McCain Offers Economic Plan: More Tax Cuts

By Jeralyn, Section Elections 2008
Posted on Tue Oct 14, 2008 at 02:13:15 PM EST
Tags: John McCain, Barack Obama (all tags)

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Sen. John McCain unveiled his new economic plan today. The chief points:

A proposal to lower the tax rate on seniors who tap their IRAs and 401(k)'s after reaching 59-and-a-half years old. Under his proposal, which he estimated would cost the government about $36 billion, the first $50,000 of withdrawals would only be taxed at the 10 percent rate, his aides said.

For those who sell stocks at a loss, McCain would increase the amount they can deduct from $3,000 to $15,000, making it less of a burden for those who need immediate cash to survive the economic downturn, his advisers said.

Capital gains taxes would be cut in half, McCain said, for two years, from 15 percent to 7.5 percent. His aides said that would cost the federal government about $10 billion, but would provide an incentive to save and invest.

More below, including the Obama camp's response:

For people looking for work whose income for the year is under $100,000, McCain would eliminate taxes on the unemployment benefits they receive. Aides said that would cost the government about $6.5 billion.

Obama's spokesman on the capital gains tax cut:

"Senator McCain also shows how little he understands the economy by offering lower capital gains rates in a year in which people don't have an awful lot of capital gains," Burton said.

Obama's four point plan is here. It's wordy, but these are the points as Obama outlined them yesterday:

Give businesses a new American jobs tax credit for each new employee they hire here in the United States over the next two years.

Save one million jobs by creating a Jobs and Growth Fund that will provide money to states and local communities so that they can move forward with projects to rebuild and repair our roads, our bridges, and our schools.

Allow every family to withdraw up to 15% from their IRA or 401(k) – up to a maximum of $10,000 – without any fine or penalty throughout 2009.

A three-month moratorium on foreclosures. Applies to banks and lenders getting money from the rescue plan if homeowners are making a good-faith effort to make their mortgage payments and re-negotiate their mortgages.

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McCain Offers Economic Plan: More Tax Cuts | 36 comments (36 topical)

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Tax cuts are good.... (5.00 / 1) (#1)
by kdog on Tue Oct 14, 2008 at 02:27:41 PM EST

no problem there, but where are the spending cuts? Where is the moratorium on federal borrowing? Where is the balanced budget?

Ya can't have one without the others...not unless you wanna go totally bankrupt. Is that McCain's goal, to bankrupt the country?

From todays edition of TMQ,an economist of some note, Peter Orszag, regarding the overall "crisis" while on Newshour...

PETER ORSZAG: One thing we need to remember is we're lucky that we have the maneuvering room now to issue lots of additional Treasury securities and intervene aggressively to address this crisis.
JEFFREY BROWN: Wait a minute. Explain that. Lucky in what sense?
PETER ORSZAG: That people are still willing to lend to us. If in 20 or 30 years we continue on the same path, with rising health-care costs and rising budget deficits, we would reach a point where we wouldn't have that ability.

From the individual on up to the entire state...we need to live within our means.

Well (none / 0) (#10)
by Steve M on Tue Oct 14, 2008 at 02:59:03 PM EST

you could make a good-faith argument that even if balancing the budget is a critical priority, the best way to get there is by using short-term deficit spending to dig our way out of this recession sooner rather than later.

There are things we can cut, like the cost of the war in Iraq, but that's still only going to get us a fraction of the way towards balancing the budget. Most federal spending goes for social programs that it would be devastating to cut, right in the middle of an economic downturn when people need those programs the most.

The most important part of balancing the budget is by bringing in higher tax revenues. The problem is that raising taxes right now won't bring in as much money (because there's less economic activity to tax in a recession) and may even slow the recovery, depending on what you tax.

So in a perfect world, we'd use smart, targeted deficit spending on things like infrastructure and job creation to get out of the recession, and then once things have stabilized, gradually increase tax rates to a reasonable level to start eliminating the deficit.

One of the problems with our political system is that it is very, very hard to engage in long-term planning. You can elect a guy like Clinton who put us on the right path in a lot of ways, and then the whole plan goes by the wayside when you elect the wrong guy to follow him. It's all very disjointed and the focus ends up entirely on the short term.


