Yesterday, the Bush administration’s proposed $700 billion bailout was defeated in the House, after the Republican leadership failed to deliver their 70-100 promised votes from the conservative side.

Following the bill’s defeat, congressional conservatives took to the airwaves, explaining what should be included in the legislation in order to persuade other conservatives to vote for it. Their additions: cutting the capital gains tax and cutting corporate taxes. Watch a compilation:

From the beginning of the bailout process, conservatives have been advocating tax cuts, claiming that they will fix the current financial crisis. Today, the Washington Times editorial board reiterated this idea, saying that tax cuts will fix “some of the structural problems behind the mortgage meltdown.”

But these tax-cutting proposals do nothing to address the mortgage crisis and don’t help troubled homeowners. They amount to little more than a conservative hand-out to the wealthy and corporations.

As the Wonk Room has previously noted, most capital gains flow to millionaires. Conservatives argue that a cut in cap gains will cause capital to “flood” into the market again, thus solving the crisis. But as Michael Ettlinger notes, this wouldn’t happen because “this money would have to come from somewhere. If it’s interest bearing accounts, the banks would be hurt by as much as Wall Street benefited.”

As for corporate taxes, the U.S. rate is already in line with the G-7 average, and the U.S. raises below the OECD average in corporate tax revenue. An analysis by the Center for American Progress found that corporate profits do not trickle-down, and thus giving corporations tax breaks would not alleviate any of the pressure on the economy.

The legislation that failed to pass yesterday was already short on provisions actively aimed at helping those facing foreclosures. Any restructuring of the bill should address that shortfall – and focus on the root of the crisis – instead of turning the legislation into a gift for corporations and the richest Americans.

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UPDATE: On Hardball today, former Rep. Tom Delay proposed suspending the capital gains tax for two years. Host Chris Matthews responded by saying “you guys have wanted that forever…you’re going to reward the people that blew it.” Watch it:

 

Sen. John McCain (R-AZ) has openly come out against tying U.S. trade deals to labor standards. His senior policy adviser Douglas Holtz-Eakin said in an interview that “McCain would reject the use of labor and environmental issues to block trade.” Instead, “his preference would be to monitor trading partners in order to determine if they are improving their standards.”

However, in a recently released paper for the Center for American Progress, – “Labor Rights Can Be Good Trade Policy” – Christian Weller argued that the United States can improve its trade deficit, which has been at or above 5% of gross domestic product since the middle of 2004, by calling for improved labor standards from America’s trading partners:

Better labor standards in trading-partner countries, especially in less industrialized economies, can positively affect U.S. exports and U.S. imports. Better labor rights could increase demand for U.S. exports by boosting the incomes of workers overseas. And better labor standards abroad reduce the cost advantage that some countries may enjoy by paying their workers poorly.

To back this assertion, Weller provided evidence showing that, currently, the U.S. “has smaller trade deficits or even trade surpluses with less industrialized countries that have some or even strong labor rights compared to countries that have limited or no labor protections.” Among Weller’s findings:

- Trade with less industrialized countries with weak or no worker protections has substantially contributed to the increase in the U.S. trade deficit from 2000 to 2007. If the United States had only traded with less industrialized economies that had some or strong worker rights during those years, its trade deficit in 2007 would have been $123 billion smaller than it actually was.

- In 2000, U.S. exports to countries with strong or some worker rights were 182.3% greater than U.S. exports to countries with limited or no worker rights.

- U.S. imports grew faster from 2000 to 2007 for countries with limited or no labor rights than for countries with some or even strong labor rights.

The AFL-CIO asserts that “McCain is missing the point“:

Labor and environmental rules are just as much a part of the trade equation as copyright protection or investment rules. It isn’t a question of blocking trade but of making sure that trade deals are fair to workers, don’t trash the environment and provide the right incentives to businesses and governments. McCain’s trade policy would serve only one constituency: multinational corporations.

Our guest blogger is Brian Levine, a Senior Policy Adviser at the Center for American Progress Action Fund.

