What I Learned at McCain University

I attended the economic policy session at the Center for American Progress' "McCain University" briefing session this morning. Gene Sperling and Jared Bernstein did not disappoint and offered incisive critiques of the McCain program. I was reminded how rare it is to find people who both understand the nitty-gritty of economic policy and can explain it in terms that mere mortals can understand.

Gene emphasized the magnitude of McCain's proposed tax cuts, which are directed almost exclusively to the very rich. By the Tax Policy Center calculations he cited, just the income tax cuts on those making over $250K a year would amount to $110 billion a year, and the corporate tax cuts would be another $110-130 billion a year.

He also declared McCain's proposal for massive tax cuts for the rich to be the "mother of all flip-flops" from his responsible opposition to the Bush 2001 and 2003 cuts. He read off what McCain said in 2001:

I cannot in good conscience support a tax cut in which so many of the benefits go to the most fortunate among us, at the expense of middle class Americans who most need tax relief.

Gene also noted that all the arguments that McCain once made against the Bush tax cuts--the need for fiscal responsibility, the wrongheadedness of tax cuts in time of war, and the injustice of tax cuts geared to the rich--are even stronger when applied to McCain's proposals.

Jared gave a very nice presentation, pointing out that contrary to conventional wisdom (among economists at least), the president matters a great deal for economic policy, by affecting three things: 1) counter-cyclical policy, 2) after-tax income distribution, and 3) the regulatory role of government.

For (2), McCain would be a big negative, exacerbating inequality at a time that it has reached its highest levels since the 1920s. On point (3), Jared noted that in March McCain gave an interview that indicated he would be radically opposed to most any form of regulation.

After the initial presentations, there was some discussion of corporate taxes. Gene pointed out that while conservatives like to say that the U.S. has the highest statutory corporate tax rates in the world, what really matters is the effective rates, and the U.S. is in fact right in the middle of industrial countries in these terms. He also mentioned a CBPP paper (which I'll need to find), which showed that even under the most extreme alternative assumptions favored by conservative economists, the tax incidence of the corporate tax is highly skewed to the wealthy, meaning that corporate tax cuts largely benefit just the rich.

Jared also summarized his Huffington Post piece from today, which argues that the whole "hold the line on spending" proposal is just a ruse--Republicans in office always find things they want to spend money on. Consequently, as he says in the post,

under a McCain or any other modern conservative administration, it's not that there would be noticeably less government. It's that there would be worse government. It's not that they'd get rid of FEMA or the Food and Drug Administration. It's that they'd perform less efficiently and effectively.

Gene likened McCain's opposition to earmarks to a guy who buys three Hummers on credit and is making car payments of $10,000 a month, showing up at his house and saying, "I have to stop spending so much money on gourmet peanut butter!"

All in all, it was a useful session. See also today's "Progress Report" from CAP, which hits McCain on economic policy.