Senate candidates sharply disagree about economy
When Amy Klobuchar released her economic plan late in the summer, the Kennedy campaign released a statement that said Klobuchar would massively increase taxes and destroy "tens of thousands of Minnesota jobs."
The crux of Klobuchar's economic agenda is to reduce the national deficit. The deficit is currently running at about $250 billion. In other words, Congress is spending that much more than it's collecting in revenue.
Klobuchar argues slashing the debt would free up a lot of money.
"One out of every 12 federal dollars that's spent by the government goes to these interest payments," Klobuchar explained while standing before a podium in a Carlson School of Business lecture room at the University of Minnesota.
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"So if you think about it in your own life, of the $5,500 that a typical middle-class taxpayer pays in federal taxes each year, $454 of that amount is wasted on paying interest on the national debt," Klobuchar said.
Klobuchar argues getting rid of the deficit and lowering the national debt would bring down interest rates and reduce the cost-of-living.
To turn around the nation's finances Klobuchar is campaigning on a plan she says would raise and save a total of $400 billion a year. Nearly half of that -- $171 billion -- Klobuchar says, could be realized through health care savings, including Medicare drug price negotiations, electronic medical record keeping, and an end of tax breaks for pharmaceutical company advertising.
To further reduce spending Klobuchar would institute a return to "pay-as-you go" budgeting, meaning that government expenditures could not exceed revenue.
Klobuchar says the country could save about $130 billion by cutting wasteful spending and eliminating off-shore tax havens.
Finally, Klobuchar says the federal government could collect $63 billion a year by rolling back the tax cut on the wealthiest one percent of the population -- people who make more than $336,500 a year. She would keep in place the tax cuts for what she calls "middle-class" Americans.
"And I know very well what the other side will try to do," Klobuchar predicted. "They're going to say, 'she's going to hurt us,' and that's not true," Klobuchar said. "I'm going to help the middle class. And I think the people making that much money, the top 1 percent -- the wealthiest of the wealthiest -- can afford this and they should want to help these middle class people who are the engine of the economy and that's where we are."
Klobuchar says her plan would net extra money that could be used for additional spending and to pay down the national debt. Among other things, she's proposing more money for police for education and she's called for a tax credit for some first-time home buyers.
Sixth District Rep. Mark Kennedy claims that Klobuchar cannot accomplish her agenda without a massive tax increase and not just on wealthy Americans.
"She has proposed a $1.5 trillion tax increase over 10 years," Kennedy said. "That would be three times larger than the largest tax increase this country has ever had. If you look at the non-partisan Congressional Budget Office they said taxing the top one percent like she's talking about will get you a half-trillion. So if that a half-trillion, where's the other $1 trillion coming from out of her $1.5 trillion tax increase that she's proposed? It just tells you whenever a Democrat tells you they're going to soak the rich the middle class get drenched."
Kennedy's economic plan sounds a lot like what many Republicans from the White House on down have been espousing for years: lower taxes, reduced regulations, and the elimination of "frivolous" lawsuits.
As for the deficit, Kennedy notes it's improving and blames much of the red ink on 9-11. Kennedy insists tax cuts, including the one on the wealthiest 1 percent of Americans, create jobs and increase tax collections.
"When we lowered taxed and passed the tax relief we created nearly six million new jobs in this country," Kennedy said. "That's six million more people paying in taxes rather than getting government benefits. And, by having six million people working, that's brought the deficit down and it's grown the economy. The way to grow the economy is let hard-working people keep more of their hard earned money and encourage investment. That's exactly what we've seen here," said Kennedy.
But Robert Bixby, the head of the Concord Coalition, a Washington-based non-partisan fiscal responsibility think tank, says tax cuts will never pay for themselves.
"There's a political argument that tax cuts pay for themselves but you won't find too many economists that will say that," Bixby said.
There is debate about just how much cutting taxes creates jobs and increases tax collections.
U.S. Treasury Deputy Assistant Secretary Robert Carroll agrees that the tax cuts will not pay for themselves. But Carroll says they have and will continue to expand the economy and create jobs. He says a vibrant economy is vital to addressing the future of Social Security and Medicare.
"Those are the real long-term problems facing out nation when you look out two decades, three decades, and four decades and really the best way that we can address those problems is from a position of economic strength," Carroll said.
Klobuchar has suggested raising the cap on the Social Security tax, but her campaign calls that just one of several options to shore-up the program. Kennedy says lifting the cap would nearly double the tax increase Klobuchar is calling for.
The latest Bush administration projection has the 2006 deficit coming in at a little less than $248 billion. That would be the lowest in four years. Still, the Concord Coalition's Robert Bixby says the red ink is not sustainable.
"People that would like to extend the tax cuts would argue that lower taxes create a good environment for the economy," Bixby said. "The problem is, if you're not also reducing spending, you're just running big deficits which is not good for the economy in the long-term. When you're cutting taxes and not cutting spending, you're actually deferring taxation. It just means that somebody else is going to have to pay higher taxes down the road," said Bixby.
More than anything it is the issue of the deficit and the corresponding national debt that's energized the Independence Party's U.S. Senate candidate Robert Fitzgerald. Here's Fitzgerald at a debate this week in Moorhead.
"We have piled on $9 trillion in debt onto young people on to future generations," Fitzgerald said. "That is an irresponsible and immoral practice."
Fitzgerald says that debt is robbing the nation of the chance to confront major problems from national security to alternative energy. Fitzgerald wants all of the recent income tax cuts rolled back.