Sunday, April 20, 2008

Where did the shame go?

I've always respected economist Douglas Holtz-Eakin, who is McCain's top economics adviser other than the public faces whom I fervently hope are just window-dressing, such as Phil Gramm and Jack Kemp. Holtz-Eakin is almost the only academic or policy intellectual (apart from Jack Goldsmith) to have a prominent Republican-appointed job in George W. Bush-era Washington and come out with his reputation enhanced, rather than besmirched. He brought honesty and candor, at least to the extent he could given the broader circumstances, to his job as head of the Congressional Budget Office.

This just makes it all the more nauseating to see him flacking for McCain's insane, almost criminally irresponsible, plans to cut taxes by $3.3 trillion over the next 8 years - to be financed, of course, by eliminating waste and abuse. When you look at the U.S. fiscal gap and McCain's expensive foreign policy plans plus the zero prospect that he will be able to take on entitlements issues (even in the unlikely event that he wants to), supporting such a plan is almost akin to saying that you want the U.S. to face a catastrophic fiscal meltdown within the next 10 to 15 years.

Back-of-the-envelope guess: I would be surprised if the infinite horizon fiscal gap estimate for McCain's proposed tax changes doesn't exceed the infinite horizon funding shortfall within Social Security. And it is more front-loaded, hence more of the damage would become irrevocable sooner.

When you work in a campaign, I suppose you get to this pass one step at a time. But it would really be nice if Holtz-Eakin could take a deep breath, step back for a second, and look at what he is doing with the eyes that I know he used to have. This is bad for his reputation, and it should be.

No-one ever resigns out of principle in Washington any more. But that is part of the problem.

UPDATE: This informative article notes that the Urban-Brookings Tax Policy Center estimates McCain's tax cuts at $5.7 trillion for the 8 years. The Center for Budget and Policy Priorities comes out at $5 trillion. But not to worry, Holtz-Eakin has identified potential tax savings that, if only they weren't politically impregnable, would make back maybe $3 billion a year. So he is well within reach of being one half of a percent of the way towards paying for it.

The revised estimate, by the way, makes it clear that the McCain tax cuts would add vastly more to the U.S. fiscal gap than the entire Social Security shortfall. Indeed, they'd get more than half the way there in a mere 8 years.

If economists could be disbarred for bad practice, I'd be ready to open the file on this one.

FURTHER UPDATE: A recent press release from the Center on Budget and Policy Priorities shows the 75-year cost of extending the Bush tax cuts as being 3-1/2 times the size of the Social Security shortfall during that period. And McCain of course wants to go far beyond merely extending the Bush tax cuts.


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