Two On McCainomics

John McCain sure sounds like a tax rate-cutting fiscal conservative. His tax proposals, detailed in this speech last week, seem to extend the Reagan-Bush legacy of lower marginal rates across the board, and special emphasis on supply-side incentives (see various tax breaks below). But this article contrasts McCain the candidate with McCain the Senator.

Elsewhere, the New York Times profiles McCain's chief economic adviser, Douglas Holtz-Eakins. The article argues McCain's policy proposals focus mainly on the revenue side, without addressing spending:

The problem is that the campaign has been far, far more detailed about its tax cuts, which would worsen the deficit, than its spending cuts, which would reduce it. Mr. McCain has proposed the elimination of the alternative minimum tax (at a cost of $60 billion a year), new child tax deductions ($65 billion), a corporate tax cut ($100 billion) and faster write-offs for corporate investments in new equipment ($50 billion to $75 billion).

But in academia, Mr. Holtz-Eakin is known for empirical work that questions the productivity of government expenditures. Here is an ungated example.

Comments

[maelstrom]

With a PhD I was hoping for something a little more insightful..but thank you for the article I enjoy them

[crowdofcheerleaders]

any real person understands that JM is no different than the (D) candidates.

[whidbey]

Actually John is different than the Democrats: He does not know what his base is worth: He wanders on the issues, and he was honest: it is true he knows little about the economy. His putative spending sensitivity is mostly for appearances, he no idea what to cut (if anything) and he will out spend G.Bush. We have problems and it does not seem there is any escape no matter which way we go.

[Tom B]

Tax the rich! Don't tax the rich! The whole debate is about as meaningful as "Bitter-gate". The problems with the tax system:1) lots of the costs (social security, etc) are rather inflexible-- there's only so far you can cut. 2) Poor ROI on our tax money. How come we don't have decent mass transit? Universal healthcare? Tax credits for REAL alternative energy (wind, solar), rather than--choke, gasp-- "clean coal"? 3) We have 4000 plus soldiers dead and the Iraqi's are sitting on a 70 B budget SURPLUS. That's OUR money, darn it! Until they have paid for the war, they shouldn't be allowed to keep even a percentage.

[ElCidCampeador]

Granted, McCain is no economist, and he admits to not being an expert on all things economic, but I wouldn't exactly characterize Sens. Obama and Clinton as economic experts by any stretch...

[crowdofcheerleaders]

all three are committed to one thing: expand the Federal govt. and the populace is more than stupid enough to be misdirected by their words while staying ignorant to the implications.

[John Pseudonym]

Raise the minimum wage to $50 an hour and all problems will be solved.

I'm voting for Hillary!

[sbenard]

We're in deep doo-doo if these three are our choices. I'll probably vote Constitution Party. Until conservatives dump their party instead of their principles, they'll keep losing. We ALL will!

[flounder]

McSame told a bunch of construction workers that lift cinder blocks all day that they weren't man enough to pick lettuce for 50 bucks an hour. The whole room pretty much volunteered for the jobs he was offering and he high-tailed it out. McSame has been on the government dole his whole life. He has not had a single occupation outside of government work. Somehow his federally ran health care is good enough for him but would be terrible for the rest of us. Sorry, just rambling random McSame facts because he is so patently full of S*** on the economy. Notice how half his economic advisers (e.g. Holtz-Eakins) claim tax cuts will increase government revenue and ostensibly the size of the government, while the other half claim tax cuts will defund government to where we can "drown it in the bathtub" (McSame adviser Grover Norquist's words). Notice how no matter what happened the McSame camp would be proven wrong?

[TheThirdWay]

Universal health care is a joke - I am just finishing the first year of my MBA in Toronto (I only left the US for the chance to study derivatives under John Hull..too bad structured products are out of favor now) - my wife is having our second child in September and I am quite concerned about the pathetic quality of care up here. The only reason universal health care exists is because it leeches off of the innovations provided by the incentive-based system in the US. My first child was born in the good ol' US of A under my PPO - I EARNED my health care through a lot of hard work and intelligence...I provided VALUE to my country...what a novel idea!

There is a balance, but universal health care is not it. I just read an article about how "average Americans" plan to spend their rebate checks and was disgusted by the stupidity and entitlement of certain Caucasian Americans (I am third generation Irish). Some folks need to start feeling some severe pain to understand how good they have it and why folks willing to work for 1/20th the wage are taking their unskilled jobs - don't talk to me about the Renminbi being pegged to the USD, because it is not and the PRC is only digging its own grave by financing the war in Iraq. You can't use $1 Trillion in US debt as a weapon if that use will make it worthless. Regulated capitalism...free market socialism...sounds like convergence to me...

