Party conventions in the US arent what they used to be, when back-room deals and dramatic roll call votes of delegates often determined who the presidential candidate would be. Nowadays the contenders fight it out in the primaries, and the convention merely provides a forum for free TV coverage of partisan speeches. But the platforms that are hammered out by delegate committees still play an important role in outlining the policy positions on which the candidate will campaign in the fall. The Democratic Party platform adopted this week at the Boston convention mainly reflects positions that Senator Kerry has been taking throughout the primaries, with some interesting new twists.
There are essentially four big issues in this years presidential contest: terrorism, the Iraq war, social controversies, and the economy. President Bush retains a commanding lead on the issue of who will be best in dealing with terrorists. The American public has turned against the Iraq war, but Bush has shifted to the policies that Kerry was proposing months ago turning over authority to Iraqis and seeking UN support and so there is not much of a debate left. On the controversial social issues of abortion, gay marriage, religion, the death penalty, civil rights, and the like, Bush takes an uncompromising right-wing position. By contrast, the Democratic platform systematically embraces the left-of-center position on each. Kerry tilts slightly to the left but straddles many of those issues.
That leaves economic policy. In the polls sizable majorities say that Kerry has better ideas for strengthening the nations economy than Bush. Kerrys lead is 8% in one recent poll, 13% in another. Interestingly, despite real GDP growth of 5%, only 37% of respondents in the latest LA Times poll say that the US economy has gotten better during the past year, while 31% say it has gotten worse, and 30% say it has stayed the same. Even among those identifying themselves as Republicans, only 51% say the US economy is better off because of Bush administration economic policies than when it took office over three years ago.
How does the Democratic platform define its economic ideas? Here are the main themes:
Economic philosophy. Pro-free market, but with active government involvement. As stated in the platform, Democrats believe the private sector, not government, is the engine of economic growth and job creation. This is the legacy of the Clinton administrations successes under former Treasury Secretary Rubin and his proteges. The role of government is to create an environment that will promote private sector investment, foster vigorous competition, and strengthen the foundations of an innovative economy. Former Fed vice-chairman Alan Blinder or former Treasury Secretary Larry Summers might have drafted those sentences. They could appear verbatim in the Republican platform, as well, without turning heads.
Fiscal policy: On this key topic, the two parties are diametrically opposed. The Democratic platform says the priority is to restore fiscal responsibility. According to a special NY Times-CBS News survey of convention delegates, fully 86% believe the budget deficit is a very serious problem, as compared to 68% of Democratic voters at large but barely a third of Republicans. The pledge is to cut the deficit in half over the next four years. To do this, Kerry will restore budget rules that the Bush administration has allowed to expire. We will commit to living within tough budget capsreal and enforceable limits on what the government can spend. In other words, the Democrats intend to reintroduce something akin to the deficit limits under the EUs Growth and Stability Pact.
Tax policy: When asked which is a better way to improve the national economy, only 4% of Democratic Party convention delegates answer: by cutting taxes. All the rest say: by reducing the deficit. Among Republicans well over half say cut taxes. Bush wants to extend tax cuts he enacted, while the Democrats promise to roll back the Bush tax cuts for those making more than $200,000. The Democratic platform also calls for changes in corporate tax provisions that now permit multinationals to defer American taxes on income earned abroad. The added revenues would be used to cut taxes for domestic companies, in order to retard outsourcing. In every presidential campaign Republicans call for lower taxes, while Democrats often propose tax increases. This years election will be typical.
Government programs: The Democratic platform lists a number of new spending or subsidy programs. Among these are plans to invest in technology, notably in energy development, to enhance the transportation system and other infrastructure, and to promote small business. There is even a proposal to form government-run venture capital corporations to give small and medium-sized businesses access to capital. Plans are also sketched out for offsetting escalating health care costs and for a significant broadening of public health insurance beginning with a program for uninsured children. Since Republicans strongly oppose most of these programs, the Democrats would need to regain majorities in both houses of Congress to enact them, not easy to accomplish.
Trade policy: The reality of American public opinion is that large majorities in both political parties favor trade restrictions to protect jobs. Only 30% agree with the proposition that free trade must be allowed, even if domestic industries are hurt by foreign competition. The Democratic Party platform broadly concurs, insisting that a Kerry administration will make it a priority to knock down barriers to free, fair and balanced trade so other nations markets are as open as our own. It also favors positions long advocated by the labor unions. Labor and environmental standards would be required in any new trade agreements. An investigation would be launched into Chinas workers rights abuses and currency manipulation. [Beyond this, however, the platform shies away from any discussion of dollar policy.] US trade laws protecting against dumping, illegal subsidies, and import surges would be effectively enforced. Tools would be used to break down trade barriers in key export markets, like the Japanese auto market and the Chinese high-technology market. This is fundamentally the approach taken during the Clinton administration and continued under the Bush administration. But the ill-judged remark by the chairman of Bushs Council of Economic Advisors to the effect that outsourcing is good for the US will probably get more attention during the campaign than either candidates real views on trade relations.
The Kerry economic policy platform will be criticized by the Bush reelection campaign on several grounds. Tax hikes wont really be restricted only to the better off, they will argue. Even if they are, higher taxes on the most productive in the economy will threaten growth, they will say. New government programs will turn out to be more expensive than and less effective than advertised.
But the Bush administration will mostly try to ignore the economy. The statistical comparisons with the Clinton years do not flatter the Bush record. Not enough good developments can take place over the next three months to change the mixed perception of current and prospective economic conditions that several polls reveal. To the contrary, the opinion polls are hardening in favor of Kerry on economics and in favor of Bush on leadership, especially on the terrorist threat.
Implications: Financial markets will pay more attention to the debate over economic policy during the campaign than most voters will. Right now the clear majority within the financial markets expects Bush to be reelected. If that changes, much more attention will be given to Kerry economic ideas and plans than now.