Monday, April 21, 2008

A Boy Not on the Bus

Nice to see at least one member of the MSM isn't suffering from The Crush:

[McCain's economic] plan’s incoherent smorgasbord of items includes a cut from 35 percent to 25 percent in the corporate tax rate. For noncorporate taxpayers, Mr. McCain offers such thin gruel as a battle against federal pork (the notorious Alaskan “bridge to nowhere,” earmarked for $223 million in federal highway money, costs less than a day of the war in Iraq) and a temporary suspension of the federal gas tax (a saving of some $2.75 per 15-gallon tank). Now there’s a reason for voters to be bitter — assuming bloviators start publicizing and parsing Mr. McCain’s words as relentlessly as they do the Democrats’.

That may be a big assumption. At an Associated Press luncheon for newspaper editors in Washington last week, Mr. McCain was given a standing ovation. (The other candidate who appeared, Mr. Obama, was not.) Cindy McCain, whose tax returns remain under wraps, has not received remotely the same scrutiny as Michelle Obama and Bill Clinton, except for her plagiarized recipes. The most damning proof of the press’s tilt toward Mr. McCain, though, is the lack of clamor for his complete health records, especially in the wake of his baffling serial factual confusions about Iraq, his No. 1 issue.
-- Frank Rich


Adam said...

McCain, however, will not be able to get any of his economic policies through; there will be no new tax cuts under a large democratic majority and the Bush tax cuts will sunset over the next President's term, completely by 2011, regardless of whether or not it is McCain.

McCain will likely veto expensive spending packages and pork-barrel spending (which the Congresional Dem's have dropped even the pretense of trying to do) and will not have any chance of implementing these economic changes.

Also, while McCain cannot by fiat pass trade treaties with our allies that have been scuttled by the Democrat controlled Congress (Colombia, Vietnam, etc.) just as he cannot by fiat cut taxes, the fact that he will not play along with the ridiculous games the Congressional Democrats are playing where they think that trade treaties = evil. I don't know if it's xenophobia, or if they've been reading up on the Juche idea and have liked what they have seen, but what the Democrats, at least in Congress, have been doing with regard to free trade has been ridiculous; this is the xenophobic Democratic equivalent to the xenophobic Republican (and Democratic) criticism of the Dubai Ports World deal.

As I have outlined on my blog, while McCain's economic policy is not coherent, if he is elected, the reality of the political situation will mean partisan gridlock, little increase in spending, moderate tax increases, and a somewhat more pro-free-trade policy (although the Democrats in Congress will really dictate that). This sounds better to me than a Democratic President signing every spending bill that comes across his desk. Gridlock forever!

bjkeefe said...

In times past, I shared your preference for gridlock as the only realistic way to keep spending and tax policies sane. However, I no longer think this is the way to go, for three reasons.

First, I don't think the Democrats will return to their "tax-and-spend" ways. They're too enamored of having wrestled away from the Republicans the title of "party of fiscal responsibility." They'll try to push through some expensive programs, like a health care plan, to be sure, but I don't think we have to worry about profligacy.

Second, I don't expect the Dems to achieve a filibuster-proof majority in the Senate, so there are some brakes right there.

Third, I think we need to let the Dems give it their best shot, as unhampered as possible, to correct some of the problems wrought by having the Republicans as the sole party in power. I mean by this not just fiscal policy, but foreign, energy, environmental, and constitutional policies as well.

McCain may not be able to push through all of the ideas he's running on, as you correctly point out. However, he'll be far more of a hindrance than a help in getting the country back on track, just by virtue of what he'll be trying to do, and by his ability to veto Congressional efforts. Having him as president won't be significantly different from having four more years of Bush, and a look back over the past year and a half shows how well that's working.

Adam said...

You think the Democrats are really committed to fiscal responsibility as anything more than a campaign slogan when they're not in power? Then why did only 4 Democrats in the Senate (2 of whom were Obama and Clinton, campaigning to unseat the incumbent party in the executive branch) vote for a measure that would not even have banned earmarks, but would have simply required a 2/3 majority for such pork-barrel spending?

Nancy Pelosi has backtracked from the Democrats' '06 campaign promise of "no more earmarks" to the slightly less fiscally responsible position of that the Democrats will exercise "legislative discretion" to keep spending bills in check. We'll see how that goes with a Democrat in the White House.

And you mention health-care as if the real spending will be bridges to nowhere and other tack-ons. While those things are expensive in the aggregate, the big increases in discretionary spending that will be on the books for decades come from expensive new entitlement programs... we saw this with Bush in the form of Medicare Part D and No Child Left Behind. A national health-care scheme would be the most expensive of them all. I have little faith in the Democrats that they will both be able to control ear-marks and subsidies and trade barriers that cost a significant amount in aggregate and at the same time find some mix of tax increases and a reasonably inexpensive health-care plan that will not massively increase the deficit (both in the short and long-term) as well as hamper economic recovery through tax increases.

While you say that McCain will be just like the last year and a half of Bush, the problems of the last year and a half stem from much earlier in Bush's administration. The housing bubble bursting and the massive spike in gas prices are at best legacies of his first several years in office (and I'd argue the latter is an exogenous shock that no Presidential action can mitigate in 1 term).

