McCain And The (Ir)relevant Concord Coalition
McCain And The (Ir)relevant Concord Coalition
Among other odd comments in his National Review article, Douglas Holtz-Eakin on Wednesday declared that the Concord Coalition, whose director had criticized McCain’s agenda, had “largely lost relevancy.”
Funny that Holtz-Eakin should pick out the Concord Coalition, a national bipartisan organization dedicated to fiscal responsibility. The co-founder and chairman of the Concord Coalition is Pete Peterson, an old friend of Senator McCain, an early supporter of his 2008 run and a member of the McCain campaign economic strategy team. When asked this January, during a GOP presidential debate, how he would make economic policy, McCain responded:
I as president, as every other president, [would] rely primarily on my secretary of the Treasury, on my Council of Economic Advisers, on the head of that. I would rely on the circle that I have developed over many years of people like… Pete Peterson and the Concord group.
Just four years ago, Peterson bestowed upon John McCain the Coalition’s annual Economic Patriot Award at an event sponsored by the Council on Foreign Relations. Peterson explained why he had set up the “Concord Coalition devoted to long-term fiscal responsibility and generational equity.” McCain in turn thanked Peterson for his “continued crusade for fiscal sanity and stability on behalf of our children and grandchildren.”
So has the Concord Coalition become largely irrelevant? Or have its principles and goals become largely irrelevant to Senator McCain’s newfound agenda of deficit-financed tax cuts and unbalanced budgets?
The McCain Deficit: Douglas Holtz-Eakin Continues To Debate With Himself
The McCain Deficit: Douglas Holtz-Eakin Continues To Debate With Himself
Our guest blogger is James Kvaal, Domestic Policy Advisor at the Center for American Progress Action Fund.
The story so far: Senator John McCain has proposed $300 billion a year in tax cuts, but – as The Economist wrote – “the savings in government spending he promises will not come anywhere close to paying for the tax cuts.”
Yesterday, McCain economic advisor Douglas Holtz-Eakin defended his McCain budgeting over at the National Review, arguing that McCain’s proposals will restrain spending and promote economic growth.
But, as Ruth Marcus pointed out, two years ago Holtz-Eakin sounded very different. He said then that, realistically, “government will not be getting any smaller” due to widespread public support for government’s activities. Even a “tremendous effort” by Congress to eliminate wasteful spending totaled less than 0.07 percent of the economy. (McCain’s $300 billion tax cut equals approximately 2 percent of the economy.)
Maybe that is why Holtz-Eakin’s new argument focuses on McCain’s cuts to entitlement programs like Social Security and Medicare. But McCain has already proposed cutting Social Security and Medicare benefits to restore those programs’ solvency. Does he really want even more cuts — hundreds of billions of dollars more — to pay for his tax cuts, as Angry Bear wonders?
It seems more likely that Holtz-Eakin is changing the subject, preferring to discuss the long-run entitlement problem rather than the short-run deficit problem. But adding hundreds of billions, even trillions, to the debt now will only make our long-run problems worse.
If McCain Likes A Subsidy, It’s Not ‘A Special-Interest Thing’
If McCain Likes A Subsidy, It’s Not ‘A Special-Interest Thing’
On the campaign trail, Sen. John McCain (R-AZ) has claimed, “I oppose subsidies. Not just ethanol subsidies. Subsidies.” However, McCain also says he will not support climate change legislation without a “dramatically increased role for nuclear power.” In an interview today on Gristmill, top McCain economic adviser Douglas Holtz-Eakin attempts to square the circle:
And if there’s a genuine national interest in using nuclear power as an available, feasible, zero-emissions technology, I don’t think he would argue that that’s a special-interest thing. It’s something the nation needs to do as a priority, and if that means a subsidy, then we need to make the agreement we’re going to do that for those reasons. I think that’s an appropriate role for government, in his view.
Holtz-Eakin went on to claim that nuclear subsidies are needed because of “powerful political obstacles” to nuclear power:
He views this as leveling, not subsidizing.
