Thursday, August 14, 2008

Furman and Goolsbee on Obama's and McCain's tax and budget policies

In today's WSJ, lead Obama economists Jason Furman and Austan Goolsbee continue to use the Bush budget baseline (for reasons I understand but regret).

As readers can tell from my past posts, I disagree with plenty of what Obama is proposing, partly though not wholly because I have the luxury of not running a contested political campaign. But I certainly agree with the following paragraph in which Furman and Goolsbee address McCain:

"The McCain plan represents Bush economics on steroids. It has $3.4 trillion more in tax cuts than President Bush is proposing, largely directed at corporations and the most affluent. Sen. McCain would implement these cuts without proposing any meaningful steps to simplify taxes or eliminate distortions and loopholes. In addition, Sen. McCain has floated over $1 trillion in new spending increases but barely any specific spending cuts."

Okay, presumably unlike Obama, Furman, and Goolsbee, I would support McCain's proposed cut in the corporate tax rate to 25% if it were fully financed and accompanied by measures shifting more tax collection to owners and especially owner-employees. (See here, for example.)

But the most interesting bit for me in the above paragraph was the $1 trillion figure they offer concerning spending increases that McCain has floated. I am sure they have something specific in mind to back this up, although possibly the figure could be contested (most likely, on the ground that McCain shouldn't be treated as actually meaning what he said on the campaign trail). But the number surely does not include the costs for all the overseas military activity that McCain is eagerly planning. That stuff can add up (e.g., $2 trillion so far in Iraq).

McCain economist Doug Holtz-Eakin attempts to defend his side's relative budgetary integrity on the ground that they will cut spending vastly compared to the present path or Obama. Color me extremely skeptical. Taking into account the extensive military adventures that McCain, even if not actively planning, will nonetheless find himself irresistibly drawn into starting, the actual balance on projected spending may lie sharply in Obama's favor.

1 comment:

Anonymous said...

The more important question is not what taxes will be but rather what federal spending will be. If taxes are low but spending is high the value of our money is undercut. If taxes are high but spending is low debt is reduced and the value of our savings goes up. Doubling federal spending per capital is how the Bush has hugely increased taxation while pretending not to.