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Here at McCain University (a Wonk Room production) the message is clear: A McCain presidency would be a third term for the Bush administration. Our first panel is on economic policy, with Robert Gordon moderating a discusion between Gene Sperling and Jared Bernstein. Some notes:
- The number to know is $300 billion, a conservative estimate of the tax cuts McCain supports on top of the Bush tax cuts. It breaks down to about $110 billion in tax cuts for families making over $250,000 a year, $110-$130 billion a year in corporate tax cuts and $75 billion in corporate expensing tax cuts. To put that in perspective, Bob Dole proposed $80 to $120 billion in tax cuts in 1996, considered a sweeping plan at the time, and Newt Gingrich's Congress passed $80 billion a year in tax cuts in 1999 (the bill was vetoed by Bill Clinton.)
- Sperling says this is "the mother of all flip flops" because McCain decline to support the Bush tax cuts in 2001 and 2003, saying both times that he could not "in good conscience" support massive tax cuts for three reasons: they targeted the most fortunate, would exacerbate the problems of the budget deficit, and they would take effect during a time of war. Have you seen any of these problems disappear since then?
- On corporate taxes, Sperling dispels the myth that the U.S. tax policy deters corporate investment by pointing out that the current effective marginal rate of corporate tax rates is 24 percent for equity financing (in the middle of G8 countries) and negative 46 percent for debt financed investments, the second most generous rate among the 19 largest industrial countries. John McCain would lower these rates further.
- The real problem in the economy is the broken linkage between productivity growth and income. Looking at the last decade, it's clear that though the economy had been improving prior to the sub-prime crisis, worker income is not. Therefore, tax incentives for corporations are not going to affect working families unless they are specifically tiled toward job creation.
- Though it's been highlighted before, Sperling offers a useful analogy for John McCain's plan to focus his spending cuts on earmarks (where the maximum cut is likely only $19 billion): A father drives his Hummer to the grocery store, checks the label on gourmet peanut butter, and exclaims "No wonder my paycheck isn't going far enough, with peanut butter this expensive!" Like the father, McCain misses the point.
The healthcare panel is coming up next...
--Tim Fernholz