I think the better analogy would be that McCain will be like what Bush's first-term would have been like if we had the current Congress seated in 1998 and then Bush came into power. Big spending items would have been vetoed and had to have been rejiggered, the war in Iraq probably would not have happened, and I think our financial situation would be much better.

I think it is somewhat naive to think that Democratic campaign promises about fiscal responsibility are anything more than that; once they have the legislative and executive branches fiscal responsibility will go out the window as Democrats rush to find new ways to spend our money. I'm imagining not just national health-care but a "New New Deal" to fight the recession. I can't say that I'm hopeful that this will be the way it turns out, but that's what it looks like is going to happen. John Maynard Keynes must be having a fiesta in his grave.

bjkeefe said...

I concede that there's no way to be sure about the Democrats and their new fondness for fiscal responsibility, but that is my sense.

I think all talk about earmarks is a red herring. Sure, it'd be nice to cut some of the extreme examples that one can trot out, but really, the cost for these is lost in the noise. I'd like to see a hard look taken at the Pentagon -- it seems to me that cutting back just one weapons program that stems from a leftover Cold War mentality could more than make up for all the pork.

Regarding a health care program, I think there's a good argument to be made that, properly implemented, significant cost savings will be realized over the medium to long term. I grant that "properly implemented" is a huge if, but it seems obvious that we can't just keep doing things the way we have been doing them in this area. The costs are crippling to businesses that do offer health care, especially as part of a pension package. There are also real societal costs when tens of millions of people don't have insurance; e.g., more emergency room visits, a tendency to let problems get worse and more expensive to treat, reduced productivity as a result of untreated conditions, poor childhood development, etc. There is also a friction in the marketplace that results from people staying at undesirable jobs just to keep health coverage.

As for your worries about a "New New Deal," this is a philosophical difference. If real stimulus can be given to the economy, then I'm inclined to favor it. I don't much care for a lot of artificially created jobs programs, of course.

On a related note, I'll point out that a lot of government money is spent due to the Republican love of crony capitalism. I wonder how much we could stimulate the economy if we started collecting the drilling and leasing fees that the energy companies are supposed to be paying, for example. Similarly for agricultural subsidies to companies like ADM, just to pick another example. And what about the sweetheart, no-bid contract deals over in Iraq? There are billions going to waste on such programs.

Adam said...

I will concede the "if implemented well" argument about health-care; I just think the likelihood that the Congress and President working together and then the bureaucracy in this country implementing something that works well is nearly zero. There are social costs to the current system, but there are also social costs (and obviously big fiscal costs) to a whole hog reform that badly misfires.

As for your other economic complaints, I will grant that the DOD could cut some fat... but the DOD makes up less than 20% of spending. As I constantly harp on at my blog if you look at the budget breakdown you'll see that Social Security, Medicare, Medicaid and other health benefits and entitlements make up 56% of the budget.

You'll also notice that Agriculture and Energy make up .9% and .8%, respectively. So, yea, there are a lot of small fish that we each don't think are worthy. I'd eliminate NASA and the earmarks. You'd eliminate the farm subsidies (as would I). But these are small potatoes compared to three things: entitlements generally, defense, and interest on the debt. Literally everything else the Federal Government spends money on makes up 16.6% of the budget; we're talking infrastructure, the justice system, the environment, scientific research, etc.

So if they're going to "fix" health-care in this country they'd better not fuck it up, since it's going to be so damn expensive. I hope you'll forgive my lack of confidence that they'll get it right.

bjkeefe said...

I find almost nothing to disagree with there, except I'd place a little more emphasis on the potential savings available from the military's slice of the pie.

In particular, I share your worries about the potential for a massive kludge coming out of the attempt to reform health care. Still, given how bad the situation is, at least in my view, I think we have to try.

One last thing: I agree that interest on the debt is a huge portion of the budget. This is another reason why I am against McCain -- I see no real indication from him of any proposals that he would make a dent in this. He can talk about cutting funds for grizzly bears all he wants, but until he either acknowledges that continued lower taxes for the rich and for corporations isn't realistic, he's going to have to make some real cuts elsewhere. Could be he's in agreement with Grover Norquist in wanting to put the government's budget in such a bad place that there will be no choice but to cut entitlement programs, although I don't really think this is the case. But anyway I look at it, it seems that McCain's plan is more Bush-style borrow-and-spend.

Adam said...

Listen, I'm not going to defend McCain's instincts on fiscal responsibility and other economic issues (although the quotes I've read about him he does seem to have an intuitive feel that free trade = good, something the Democrats have been clambering over each other to deny) but with regards to this:

But anyway I look at it, it seems that McCain's plan is more Bush-style borrow-and-spend.

Even if McCain had this as a coherent philosophy of political economy (which I highly doubt; I doubt he has an articulable, coherent ideology about what the proper role of the Executive in fiscal policy is) I really find it hard to believe that he can make any of it happen. As I've already said, the income tax (and the estate tax which I have a post about) are going to back to Clinton-era levels, no matter who's President, unless the Republicans win some impossible, stunning turnaround in Congress. I'd rather have this modest tax increase with McCain vetoing a lot of expensive spending packages than Obama increasing taxes beyond simply sunsetting the tax cuts in order to finance massive new spending programs.

If you want to respond I'll let you have the last word, I think I've said my piece, so go ahead.