you'd have to pay $300 billion more in interest payments on the national debt," Greenstein said.
Both presidential hopefuls have pledged to set aside nearly all of the Social Security surplus -- $2.39 trillion -- in a "lock box," which would be devoted to paying down the national debt. But under Bush's plan, the projected surplus would be reduced by the amount diverted into private investment accounts under his Social Security privatization plan.
Bush aides argue that private accounts "are still part of the Social Security system," thus the plan still "lock boxes" the entire Social Security surplus.
Aside from Social Security, the Bush campaign has proposed $475 billion in spending. The largest share -- $158 billion -- would be devoted to adding a prescription drug benefit under Medicare, mainly through health maintenance organizations (HMOs). The GOP nominee has also promised to set aside $132 billion to increase access to health care; $48 billion in federal education spending; and $45 billion to increase military spending.
After additional spending proposals on Medicare services, agriculture, housing, the environment, and other domestic priorities, the Bush camp projects that $265 billion would be left over in the non-Social Security surplus.
The spending proposals -- although small in size when compared to Bush 's tax cut plan -- also fall under the "compassionate conservative" mantle used to attract middle-class voters who rate education or healthcare as their top concerns.
"I don't believe that government is always the enemy," Bush said during a stump appearance in Wisconsin last month.
The Gore economic policy is also clearly aimed at middle-class voters.
In many regards, it's a reverse image of the Bush plan. The Democrat nominee's tax cut proposal are roughly equal in size to Bush's spending plans, while the same can generally be said when comparing the size of the Republican nominee's tax plan and Gore's spending proposals.
The entire Gore economic plan -- detailed in a 191-page book titled, "Prosperity for America's Families," outlines $480 billion in targeted tax cuts over the next ten years, with no change in the overall tax structure.
Vice President Al Gore says he would pay $2 of projected surpluses toward
debt reduction for every $1 he would devote to tax cuts or investments
Even more so than Bush, Gore views the tax code as an instrument of social and public policy. His plan is particularly aimed at helping low- and middle-class pay for health and child care, save for college and increase retirement savings -- through a series of new and expanded tax credits and deductions.
The vice president's tax plan also offers incentives for such things as land conservation, scientific research and the use and development of clean energy sources.
The largest element of the Gore tax plan is the creation of "Retirement Savings Plus" accounts. Designed to help families help families without access to IRAs or 401ks save for retirement, the $202 billion plan would matches private savings by as much as $3 for every $1 dollar saved. Participation would be voluntary, and limited to households earning less than $100,000 a year.
The vice president has also called for tax credits worth $76.6 billion over 10 years to help families meet health care costs. The plan includes a 25 percent tax credit for low-income families who buy their own insurance, a $3,000 credit for those saddled with long-term care needs and tax breaks to help small businesses provide coverage to employees.
Unlike Bush, the Democratic nominee would keep the existing child tax credit at $500 per child, but would rather expand tax credits for moderate income families with child care expenses, as well as create new breaks for stay-at-home parents.
For low-wage workers -- mostly those making $30,000 or less -- Gore would expand the Earned Income Tax Credit by $39 billion over 10 years. On education, Gore would provide credits of $54.9 billion over ten years, the bulk being used to provide families with a $2,800 tax credit or $10,000 deduction to help pay for college tuition.
The Bush campaign argues that Gore's targeted tax cuts would "leave out 50 million people" and result in more government red tape than actual relief. GOP vice presidential candidate Dick Cheney recently argued that "you need a CPA to understand" the plan.
Gore outlines the economic fundamentals he promises to practice
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Bush promotes his tax reform proposals
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Some analysts see good reason for such complexities.
"In some of these cases it would be better not to sort of clog up the tax code, but do them through a straight forward program," said Greenstein. "But if you do them through a straight forward program, your opposition attacks you as someone who want to expand government."
