Tuesday, April 15, 2008

McCain's Economic Proposal: a Do-Nothing Dance around the Real Problems

John McCain wanted to show he was as strong on the economy as he was on other issues. Well, given his repeated inability to distinguish Sunni from Shiite, I'd say his economic proposal is right in line with his understanding of other issues. With a few notable exceptions, McCain's proposals are what is becoming alarmingly common with Republicans. They seem to have no economic policy, except the one we know doesn't work: cut taxes and hope, while the budget deficits grow larger and larger.

To help people weather the [economic] downturn immediately, McCain urged Congress to institute a "gas-tax holiday" by suspending the 18.4 cent federal gas tax and 24.4 cent diesel tax from Memorial Day to Labor Day.

Well, it is always nice to have more cash in your pocket, but what exactly is this going to accomplish? The majority of people used their income tax rebate to pay down their personal debt, rather than going out and spending and stimulating the economy. What makes McCain think this will be any different? In addition, every dollar in tax reduction is a dollar more we add to our already massively swollen deficits, which just increases the burden on us in future years.

He also renewed his call for the United States to stop adding to the Strategic Petroleum Reserve and thus lessen to some extent the worldwide demand for oil.

Now we are talking. While this subject is a bit outside my areas of knowledge, at least it is a legitimate economic policy. Sadly, there are very few of those in McCain's proposal.

McCain also said the Education Department should work with the country's governors to make sure that each state's guarantee agency — nonprofits that traditionally back student loans issued by banks — has both the means and the manpower to be the lender-of-last-resort for student loans.

Making it easier for college students to get loans is a laudable goal. After all, we need high-skilled, highly educated workers. But it takes money to do this. Where is it going to come from?
As usual, there is no answer.

"Require more affluent people — couples making more than $160,000 — enrolled in Medicare to pay a higher premium for their prescription drugs than less-wealthy people."

This is a move in the right direction, and one that is likely to continue on that trend regardless of who is in office. Social Security and Medicare are, in essence, welfare programs for old people. It makes little sense to have such a program apply fully to people who are wealthy and need little assistance, especially with our current budget crisis. However, this is unlikely to have a significant impact on the problem without considerable help from other sources.

"Raise the tax exemption for each dependent child from $3,500 to $7,000."

This is horribly flawed for several reasons. First, it is anachronistic. The United States no longer has a motive to encourage childbearing. We have more people than we need. If anything, the tax code should surcharge people for having children, not reward them for it. Second, the vast majority of Americans pay little in taxes in the first place. This is the piece of the puzzle the Republicans seem blinded to. Tax cuts don't mean jack if you aren't paying taxes in the first place. And third, however small the effect, this is yet another cut in income at a time where our income is too small already.

"Offer people the option of choosing a simpler tax system with two tax rates and a standard deduction instead of sticking with the current system."

Aside from the sheer fantasy nature of such a proposal, what problems would it solve? Sure, we'd spend less time filling out our tax forms, but unless it amounts to greater government revenues, we still have all the same problems we had before.

"Suspend for one year all increases in discretionary spending for agencies other than those that cover the military and veterans while launching an expansive review of the effectiveness of federal programs."

This is economic masturbation. The military, veterans benefits, social security and medicare, and interest on the debt, amount to about 74% of government spending. Restricting spending cuts to the remainder is swatting at a fly while ignoring a swarm of hornets. As long as politicians treat the military and social security as untouchable, our budget problems will continue.

At least McCain got some of the rhetoric right:

"In so many ways, we need to make a clean break from the worst excesses of both political parties," McCain said, adding "somewhere along the way, too many Republicans in Congress became indistinguishable from the big-spending Democrats they used to oppose."

Indeed, they have. So put your budget where your mouth is Mr. McCain, and put ALL government spending on the table for possible cuts. I can think of one $14Billion a month military expense that could stand some cutting pronto.

McCain's parting commentary on the plans of Barak Obama and Hillary Clinton was typical pie-in-the-skyism:

"Both promise big 'change.' And a trillion dollars in new taxes over the next decade would certainly fit that description," McCain said. Playing on the title of an Obama book, McCain added: "All these tax increases are the fine print under the slogan of 'hope:' They're going to raise your taxes by thousands of dollars per year — and they have the audacity to hope you don't mind."

Is it better to continue to run up deficits? We spent $243 BILLION last year in interest on the debt. That's $243,000,000,000, or close to $1,000 for every man, woman, and child in the country! Rigid resistance to tax increases without an alternative that will close the budget gap is irresponsible at best, and childishly dishonest at worst. Someone needs to tell the Republicans that "Cut taxes and hope" is not an economic plan. It is denial of their civic responsibility, and it is something this country can no longer tolerate.

1 comment:

Richard said...

I appreciate your post. McCain is going to out Bush Bush when it comes to driving us further into debt. I am leery of any of his economic proposals. I believe him when he says he knows little about it.
One of his economic advisers [ C.Fiani, I think. I don't exactly recall the person's name] said that the Iraq war has not affected oil prices.[!]
Goldman-Sachs put a minimum $20/barrel "instability premium" on the price of oil this year.