Whistling Past the Graveyard: McCain’s Stupid Economy
McCain’s economic plan has been leaked just before release (pdf) and it’s as incoherent as one might expect. This is epitomized best by this quote:
The McCain administration would reserve all savings from victory in the Iraq and Afghanistan operations in the fight against Islamic extremists for reducing the deficit. Since all their costs were financed with deficit spending, all their savings must go to deficit reduction.
So, McCain is saying he expects to quickly "win" the wars in Iraq and Afghanistan, withdraw the troops and save hundreds of billions as a result? Does anyone believe this? Would it speak worse of McCain if he really believed that he’ll win within a year or two and is thus delusional, or would it be better if he knows he’s bullshitting us?
Now, let’s give the old man his due: it’s not all bad. He wants to end the corn ethanol subsidy, which is smart. His plan to help homeowners is insufficient, more expensive than it should be and overly punitive to folks who didn’t know what they were getting into, but it does one basic idea right—scrap lousy mortgages, put people into 30 year fixed mortgages. Of course, it’s essentially no different than the current Congressional Democratic plan. On the energy front, much as I’m sure many people don’t want to read it, a nuclear expansion isn’t necessarily a bad idea.
But there’s also a great deal more incoherence:
- McCain thinks he can lower corporate tax rates, lower capital gain, increase health insurance subsidies and somehow get to a balanced budget by having a one year freeze on discretionary spending, then by getting a line item veto. Uh, yes. A Democratic Congress is going to give a Republican president what a Republican Congress wouldn’t. (Ok, ok, maybe he’s not totally out to lunch). But seriously, McCain’s financial plan is to try and cut revenues but cut expenses more. It simply won’t work. Even if he was to end the war, it still wouldn’t be sufficient. And that’s assuming the US wasn’t going into a prolonged recession, which it is.
- McCain’s health care plan is to give families a $5,000 tax credit. Individuals get $2,500. Leaving aside the not insignificant cost of this:
- Most folks who can’t afford insurance still won’t be able to with the subsdidy;
- Most folks who are uninsurable because of occupation or preexisting conditions will still be uninsurable;
- Folks who need individual insurance and aren’t young and healthy won’t be able to to afford insurance;
- While there are some fiddles around the corners with records and such, it doesn’t reduce administrative costs significantly;
- It doesn’t get rid of anti-selection or underwriting
- Bottom line: it doesn’t get the benefits of having a single unified insurance system. What it will mostly do is subsidize companies, not people. That’s not necessarily a bad thing, but very few people who can’t afford insurance, or who have bad insurance now, or you the insurers won’t cover, will not be much better off with this plan.
- John McCain wants to"reform" social security by adding private accounts to it. Unbelievably stupid idea because either the returns will be on a normal curve and thus many people will lose out badly, or they will in effect be guaranteed, in which case, why bother? And if they ostensibly aren’t guaranteed, after millions of people lose their shirt, and they will, because most amateurs do, the government will probably wind up having to bail them out anyway. SS privatization is a way to give Wall Street a huge boost by making mandatory buys on the market. Millions of accounts, with millions of transaction fees, and all of it stupid money. I can practically see the pros salivating as we speak.
- McCain thinks increased drilling in the US will make a significant difference in oil prices. It won’t. He also thinks that"clean" coal is clean. Unfortunately, and much as I would like to say otherwise, that’s simply not the case. As an electoral issue, of course, cleancoal is hard to beat because it puts coal-mining areas into play. But as a scientific and technical matter, it’s just not there.
- McCain wants to reduce the estate tax further. He calls it "letting families keep businesses" but almost no businesses are lost to the estate tax. Billions of dollars of tax revenues are, however, and if dead people don’t pay taxes, well then living people who still need the money do. McCain wants the basic exemption up to 10 million, because lord knows, anything less than that is hardly anything these days, dahhhling.
McCain’s plan is also notable for what’s not there — say, for example, a way of restructuring US debt, or a realistic understanding that revenues will be decreasing over the next couple years because of economic conditions, so it’s not a static situation.
Bottom line: the US is not going to get out of its deficit by cutting expenses unless, say, you want to cut half the military budget or massively cut entitlements (which, to be fair, may well be what McCain’s "private accounts" amount to.) Everyone squeals about how raising taxes is impossible, but the math is real simple—you can raise taxes, or you can borrow the money. Since borrowing costs are going to start rising, probably precipitously, trying to keep borrowing out of a problem caused by living beyond your means already is just going to make the situation worse.
John McCain, in wanting to expand tax cuts, is very much the guy in the hole who instead of saying "first thing we do is stop digging" instead cries out "we need bigger shovels".
And what he’s shoveling out of the hole doesn’t smell like clean earth to me.