Top economic advisers to the U.S. presidential candidates on Tuesday debated economic policy at a forum sponsored by New York's Council on Foreign Relations. The main differences involved tax and trade policy.
Alan Blinder, a Princeton University professor advising Democratic presidential candidate John Kerry, turned aside assertions that Mr. Kerry is less inclined to support free trade than is Mr. Bush. He said that while President Bush says he is a free trader, in fact he has granted trade protection to the hard-pressed steel and textile industries. Mr. Kerry has been labled a protectionist because he favors government action to stem the loss of American jobs to cheaper, lower cost nations. That, said Mr. Blinder, is not protectionist.
"I think if you look at it closely, there is nothing protectionist in it," he said. "He [Kerry] has said, 'we're going to review the [free] trade agreements. That's a reasonable thing to do. They're already written. They're signed. We might as well review the trade agreements and see if they're being followed.'"
Larry Lindsey, who until last year was a top economic policymaker in the Bush administration, said Mr. Kerry is overtly protectionist. He said Mr. Kerry's proposal to tax American companies that shift jobs abroad would erode the competitiveness of U.S. companies.
Mr. Lindsey said if President Bush is re-elected his priority will be to enhance American competitiveness in the global marketplace.
"That means tackling some of our own structural rigidities," he said. "It includes fundamental tax reform. We have a complicated tax system that, in my opinion, works against the competitiveness of American companies. It includes legal reform, fewer tort lawyers. And it means moving towards a more rational financing of our health care system."
Both presidential candidates are promising to reduce the burgeoning U.S. budget deficit by half. Mr. Kerry says he would accomplish that task in four years. Mr. Bush said he would do it in five. Their economic advisers concede that tough decisions are required to meet those objectives.
Mr. Kerry says that he while he would retain most of the tax cuts enacted by the Bush administration he would overturn the tax reductions for the wealthiest individuals. Mr. Lindsey says the Bush tax cuts fended off what would certainly have been an economic recession after the bursting of the stock market bubble and the 2001 terrorist attacks.
Mr. Lindsey says a fast growing economy is the best way to remedy the budget deficit. Mr. Blinder said the Bush tax cuts have been too big, making it difficult for government to meet its obligations to provide health care and income support to retirees.