This morning, the Republican National Committee launched a new ad, which suggests that the only thing that could make our current economic problems worse is reckless spending, which will create “new debt.”

After watching the ad, viewers might assume that McCain is a deficit hawk who won’t create “new debt.” Nothing could be further from the truth. According to the nonpartisan Tax Policy Center, John McCain’s tax plan – which bestows lavish benefits on corporations and wealthy individuals — would increase the deficit by $5 trillion over the next ten years.

McCain claims he will balance the federal budget by 2013. The Washington Post recently called this claim “not credible,” as it is based on low-ball estimates of the cost of his tax cuts and $470 billion in unrealistic and largely unspecified spending cuts. The Post called the McCain campaign’s claimed savings “illusory.” McCain constantly talks about cutting earmarks. But eliminating every earmark in the federal budget would only save $18 billion – a small fraction of the cost of McCain’s tax plan.

The McCain budget also does not account for the new spending associated with his health care and energy plans as well as fully funding No Child Left Behind. His health care plan could cost $130 billion a year and McCain’s top economic adviser admitted that the high risk pools McCain promises to subsidize to cover those with pre-existing conditions could cost $20 billion.

If the Republican National Committee is so concerned about fiscal responsibility, they must be terrified at the prospect of their own candidate being elected.

In the aftermath of the financial crisis, conservative commentators have blamed the Community Reinvestment Act (CRA), low-income people, minorities, and past Democratic administrations for the sub-prime mortgage meltdown:

- Laura Ingraham: “When Bill Clinton decided to tell Robert Rubin to re-write the rules the Community Reinvestment Act and push all of these institutions to lend to minority communities.”

- Neil Cavuto: “I don’t remember a blaring call that said, Frannie and Freddie are a disaster, loaning to minorities and risky folks is a disaster.”

- Gov. Mike Huckabee (R-AR): “It was their harsh regulation under the Community Reinvestment Act that started this ball rolling down the hill.”

Watch a video compilation:

Congress passed the Community Reinvestment Act in 1977, requiring banks “to lend throughout the communities they serve.” In the 1990s, greater “home mortgage lending to lower income households and in lower income communities by the banks and thrifts covered by the CRA,” increased the homeownership rate “for lower income and minority families.” As a result, “property values went up dramatically in low and very low income urban” communities, “reversing severe declines during the prior two decades.”

But the Bush administration ushered an end to CRA enforcement. In 2004, Bush “announced plans to sharply weaken CRA regulations, pulling small and mid-sized banks out from under the law’s toughest standards.” Ironically, conservatives are now blaming legislation that “was losing force and relevance” just as “sub-prime lending was exploding,” for the current crisis.

As CAPAF Senior Fellow Robert Gordon argues in The American Prospect, “the real problems came from the institutions beyond the reach of the CRA“:

- CRA Only Applies To Federally Insured Banks And Thrifts: CRA did not apply to independent mortgage companies, which were responsible for “half of sub-prime loans.” Only about “one in four sub-prime loans were made by the institutions fully governed by CRA.”

- CRA Institutions Engaged In Less Dangerous Lending: As the president of the San Francisco Federal Reserve points out, “independent mortgage companies, which are not covered by the CRA, made high-priced loans at more than twice the rate of the banks and thrifts.”

- CRA Does Not Encourage Or Condone Bad Lending: According to Ellen Seidman, Director of the U.S Treasury Department’s Office of Thrift Supervision from 1997 to 2001, CRA-covered institutions were warned “that badly underwritten subprime products that ignored consumer protects were not acceptable. Lenders not subject to CRA did not receive similar warnings.”

While most economists blame the current crisis on market failure and sparse regulation, conservatives are attempting to elude responsibility by smearing the victims of predatory lending. As Matt Yglesias points out, “it was conservatives who watched as the housing bubble developed and it was conservatives who blocked any action to try to ensure a soft landing once the bubble popped….It was conservatives who blocked efforts to curb predatory lending and it was conservatives who blocked efforts to investigate fraud more robustly.”

Now, the preachers of ‘personal responsibility’ are ducking for cover.

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