$2.8 Trillion — The Gap Between What McCain Promises On The Stump And What His Advisers Say In Private»

Senator John McCain has been offering opposing policies to different audiences.

In its last report on the candidates’ tax plans, the Tax Policy Center had focused on a series of private assurance from the campaign. Today, the Tax Policy Center surveyed what McCain tells the public. It was not pretty.

On a series of tax proposals, from eliminating the Alternative Minimum Tax to allowing the full expensing of all business, McCain has promised more expansive and expensive versions to crowds and on his website, while his advisers reassure tax and budget experts with relatively cheaper, phased-in proposals.

Now, the Tax Policy Center has put a price tag on the gap between McCain’s rhetoric on the trail and his adviser’s private e-mails: $2.8 trillion.

Earlier this year, the Tax Policy Center did an analysis based on private correspondences with the McCain campaign staff and advisers. But in a revision of their analysis they found that if they did an analysis based only on public statements and publicly available text on their website, his tax plan would cost an additional $2.8 trillion over ten years. That’s over “two-thirds more than the plan described by McCain’s campaign staff.”

Read the full analysis here.

McCain’s public plan is even more skewed towards the rich than his adviser’s plan is, with the richest .1% of Americans earning “twice the tax cut that they would get under the more modest plan outlined by Senator McCain’s economic advisers.”

In addition, the Tax Policy Center points out that the public version of McCain’s plan “would add enormously to the public debt,” making his public plan to balance the budget require “a radical and unprecedented downsizing of government.”

John McCain’s Budget Requires Massive Withdrawal from Iraq By 2013»

Our guest bloggers are Robert Gordon and James Kvaal, senior fellows at the Center for American Progress Action Fund.

John McCain’s balanced budget plan relies on steep cuts to U.S. spending in Iraq, according to a memorandum written by economic policy advisor Douglas Holtz-Eakin and published in the Washington Post today. The plan calls for $150 billion in savings in 2013, which is only possible with the kind of timed mass withdrawal from Iraq he has criticized.

Here is what the plan says:

“Balance the budget requires slowing outlay growth to 2.4 percent. The roughly $470 billion dollars (by 2013) in slower spending growth come from reduced deployments abroad ($150 billion; consistent with success in Iraq/Afghanistan that permits deployments to be cut by half — hopefully more) …”

Whatever McCain says about cutting deployments in half, achieving $150 billion in savings would require a massive withdrawal of American troops from Iraq and Afghanistan.

First, U.S. spending in Iraq and Afghanistan totaled $171 billion in 2007, according to the Congressional Budget Office – and that includes money for Iraqi security forces, foreign aid, and veterans benefits. If current policies continue – and spending grows with inflation – the war might cost $200 billion in 2013. Cutting the cost by three-quarters, especially when other costs (like veterans benefits and foreign aid) will remain, would require a sharp, perhaps nearly complete withdrawal of troops.

The numbers from CBO look even worse. According to CBO, rapidly reducing the number of troops in Iraq and Afghanistan to 30,000 would save only $55 billion in 2013. So CBO is saying that a much bigger troop reduction than McCain wants would save barely a third as much money as McCain claims.

Finally, Obama’s own, more aggressive plan to withdraw forces from Iraq will save only $90 billion a year, according to his campaign.

McCain has previously said that an Iraq withdrawal timetable would mean “disaster” and “chaos, genocide.” But his own budget documents contain a plan not merely for withdrawal, but for mass withdrawal.

To Balance McCain’s Budget, U.S. Economy Would Have To Grow At An Unrealistic 8% Per Year»

Yesterday, McCain spokeswoman Nancy Pfotenhauer responded to our analysis showing that McCain could eliminate 10 government agencies and still not balance his budget by 2013. Watch it:

But some quick calculations show that to balance his budget the economy would have to grow by a blazing 8% a year between now and 2013.

That annual growth rate is faster than any the U.S. economy has experienced since 1950, and faster than any economy in the G7 (which includes Germany and Japan) has grown since 1970. And to balance his budget, McCain needs it to happen five years in a row.

The last time the Unites States experienced 5 years of growth that fast was between 1939 and 1944 when growth averaged 12.8% per year.

Put simply, the only way McCain could achieve that kind of growth is to start World War III.