I understand why deficits... (5.00 / 1) (#14)
by kdog on Tue Oct 14, 2008 at 03:06:48 PM EST

in the short run can be beneficial for our nation...problem is, as you alluded too, our leaders cannot be trusted to ever balance the books. Part because of the revolving door you mentioned, and part because balanced budgets and debt reduction through tax increases or cuts in entitlement spending are not something anybody wants to hear, and make it hard to get elected.

We b*tch that politicians are never honest...but we may be the reason for that, we don't vote for honesty and necessary sacrifice, we vote for pie in the sky promises of tax cuts coupled with spending increases...iow, fantasy land.


budget (5.00 / 1) (#16)
by Jlvngstn on Tue Oct 14, 2008 at 03:14:09 PM EST

22% defense
21% social security
21% medicare, 'caid and schip
9% interest on debt
9% safety net programs
18% everything else including
6% benefits for retirees and vets
3% scientific & med research
2% transportation infrastructure
2% education
1% non-national security
3% all other

as of 2007

Cut defense. We spend 2% on education and 22% on defense. Of course no demo in his/her right mind would say it out loud and it would cause a lot of job loss in that sector, but that is obscene.


And what the CIA is spending... (5.00 / 1) (#18)
by kdog on Tue Oct 14, 2008 at 03:19:22 PM EST

ain't even in there, if I'm not mistaken.

In all honestly, I don't if anyone on earth knows the grand total the govt. rips through every year...certainly not Obama or McCain.


In my opinion (5.00 / 1) (#19)
by Steve M on Tue Oct 14, 2008 at 03:21:23 PM EST

Secretary Gates has actually been really good at shutting down some of the boondoggle programs that aren't really important for defense and waste a lot of government money in relation to the jobs being created. That's the approach we need.


More Dems should (5.00 / 0) (#21)
by ruffian on Tue Oct 14, 2008 at 03:24:32 PM EST

take on the defense industry. I do some of my work on defense jobs, and I can promise you there is plenty of fat. It is hard for Dem candidates to even mention cutting defense spending though, because defense workers share the misguided view that Dem presidents will recklessly put them all out of work. In reality Clinton grew the defense budget more than Reagan did. Speaking to some of these defense workers rationally about it does not help, even though (because?) they can see the waste with their own eyes.


For the Record (5.00 / 1) (#27)
by The Maven on Tue Oct 14, 2008 at 04:41:22 PM EST

If one looks at DoD outlays for each fiscal year (warning: large PDF), for FY82 (the first year under Reagan's budgets), outlays totaled $184.5B, rising to $294.9B for FY89. Outlays under Clinton went from $268.6B in FY94 to $291.0B for FY01. That's an increase of $100 billion for Reagan, $22 billion and change for Clinton.

The figure for FY09 is now well over $500 billion. Clearly, there's a healthy dose of flab in all that extra money that Bush/Cheney have been pumping back to their pals in the defense contracting sector.


: On top (none / 0) (#34)
by cal1942 on Tue Oct 14, 2008 at 11:36:37 PM EST

of that Pentagon brass are going to submit a demand to INCREASE Pentagon spending (Pentagon spending does NOT include funds for combat operations in Iraq and Afghanistan) by $450 billion over the next 5 years. The plan is to submit this request just before Bush leaves office.
The Pentagon has become a corrupt cesspool. The potential for massive cuts is stagering. Our military expenditures exceed the rest of the world combined. Dismantling our overseas empire is the key to our survival as a nation. Massive military spending is bringing us down.

I wish Obama would ask McCain (none / 0) (#26)
by Jlvngstn on Tue Oct 14, 2008 at 03:55:47 PM EST

tell me, what exactly do you intend to cut in the wasteland of washington?

"Waste" is such a red herring and it means absolutely nothing in the broader context of the argument.

What we need is a fundamental discussion that addresses our addiction to military spending which is 48% of the worlds mil spending and 5 times that of China. We have enough nuclear deterrence and shock and awe to repeal any threat 20 times over.

We need serious discussions as to who we are as a people when our gov't spends 22% of its budget on defense.

Who on this site spends 20% of their income on home and self security? Approximately 3700 people were murdered on 9-11, yet about 16000 are murdered in the US every year. You should be more afeared of your neighbor than Osama.

We need real discussion on what our values are as a nation and WHY we cannot resist sending our troops out unprovoked on a regular basis.

Waste in warshington is created in the minds of politicians who sell us fear and the main stream media who deliver what we are buying.


Why start living within our means now? (none / 0) (#29)
by BrassTacks on Tue Oct 14, 2008 at 07:05:18 PM EST

We like spending! What's another trillion or two added to the deficit?

