Dueling economic agendas: Clinton and Dole face off over divergent economic platforms

Black Enterprise, Nov, 1996 by Thomas D. Boston

A year ago, the media predicted that this presidential campaign would cause a bitter racial division with candidates exploiting the race card. But today, race is not the wedge issue it was predicted to be, at least up to now. Instead, economics has taken center stage.

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.