McCain Policy Defies Math
Image has not been found. URL: /wp-content/uploads/2008/09/mccain-leaning2.jpgSen. John McCain (WDCpix)
Sen. John McCain (R-Ariz.) says that his age provides him with the “experience that is the basis for sound judgment.” That raises a simple question. How could an experienced senator run for president in the midst of a recession and put forth an economic plan which is, frankly, incredible?
McCain has just finished his “time for action tour” of “forgotten” America. Clearly designed to reassure affluent independent voters that McCain is a “compassionate conservative,” it offered relatively little to the working and poor people who turned out to hear him. After echoing the president for months that the economy’s “fundamentals are strong,” McCain has been loath to admit how serious this recession, indeed, the entire economic situation, is.
Image has not been found. URL: http://www.washingtonindependent.com/wp-content/uploads/2008/08/politics.jpgIllustration by: Matt Mahurin
He has been slow in addressing those losing their homes, provides no relief from trade policies shipping jobs abroad, offers no major initiatives for the rising numbers of poor and has no plan to cover the 43 million Americans without health insurance. McCain’s big answer to the recession seems to be a “gas tax holiday” for the summer — a tax break more likely to end in the pockets of the oil companies than consumers.
The core of the McCain economic plan consists of heroic promises to cut taxes on the wealthy and the corporations. Cobbled together to appeal to conservatives in the earlier Republican primaries, when the economy was growing, these aren’t designed to counter the recession and won’t kick in completely until 2012. McCain starts by pledging to extend all the Bush tax cuts — which he opposed in 2001 because he could not “in good conscience support a tax cut in which so many of the benefits go to the most fortunate among us.” That will cost an estimated $2 trillion over the next 10 years, according to the Tax Policy Center, a nonpartison group.
Then McCain proposes new tax cuts – even more skewed to the wealthy than the Bush cuts. The soon-to-be Republican nominee would eliminate the Alternative Minimum Tax. He calls this a “middle-class tax cut,” but most of the benefit of eliminating the provision – as opposed to limiting its reach to middle income taxpayers – goes to those making more than $500,000 a year.
He would also lower the rate and coverage of the estate tax. He’d cut the top corporate tax rate across the board from 35 percent to 25 percent; allow corporations to write off all investments in their first year, and make the corporate research and development tax break permanent. He would double the child tax deduction — providing the greatest benefit to families paying the top tax rates, and offering nothing to those making less than $28,000 a year.
The Tax Policy Center did the math. When all the McCain tax cut promises kicked in by year 2012, they would cost more than $550 billion a year — with an estimated total of nearly $6 trillion over 10 years.
He would lower tax receipts from 20.3 percent of gross domestic product to 16.7 percent. The decrease is about 17 percent of the federal budget – as much as the size of the military budget and more than the entire sum spent on domestic discretionary programs like, education, energy, environment, homeland security, public health, everything the government does outside of the military and entitlement programs like Social Security and Medicare.
McCain claims that he would still seek to balance the budget in his first term. So how does he pay for the cuts?
McCain’s first response to this – and virtually any question about the budget – is to say that he will eliminate earmarks. But earmarks – many of which involve programs like increases in veteran’s housing that McCain himself supports – total about $18 billion a year. McCain says he can find $100 billion in savings for “earmarks, program review and other budget reforms.”
He says he’d save another $30 billion from corporate tax loopholes. He’ll save $2 billion by requiring that retirees with incomes above $87,000 pay for their prescription drugs.
That still leaves staggering deficits as far as the eye can see.
When asked, McCain argues furiously that he will freeze domestic spending for a year and “scrub” every program, arguing that every American knows there are “hundreds of billions of waste that can be eliminated.” That may be true, but when politicians call for balancing the budget by eliminating unspecified waste, fraud and abuse, Americans should hold on to their wallets. Eliminating waste is an ancient refuge for politicians unwilling to pay for their promises.
Meanwhile, McCain’s new promises will cost more than any waste he’d eliminate. McCain is famously committed to sustaining the war in Iraq, at $12 billion a month not projected in current budget estimates. He argues that we need to increase the military by 150,000 soldiers, develop a new civilian corps to manage foreign occupations, create a new secret intelligence agency beyond the Central Intelligence Agency for covert operations and revive a separate information agency to sell America’s story abroad. He admits “this will cost real money,” so McCain sees the military budget going up, not down, saying “we can afford to spend more on our defense.”
In addition, in recent weeks, McCain has promised he’ll create a new program to bring the Internet to poor areas that don’t have it, expand a wage insurance program for older workers that lose their jobs when companies move abroad, expand education and training to help younger workers retrain, have the federal government backstop companies offering student loans and more. He pledges a new “Medicaid Trust Fund” that will help those with pre-existing conditions who can’t get health care under his plan – “we’re not going to leave anyone behind” — a commitment that will cost hundreds of billions, if he is serous.
So McCain’s program violates basic addition. He admits this by saying that he’d go with his tax cut plans even if the spending restraints weren’t in place. In presidential politics, arithmetic is for sissies.
Americans are sensibly cynical about such promises — even from someone who advertises his “straight talk.” The real rub is that there is no reason to think that McCain’s plan will help either the economy or working people.
Essentially, McCain is offering a sequel to the Bush years – top-end and corporate tax cuts, costly war abroad, corporate trade policies and constraint on domestic spending. George W. Bush tried this mixture, presumably with fewer spending cuts than McCain.
We have seen the result. Gilded age inequality exacerbated by the tax cuts. Key domestic agencies –from FEMA to the Consumer Product Safety agency – starved for resources and staff, leaving Americans at risk. Bridges, levees and sewers collapsing as vital public investment is postponed. Large budget deficits and dramatically increased national debt, even as the United States racks up unsustainable foreign debts. And for most Americans, stagnant incomes that don’t keep up with rising costs in health care, education, gas and food. Despite low interest rates, top-end tax cuts and the military buildup after 9/11, Bush’s plan gave us a “recovery” of relatively slow growth, weak job growth and declining incomes – the median income never recovered the level it had reached in 2000.
And McCain would inherit a very different world than Bush did. Both would inherit a recession in the wake of a bursting speculative bubble –but Bush inherited a surplus; McCain a deficit and a country far deeper in debt. Bush inherited a strong dollar; McCain a currency already debased and likely to fall further. Now disparities of wealth and income have reached levels not seen since 1929, just before the Great Depression.
McCain, of course, is not selling Bush redux to America; he’s selling “change” and “character.” “They know that I’ll take action,” he says. But his policies offer only to keep digging the hole we are in.
And what does it say about character that, as a senator, McCain opposed the Bush tax cuts because they were too favorable to the wealthy, were not tied to spending constraints and were passed during a war; but now, as a candidate, he not only embraces extending the Bush tax cuts, but calls for more? What does it say about the character of a presidential candidate that, in the middle of the worst financial crisis since the Great Depression. he offers an economic plan that he must know is simply fantastical?
Robert L. Borosage is the president of the Institute for America’s Future and co-director of its sister organization, the Campaign for America’s Future. He has contributed to The Washington Post, The Los Angeles Times and The American Prospect magazine.