Douglas Holtz-Eakin, a former Director of the Congressional Budget Office and current chief McCain economic advisor tells Fortune columnist Matt Miller in a forthcoming book, The Tyranny of Dead Ideas, that the next President is simply going to have to raise taxes.
Joe Klein has an advance copy of the book and the details:
“If you do nothing on the spending side, you’re going to have to raise taxes whether you’re a Republican, a Democrat or a Martian,” he tells Miller…and then he immediately makes it clear that the “spending side” part of the argument is nothing more than a political fig-leaf.
“It’s arithmetic.” Federal revenue today is 18.8 percent of GDP and federal spending is 20 percent. Holtz-Eakin observes that “the pressure are there” to lift spending [on entitlement programs, mostly] and taxes to 23 or 24 percent of GDP by around 2020, and to as much as 27 percent if health costs remain out of control.
Miller does the arithmetic: that’s an annual tax hike of $550 to $700 billion, well beyond the range of any spending cuts that McCain has or might propose. (Those vaunted earmarks cost about $20 billion per year.)
So how come, with this guy on board, the McCain campaign is still pushing tax cuts and more tax cuts even if they are fiscal suicide?
“It’s the brand,” he said, “and you don’t dilute the brand.”
How’s that for cynical? Of course, the book isn’t out until after the elections.
Klein may well think Holz-Eakin is ‘an honest man”, but to me he looks like just another Republican hack willing to deceive about McCain’s economic policies and their impact. He has been doing the rounds of the likes of Forbes magazine pushing McCain’s tax-cut budget and while admitting that it’s “not exactly revenue-neutral,” saying that it’s a pro-business plan. However, he also told the wonks at the Center for American Progress that McCain’s plan would “make deficits expand up front, no question”. Expert economists at the the Center for American Progress Action Fund seriously questioned McCain’s deficit-funded corporate-welfare budget because in the short-run such tax cuts are the least cost-effective stimulus among 13 options, andin the medium or longer-run, the effect on growth of deficit-financed tax cuts “tends to be small”.
Obama, of course, says that his greater tax breaks for the less well off would be paid for by tax increases on those in upper tax brackets, especially those earning over $600,000 a year. Anderson Cooper recently explained the differences in tax proposals very simply on CNN:
Crooks and Liars » McCain’s Economist: We Need Tax Increases