Indeed, the mainstay of the Gore economic agenda is based on more assertive government intervention on behalf of "the middle-class families who have always been America's purpose and pride." The largest portion of spending, $340 billion over 10 years, would go to expanding Medicare to include a prescription drug benefit.
Gore has also called for a large infusion of federal spending on education -- some $115 billion over ten years -- aimed at building and modernizing public schools, hiring new teachers, raising accountability standards and creating education saving accounts. He would also spend $100 billion to modernize the military, $120 billion to expand access to healthcare and $120 billion on environmental and energy policies.
Taken in its entirety, Gore economic plans also sets its sights on 10 ambitious goals. In addition to creating Social Security and Medicare lockboxes and help pay down the debt the Democratic nominee hopes to:
-- Increase real family income by one-third
-- Boost home ownership to 70 percent -- largely by paying off the debt and keeping interest rates low.
-- Double the number of people with accumulated savings of more than $50,000.
-- Increase college attendance and graduation rates.
-- Create 10 million in high tech jobs.
-- Halve the pay gap between men and women.
Not surprisingly, Gore's assertion that he can be the candidate of both fiscal prudence and new social spending has come under heavy fire from the Bush campaign, which claims that the Democrat nominee's economic plan could exceed the $2.2 trillion non-Social Security surplus by as much as $900 billion. Those figures were compiled by the Republican-controlled Senate Budget Committee.
But even more drastic, Bush argues on the stump, is the increased power Gore would bestow upon the federal government.
"Down his path, many of us will feel the expansion of government in our lives -- working through a maze of bureaucracy to get health care, or tax relief, or help with education," Bush told supporters last month. "More forms to fill out, more regulations to meet, more lines to stand in."
Gore, however, does set aside more money than Bush to pay down the $3.4 trillion national debt. The Gore campaign says it would devote more than $400 billion in Medicare surpluses and solvency transfers under its proposed "lock box" for debt reduction. Gore has also proposed a $300 billion "rainy day fund" to be used as a reserve to protect against unforeseen budget shortfalls, but that money would also be put toward debt reduction in the meantime.
The Gore campaign said the vice president's overall plan would devote $2 of projected federal budget surpluses toward debt reduction for every $1 set aside for tax cuts or spending. In addition to freeing up billions of dollars in interest rates, the Gore campaign says that paying down the debt would result in lower commercial interest rates on mortgages, car loans, credit card balances and other personal debts.
"It's always easier to spend money you don't have, rather than save for a rainy day. That's how we ended up with a multi-trillion dollar national debt in the first place," Gore argued on the campaign stump earlier this month.
With the presidential race headed to a down-to-the wire finish, Gore and Bush are likely to continue outlining their economic agendas in a strikingly similar manner: warning that the other candidate's proposals would bust the federal budget and wreak havoc on the national economy.
Of course, none of those dire predictions will likely come to pass if the economy continues to produce unprecedented budget surpluses. The White House and the Congressional Budget Office will release new, 10-year budget surplus projections after the November elections.
"The important thing to remember is that all of these numbers are wrong," argues Wait, of The Committee for a Responsible Budget. "They're going to be wrong. We're talking about aggregate numbers for 10 years in an economy that is already over $10 trillion a year growing to $12 trillion ... the numbers are so big, that if we came within a half a trillion [dollars] of estimating the cost of any of this stuff, we'll look like geniuses."
By the same token, there's also a very good chance that a President Bush or a President Gore will have to overcome Washington gridlock to make good on their respective promises. Political pundits and election watchers predict that the Senate will likely remain in Republican hands. But the fight for control of the House Representatives -- where the GOP holds a slim, five-seat majority -- is too close to call.
Although undesirable to the political parties, a number of economists view gridlock as a good thing.
"If you have gridlock, you have more debt repayment," said the Center on Budget and Policy Priorities' Greenstein. "My biggest fear is not gridlock, but rather a feeding frenzy, in which whoever wins enlarges his own plan and Congress adds on top."