Our guest bloggers are Robert Gordon and James Kvaal, Senior Fellow and Domestic Policy Advisor, respectively, at the Center for American Progress Action Fund.
One of Sen. John McCain’s economic advisers, former Congressional Budget Office Director Douglas Holtz-Eakin, has responded to this Center for American Progress Action Fund study of the McCain tax plan:
On the question of tax cuts Gordon and Kvaal had a point, he conceded, though he added voters should wait until the senator fleshes out his tax proposal before passing judgment.
“It will make deficits expand up front, no question,” Holtz-Eakin said, adding 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.”
Apart from the signal that Senator McCain may change his economic agenda yet again, this candid response raises four questions:
1) Why is it necessary to cut 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 Economy.com 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 Senator McCain meet his own goal of balancing the budget by 2012?
UPDATE: Center for American Progress Action Fund Senior Fellow Jeanne Lambrew responds below to Holtz-Eakin’s comments on the criticism of McCain’s health care plan: Read more