McCain may frequently praise himself for using “straight talk” to oppose all subsidies — but will change his tune for the nuclear industry, perhaps because Arizona is home to the nation’s largest nuclear power plant.
But home-state pride can’t fully explain McCain’s obsession with a dangerous and permanently toxic energy source. Arizona’s deserts offer the highest solar power potential of any state in the country. Yet McCain thinks the nascent industry “is doing fine” — and he’s backed up this talk by repeatedly killing incentives for solar power.
Douglas Holtz-Eakin Vs. Douglas Holtz-Eakin On Corporate Expensing
Douglas Holtz-Eakin Vs. Douglas Holtz-Eakin On Corporate Expensing
Our guest bloggers are Robert Gordon and James Kvaal, fellows at the Center for American Progress Action Fund.
John McCain has proposed to let corporations immediately deduct (or “expense”) the full cost of equipment and technology purchases, rather than deducting the costs over time. We analyzed this proposal several weeks ago and concluded that it would cost $745 billion over the next 10 years.
The McCain campaign and its top economic advisor, Dr. Douglas Holtz-Eakin, are now saying that this central provision of his corporate tax cut will cost taxpayers nothing. But the Congressional Budget Office, when led by Dr. Douglas Holtz-Eakin, reached the opposite conclusion.
The McCain campaign is claiming this measure is free because Treasury will lose money at first, then recoup it over time.
On its face, this doesn’t make a lot of sense. We all know $100 today is worth more than $10 a year for 10 years. And McCain is saying his plan will increase investment — how could that be if his plan has no cost to the Treasury?
In the past, Holtz-Eakin has recognized that expensing costs money. He signed a cost estimate for making permanent a provision of the 2002 stimulus package that allowed companies to expense 50% of their costs. The estimate is the last line on page 92 here, reproduced below:
This estimate shows that allowing companies to expense 50 percent of new investments would cost $440 billion over 10 years. And the costs are still very high, nearly $30 billion, 10 years after the provision is made permanent. McCain’s proposal for 100 percent expensing would be even more expensive.
If Holtz-Eakin was right then, how can he be right now?
Earmark Accounting Leaves Two Thirds Of McCain Tax Proposal Unfunded
Earmark Accounting Leaves Two Thirds Of McCain Tax Proposal Unfunded
Our guest blogger is Scott Lilly, a Senior Fellow at the Center for American Progress.
Alright, so maybe a candidate for President of the United States doesn’t need to know the first thing about the Federal Budget. That’s a job for staff—right? But what if a candidate for President doesn’t know anything about the budget and can’t hire someone who does?
That appears to be the situation that John McCain is in, based on the background provided today by his “Director of Economic Policy” Douglas Holtz-Eakin told reporters recently:
We have $60 billion in discretionary spending that was sourced to earmarks.
Holtz-Eakin says that money could be used to fix the repeal the alternative minimum tax. The problem is that virtually no one can find even a third that much money in the annual spending bills in earmarks.
The most credible effort at earmark accounting in recent years was completed recently by the Taxpayers for Common Sense. They did an exhaustive review of the 2008 spending bills and reported $18.3 billion in earmarks. The White House Office of Management and Budget scrubbed the twelve 2008 appropriation bills and came up with only $16.9 billion. Where does McCain’s other $41.7 billion come from?
There is virtually no explanation. Did Congress spend money in other areas that McCain is counting but neither Taxpayers for Common Sense for the White House counts? That seems to be a hard argument to make. For 2008, the President’s request totals $932.8 billion (not counting the pending supplemental.) The Congressional Budget Office scores the action taken by the Congress on the 2008 appropriation bills at $932.8 billion—exactly the amount requested.
There were some areas that Congress spent more than the President requested and other areas where Congress spent less than the request. But McCain would find it difficult in most instances to object to the judgments made by Congress, for instance the $3.8 billion to improve the quality of health care for returning veterans which was included in the final Military Construction—Veterans bill but not contained in the President’s request.
It is even difficult to imagine that McCain would want to get rid of all of the earmarks. $1.2 billion of which was for better housing and facilities for servicemen and their families at military installations around the world.
