How Kerry Would Fix The Economy

The senator talks about jobs, trade, China, Big Business, and the error of George Bush's ways

Heading into a key Mar. 2 battle for the Democratic nomination, Massachusetts Senator John F. Kerry seems increasingly confident of his ability to weather the challenge from North Carolina's John Edwards. Now, Kerry is shifting his sights toward a showdown with President George W. Bush -- a battle many Democrats think will hinge on globalism's toll and the economy's achingly slow job growth. On Feb. 24, en route to Ohio's battered Rust Belt, Kerry sat down with Washington Bureau Chief Lee Walczak to discuss his economic philosophy.

Every candidate seems to have a 10-point plan to create jobs. Why is yours the best?

It's the most comprehensive. [Now,] we actually reward people for taking jobs overseas. With the business deduction, you get a benefit for offshore status, which allows you to avoid taxes. Tyco is a classic example: They move to Bermuda, shift the corporate address, and reduce their tax burden by $400 million. I'm going to end that advantage. [But] I'm not going to penalize companies for competing globally.

What's wrong with the Republican approach to job growth -- cut marginal tax rates, stand back, and let 'er rip?

I like low rates and I have voted for them. I don't want to raise them beyond where they were in the Clinton years. I simply believe we can't afford the tax cut that George Bush has given us.

But when you repeal a chunk of that tax cut, you are taking stimulus out of the economy, right?

I am taking a little bit of stimulus out, but there's an awful lot of stimulus that has been put into the system. In the past couple of years, there has been a lot of [federal] spending.

Fed Chairman Alan Greenspan is worried by some of the protectionist rhetoric being voiced this election year. Do you agree that this sort of talk is inflammatory?

The consensus [for free trade] has been fraying. The backlash is not only coming from American workers but from companies, too. Look at Boeing. It has been fleeced by Airbus' subsidy structure, and we didn't do anything about it. Or look at intellectual-property laws. We have companies getting clobbered by China's [piracy]. You need to keep the consensus for trade alive. But you keep it alive by making sure everybody's being helped by it, and that's not what's happening.

How would you fix NAFTA?

I want to put [changes] into the body of the treaty. I know the Republicans don't like that approach. But I believe it is important for sustaining the consensus on trade. And I'm not talking about draconian, counterproductive standards. I'm talking about doing reasonable things.

You're a critic of Beijing's economic practices, so why vote to admit China into the World Trade Organization?

Because we can enforce the agreement. Because it was important to get the foundation in place -- and it had anti-dumping provisions.

But you intend to apply more pressure on Beijing on the trade, intellectual-property, and currency fronts, right?

Absolutely. I think you have to.

I recall candidate Clinton promising to pressure the Chinese and then flip-flopping.

I disagree. Clinton did, in fact, leverage some changes from time to time, and this Administration has been slow to rise to the challenge. Commerce Secretary [Donald L.] Evans was [in Beijing] over a few months ago; he rang a few bells. [But] I'm not convinced this Administration has done [enough]. Number two, with our current-account deficit as bad as it is right now, we lose leverage because we're dependent on China to buy our debt.

You frequently assail corporate bigness -- Big Oil, big insurers, big HMOs, and big drug companies. Are you surprised that some CEOs get nervous?

What I'm talking about is fairness. What the drug companies did in the [Medicare prescription] drug bill was unfair. It is simply a transfer payment that is asking taxpayers to pay more. Likewise with the oil companies. We're going to drill for the next 40 to 50 years; I acknowledge that. I want the oil companies to be successful. But I'm not going to support drilling in the Arctic National Wildlife Refuge when we have other alternatives.

Do you favor a return to national industrial policy in the form of federal support for homeland security and energy independence?

What I want is to create incentives. I'm not going to make decisions for people. In my judgment, that's industrial policy. We create incentives all the time. We have a national low-income housing credit. We have incentives for oil and gas drilling. The question is, what do we do it for?

Republicans claim you're anti-business and, since you propose to raise taxes, a job-destroyer to boot....


Still, you have made a lot of promises for expanded health care and education -- and everything is based on the problematic repeal of the Bush tax cuts, right?

The repeal of the high-end cuts only. I am not going to repeal the middle-class tax cuts. Look, I'm going to pay more tax. But I think it's the right thing to do, and countless executives around the country have said the same thing.

But the linchpin for funding everything remains the Bush tax cut, no?

Part of it. Part of it comes from closing some [tax] loopholes. But look, if we don't do that, we can't pay for [my programs].

Then what? A gradual phase-in of new initiatives?

Yes. You've got to pay for it, because I've pledged to cut the deficit in half in four years. I've always been up front with people. I say this is a choice election. They can have a tax cut for [rich] people...or we can invest in other things.

Where did all this anti-special interest rhetoric in your stump speech come from? In 30 years in the Senate, you didn't strike many folks as a populist.

I have fought against the oil companies over drilling in ANWR. I have fought developers and others who tried to change the Clean Air and Clean Water Acts. I stood up to the insurance companies and banks over the bankruptcy-reform bill. The votes are there. There's a consistency in my battles against powerful interests.

Once you were described as a neoliberal, then a New Democrat. Now the Bush campaign calls you a Ted Kennedy-style retro-liberal. Which is it, Senator?

I don't think it helps to be ideological or doctrinaire. The principles that guide me are these: One, you want to maximize competition, you want to maximize freedom of entrepreneurial ability and create jobs and wealth. But you also need to regulate at an appropriate level so you're not concentrating too much power.

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