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Correspondent Paul Solman Explores the Kerry Economic Plan

July 26, 2004 at 12:00 AM EDT


PAUL SOLMAN: On Boston’s ritziest shopping street, Laura Tyson, economic advisor to President Clinton, now speaking for the Kerry-Edwards campaign.

LAURA TYSON, Kerry-Edwards Economic Advisor: The focus is on Two Americas. We’re walking down Newbury Street. Newbury Street captures the small number of Americans who have done very, very well.

PAUL SOLMAN: The Democrats are talking about the Bush-Cheney years as a new gilded age that’s benefited the wealthy few at the expense of the many.

LAURA TYSON: Most Americans are struggling. They feel squeezed. They feel pressed. Their wages have not been rising; they’ve been falling. Their health care costs have been soaring. Their sense that they can provide opportunities to their children is diminishing.

PAUL SOLMAN: The Democrats’ economic program is designed for what Tyson calls the “average” American.

PAUL SOLMAN: And by average American you mean?

LAURA TYSON: I mean most Americans. I want to say…

PAUL SOLMAN: Most? Fifty percent — 60 percent –

LAURA TYSON: I would say that, look, 80 percent of Americans make $100,000 or less. This is an important thing to begin with.

PAUL SOLMAN: And so on convention eve, Tyson began the Democrats’ guided tour of the Boston area in the working class suburb of Everett … filled with average-income Americans like John Ragucci, who spent 26 years at Fleet Bank, working his way up from messenger to communications specialist. He was laid off 13 months ago.

JOHN RAGUCCI: Probably put about 300 letters out. And no one responds, which is amazing. And I know technically I can go into a job and kick butt, but I’m not getting any bites.

PAUL SOLMAN: As we were talking, along came the daily mail.

JOHN RAGUCCI: Thank you. More bills — bills that I can’t pay. Thank you.

PAUL SOLMAN: Bills and, as it happens, one of John Ragucci’s last unemployment checks. His benefits run out August 7.

JOHN RAGUCCI: I have, uh, Mass Electric. Oh I got my check from DET so thank you, I can pay for it. Thank you.

PAUL SOLMAN: What’s it like now?

JOHN RAGUCCI: I feel inferior because I’m not working. I’m watching my wife go to work. I’m watching her work two jobs. And so what I do now is — I try to — is earn my keep. I’ll do the domestic part. And there’s a joke between, my wife calls me “Mrs. Ragucci” now. But she’s trying to keep me up. And every day we just, okay, “something good’s going to happen,” and it doesn’t. And you just kind of mope around.

PAUL SOLMAN: So what do the Democrats propose for dealing with people like him?

LAURA TYSON: Look, society, our society is looked at as a society which has the flexibility of the labor market is one of its great strengths. We can move people around — that’s flexibility. From the point of view of the average worker dislocated, it’s pain and suffering.

Society is better off because of the flexibility. But we’ve got to take those net benefits and share them with the individuals who go through the pain and suffering to give us a more flexible labor market.

PAUL SOLMAN: In theory, a flexible, free labor market creates more for everyone — so there should be enough to compensate those who lose out in the process. The Democrats would target such people directly.

LAURA TYSON: First of all, we need to get employers creating jobs at a more rapid rate. So we’ve proposed a new jobs tax credit so that employers sitting in the United States saying, “hmm, I want to bring on a new worker, I have to pay a certain payroll tax for that worker,” we would come along and say, “No, we’ll actually pay the payroll tax, we’ll give you a credit against that if you bring on a new worker” so that we can have more jobs.

The second thing is to think about what you do to help the worker in transition. So we are in favor of longer unemployment compensation terms, we are in favor of much more generous training assistance, much more generous relocation assistance.

PAUL SOLMAN: People get very scared, I think, when they hear Democrats use the term, you have to be “very generous.”

LAURA TYSON: I don’t — see if you believe the benefits of flexibility are as great as our economic models suggest, I think most Americans would feel quite generous to helping workers who are dislocated in this particular way get training. That’s actually to create their greater productivity for the future. To move to a better job — that helps everybody.

PAUL SOLMAN: But the creation of better jobs, the Democrats say, is being stymied by yet another factor, especially when it comes to small businesses.

LAURA TYSON: America generates most of its jobs in small businesses.

PAUL SOLMAN: And this is one of the city’s most buoyant small business successes, Boston Duck Tours.

SPOKESPERSON: Captain Courageous.

PAUL SOLMAN: Captain Courageous?

PAUL SOLMAN: Tyson had arranged to take us aboard to explain the problem — that America’s small businesses face rising health insurance bills, thus putting a damper on job creation.

CINDY BROWN, General Manager, Boston Duck Tours: Our insurance costs have gone up 30 percent a year for the last three years.

PAUL SOLMAN: Thirty percent a year?

