The Progressive:

McCain-onomics


Sen. John McCain (R-AZ) has spent much of his general election campaign for president trying to distance himself from President Bush's failed policies -- even though the policies he has outlined and would pursue as president mirror those of the last eight years. McCain's strategy so far has been to make the public forget he is offering Bush's policies. During the Republican National Convention earlier this month, McCain and his fellow conservatives seemingly refused to acknowledge that the current administration even exists: Bush's name was mentioned once while Vice President Dick Cheney's name was not mentioned at all. Convention speakers also ignored many key issues that face Americans today, such as health care, environment, and the economy. Yet at times, McCain's surrogates will let the truth slip out. In June, Sen. Lindsey Graham (R-SC) admitted that McCain's economic policies would "absolutely" be an "enhancement" of Bush's. He's right. McCain's economic policies are rooted in the same supply-side economic theories that give huge tax cuts to the rich and the most profitable corporations, which will ultimately expand the already ballooning federal deficit. Indeed, as New York Times columnist and Princeton University economics professor Paul Krugman noted, McCain's economic proposals are "Bush made permanent" and "would leave the federal government with far too little revenue to cover its expenses."

THE WEALTHY WILL CASH IN: If elected president, McCain plans to double down on Bush's corporate and individual tax cuts. His plan calls for reducing the corporate tax rate from 35 percent to 25 percent, a plan that would save corporations $175 billion per year, with $45 billion going to America's 200 largest companies as identified by Fortune Magazine. The five largest U.S. oil companies would save a grand total of $3.8 billion per year. The wealthiest Americans would also cash in. McCain's tax plan will increase after-tax income of the richest 3.4 percent by more than twice the average for all households -- and offer no benefit to the poorest taxpayers and minimal savings for the middle class. At the same time, McCain has not offered any specifics on how he would pay for these massive cuts. In fact, McCain's plan would produce the highest federal deficit in 25 years. After inheriting Bush's $407 billion deficit, yearly deficits under McCain would increase sharply, beginning with at least $505 billion in FY2009. 

THE FLAWS OF SUPPLY-SIDE ECONOMICS: Like Bush -- and President Reagan before him -- McCain is fully embracing supply-side economics, lowering tax rates to promote economic activity which, in theory, lead to additional government revenue. But a new report from the Center for American Progress and the Economic Policy Institute has analyzed the two "supply-side eras" in U.S. history -- 1981 to 1993 and 2001 to present -- and concluded that "the results have been meager." The report found that after tax increases in 1993, real investment growth was much higher than after the tax cuts of 1981 and 2001 and "economic growth as measured by real U.S. gross domestic product was stronger following the tax increases of 1993 than in the two supply-side eras." Real median household income "was greatest after the 1993 tax increases, at 2.0 percent annually compared to 1.4 percent after 1981 and 0.3 percent after 2001." Wages and employment also rose higher after 1993 as compared to the two supply-side eras. And in contrast to record deficits that resulted from the two supply-side eras, between 1993 and 1999, the United States"went from a federal deficit of 3.9 percent of GDP to a surplus of 1.4 percent." Even Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke have said that tax cuts do not offset revenue losses.

GREENSPAN WEIGHS IN: Former Fed Chairman Alan Greenspan said that the current downturn in the economy is "probably a once in a century type of event," one that is the worst he has seen in his career "by far." Indeed, just yesterday, Merrill Lynch agreed to sell itself to Bank of America "for roughly $50 billion to avert a deepening financial crisis, while another prominent securities firm, Lehman Brothers, filed for bankruptcy protection and hurtled toward liquidation after it failed to find a buyer." But Greenspan also addressed McCain's $3.3 trillion tax cuts, telling Bloomberg news last week that the country cannot afford the cuts "unless we cut spending." "I'm not in favor of financing tax cuts with borrowed money," Greenspan said. Perhaps McCain will take Greenspan's advice. While McCain has acknowledged that "issue of economics is not something I've understood as well as I should," he has also added the caveat: "I've got Greenspan's book."...