I like both of their plans. I'd support doing ALL of the above, anything that puts more money into the hands of Americans to spend and increase jobs.


Disagree (none / 0) (#33)
by cal1942 on Tue Oct 14, 2008 at 11:26:28 PM EST

tax cuts are not good unless targeted exclusively to middle or lower income workers.

Cuts like capital gains aid only the very well to do. They don't need any assistance and in fact should be shouldering the burden.

I would raise taxes significantly on incomes over $250,000.

A balanced budget kdog will make our situation much worse not better. You are basically suggesting that we do NOTHING.

Your neo-Hooverism would ruin the country.

Please read the late great John Maynard Keynes and the very much alive Joseph Stiglitz or for that matter the late John Kenneth Galbraith or his son James Galbraith.

Notice that Orszag favored heavy spending by pointing out that people are still willing to lend. Continuing to run deficits 20 or 30 years out would be a problem according to Orszag. He's right. No one is suggesting that large scale deficits continue for another two decades.

Stiglitz said that "all deficits are not created equal." Very wise indeed. Deficits from tax cuts are fiscally irresponsible and place the nation in debt without any return. Deficits borne of national investment pay short and long term benefits.

If the nation were always run your way (tax cuts AND no deficits) we'd still be trying to build a transcontinental railroad, we would have lost World War II and we would have completely lost the American system of government and commerce.

Every penny of deficit spending during the Great Depression, the Second World War and in the aftermath of the war paid this nation and the world huge dividends.


: What dividends are we getting now? (none / 0) (#36)
by kdog on Wed Oct 15, 2008 at 09:19:52 AM EST

More bombs than we could ever drop, troops in 90+ countries, prisons all over the place, high class junkets for AIG? Color me unmoved to sign my name to that mortgage.
Again, I can understand the need for a short term loan to build necessary infrastructure or fight a necessary war like WWII, or a real crisis like the depression...borrowing money for Iraq or to save Goldman Sachs? I don't know d*ck, but it stinks holmes.
And I'm working off the basis that taxation is theft...a necessary evil that should be kept at an absolute minimum.

i'm not an economist either, (5.00 / 1) (#6)
by cpinva on Tue Oct 14, 2008 at 02:53:21 PM EST

and i don't play one on tv. i am, however, a cpa (not on tv, in real life), so let me explain.

if your not making a profit, from selling your capital assets (stocks), then it really makes no difference what the tax rate is on gains, you don't have any.

on the other hand, in a time when serious losses are being taken, on sales of stock, increasing the amount of capital losses allowed (by individuals) to be deducted on your tax return, from $3,000 to $15,000, is a significant increase.

assuming a marginal rate of 28%, that translates into a tax savings of $3,360 ((15,000 x .28) - (3,000 x .28)), a not insignificant sum for most people.

the real question, for both candidates and their economic advisors: where are the funds to come from, to finance these proposed tax breaks? as noted by kdog, no spending cuts have been proposed, to offset the lost revenues any of these proposals would cost.

the national debt currently stands at approx. 11 trillion (yes, trillion, that wasn't a typo.) dollars, and counting. this past fiscal year alone saw a nearly half trillion dollar increase.

this is a debt of historic proportions, costing billions annually in debt service (interest expense), with a huge portion of that going to foreign investors. at this rate, USA, Inc. will have less to worry about from terrorists than from foreign banks. we'll collapse, not from an enemy's gun, but from their lawyer's briefs.

: Except a lot of people including myself (5.00 / 1) (#28)
by Pepe on Tue Oct 14, 2008 at 06:59:18 PM EST

bought stocks long ago that are still worth more today than they were when we bought them. A lot of boomers have stocks like that if there were a need to cash them out now. So the lower capital gains rate is attractive to them.

: I oppose the tax cut for the reasons (none / 0) (#9)
by ruffian on Tue Oct 14, 2008 at 02:57:42 PM EST

you give - the huge deficit. The reason Buirton gives - that people don't care about it - just seems to me to miss the point entirely.

I'm so tired of this tax cut broken record (5.00 / 1) (#25)
by esmense on Tue Oct 14, 2008 at 03:53:47 PM EST

Will we ever be able to start a new, more realistic conversation about the economy? How long will it take, and how much social unrest and dislocation will it require, before we can wring the Reagan/Norquist/Chicago School/Ayn Rand fan/Alex Keaton voodoo and fantasies out of our political and economic systems and start addressing reality?