CINDY BROWN: Thirty percent. That’s a huge increase that, you know, we can only raise our ticket price so much, we can only sell so many Duck Tour T-shirts.

PAUL SOLMAN: One problem for a small business like this – 125 employees in peak season – is if a few of them get very ill, like 67-year-old Captain Courageous himself.

RICHARD CLERMONT: I had cancer of my kidneys, in both my kidneys. One of the kidneys was removed, the other one was partially removed. Also, I had a stent put into one of the arteries that went to my heart, you know. So those are all pretty serious items that I had done. So I’m sure it cost the insurance companies a lot of money and I was glad to have that insurance.

PAUL SOLMAN: Supplementing Medicare, Duck Tours’ private insurance has kept the Captain at the helm. But cases like his drive up insurance premiums so that they become too heavy a load for a small company to carry.

LAURA TYSON: What Sen. Kerry has proposed is taking the insurance risk of those catastrophic cases and having that risk be taken on by the government. So any employer would see their premiums go down as much as $1000 per employee covered as a result of having the insurance of these catastrophic cases be taken on by the government itself.

PAUL SOLMAN: But a federal system reeks of bureaucracy, at least in my imagination.

LAURA TYSON: In this particular case, a national pool is actually more efficient than having each firm do it themselves.

PAUL SOLMAN: Back on dry land, Tyson had one last thing to say about the Kerry health care plan, and produced one last case in point — Jackie West who, after losing her full-time job and now working 20 hours a week at $8 an hour, is about to become one of 40-some-odd million Americans with no health insurance at all.

JACKIE WEST: I just had to end my coverage as of July 31. I just can’t keep going with it.

PAUL SOLMAN: How much was the coverage?

JACKIE WEST: $661.81 per month, which included prescription coverage.

PAUL SOLMAN: But wait, you making $8 an hour, 20 hours a week — $160, $320 – that’s barely $660 a month in total income! Literally every penny would go to cover your health insurance.

JACKIE WEST: It’s been, it’s been crazy, especially, that $661 is after-tax money. And the amount you’re calculating per hour -

LAURA TYSON: You’re right.

JACKIE WEST: — is before the taxes are taken out.

LAURA TYSON: Very good point.

PAUL SOLMAN: So Sen. Kerry is proposing relief for the working poor. For one thing, a 36 percent rise in the minimum wage, which should lift all lower-income Americans, says Laura Tyson. Plus…

LAURA TYSON: A variety of programs – tax credits – through which a minimum wage worker or someone close to the minimum wage can get health insurance, and generous earned income tax credit relief.

PAUL SOLMAN: And the net effect would be?

LAURA TYSON: Under Sen. Kerry’s proposals, 95 percent of Americans would be insured. The 5 percent who would end up not insured would almost all be people who chose not to be insured – young workers don’t expect to be sick, don’t want to pay the money. Ninety-nine percent of America’s children would be insured.

PAUL SOLMAN: So who’s going to pay for that? It must be a huge tab to make that possible.

LAURA TYSON: Sen. Kerry has been very clear. He would get the resources by rolling back the tax cuts that President Bush has introduced for families with $200,000 or more income a year.

By the way, just to point out how generous those tax cuts have been to the well-off, this year, families that earned a million dollars or more will get a tax cut of $135,000. That’s more than almost all Americans make in a single year.

PAUL SOLMAN: And so Laura Tyson ended her tour as she began — with the theme of the Two Americas and the Democrats’ ambition to narrow the gap between them. But, we reminded her, we’ve been doing pre-convention economics pieces on the NewsHour for the past 12 years now – several of them with Tyson herself as tour guide – Chicago in ’96, LA in 2000 — and not everything we’ve been told actually came to pass.

LAURA TYSON: Go back to 1992. What President Clinton was saying as a candidate, he was saying if you work hard and play by the rules, you should have an income which is adequate to get your family out of poverty. He put in place earned income tax credit expansion, increase in the minimum wage, increase in support for child care. He helped Americans bring their families out of poverty. That was part of his commitment. It was done.

Fast forward to 2000 — 2000, President Bush says essentially, regardless of what happens, my first priority is to cut the marginal tax cut, particularly for the upper income group. That is my priority. That is what he did.

PAUL SOLMAN: The point is, says Tyson — promises have been kept.

LAURA TYSON: So listen to what John Kerry says. His priorities are jobs; his priorities are health care; his priorities are education; his priorities are helping American families make it and deliver opportunities to their children.

PAUL SOLMAN: So that’s the economic platform the Democrats will showcase when they open their convention here in Boston. It’s a platform that promises to create 10 million jobs in the next four years, extend health care benefits and cut the federal deficit in half.

The Democrats say they’ll pay for it all with tax hikes on the wealthy. Republicans contest the numbers. But the basics of the platform are pretty clear, as the party begins its push to recapture the White House in 2004.