In the last week, the three remaining presidential candidates made big-picture economic speeches that were perfectly in keeping with the tone of their campaigns. Barack Obama delivered his speech, introduced by New York Mayor Michael Bloomberg (a potential Obamacan?), at Cooper Union, a venue long identified with great oratory. Hillary Clinton tactically delivered her speech in the current battleground state of Pennsylvania and offered a list of solutions. Both campaigns have remarkably detailed (and remarkably similar) platforms on how to attack the various economic woes facing America.
John McCain, fresh from a whirlwind tour aimed at demonstrating his foreign-policy credentials, took a somewhat different approach. There's an emerging theme surrounding his campaign: The problem with the last eight years isn't that the Bush administration had the wrong policies or was incompetent. No, the problem is that it lacked intensity. Which is why McCain is bent on offering a more concentrated, sustained, high-energy form of Bushism. Bush has been adamant about staying in Iraq until the end of his presidency; McCain is adamant about staying up to 100 years, if necessary. Bush has taken to carefully cherry-picking facts and metrics (the number of soccer games visible from the air, to cite one) to construct a narrative on how well things are going there. (I bet there weren't many soccer matches in Sadr City today.) McCain prefers simple declarations to data points: "We're winning. I don't care what people say. I've seen the facts on the ground."
The same holds true for the economy. By virtue of his history as a deficit hawk, a foe of earmarks, an opponent of the Bush tax cuts, and the presence of reality-based advisers like Douglas Holtz-Eakin, former director of the Congressional Budget Office, McCain deserves some benefit of the doubt. Unfortunately, the brains behind the economic operation seems to be former Sen. Phil Gramm, the Texas A&M economist-turned-senator who confidently forecast in 1993 that the Clinton program of spending cuts and tax increases on the wealthy would be "a one-way ticket to recession." And the sections on McCain's Web site about domestic policy reveal, as Matt Yglesias noted, "a nearly astounding level of vacuity."
Reading McCain's economic agenda, and listening to his speech, it appears that the problem with the last eight years is that we haven't seen enough tax breaks for the wealthy, that economic royalism hasn't been pursued with sufficient vigor, and that the middle and working classes haven't been stiffed sufficiently.
McCain wants to extend the Bush tax cuts, which he once opposed as a needless sop to the rich in a time of war. (I await David Brooks' inevitable explanation of how opposing taxes in a time of war in 2001 and 2003, when deficits were low, but supporting them in 2011, in a time of war and high deficits, is deeply moral and admirable.) But McCain wants to see Bush's tax relief and raise it some. McCain would slash the corporate-income-tax rate from 35 percent to 25 percent (because corporate profits as a percentage of GDP didn't spike enough this decade?), and he'd abolish the Alternative Minimum Tax, which would be a welcome move for many upper-middle-class taxpayers. "In all, his tax-cutting proposals could cost about $400 billion a year, according to estimates of the impact of different tax cuts by CBO and the McCain campaign," the Wall Street Journal reported. And how to make up for the lost revenues? Hmmm. McCain promises to cut earmarks; to eliminate waste, fraud, and abuse; and to reduce the projected growth of Medicare; but he won't provide many numbers. As the WSJ deadpanned: "The cost will make it difficult for him to achieve his goal of balancing the budget by the end of his first term." That's perhaps the understatement of the year. The 2009 budget calls for a deficit of $407 billion on projected receipts of $2.7 billion, as this table shows. Essentially, McCain wants to cut revenues by about 15 percent from current levels, with nothing close to that in spending reductions, in a time when, even after spending excess Social Security payroll taxes, the deficit is running at more than $400 billion. Here's some straight talk: McCain's fiscal program is either a joke or a fantasy.
McCain's housing speech, delivered in Orange County, Calif., ground zero of the housing crisis, was a mixed bag. He provided a good description of the problem. But his solution to an era in which financial deregulation set the stage for federal bailouts, rampant speculation, and reckless lending is ... less regulation. "Our financial market approach should include encouraging increased capital in financial institutions by removing regulatory, accounting, and tax impediments to raising capital." Bizarrely, he has also joined the chorus arguing that mark-to-market accounting—the rules that require companies to, you know, tell investors the actual market value of assets they hold-should be revisited.
The Federal Reserve and the Bush administration have justified the extraordinary help offered to investment banks and investors by saying that it matters less how we got here and more how we deal with the situation as it is. For McCain, however, it's all about the journey. Poor decisions should not be rewarded-unless those poor decisions are made by really rich people who run investment banks and hedge funds. While "those who act irresponsibly" shouldn't be bailed out as a matter of principle, it's OK to take extraordinary measures to help banks prevent "systemic risk that would endanger the entire financial system and the economy." Obama and Clinton-and the Bush administration, through its various efforts to ease the mortgage crisis-have argued that it might be possible to spare further systemic risk if something was done to buck up the fortunes of homeowners. Bollocks, says McCain. People should just put up more money for down payments and work harder to keep current with their mortgage payments.
Straight talk? No doubt. At a time of rampant economic insecurity and low consumer confidence, at the end of a business cycle in which median incomes didn't rise and the percentage of working people with health insurance fell, McCain won't succumb to the easy temptation of saying that government policy can help improve the situation. But smart politics? I wonder. What's left of the Republican Party is becoming increasingly downscale, and many swing states have been ravaged by the housing crisis (Nevada, Florida) and globalization (Ohio, Michigan). Besides, he's already got the Let-Them-Eat-Cake vote sewed up.