: esmense (none / 0) (#35)
by cal1942 on Tue Oct 14, 2008 at 11:58:17 PM EST

I'd give you 100 5s if I could for that one.
You've nailed it completely.
The whole tax cut broken record has been so drilled into people's heads over the past 30 years that we're allowing our nation to go into the toilet.
Just look at many of the comments on this thread and any other thread when economic policy is the subject. And this site is alleged to be left of center.
All we read are tax cuts this, tax cuts that.
Madness.
"taxes are what we pay for a civilized society"
-- Oliver Wendell Holmes
What we've been degenerating into is an uncivilized society. The political right has made real patriotism a thing of the past.

Is it too early (none / 0) (#2)
by ruffian on Tue Oct 14, 2008 at 02:32:15 PM EST

to express my wish that Burton is not the press secrectary in the Obama administration? I can only hope he went on to offer a more cogent criticism than this:

I'm not an economist, and neither are most people. I need that statement explained to me, because it is not intuitively obvious to an amateur why it is bad to let people keep more of their capital gains in a year when they are hurting. I think Burton consistently does a horrible job.

Let me give it a shot (none / 0) (#5)
by Steve M on Tue Oct 14, 2008 at 02:48:10 PM EST

Capital gains tax is what you pay when you sell a stock for a profit.

With what's going on in the market, very few people will be selling their stocks for a profit any time soon. Thus they really don't care what the tax rate is on their nonexistent profits.


I think the few that do make (none / 0) (#7)
by ruffian on Tue Oct 14, 2008 at 02:55:01 PM EST

a profit would love to see their taxes cut. why does Burton not explain why it is bad for the economy to do so?

The reason I would give is that any tax cuts to the upper 1% are irresponsible when we have such a huge deficit. Why isn't Burton making that case?


He is saying (none / 0) (#12)
by Steve M on Tue Oct 14, 2008 at 03:00:33 PM EST

that this is a proposal which would only affect a very few people, full stop.


OK (none / 0) (#15)
by ruffian on Tue Oct 14, 2008 at 03:08:22 PM EST

Well, I guess if that is the worst thing about it, it does not sound that bad to me.


Sure (none / 0) (#20)
by Steve M on Tue Oct 14, 2008 at 03:22:37 PM EST

it's not that it would be actively harmful, it's that some of us believe the state of the economy requires something that's actually helpful.


: Can you be the new spokesman? (none / 0) (#22)
by ruffian on Tue Oct 14, 2008 at 03:26:54 PM EST

You do a better job than Burton every day!

of course if you bought (none / 0) (#8)
by Jlvngstn on Tue Oct 14, 2008 at 02:56:08 PM EST

GE, BOA and GM on friday and in 2010 they are 20% up and you CAN get a reprieve from cap gains, you should take it. Which of course will drive down the market because I know I will not be the only one selling to take advantage.

Always looking out for us middle class working americans that McCain is.....


: Yup (none / 0) (#11)
by ruffian on Tue Oct 14, 2008 at 03:00:21 PM EST

You are all making my point. Two posters right here have made better arguments against the McCain tax cut than Burton did.
He consistently misses the point - this is not the first time, by any means. I'll let it go now.

: Also, most of the middle class has (none / 0) (#24)
by seeker on Tue Oct 14, 2008 at 03:42:00 PM EST

their few stock investments in retirement accounts. Capital gains and dividends are not taxed in such accounts. They are taxed as regular income when the money is withdrawn in retirement (for a standard plan) or on the money contributed up front and not at all when withdrawn (Roth IRA). Thus, McCain's proposal would have little effect on the "middle class".

Even equity Mutual Funds (none / 0) (#17)
by ding7777 on Tue Oct 14, 2008 at 03:15:12 PM EST

will distribute Capital Gains -- especially this year now that the equity funds sold stock to pay sellers who fled to safer investments - so anyone owning a Mutual Fund come December (i.e, those who stayed or bought back in) will pay Capital Gains


McCain gives with one hand (none / 0) (#3)
by shoephone on Tue Oct 14, 2008 at 02:35:48 PM EST

and takes with the other. The tax cuts are a sop. And cutting capital gains taxes to 7.5% is truly a joke.