UPDATE: An alert Wonk Room reader noted that we were comparing McCain’s needed growth rates to inflation adjusted growth rates instead of nominal growth rates (which is the proper historical comparison to make). The point remains, however, that a growth rate of 8% for five years in a row is wildly unrealistic. Nominal growth rates have never achieved such a stretch since the late seventies when inflation accounted for most of the growth. This post’s title and the accompanying chart have been removed to reflect this change.

Read methodology and calculations after the jump. Read the rest of this entry »

McCain Could Eliminate 10 Cabinet Agencies And Still Not Balance His Budget»

Although his Jobs Plan today promises “Leadership, Courage and Choices,” Senator McCain unfortunately offered none of the above when he pledged today to balance the budget and cut taxes by 2013.

The Congressional Budget Office projects that, with the extension of expiring tax cuts, the budget deficit will top $400 billion that year. In addition, McCain has called for some $300 billion in new tax cuts. McCain has not identified specific spending reductions that save much money; earmark reductions, for example, would save only $9 billion, according to the Heritage Foundation. A generous estimate of the savings from McCain’s proposed spending freeze would be $50 billion. This leaves McCain with a budget hole of about $650 billion.

This is an astonishing amount. To put it in perspective, McCain could eliminate the following 10 Cabinet agencies and still come up $100 billion short:

We will have a more comprehensive analysis later this week.

McCain Embraces Economists After Rejecting Them»

Today, as part of a broader effort to sell Sen. John McCain’s (R-AZ) job-stimulus plan, the McCain campaign “released a statement signed by over 300 professional economists” who support the senator’s proposal.

McCain’s sudden embrace of professional economic opinion is confounding. In June, after the campaign failed to find a single economist to endorse McCain’s proposal for a gas tax holiday and his claim that off shore oil drilling would reduce gas prices, McCain and his top advisers repeatedly trashed economists:

- Sen. John McCain: “If you want to call it [his gas tax proposal] a gimmick, fine. You know the economists? They’re the same ones that didn’t predict this housing crisis we’re in.”

- Senior Advisor Carly Fiorina: During an appearance on ABC’s This Week, Fiorina “scoffed at the lack of support from economic analysts” for McCain’s proposed gas-tax holiday, “‘I don’t think it matters,’ she said.”

- Senior Advisor Douglas Holtz-Eaken: “You can stack all the economists end to end and still not find common sense.”

What a difference a month makes. Now, the McCain campaign is arguing that “the economists” matter after all, even if they rejects the senator’s signature economic proposals. As Avi Zenilman points out, the 300 conservative economists who endorse McCain’s plan still reject “two big chunks” of the senator’s proposal: “the gas tax holiday and his promise to balance the budget by 2013.”

As the Wonk Room has previously pointed out, suspending the gas tax would transfer more wealth to Saudi Arabia and increase “our contribution to global warming for our kids to inherit.” McCain’s promise to balance the budget while simultaneously providing a $175 billion tax cut to the nation’s largest corporations is similarly unrealistic.

McCain’s economists seemingly agree.

The Return Of The Reagan Era Philosophy — ‘Deficits Don’t Matter’»

It’s no shock that John McCain’s statements about economics are clueless, but it’s becoming increasingly clear that his uninformed views are also quite radical.

In a burst of Reagan-style policy making, McCain has offered to balance the budget by decreasing federal expenditures. In a campaign event in Connecticut this week, McCain responded to a question by stating:

“When Ronald Reagan came to office,’’ he said, noting that few in the audience were old enough to remember, “we had 10 percent unemployment, 20 percent interest rates, and 10 percent inflation, if I’ve got those numbers right. That was when Ronald Reagan came to office in 1980. And so what did we do? We didn’t raise taxes, and we didn’t cut entitlements. What we did was we cut taxes and we put in a stimulus to the economy, and by the way, Jack Kennedy also did that as well – and so my answer to it is a growing economy. And I think you best grow the economy by the most efficient use of the tax dollar.’’

As The Huffington Post has rightly noted, though, “the deficit nearly tripled during the Reagan presidency, partly due to tax cuts and increases in military spending.”

McCain’s supply-side economic plan doesn’t just end with decreased spending — he parrots the failed 1980’s era Reagan policies of huge tax cuts and prolonged military spending, with no plan on how to balance the budget. Newsweek’s Daniel Gross says it all: “McCain’s fiscal program is either a joke or a fantasy.”

Perhaps McCain believes that “Reagan really did show that deficits don’t matter.“