WaPo clues in to McCain's disastorous economic policies

It's been obvious for some time that John McCain would bring us little more than Bush Economics Redux. It appears that even McCain's "base", the political press (according to Chris Matthews), has clued in to this. In today's Washington Post they review McCain's economic speech from yesterday,

Sen. John McCain yesterday offered sweeping rhetoric about the economic plight of working-class Americans, promising immediate assistance even as he spelled out a tax and spending agenda whose benefits are aimed squarely at spurring corporate growth.

In a speech billed as the most comprehensive summary of McCain's economic vision to date, the candidate proposed to eliminate the alternative minimum tax, slash corporate income tax rates and offer a grab bag of other business breaks. His most direct proposal for relief to working-class voters was a call to suspend the federal gasoline tax for the summer driving season.

McCain may have offered sweeping rhetoric on the plight of the working class but what about his proposals?

• He wants to eliminate the AMT, which mostly affects people who earn between $200,000 and $1 million. No working class Americans in that group
• He wants to slash corporate tax rates, nothing for working class Americans there either.
• He offered a "grab bag of other business breaks", again nothing for working class Americans.

McCain did offer up a silly and counterproductive offer for a federal gas tax timeout as he pandered for "working class" votes. This is a very shallow, poorly thought out idea that is insulting to true blue collar Americans who are facing hard economic times. Insulting in that the federal gas tax is about 18 cents a gallon. McCain can come up with billions in tax breaks for various other interest groups and for blue collar Americans he offers a few dollars relief on every tank of gas. John McCain believes he can buy the support of working class Americans with a $2.50 cent break at the pump. That is the definition of elitist condescension towards blue collar Americans. He is essentially saying, "Let them eat cake" while offering massive giveaways to his corporate bosses.

It's also a very bad idea as far as public policy goes. The federal gas tax pays for road and highway construction. That money is sent to the states and spent on key infrastructure projects. These are important projects, as we learned in Minneapolis last summer. Does McCain propose that the feds withdraw all funding for our infrastructure while the gas tax holiday is in effect? Or does McCain propose that the funding continue without the revenue stream - thus creating billions more in debt?

Beyond that there is the matter of the economics of this proposal. Demand will not go down, supply will not go up. Eliminating the gas tax will only allow Big Oil to fatten their wallets. Economist Dean Baker explains,

According to the oil industry, they have their refineries running flat out, producing all the gas they can. This means that the price is determined on the demand side.

We have a fixed amount of gas entering the market, the question is simply what price clears the market. In this context, if we reduce or eliminate the gas tax, the price doesn't change, the lower tax will simply allow Exxon and other oil companies to keep more profits (unless of course they were lying about running their refineries at capacity).

McCain's gas tax proposal offers little in real relief, further jeopardizes our already rapidly aging infrastructure and will succeed only in more profits for Big Oil. It's a superficial and insulting proposal that should be rejected out-right.

Thankfully the Washington Post article does a good job of smacking back the rest of McCain's rhetoric,

"In my administration, there will be no more subsidies for special pleaders, no more corporate welfare," McCain said.

But much of what he detailed was a corporate special pleader's dream: a cut in the corporate income tax rate, from 35 percent to 25 percent, a proposal to allow businesses to write off the cost of new equipment and technology from their taxes, a ban on Internet and new cellphone taxes, and a permanent tax credit for research and development.

He promised to remove the "myriad corporate tax loopholes that are costly, unfair and inconsistent with a free-market economy," but he offered no specifics...

And McCain's proposed "middle-class tax cut" -- a full repeal of the alternative minimum tax -- stretched the definition of middle class. Of the 4 million taxpayers paying the AMT, 93 percent earn between $200,000 and $1 million, according to the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution...

He said his support for making Bush's tax cuts permanent would benefit people from all income levels by making sure that taxes on dividends and capital gains stay low. But most lower- and middle-income investors have the vast majority of their stock and bond holdings in retirement accounts that are exempt from federal taxation. A worker with income between $50,000 and $75,000 got an average tax cut from the dividend and capital gains changes of $43. Those with incomes over $1 million saved $37,962 on average, according to the Tax Policy Center.

McCain offered no details about a plan to create a simpler alternative tax system, other than saying it would have two tax rates and a more generous standard deduction, and taxpayers could chose whether to use it or the current system. McCain's friend and former rival for the Republican nomination, Fred D. Thompson, proposed just such a system, with no AMT and a 15 percent tax rate and 25 percent tax rate. Because taxpayers would be allowed to choose whichever system gave them the lowest tax bill, critics estimated that the cost to the Treasury could be in the trillions of dollars.

McCain advisers acknowledged that the costs to the Treasury would be substantial.

Given the press' usual fawning over all things the McCain says and does this article is a welcome change of pace. This article is a prime example of what good campaign reporting should look like - actual analysis and more than just mere stenography of what the pol says. One can only hope that the press applies the same skepticism to his foreign policy ideas.