It's McCain's intention to raid Medicare and Medicaid to the tune of $1.3 trillion in order to fund his phony health care plan that seniors should be paying attention to, but since Obama didn't happen to mention it in the last deabte... here's hoping he will focus on it tomorrow night. McCain should not be allowed to get away with this.

Now to the content (none / 0) (#4)
by ruffian on Tue Oct 14, 2008 at 02:41:31 PM EST

Sorry, I just had to vent about Burton.

I think any plan that gets passed is going to have a combination of both the Obama plan and the McCain plan. Neither of them are that drastic to the left or right. Neither really help the homeownwers on the verge of foreclosure. That 10,000 he takes out of the 401k under Obama's plan will last a few months, maybe, perhaps not save his house, and then he has lost the equivalent of a lot more from his retirement fund down the road. In some cases he'd be better off letting the house he can't really afford go.

High Broderism wins the day, IMO.

Did McCain mention jobs (none / 0) (#13)
by Jlvngstn on Tue Oct 14, 2008 at 03:05:58 PM EST

or is he still unaware that 10 million americans are unemployed and 6 million americans are under employed and companies are planning to reduce workforce and commence hiring freezes?

If you don't talk about it, it doesn't exist.

I don't like the drawing down on the 401k because it hurts the market and hurts people's savings. It may be necessary though because job creation is still many months away.

McCain has really presented a lot of half-as*ed proposals as of late with what would appear to be very little thought. His campaign messaging and platforms seem chaotic at best and manic at worst.

I really thought he would close strong and it is abundantly clear that he "wings it" and that is frightening. Can you imagine him as president with the lack of organization and leadership he has demonstrated?

It is no wonder the campaign is short-circuiting and the republicans are running for cover in other races. I think in 5 years this campaign will be looked at as almost surreal in its stupidity.

I don't mean that in a bad way, I really don't. I just think that history is going to judge his campaign very harshly.

IRA/401K withdrawals (none / 0) (#23)
by jsj20002 on Tue Oct 14, 2008 at 03:33:15 PM EST

McCain proposes to allow anyone to withdraw funds from their IRA or 401K and pay a tax rate of only 10% on those gains. That is patently rediculous. I have an IRA invested in government securities. I think I may have been in the 28% to 33% bracket when I made those investments. In other words, I actually saved money on taxes when I made the investments. I am now retired and in a much lower bracket -- about 21%. I didn't lose money when the stock market crashed, so why do I get to pay a lower rate of only 10% when I draw out of my IRA the income that has never been taxed and has, in my case, grown in value.

Economic plans (none / 0) (#30)
by UnderCoverGuy on Tue Oct 14, 2008 at 08:11:33 PM EST

You know, I couldn't even image what the economy would be like now if President Bush's economic plan hadn't grown the economy so well. The DOW recently hit the lowest since 2003 (which goes to show how much it grew under President Bush). If it wasn't for the bousing bubble bursting, which led to Fannie, Freddie, AIG, etc. and the downfall of the world's economy, our economic picture right now would be much better. It was Franks that stood down President Bush when he warned that this would happen, but Franks called it Rupublican scare tactics. Don't hear about that much now, do we? It is what it is and I praise Bush for having grown the economy or we would really be in trouble now.

As for the other economic plan, socialism. What else do you call wealth distribution. I work 10 - 12 hours a day to keep my family going. Times are tough and I don't want to have to work 16 hours a day thanks to "wealth redistribution". let everyone else get up off their butt and work hard also. When everyone does that and works as hard as I do to keep my family afloat, then maybe we can talk about redistributing the $$$. If I work hard all my life and bust my a$$ like others, I should be able to enjoy it if I become successful. What we don't need are those born with silver spoons in their mouths like those in Hollywood and Beverly Hills and Manhattan. Recently, a plumber asked Obama about his economic plan and Obama stated plainly that he will make sure that wealth redistribution occurs. Sounds like Solialism to me - bordering on Communism.

: Dude.... (none / 0) (#31)
by kdog on Tue Oct 14, 2008 at 08:57:06 PM EST

the wealth redistribution already got going hardcore in the last few weeks...we're on the hook for 3-5 grand or so each so far. Where you been?
More socialism or more facism...whats a freedom lover to do, I hear ya. But I'd love some of what you're smoking if you think 4 more years of Bush is what we need.

: Coming from you. . . (none / 0) (#32)
by LarryInNYC on Tue Oct 14, 2008 at 09:33:02 PM EST

it sounds like Rastafarianism, if you get my drift (I'm sure kdog does).