When it comes to taxes, John McCain wants to make Bush’s cuts permanent, and slash the corporate income-tax rate from 35% to 25%. In all, according to the McCain campaign and the Congressional Budget Office, McCain’s plan would cost an additional $400 billion a year (at a time of already huge budget deficits), and at the same time, the senator is also vowing to balance the federal budget by the end of his first term.
Robert Gordon and Advisor James Kvaal, both of the Center for American Progress, explained a few days ago that McCain’s plan costs more than $2 trillion, prompting former CBO Director Douglas Holtz-Eakin, a top McCain aide, to acknowledge that McCain’s plan “will make deficits expand up front,” but over the long term, the deficits will shrink again because his policies promote growth. “That place has to be economically viable, otherwise they have a problem,” Holtz-Eakin said.
It prompted Gordon and Kvaal to ask four good questions.
1) Why is it necessary to cuts taxes for corporations to make them “economically viable” when the United States already has the fourth-lowest corporate tax revenue as a share of the economy in the industrialized world?
2) Why are deficit-financed corporate tax cuts likely to increase growth when (a) in the short-run, Moody’s Economy.com ranked them the least cost-effective stimulus among 13 options, and (b) in the medium or longer-run, the effect on growth of deficit-financed tax cuts “tends to be small?”
3) How do massive tax cuts for the most fortunate further shared prosperity when income inequality is at its highest level since before the Great Depression (or earlier)?
4) Given the admission that this plan will immediately increase federal budget deficits, how will Senator McCain meet his own goal of balancing the budget by 2012?
McCain has acknowledged that he doesn’t understand economics, so I don’t imagine he’ll be able to answer these questions. Either way, the fact that McCain’s numbers don’t add up should matter quite a bit.
I was pleasantly surprised to see this Reuters report recently.
McCain’s promises to reduce wasteful spending if elected president in November would not begin to cover the costs of his proposed tax cuts, analysts say.
He also has not yet explained how he would rein in the health-care and retirement costs expected to swamp the federal budget as some 77 million people retire from the U.S. work force in the coming decades.
On top of that, a President McCain would inherit a $400 billion budget deficit, wars in Iraq and Afghanistan that cost nearly $200 billion per year and a similar bill for interest payments on the $10 trillion national debt.
Many experts said McCain’s proposals would make the fiscal picture worse.
“This is one of the most fiscally irresponsible plans we’ve seen by a presidential candidate in a long time,” said Robert Greenstein, executive director of the liberal Center on Budget and Policy Priorities.
Vague, expensive promises are not unusual on the campaign trail and the proposals put forward by Democratic candidates Barack Obama and Hillary Clinton also would likely lead to increased deficits, analysts said.
“I don’t think anybody’s numbers add up when they run for president,” said Jared Bernstein of the liberal Economic Policy Institute. “I do fear that (McCain’s) don’t add up the most.”
Maybe — I’m just throwing this out there — if media coverage of the campaign devoted one-fiftieth of the attention it’s given the Jeremiah Wright story to the fact that McCain is offering economic gibberish, voters might be better off. Just sayin’.