The disturbing point here, however, is that even by the loose rules of budget discipline used in Washington in recent years this accounting is completely off the wall. Revenue cuts that are offset by phony spending reductions simply add to the deficit and the nation’s long term debt burden. Senator McCain needs to detail his figures in a manner similar to the materials provided by OMB and Taxpayers for Common Sense.
Douglas Holtz-Eakin’s Battle With Fuzzy Math
Our guest blogger is Robert Gordon, a Senior Fellow at the Center for American Progress Action Fund.
Ezra Klein captures some of the magic of Douglas Holtz-Eakin’s presentation today. One more funny number: Holtz-Eakin said that earmarks, or spending connected with earmarks, cost $60 billion per year. That’s more than three times the figure for earmarks cited by the Wall Street Journal and the anti-earmarkers at Taxpayers for Common Sense.
Holtz-Eakin also showed little patience with an Americans for Tax Reform (Norquist’s outfit) staffer who complained that replacing a tax break with a refundable tax credit by definition amounts to a tax increase. On this narrow point, Holtz-Eakin has it right. This is the kind of accounting game that conservatives have long used to derail rational budget proposals. What matters is how McCain’s health plan changes people’s lives. And without resorting to accounting games, it has problems enough.
McCain Still Flip-Flopping On Whether To Rescue Homeowners
McCain Still Flip-Flopping On Whether To Rescue Homeowners
Our guest blogger is James Kvaal, Domestic Policy Advisor at the Center for American Progress Action Fund.
It’s hard to know whether McCain supports the Democratic plan to help struggling homeowners by guaranteeing more affordable, refinanced mortgages against default.
Two weeks ago, McCain economic advisor Douglas Holtz-Eakin derided the idea as “throwing money at problems” and said it had “the potential to do more harm than good.”
Last week Holtz-Eakin reversed himself, saying that the proposal reflected McCain’s principles and McCain might support it.
But yesterday McCain said he does not support the bill after all, according to Laura Meckler of the Wall Street Journal.
Am I the only one confused?
McCain Does About-Face On Housing Rescue Bill
Our guest blogger is James Kvaal, Domestic Policy Advisor at the Center for American Progress Action Fund.
That was fast.
Only days ago, McCain advisor Douglas Holtz-Eakin dismissed Sen. Chris Dodd and Rep. Barney Frank’s mortgage rescue plan – also endorsed by Sens. Clinton and Obama — as “throwing money at problems.” He said it had “the potential to do more harm than good.” Meanwhile, Sen. McCain gave a major housing speech in which he “more or less came out against aid for troubled homeowners” and his hands-off approach drew comparisons to Herbert Hoover.
That’s all changed. Yesterday, the Senate voted 94-1 to move ahead with a housing rescue bill, and now McCain’s for it too. Last night Holtz-Eakin called the Senate action “progress.” And today he said that the Dodd-Frank proposal reflected McCain’s principles and McCain may support it.
For homeowners, it’s a welcome about-face.
Is Holtz-Eakin Backing Away From McCain’s Economic Plan?
In today’s Washington Post, Douglas Holtz-Eakin, senior policy adviser to Sen. John McCain’s (R-AZ) presidential campaign, writes 489 words about McCain’s plan for “turning around the economy.” There is not one word about the two massive corporate tax cuts that Sen. McCain billed, barely two months ago, as the top two items in his “economic stimulus plan“:
JOHN MCCAIN UNVEILS ECONOMIC STIMULUS PLAN
For Immediate Release
Thursday, January 17, 2008ARLINGTON, VA — Today in Columbia, South Carolina, John McCain unveiled his plan to stimulate the American economy. McCain’s plan will lower the corporate tax rate, allow expensing of equipment and technology investments and establish a permanent research and development tax credit. …
Dr. Holtz-Eakin is smart to want to walk away from this absurd Norquist pander, but will the media let Sen. McCain do the same?
Coming soon from Sen. McCain: I was against irresponsible tax cuts before I was for them.
UPDATE: My bad. Although this article didn’t mention expensing, it did mention the corporate rate cuts. Sorry for the error.
Responding to Douglas Holtz-Eakin
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