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Tuesday, April 15, 2008

McCain Turns His Back on the Working Class

The press ought to be all over McCain for his lack of an effective plan to help struggling Americans. From the WSJ report below, here's what McCain proposes to do:

Temporarily reduce gas taxes and quit adding to Strategic Reserve. The reduction in taxes would last from Memorial Day to Labor Day of this year.

Make sure states support student loans.

Double the tax exemption for children.

Cut real discretionary spending.

On the first proposal, a temporary cut in gas taxes, this isn't even a proposal for when he is in office, so he hasn't promised to do anything except hope this Congress and administration take measures to make global warming and our energy import problems worse. We'd be better off with a rebate to the poor of the same amount rather than lowering gas taxes - there are a multitude of ways to provide relief with better economic properties. Why not spend the money on infrastructure instead and provide a boost to employment at the same time? This proposal is, well, pretty dumb and it shows McCain's weakness in economics. It might have populist appeal, but the economics are just plain lousy.

The student loan proposal asks states to do something, but the federal government hasn't promised anything. So, McCain hasn't promised much here.

Thus, so far, two proposals and the net promises for the federal government if McCain is actually in office? Zero. He hasn't promised to spend a dime to help the working class.

Finally, a proposal that might help - double the exemption for children - and this would be worth around $3,500 per child. But if you have children, and if your tax rate is, say, 20%, this is only worth $700. That will likely be more than offset by McCain's planned cuts in programs - programs that in many cases help the working class - so the net benefit here is small or negative.

So that's it, the plan McCain has devised for when he is actually in office is to increase the deduction for children and cut lots of other programs. But will the press focus on this, and ask the hard questions about McCain's commitment to make things better for the people who have endured the costs of economic change in recent decades? Or will they continue to help bash Obama for his remarks? Lack of action - and we've seen plenty of that from the Republicans when it comes to helping the working class - ought to speak louder than words.

Here's more detail form the WSJ:

McCain Wants to Temporarily Halt Federal Gas Tax, Ease Energy Prices, WSJ/Associated Press: Sen. John McCain called Tuesday for the federal government to free people from paying gasoline taxes this summer and ensure that college students can secure loans this fall, proposals aimed at stemming the public's pain now from the troubled economy.

In the longer-term, the certain Republican presidential nominee said he would double the tax exemption for dependent children and offer people the option of choosing a simpler tax system. ...

To help people weather the downturn immediately, Sen. 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. He also renewed his call for the U.S. to stop adding to the Strategic Petroleum Reserve and thus lessen to some extent the world-wide demand for oil.

Combined, he said, the two proposals would reduce gas prices, which would have a trickle-down effect, and "help to spread relief across the American economy." ...

Addressing the feared fallout of the ongoing credit crunch, Sen. 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. ...

Among other proposals, Sen. McCain said he would:

• 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.

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

• 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.

• 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. ...

The speech was part of Sen. McCain's ongoing effort to counter the notion -- fueled by his own previous comments -- that he's not as strong on the economy as he is on other issues. He also sought to fend off criticism from Democrats, including Sens. Obama and Clinton, that his small-government, free-market stances don't mesh with people feeling the pinch -- particularly those hurting now. ...

Update: Reading the speech gives adds a bit more detail:

So I will send to Congress a proposal to cut the taxes these employers pay, from a rate of 35 to 25 percent. ...

I will also send to the Congress a middle-class tax cut -- a complete phase-out of the Alternative Minimum Tax to save more than 25 million middle-class families more than 2,000 dollars every year. ...

I will propose ... a reform agenda to permit the first-year expensing of new equipment and technology... to ban Internet taxes, permanently... to ban new cell phone taxes... and to make the tax credit for R&D permanent, so that we never lose our competitive edge. ...

[T]o help our workers and our economy... we must start with the subprime mortgage crisis... Under the HOME plan I have proposed, our government will offer these Americans direct and immediate help that can make all the difference: If you can't make your payments, and you're in danger of foreclosure, you will be able to go to any Post Office and pick up a form for a new HOME loan. In place of your flawed mortgage loan, you'll be eligible for a new, 30-year fixed-rate loan backed by the United States government.

So there is a proposal to cut business taxes and a few no new taxes pledges, a tax cut proposal for the middle class of around $2,000 per year, and a mortgage plan to offer replacement loans. Note though, that he promises to balance the budget each year, so all of these tax cuts will have to be paid for by cutting programs, programs he has left vague. Once that is factored in, it's not at all clear that middle and lower class Americans will see any net benefit from these proposals. McCain has made it very clear that he will not pay for AMT reform by increasing taxes on higher income earners, so that leaves cuts in federal spending as the only option.

If that's the best he can do, then he has clearly demonstrated his weakness on economic issues rather than countering any criticism. If you are a struggling worker in this economy, this proposal does very little to provide you with the help you need, and the net effect may very well be negative.

The use of the phrase "trickle down" to describe the benefits to typical households tells you all you need to know.

[Update: Comments are asking "Why would anyone even pay the least attention to anything McCain says?," and, "With respect to Mark, McCain's economic proposal does not even deserve to be criticized on economic let alone class warfare grounds.

McCain's economics advisers – if not the candidate himself, who really is in a fog on these matters – know that virtually nothing in McCain's proposals stand the proverbial snowball's chance of getting by Charlie Rangel, who would rightly dismiss them with, at best, a derisive comment.

This is simply a cynical ploy on the part of the McCain campaign to position itself in the upcoming general as an advocate for fiscal conservatism in the face of a tax and spend Democrat, be it Obama or Clinton.]

    Posted by on Tuesday, April 15, 2008 at 11:07 AM in Economics, Politics | Permalink  TrackBack (0)  Comments (21)

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