Short-Term Costs of Long-Run Fiscal Stupidity
Final Sales vs. Production

Paul Krugman Likes McCain Fiscal Policy Even Less than I Do

Paul writes:

Bush Made Permanent: [T]he perception, eagerly propagated by Mr. McCain’s many admirers in the news media, [is] that he’s very different from Mr. Bush — a responsible guy, a straight talker. But is this perception at all true? During the 2000 campaign people said much the same thing about Mr. Bush; those of us who looked hard at his policy proposals, especially on taxes, saw the shape of things to come. And a look at what Mr. McCain says about taxes shows the same combination of irresponsibility and double-talk that, back in 2000, foreshadowed the character of the Bush administration.

The McCain tax plan contains three main elements.

First, Mr. McCain proposes making almost all of the Bush tax cuts, which are currently scheduled to expire at the end of 2010, permanent.... Second, he wants to eliminate the alternative minimum tax.... Third, he wants to sharply reduce tax rates on corporate profits.... [T]he overall effect of the McCain tax plan would be to reduce federal revenue by more than $5 trillion over 10 years. That’s a lot of revenue loss — enough to pose big problems for the government’s solvency....

[L]et’s look at what I found truly revealing: the McCain campaign’s response to the Tax Policy Center’s assessment... written by Douglas Holtz-Eakin, the former head of the Congressional Budget Office, criticizes the center for adopting “unrealistic Congressional budgeting conventions.” What’s that about? Well, Congress... [compares] the McCain plan with what would happen if the Bush tax cuts expired on schedule. Mr. Holtz-Eakin wants the McCain plan compared, instead, with “current policy” — which he says means maintaining tax rates at today’s levels. But here’s the thing: the reason the Bush tax cuts are set to expire is that the Bush administration engaged in a game of deception. It put an expiration date on the tax cuts, which it never intended to honor, as a way to hide those tax cuts’ true cost. The McCain campaign wants us to accept the success of that deception as a fact of life. Mr. Holtz-Eakin is saying, in effect, “We’re not engaged in any new irresponsibility — we’re just perpetuating the Bush administration’s irresponsibility. That doesn’t count.”

It’s the sort of fiscal double-talk that has been a Bush administration hallmark.... Mr. McCain’s budget talk simply doesn’t make sense. So what are Mr. McCain’s real intentions?... [T]he McCain tax plan... [is] a giant exercise in pandering — an attempt to mollify the G.O.P.’s right wing, and never mind if it makes any sense.

The impression that Mr. McCain’s tax talk is all about pandering is reinforced by his proposal for a summer gas tax holiday — a measure that would, in fact, do little to help consumers, although it would boost oil industry profits.

More and more, Mr. McCain sounds like a man who will say anything to become president.