Appearing on CNN’s post-debate coverage is a graphic with the text:

FACT: McCain says he would lower business taxes in order to encourage job growth.

McCain did say during the debates, “I want to cut that business tax. I want to cut it so that businesses will remain in — in the United States of America and create jobs.”

But the real fact is this: according to the Congressional Budget Office, a corporate tax cut “does not create an incentive for [corporations] to spend more on labor” and “is not a particularly cost-effective method of stimulating business spending.” And McCain opposes eliminating the tax loopholes that encourage companies to send jobs overseas.

CNN should have indicated it was posting a “fact” about a “lie.” Is that a lact? A flie?

Yesterday, negotiations over the $700 billion federal bailout imploded after House Republicans, led by Rep. Eric Cantor (R-VA) and Rep. John Boehner (R-OH) circulated an alternative plan that “advocates tax cuts and relaxed regulations.”

This is the second alternative plan offered by conservatives. This week, the Republican Study Committee (RSC) released its own plan, which is also being supported by former Speaker of the House Newt Gingrich.

Both of these plans are fundamentally flawed, and fail to address the causes of the current financial crisis.

The Boehner/Cantor Plan, among other provisions, calls for the removal of “burdensome regulatory and tax barriers” to pull capital into the market:

Instead of injecting taxpayer funds into the market to produce liquidity, private capital can be drawn into the market by removing burdensome regulatory and tax barriers that are currently blocking private capital formation. In short, too much private capital is sitting on the sidelines during this crisis, and it is well past time to unleash it.

This plan is essentially a non-starter. It doesn’t address the underlying problems in the mortgage market by allowing any restructuring of bad mortgages. Also, the plan’s provision to “insure mortgage backed securities (MBS) through payment of insurance premiums” is “akin to selling homeowners insurance in New Orleans after the dikes broke.” Only those financial institutions with the very worst assets would be willing to participate.

Cantor has admitted his plan has a problem, and said “he would support giving the Treasury secretary some authority to purchase the most troubled securities linked to failing mortgages,” because “some of the ‘exotic sliced and diced’ mortgage-backed securities at issue for the financial institutions are of such little value.” But the plan still does nothing to restructure the “sliced and diced” mortgages.

For its part, the RSC proposed cutting the capital gains tax to zero and privatizing Fannie Mae and Freddie Mac, in a “market based alternative” to the bailout. The RSC solution also calls for the suspension of mark-to-market accounting.

As previously noted on the Wonk Room, zeroing the capital gains tax would mostly benefit the wealthy and not draw capital into the market. Meanwhile, privatizing Fannie and Freddie incorrectly places the blame for the crisis on the GSE’s alone. While Fannie and Freddie did invest in bad mortgages, Bush administration regulators failed to prevent such practices.

Moreover, the collapse of Fannie and Freddie “was patently not the beginning of the latest leg of this crisis.” Instead, that honor belongs to the unregulated credit default swaps issued by insurance giant AIG that AIG subsequently couldn’t back up. The elimination of mark-to-market accounting would simply allow U.S. financial institutions to continue pretending that their bad assets are good, which would not fix the underlying problem of toxic mortgages pervading the market.

All in all, the conservatives have proposed deregulation to get the U.S. out of a problem caused by deregulation – with some tax cuts for the wealthy thrown in as a bonus.

Our guest blogger is Michael Ettlinger, Vice President for Economic Policy at the Center for American Progress Action Fund.

The late-arriving proposal from a group of arch-conservative Congressional Republicans for dealing with the financial crisis is a disaster on two fronts. First, right now the credit markets worldwide are close to collapse and it may well not be long before we start seeing consequences in the rest of the economy where most of us work, use credit cards, buy consumer goods and purchase houses — with companies not making payrolls and all manner of credit disappearing. Congressional leaders were right in not passing the administration’s flawed bailout proposal precipitously, as the Center for American Progress discussed here.

But the responsible parties in Congress were moving the administration towards compromise, and it appeared that legislation that includes meaningfully addressing the underlying problem of home and asset values was very close. The last minute proposal by the defecting Republicans has, however, essentially put the discussion back to square one. That is a huge problem.

Also, the new proposal would be absolutely, totally and completely ineffective. Details are scarce at this point, but if reports are to be believed, its central components are:

1. Tax cuts for the rich and corporations (surprise!)
2. Insurance for mortgage-backed securities
3. Deregulation (sound familiar?)

Why each of these components would be ineffective is discussed below. Read more