How Scary the Economy Would Be in McCain's Hands
About a year ago, I had a memorable chat with a high-ranking Republican operative. The presidential primaries were revving up, and he asked me which Republican candidate I feared the most. Without hesitating, I answered McCain.
My rationale was simple. While he was increasingly out-of-step with the public on the war, so were all the other Republican candidates. But unlike them, McCain had repeatedly stood up to his party on matters economic, especially the Bush tax cuts, and he did so with resonant language.
In 2001, when the richest one percent of households held 18% of all income, he said he could not "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."
In 2003, when we had gone through a recession, were waging an expensive war, and the federal budget had flipped from surplus to deficit, he voted against another round of tax cuts for the wealthiest, this time arguing that "At a time of war, at a time of economic stagnation, at a time of rising national debt ... one might expect our national leaders to pursue policies calling for shared sacrifice to achieve shared benefits. Regrettably, that is not the case."
The most recent data show that in 2006, 23% of all income is held by the richest 1%, the highest level on record but for one year: 1928. Spending on the war has not abated, and the budget deficit is on the rise. Middle-class Americans, who allegedly weighed so heavily on McCain's conscience circa 2001, are much more squeezed now than they were then.
The economy is surely in recession. Financial markets are deeply screwed up, and on Friday we learned that the job market contracted by another 159,000 last month, the ninth month of consecutive job losses.
In other words, if the Bush tax cuts didn't make sense in 2001 and 2003, they make a whole lot less sense now.
Yet McCain doesn't merely want to extend these cuts forever. He wants to expand them dramatically, by cutting the corporate tax rate by about a third, at the cost of $735 billion over 10 years, according to the non-partisan Tax Policy Center (TPC). As Biden effectively emphasized in last week's debate, that move delivers $4 billion in annual tax cuts to the Exxon-Mobil's of the world.
What happened? How does McCain's erstwhile good conscience countenance this policy? The answer, or at least the spin, was revealed to me a few weeks ago in a debate I had with his top economist, Doug Holtz-Eakin. When I pointed out that these cuts do nothing to help the middle class, while needlessly raining more wealth on the "haves," Doug disagreed. Based on the fairy dust of supply-side, trickle-down economics, he asserted that these cuts would lead to more jobs and income for middle-class families. Contrary to McCain's position a few years back, the campaign now frames a cut in corporate taxation as their middle-class tax cut.
(Fact check: Data from the non-partisan Congressional Budget Office show that middle class people hold a mere 3% of all corporate income, compared to 88% for the top fifth, and about 60% for the top 1%. In our new State of Working America, we show that an important factor driving the almost unprecedented level of inequality right now is the double whammy of a) the growth of corporate income, like dividends and capital gains, versus labor market income, i.e., earnings, and b) the increased concentration of corporate income among the richest households.)
The only way McCain can implement this fiscal policy without generating unsustainable debt levels is to cut deeply into government spending. His and Palin's hated earmarks won't get you there (in Palin's case, of course, the hatred is newly founded). His promise to freeze certain aspects of discretionary government spending gets you even less savings than the earmarks. They'll have to go after the entitlements, and since Social Security is actually a relatively small problem in this regard, for their plan to work, they have to cut the heck out of Medicare and Medicaid.
This brings you to their truly unfortunate health care plan, which I wrote about last week in this space.
So, my first point is that McCain and his team have crafted an economic plan that contradicts the candidate's recently held fundamental views and is far out-of-touch with the needs of the country. That might not have posed a big problem except for the fact that a series of events, including the middle-class squeeze generated by stagnant incomes and rising prices, recession, and financial meltdown, have made the economy front and center in this campaign.
How did McCain end up with an economic platform, especially on taxes, that is so out of sync with his past views as expressed in the above quotes, an agenda that is anything but "mavericky."
The answer comes from the Palin debate last week. Since Ms. Palin is a newcomer on the national scene with scant governing experience, little knowledge of the major issues, and few deeply held views, she serves as a talking head for the people behind the curtains, the staff and advisors running the campaign. When McCain spouts this stuff, he's filtering it through years of intense experiences, as a veteran, a former POW, and member of the Senate for 26 years. With Palin, it's unfettered, thin, talking points.
What we learn -- and yes, I fully grant you that we knew this well already, but the debate was a strong reminder -- is that the same neocons that wrote the Bush agenda wrote McCain's. Despite the fact that the electorate has moved on, they can't help themselves.
For example, they briefed Palin to spout the supply-side, anti-government, Reaganisms that are so deeply out of sync with where things are at right now. As we speak, the economy is reeling from market excesses and lax oversight, driven by an ideology that guaranteed us that unchained from its government overseers, the invisible hand would guide us to the economic promise land. Instead, it's guided us over a cliff.
Yet, here's how Palin reminded the audience about the true meaning of patriotism: "Patriotic is saying, government, you know, you're not always the solution. In fact, too often you're the problem so, government, lessen the tax burden and on our families and get out of the way and let the private sector and our families grow and thrive and prosper."
That recipe has certainly worked wonders over the past eight years.
Palin channeled the other great neocon tactic: talk it, don't walk it. I don't think she mentioned "Wall St." without the preface of "greed and corruption," but she failed to offer one concrete proposal to address that. To the contrary, she and McCain still want to turn part of the dollars flowing into Social Security over to the stock market.
Obama, on the other hand, back in March articulated a six point plan that had it been in place, would arguably have prevented much of what's going wrong in markets today.
The campaign's fondest hope is, of course, that the economy would just go away so they could get back to arguing foreign policy, where polls are more favorable toward their guy. But it's too late for that, and anyway, most people scored the first presidential debate a draw in matters of foreign affairs, as Obama effectively tied McCain to Bush's failed Iraqi policy.
More importantly, as the election nears, the undecided voters who will decide this thing seem to be recognizing the importance of the Obama "change" mantra. Unlike myself, most people don't have the time and interest to track the income shares of the top 1%, but for a while now, vast majorities have recognized that the country is on the wrong track, and for all its verbiage, the Obama campaign is really quite simply about getting it back of the right one.
We can have great arguments about whether his plan to end the war, his tax policies to favor the middle class while raising taxes on, and only on, the very high end, or his health care plan are, in fact, the right ones. But at this point, one of their key selling points is that they take us on a different path than the one we're on.
That's largely policy wonkery, I grant you, but let's close out with some reflections on character. Lo those many months ago, when I chatted with my conservative counterpart, I feared McCain because I viewed him as having the character to stick to his convictions, many of which I disagreed with, but that's not something you see enough of in politics these days.
He's lost that. It started with the policy reversals discussed above, was amplified by the outright lies of the campaign, and culminated in the cynical, reckless, and politics-over-country choice of a running mate who is dangerously unprepared to step into the presidency.
At this point I really wonder: what's in it for him? Why does McCain want to be president? Those who have followed him for years don't recognize his agenda, his tactics, his positions (e.g., the great populist regulator!). How could a man of seemingly deep conviction morph into this caricature? His campaign is empty, with no spiritual or intellectual core; its tactics have devolved into a series of crass surprises and Hail Mary passes.
I get Obama in this regard. To get the country back on track, to reconnect middle-class living standards and growth, to rein in market fundamentalism, to rectify a series of unjust and even fatal policy choices, to restore America's standing in the world, he seeks to implement his change agenda.
But I don't get McCain. I hope the country doesn't get him either.