John McCain's Plan to Reform the Financial Markets:
John McCain proposes creating a Mortgage and Financial Institutions Trust (MFI) which will work with banks and regulators to identify and purchase bad loans to resell later at a profit when the market has improved. The government would take a controlling stake in the companies it helped. All profits would go to the Treasury. MFI will be managed by a board of directors consisting of the Secretary of the Treasury, Federal Reserve Chairman, Chairman of the FDIC and two public members. (Source: JohnMcCain.com)This is very similar to the $700 billion bailout plan proposed by Treasury Secretary Henry Paulson.
McCain's Economic Stimulus Plan:
- Cut the corporate tax rate to 25% from 35%. Fund the reductions with cuts in "pork-barrel spending", such as the 10,000 local projects, totaling over $10 billion, in legislation recently signed by President Bush.
- Allow expensing of businesss equipment and technology investment for the first year.
- Establish a tax credit equal to 10% of wages spent on research and development.
McCain's Long-term Economic Platform:
McCain's Economic Platform includes his short-term stimulus measures, and adds the following:- Repeal the Alternative Minimum Tax (AMT) which cost middle class families nearly $60 billion a year. This tax was originally designed to fall on the wealthiest but, thanks to inflation, each year it snags more middle-income taxpayers who claim a lot of deductions.
- Extend expiring tax cuts from Bush's first term, worth $100 billion a year.
- Approve the President's line item veto.
- Add personal accounts to Social Security.
- More trade agreements. For more, read McCain and Trade
- Increase troops in Iraq.
- More nuclear energy.
- Tax credit of $2,500 per person / $5,000 per family towards health care insurance.
- Reduce wasteful government spending, saving $18 billion per year.
- Reduce Congressional earmarks, saving $60 billion per year.
- Eliminate tax loopholes, saving $45 billion a year.
- Control Medicare costs, reform unemployment training.
Impact on the Economy:
Although McCain states he wants to balance the budget by the end of his first year in office, his economic platform does not support that. For example, extending the Bush tax cuts and repealing the Alternative Minimum Tax will add $160 billion to the deficit. Providing tax cuts to businesses would cost another $100 billion. These cuts would spur business investment, but may not trickle down to prices which would help consumer spending. In total, McCain tax cuts would total $400 billion. His spending cuts only total $133 billion.Furthermore, McCain's solution to the Social Security shortfall is to cut benefits to match projected payroll tax revenues. He may extend the retirement age to 68 and reduce cost-of-living adjustments. He says point-blank that promises to retirees can't be kept. can't keep promises made to retirees. Although his web site says that personal savings accounts won't replace Social Security payments, in an interview with the Wall Street Journal he said they they would. (Source: WSJ, McCain's Economic Platform, March 3, 2008)
Increasing troops in Iraq would also raise the budget deficit. The CBO estimates spending on the wars at about $145 billion this fiscal year.
More nuclear energy would only help relieve 1/3 of the nation's dependence on oil. Two-thirds of oil use is for transportation. Furthermore, the U.S. has become dependent on Japanese engineers to build new nuclear plants. (See U.S. has Lost Skills to Build Nuclear Plants)
More trade agreements would certainly help the economy. However, McCain doesn't address the main impediment to any U.S. trade agreement, which is massive subsidies to agri-business. This one issue effectively halted the World Trade Organization Doha round. McCain's general calls to reduce government spending are good, but he gives no detail as to how to accomplish this.
Overall, the McCain economic platform would reduce budget revenues and raise costs, increasing the deficit and weakening the U.S. economy.
