More Bushenomics: Why McCain's Plans Would Only Add to Americans' Economic Pain
Somewhere between box-office hit and policy wonk mentality is the real world. Here, "Country First" should represent more than military prowess; it should mean economic stability. A country can't be strong if the personal economies of its citizens are weak. Yet, under McCain's economic strategy, individual financial security is under attack.
Grandiose notions of combat don't pay for adjustable mortgages, sneaky credit card fees and rate hikes, health care premiums, tuition, gas or food. They don't regulate a banking system gone mad that has already commandeered billions of dollars of bailouts (from Bear Stearns to the cost of "effectively nationalizing" Fannie Mae and Freddie Mac).
McCain's main economic promises are cutting taxes, creating jobs and balancing the budget (aka removing pork). All commendable, except when you consider the details. His policies would result in a higher deficit, a lower dollar, more jobs leaving the country, and a reduction in Social Security, Medicare, education and other entitlement programs.
Let's start with tax cuts. The "pro-growth" plan on his Web site centers on corporate taxes, which he would cut from 35 percent to 25 percent to "help American companies compete and keep jobs from going overseas."
But his cuts won't actually be tied to job creation. Already, corporations don't pay a lot of taxes, and that hasn't kept jobs from heading east. According to the U.S. Government Accountability Office, two-thirds of U.S. corporations paid zero federal taxes during the past decade. Almost three-quarters of all foreign corporations between 1998 and 2005 didn't, either.
Citizens pay the bulk of the $2.5 trillion federal tax revenue. Our income taxes contributed 43 percent of it and Social Security taxes 37 percent. Corporate taxes only accounted for 13 percent. If McCain was truly a "reformer" bent on "fighting" for us, he'd go after the $20 billion of executive compensation sliding through loopholes, or the $100 billion of annual offshore tax dodges. Instead, American citizens effectively wind up subsidizing this.
As for jobs, McCain said, "We're going to help workers who've lost a job that won't come back find a new one that won't go away." He didn't specify how, even though the unemployment rate of 6.1 percent is a five-year high, and we have lost more than 600,000 jobs this year.
When he talks about jobs going overseas, McCain means China. Between 2001 and 2007, 2.3 million jobs were lost or displaced (two-thirds of those jobs came from the manufacturing sector, the rest from the tech sector), as the trade deficit with China tripled. He didn't say how he would change that. In his acceptance speech, McCain pretended to acknowledge the pain of voters -- in swing states. "Bill and Sue Nebe from Farmington Hills, Michigan ... lost their real estate investments in the bad housing market. Bill got a temporary job after he was out of work for seven months. Sue works three jobs to help pay the bills."
Now, I don't know Bill or Sue, but they probably own fewer homes than McCain does. This characterization of the homes of millions of Americans as "investments" rather than actual residences comes from a man who, like Bush, is against regulating the lending industry or helping homeowners, though he considered the $30 billion bailout of Bear Stearns "necessary to protect the economy."
Other than that, he didn't address the foreclosure crisis. The percentage of homes in foreclosure doubled this quarter versus last year, 30 percent of subprime loans are now in foreclosure, and 5.35 percent of prime ones are. McCain has no plan to deal with this.
On health matters, McCain said he fights "for Jake and Toni Wimmer of Franklin County, Pennsylvania. Jake works on a loading dock, coaches Little League and raises money for the mentally and physically disabled. Toni is a schoolteacher, working toward her master's degree. They have two sons; the youngest, Luke, has been diagnosed with autism. Their lives should matter to the people they elect to office. They matter to me."
Maybe their votes matter, but implementing McCain's health plan won't help them. McCain believes that competition will improve health insurance quality and lower prices and that "families should be able to purchase health insurance nationwide, across state lines."
His plan extends the carrot of a direct refundable $2,500 tax credit for individuals and $5,000 for families to offset the cost of insurance. Which sounds peachy, except that the average family cost of health insurance is $12,000 (up from $7,600 in 2001.) Plus, families won't be getting that $5,000 directly; the money would be sent straight to insurance companies, which would make them very happy.
Of course, you can't get the credit if you don't have health insurance to begin with. Opening insurance companies to interstate competition will result in a strategy similar to that of credit card companies: Health insurance providers will consolidate through mergers and relocate to the states where they can charge the most and pay the least taxes, negating the potential positive effects of competition. This will not bring down the cost of insurance any more than it has brought down credit card rates and fees.
McCain says he will cut government spending, but the three top items of government spending are defense, social programs and interest on our debt. Since 2001, defense spending has risen from $376 billion to $587 billion. The debt owed by the U.S. government has nearly doubled, from $5.7 trillion in 2001 to almost $10 trillion (PDF). Interest on that debt is $401 billion per year, the third-largest line item in the federal budget. Foreign governments hold a record $4.1 trillion of it.
He has promised to balance the budget by 2013. But, since he's not cutting defense and can't control our interest payments, and if he cuts corporate taxes further, debt and debt payments will rise, as they have during the past eight years, that leaves other entitlement spending on the chopping block.
Sure enough, his strategy for "reforming" Social Security, in shades of Bush, is propping it up with personal accounts. He has already voted to use the Social Security surplus to fund his corporate tax reductions. He will also "reduce the growth" of (read: cut) Medicare spending, at a time when 1.85 million Americans go bankrupt each year due to medical bills alone.
As for education, "the civil rights issue of this century," his plan for doubling the child tax exemption from $3,500 to $7,000 will surely help millions of American families, but they won't be able to afford college tuition, which has increased by 70 percent since 2001. It doesn't bode well that he voted against $5 billion for grants to local educational agencies and against shifting $11 billion from corporate tax loopholes to education.
McCain's policies would benefit corporations by reducing the tax burden they already shirk, ignore the need for regulation in the banking industry, and inject cash into an overcharging health insurance industry. He would fund this by subtracting from Social Security, Medicare, education and other entitlement programs. That's the only way the math works. The end result would be a federal government more in the hole to foreign governments, and a citizenship on shakier economic ground than it already is. For those reasons, we can not afford to elect John McCain.
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