Published October 25, 2004
WASHINGTON – Despite the stark differences in economic plans from President Bush and John Kerry (search), growth and job creation should turn out pretty much the same no matter who takes the White House.
Private economists also say the federal budget deficit (search), mentioned infrequently during the campaign, will bedevil the winner of the Nov. 2 election.
Experts who have analyzed the spending and tax proposals of both candidates say the plans, if enacted by Congress, would have a similar effect on growth, but the gains would come in different ways.
"If both candidates were to follow through on everything they have promised, then the economy would be roughly the same four years from now under either plan," said Mark Zandi, head of Economy.com, a private forecasting company.
Global Insight, an economic consulting firm that has fed the details of the two economic plans into a computer forecasting model, reached the same conclusion.
"The economic impacts of the Bush and Kerry budget plans are so close as to be almost indistinguishable," said Nariman Behravesh, the firm's chief economist.
Under the Economy.com analysis, the economy as measured by the gross domestic product will have average growth rates of 3.1 percent over the next 10 years under the Bush plan and 3.2 percent under the Kerry plan.
Global Insight forecasts growth rates of 2.9 percent under both plans.
Zandi projects that Kerry's plan will create an average of 1.5 million jobs each year over the next decade, compared with 1.3 million for Bush's.
The Global Insight model puts the figure at 1.4 million, resulting in 146 million jobs by 2014.
All of those forecasts would represent an improvement over the actual experience of the past four years in which the economy, struggling with a recession and then weak job growth, has seen a net job loss of 821,000 since January 2001.
The growth predicted for the plans would come about from different approaches.
Bush's centerpiece proposal is to make the tax cuts of his first term permanent, at a 10-year cost of nearly $1 trillion. That would increase growth by promoting higher capital spending through a more attractive investment climate.
Kerry's plan would rely on greater government spending, in part from spending $653 billion to expand health care coverage.
"The Bush plan helps boost the stock market, profits and capital spending while the Kerry plan provides a bigger boost to government spending," Behravesh said.
The wealthy would not be treated the same under the Bush and Kerry plans.
The Democratic senator from Massachusetts is campaigning on a pledge to roll back the rate cuts for households earning more than $200,000 per year.
Clint Stretch, director of tax policy at Deloitte Tax in Washington, said a family of four earning $40,000 annually, was saving $2,000 under the Bush tax cuts and would continue to see those savings under Kerry's plan.
Stretch estimated that a family with earnings of $575,000 annually is now saving $19,300 under Bush's tax cuts, but would lose about 70 percent of that relief and see its tax bill increase by $13,700 under Kerry's plan.
Private economists see both candidates failing to control the federal deficit.
The Republican incumbent and his challenger are campaigning on a pledge to cut the deficit in half by 2009. Analysts, however, do not see either man coming close to achieving that pledge.
The deficit set a record in dollar terms of $413 billion in the just completed 2004 budget year.
Global Insight forecasts that the deficit would climb to $451 billion in 2009 under Kerry's programs, while dipping only slightly to $384 billion under Bush.
Looking out five more years, the deficit figures grow even more ominous as the retirement of the baby boomers starts to put severe strains on Social Security and Medicare.
Global Insight projects a 2014 deficit of $633 billion under Kerry's programs and $570 billion under Bush.
Many analysts believe that despite the absence during the campaign of discussion about the deficit, the next president will be forced to make some painful choices to deal with the problem.
"Whoever gets elected will end up raising taxes," predicted Tim O'Neill, chief economist at Harris Trust in Chicago.
Zandi predicted that if action is not taken, the deficit will figure prominently in the 2008 presidential race, given the pending retirement of baby boomers.
"The budget deficits will be coming to a head just as the baby boomers are starting to retire and the problems will grow exponentially after that," he said. "We have some very hard choices ahead of us."