What is John McCain's Economic Agenda?
Next time you catch a John McCain interview, watch for what, at least to my ears and eyes, is a fascinating, albeit subtle, shift. When he's talking about almost anything other than the economy - foreign policy, the war, Congress, immigration - he exudes the typical confidence of a veteran Washington player. He deftly shifts the question to his turf, he ardently hits his message points ... just about what you'd expect, actually.
But when the topic turns to the economy, his whole demeanor changes. His body language becomes uncomfortable; he almost seems to shrink a little. His edgy smile becomes forced, his words a bit - sometimes more than a bit - hesitant. Putting aside your views on his positions and evaluating his performance on form only, when he's on the other topics, he's a basketball player driving the lane.
On the economy, he's looking to pass ASAP.
In his heart, I think candidate McCain wants to fundamentally alter the economic landscape of goverment's role in the economy by deeply cutting non-defense spending, from discretionary programs to entitlements. He gets there not because he's heartless but because that's the unforgiving combination of his arithmetic and his ideology.
Perhaps one shouldn't expect candidates' numbers to add up. Tally up Clinton and Obama's expenditures on health care and tax cuts and you will find that they both spend more than they raise. But McCain's numbers are out of whack by orders of magnitude beyond those of either Democratic candidate.
Here's the gist of it: Despite his earlier opposition, he now wants to make the Bush tax cuts permanent. Price tag: more than $2 trillion over 10 years, He wants to repeal the alternative minimum tax. Price tag: "up to $2 trillion" according to the Center on Budget and Policy Priorities (CBPP). He wants to keep the war going adinfinitum, at a cost of between $100 billion and $150 billion per year, according to CBO estimates.
Then there is his health-care plan, which ends the employer tax exemption for the cost of covering employess, and uses the proceeds to subsidize the purchase of health coverage in the private market. The costly part has to do with the poor, the old, and the sick. As health econimist Jon Gruber noted, "his plan will require huge subsidies he's not talking about."
Oh, and did I mention he wants to cut the corporate tax rate too, from 35 percent to 25 percent, and allow businesses to fully write off capital investments as soon as they make them?
According to Len Burman of the Brooking Institution's Tax Policy Center, McCain's tax cuts would shrink federal revenues by 25 percent over ten years, at which point they would account for about 15 percent of GDP, compared to 19 percent last year.
So, let's review. McCain is shaky on economic policy, has quite massive plans to cut taxes while kicking up spending on health care and the war, is loathe to raise taxes, and is articulating only tiny spending cuts. Or is He?
John McCain, along with his top economic advisor, economist Doug Holtz-Eakin, talk a lot about "entitlement reform." What does this mean? Holtz-Eakin has integrity, and he likes his numbers to add up. He knows that they can't do what they say they're planning to do without going after entitlements big time.
When it comes to economic stewardship, this election is truly a fork in the road. There are surely those who want to travel McCain's route, deeply cutting the size and obligations of the federal goverment in order to pay for tax cuts and war. But I think there are more of us who recognize that this path is a dangerous one.
We've seen the outcome of Bushonomics. Its inattention to good goverment and its deregulatory zeal are evident from Katrina to Iraq to the current recession.
Its reverse Robin Hood tax policies have exacerbated market-driven inequalities. Yet, much to some conservatives chargin, Bush was never willing or able to pursue a true slash and burn approach to fiscal policy. His privatization plans failed, he laid nary a finger on the entitlements (other than to expand Medicare), and his tax cuts will not be made permanent by the time he leaves D.C. As I see it, McCain wants to change that.
He may come across as fumbling in interviews, but to see where he is headed, you have to blend an understanding of his campaign platform, his advisers, and his ideology.
What you're left with is a plan to considerably shrink that part of goverment that functions to enhance economic security at a time when we arguably need a lot more of it.
By Jared Bernstien, Senior Economist, Economic Policy Institute.