Matt Ortega

Senator John McCain (R-Arizona) released an economic plan that is rooted in imagination rather than fact. Somehow the McCain administration will figure out a way to massively cut taxes and balance the budget within four years. These are merely platitudes because the McCain campaign does not explain how they will do that. New York Times:

Mr. McCain said he would also slow the growth of Social Security, Medicare and Medicaid, and fiscal experts agree that he would need to do that to achieve his goal. But Mr. McCain did not give details of how he would alter those benefit programs, which have powerful constituencies, including older Americans, a huge health care industry and state and local government officials. [...]

Mr. McCain proposed a one-year freeze in most domestic spending subject to annual appropriations, “to allow for a comprehensive review.” This proposal would affect education, scientific research, law enforcement and scores of other programs.

This conservative pipedream would not be complete without irresponsible tax policy.

Mr. McCain said he was counting on “rapid economic growth” to help reduce the deficit. While a growing economy generates additional revenue, several of Mr. McCain’s tax proposals would be costly, experts said.

He would “phase out and eliminate” a provision of the tax code known as the alternative minimum tax, which has ensnared a growing number of middle-class Americans in recent years.

By his own account, repealing this tax “will save middle-class families nearly $60 billion in a single year.” That is $60 billion that would presumably not be available to the Treasury.

Mr. McCain also wants to extend many of the Bush tax cuts, scheduled to expire by Jan. 1, 2011. That could reduce tax collections below the levels assumed under current law, and it could widen the deficit, many economists said.

In January, the Congressional Budget Office estimated that extending the Bush tax cuts would cost more than $700 billion in the next five years.

Economists from both sides of the aisle are left asking, “Where’s the beef?”

C. Eugene Steuerle of the Urban Institute, who worked in the Reagan administration, said Mr. McCain “may well be committed to balancing the budget in five years, but does not tell you how he would reach that goal.”

J. Bradford DeLong, a professor of economics at the University of California, Berkeley, who worked at the Treasury under President Bill Clinton, said, “Senator McCain and his advisers want to claim they will balance the budget by 2013, but they have given us no clue and no plan to meet all the commitments he has made and still get there.”

In the USA Today, an editorial ran castigating the McCain plan to balance the budget by 2013 a “flimsy vow on the budget.”

On Social Security, which will begin paying out more than it collects in a decade, his approach could be summed up with the words: Watch this space. McCain would reach out to Democrats to craft a solution but offers no guidance as to what that might be.

On Medicare, he merely points to his health care plan, which centers on encouraging workers to buy insurance individually rather than through employers. What, if any, effect this would have on a government program for retirees is debatable. [Ed. note: Buying insurance on the individual market is grossly more expensive than the shared costs of employer-provided healthcare. The only one who benefits from this are businesses, not individuals.]

McCain also proposes a one-year freeze on the growth of non-defense government programs, which might cut the deficit by all of 2% to 3%. On defense, he says he would steer any peace dividend from concluding the wars in Iraq or Afghanistan to deficit reduction. That amounts to a kind of imaginary lockbox for hypothetical savings.

The reality is that the federal budget is so far out of whack that you could eliminate about two-thirds of the defense budget, or all of the non-defense programs McCain would freeze, and still run a deficit this year.

The verdict is in on the McCain plan: it is full of holes.

Maya MacGuineas, a budget expert at the New America Foundation who advised McCain on Social Security in 2000, said of his proposal: “In terms of details, there is so much to be filled in.”