How will the US create comparative adavantage over the next 25 years? Surely not through government spending - internationally or domestically. At least the advisers of the Dems understand the fundamentals of prosperity creation. McCain is a joke and I hope that the stupid and entitled individuals mentioned earlier are not tricked again.

[User 167292]

I sometime think the comments are more intelligent and informed than the article writers.

[quickchange]

to the third way.
Great comment, up until the last two sentences you were right.
1. you can't spend your way out of debt
2. you can't borrow your way out of debt.
3. Dem. advisors are more interested in politics than economics.
4. Until we stop producing "debt" and start producing innovative and competitive products we will keep on getting into trouble.
5. YES we will muddle thru, but our record of higher highs and higher lows is coming to an end.
6. Future generations will pay the price this time.

[Simple Simon]

Wow...boy did this article strike a range of chords in readers. As a combat vet of 40 years ago, I recall calculating how much fuel our 72 F-100's were drinking down daily. My estimate was something like a Mississippi River of oil required. Yet one corp, like Exxon, netted some 40.6 billion this past year alone. There's money for lots of things, including the hunt for Islamic Fascists.( practically a hobby ) Consider that the U.S dollar has fallen to ten cents in value since my F-100's, and you get an idea that a billion here and a billion there is chump change-AFI ( adjusted for inflation -vis 40 years of AFI-this means DRYS is selling for approx $8 a share. ) What is really needed is some vision...we have geothermal, solar, wind energy coming on line, and such things as the Chevy Volt...we just all got distracted by our overwhelming inclination to narcissistic avarice, and material one upsmanship ( after reading books like "How to get rich in Real estate, overnight" ). Now let's focus on restraint, innovation, self discipline, actually working for a living, ( as opposed to shuffling too much information from one hard disc to another; and slinging hamburgers; and shopping at flea markets...our "industrial base , sigh ) ..I'm describing America 40 years ago. it can still be done. Call me a terminal optimist; who will soon be dead under the trample of the vast sea of get something for nothing fast buck geeks all around me.

[kurt walter]

McCain vs. Obama or Hillary (who has no shot to get the nomination), the two socialist, big daddy government will solve all "your pain" at taxpayer expense. The choice is so easy. The failed LBJ Great Society Welfare State Policies of the Dems is for losers only. We have spend trillions in the last 40 years on LBJs war on poverty. A large sinkhole that has failed again and again.

[sopocistudio]

One thing I see pretty consistently by responders to various financial blogs when it comes to "big Oil" and alt. energy. Before screaming about "obscene" profits, look at things like ROI. "Big Oil" is middlin', at best. Secondly, does anyone REALLY think solar/windfarms, etc., would be viable alternatives if oil was back to $30/$40 bbl.? They'd be back to the teeny niches they occupied 20/30 years ago. The only way they make economic sense, is with oil north of $80/$90 bbl.

Jan

[Xyrus]

McCain, Hillary, or Obama. Any of these choices will most likely put the country on the brink of bankruptcy. Don't take my word for it, just listen to David Walker, the comptroller of the GAO. Our country is already bankrupt, were just a couple decades away from realizing it.

Another poster had it right. You can't borrow your way out of debt, and you can't spend you're way out of debt. The only way to get out of debt is to get rid of what put you in debt in the first place (in this case, government spending).

Republicans USED to be for fiscal conservatism and responsibility (see Ron Paul). Now, we have two choices: The tax and spend democrats or the Spend and Spend republicans. McCain wants to cut taxes but increase spending. He's always used "pork barrel" spending as a talking point, except as far as government spending goes it makes up less than 1%. The real hogs are defense, social security, medicare, welfare, and just recently making it into the top 5 is the interest on the national debt (now over 12% of the budget).

Then on the other side we have "universal healthcare" democrats. We can't even afford the social programs we have. How are we going to carry universal healthcare too?

This year we're going to see the national debt hit double digits in trillions of dollars. And it is only going to get worse. We simply can not maintain this level of spending without greatly increasing the tax rate or greatly slashing government spending. I don't know about you, but I favor the government spending cuts. The quickest cuts would be in defense. The social programs would have to be phased out over a decade or two (unless you want to dump a whole bunch of people right into the street).

No one ever wants to talk about the elephant in the room.

More on topic, I disagree with feds slashing rates period. The rates should reflect the risk in the market, not some idle number picked out by a secretive bunch of bankers. Face it, the financial companies got fast, loose, and sloppy. They reaped what they sowed. So far, all the fed actions have done is raised the REAL inflation rate to much higher levels.

~X~