Video: Despite detour, economy debate continues

By NBC/National Journal Reporter
updated 7/15/2008 5:04:22 PM ET 2008-07-15T21:04:22

ALBUQUERQUE, N.M. -- Republican presidential candidate John McCain has taken to linking the GOP's traditional campaign message on taxes with a more immediate theme -- his differences with Democrat Barack Obama -- in a half-joking way on the stump.

"I just want to establish one fundamental fact with you," McCain told a group of voters in Belleville, Mich., this week. "If you want a president of the United States that's going to raise your taxes, I'm not your candidate. I'm not your candidate, Senator Obama is. I just want to make that very clear."

Obviously, McCain doesn't expect to dissuade many undecided voters with his reverse sales pitch. But with the struggling U.S. economy looming as the biggest issue in this election, McCain, like Obama, knows his words on taxes and his positions on the federal government's role in repairing the market are sure to be closely monitored.

McCain felt the increased attention last week when surrogate Phil Gramm -- national co-chairman of the Arizona senator's campaign and one of his top economic advisers -- made national news for calling the current economic downturn a "mental recession" and America a "nation of whiners." And both candidates have been asked repeatedly about a bailout for government-backed mortgage corporations Fannie Mae and Freddie Mac.

As the rhetoric heats up between the candidates themselves, it's important to watch how they emphasize different aspects of each other's proposals to make a point.

McCain does his best at every event to paint his opponent as a stereotypical tax-and-spend liberal, a label that simultaneously creates cracks in Obama's promise of a new kind of politics and in voters' faith that the Illinois senator can handle the economy. The problem with this label is that many independent groups have concluded that Obama's tax plan actually offers more cuts to those in the middle and lower income brackets than McCain's.

Analyzing a tax plan is a complicated feat, particularly since each candidate's plan changes as time goes on and policies are phased in or out. The much-publicized report released last month by the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, analyzed the effects of the candidates' plans both immediately after the election as well as after 2011, when President Bush's 2001 and 2003 tax cuts are set to expire. Obama plans to preserve the sections of these tax cuts that apply to those making less than $250,000 per year, while McCain -- who initially opposed both tax cuts -- plans to make them permanent and add more of his own.

According to the TPC's comparison, "the Obama tax plan would make the tax system significantly more progressive by providing large tax breaks to those at the bottom of the income scale and raising taxes significantly on upper-income earners. The McCain tax plan would make the tax system more regressive, even compared with a system in which the 2001-06 tax cuts are made permanent. It would do so by providing relatively little tax relief to those at the bottom of the income scale while providing huge tax cuts to households at the very top of the income distribution."

So although it may be true that Obama's tax plan quantitatively offers more tax increases, as McCain frequently advertises, the TPC found that once Obama's entire plan is in effect in 2012, it will benefit lower- and middle-class taxpayers significantly more than McCain's. And each income level would "on average, receive a tax cut, but those at the very top of the income scale would receive tax increases."

There are additional corporate tax loopholes addressed in the Obama plan that are not included in the TPC's comparison because they do not directly affect individual filers, and the McCain campaign adds these to the tally of the Democrat's proposed tax increases. This approach allows McCain to emphasize the number of tax increases rather than their effect on the average taxpayer, making Obama's plan sound more dangerous than it may actually be to the voter listening.

For his part, when Obama discusses his opponent's plan, he often emphasizes that the biggest beneficiaries of McCain's tax cuts will be those in the higher income brackets and that the effect on the budget as a whole is still uncertain.

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"Every independent observer who's looked at John McCain's plan says that his plan would add 200 to 300 billion dollars a year in deficit spending," Obama said this week when asked about McCain's promise to balance the budget by 2013. "He hasn't specified how he would bring it down. His own campaign has acknowledged that they don't have specifics."

McCain's recent promise to balance the budget came as part of his new Jobs for America plan, which was rolled out last week. According to his Web site, as part of "reforming Washington to regain the trust of taxpayers," McCain "will balance the budget by the end of his first term."

When asked about this ambitious goal in a telephone town hall with Virginia voters, McCain said that he plans to accomplish it "by restraining spending, having taxes cut, increasing revenues and eliminating not only the pork-barrel spending by Congress but the parts of government that have become obsolete and yet we are still spending enormous amounts of money on."

Obama called this factually inaccurate last week: "Every time that he's been asked about specific spending cuts -- for example, the $2 billion required for the restoration of Everglades in Florida -- he'll say, 'Well, I don't have a problem with that particular bit of spending. I just don't like the earmarks process it went through.' Well, if that's the case, then it's not a real cut and the truth is there are only about $18 billion worth of earmarks.

This is an oversimplification of McCain's argument. Although many of the specific spending cuts in McCain's plan remain unidentified, his approach to fiscal restraint goes far beyond earmarks alone. McCain has proposed a freeze on the federal government's discretionary spending to allow for a thorough review of all spending programs and an evaluation of areas where spending could be cut.

Voters who listen only to the candidates themselves might believe that Obama will raise taxes on everyone in America and McCain will sink the country into irreparable debt. While there are kernels of truth in each candidates' attack, neither offers an accurate representation of the facts.



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