Wednesday, March 26, 2008

Worse Than Bush

March 24, 2008
by Faiz Shakir, Amanda Terkel, Satyam Khanna, Matt Corley, Ali Frick, and Benjamin Armbruster

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Worse Than Bush

In 2001, Sen. John McCain (R-AZ) opposed the first round of President Bush's tax cuts, saying they were "generous tax relief to the wealthiest individuals of our country at the expense of lower- and middle-income American taxpayers." But now, as he runs for president, McCain openly mocks rhetoric that talks about "who the, quote, 'wealthy' are in America." In fact, McCain has offered massive tax cuts, mostly for corporations, that are as costly as Bush's tax cuts and even more regressive. In an analysis released last week, Center for American Progress Action Fund Senior Fellow Robert Gordon and Domestic Policy Adviser James Kvaal conclude that McCain's proposals are "enormously expensive," as they essentially double the Bush tax cuts. Additionally, "the McCain plan would predominantly benefit the most fortunate taxpayers" while shifting "the tax burden from investment income onto earned income." Not only would McCain ease the tax burden predominantly for the most wealthy, according to Gordon and Kvaal, but his plan "will lead to increased sheltering." Additionally, "McCain cannot pay for his tax cuts without massive reductions in Social Security, Medicare, or other key programs that benefit the vast majority of Americans." In essence, McCain has adopted the agenda of anti-tax ideologue Grover Norquist, who wants to make radical changes to the U.S. tax code "at the expense of lower- and middle-income Americans."

EMBRACED BY NORQUIST: Throughout McCain's time in the Senate, he has rarely been a favorite of Norquist's. In fact, just three years ago, Norquist referred to him as "the nut-job from Arizona." Pressed on the comment by the Washington Post, Norquist said he "misspoke" and that he "meant to say gun-grabbing, tax-increasing Bolshevik." Now, Norquist -- who famously said he wants the government "down to the size where we can drown it in the bathtub" -- calls McCain "very good on taxes" because he has embraced "the Americans for Tax Reform's entire agenda." Speaking to Newsweek last month, Norquist said that "on the tax issue," McCain "has moved very hard and far, and I believe convincingly." Explaining his recent embrace of McCain, Norquist told the Politico earlier this year that "successful movements accept prodigal sons when they return."

McCAIN BEGINS BACKING AWAY?: Speaking to the Washington Post last week, Douglas Holtz-Eakin, McCain's senior policy adviser, responded to Gordon and Kvaal's criticism, conceding that they "had a point" on "the question of tax cuts." "It will make deficits expand up front, no question," admitted Holtz-Eakin, former director of the Congressional Budget Office. But Holtz-Eakin defended the central points of McCain's plan, claiming that "helping corporations ultimately helps workers because it ensures their employer remains internationally competitive." "That place has to be economically viable, otherwise they have a problem," said Hotz-Eakin. Moreover, though he conceded to Gordon and Kvaal on tax cuts, Holtz-Eakin's Washington Post op-ed today about McCain's plan for "turning around the economy" never mentions the massive corporate tax cuts that McCain billed barely two months ago as the first item in his "economic stimulus plan."

QUESTIONS FOR McCAIN: Responding to Holtz-Eakin on the Center for American Progress Action Fund's Wonk Room blog, Gordon and Kvaal note that Holtz-Eakin's "signal that Senator McCain may change his economic agenda yet again" raises four questions: 1) Why is it necessary to cuts taxes for corporations to make them "economically viable" when the United States already has the fourth-lowest corporate tax revenue as a share of the economy in the industrialized world? 2) Why are deficit-financed corporate tax cuts likely to increase growth when (a) in the short-run, Moody's ranked them the least cost-effective stimulus among 13 options, and (b) in the medium or longer-run, the effect on growth of deficit-financed tax cuts "tends to be small?" 3) How do massive tax cuts for the most fortunate further shared prosperity when income inequality is at its highest level since before the Great Depression (or earlier)? 4) Given the admission that this plan will immediately increase federal budget deficits, how will McCain meet his own goal of balancing the budget by 2012?

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