McCain Offers the Best Economic Stimulus Package
By Dr. Merrill Matthews, resident scholar with the Institute for Policy Innovation
There are at least three necessary ingredients for jumpstarting a faltering economy. John McCain embraces all three; Barack Obama shuns them. It's just that simple.
Free Trade -- Economist Milton Friedman once said that of all the pro-growth policies a government should adopt, free trade is the most important. Former Federal Reserve Bank Chairman Alan Greenspan has said that taxing trade between countries makes no more economic sense than taxing trade between states.
McCain aggressively pushes free trade agreements. Obama, especially since pandering to the union vote in the Ohio and Pennsylvania primaries, talks like a protectionist and even opposes the Colombia Free Trade Agreement.
Low, simplified taxes -- McCain maintains the current tax rates on income, capital gains and dividends and cuts the corporate tax rate. Obama proposes numerous "tax cuts," many of which are nothing more than income transfers to people who don’t pay taxes. He would complicate the tax code and, because he's targeting the cuts, he gets to pick the economic winners and losers.
Reduced government spending and regulations -- According to the National Taxpayers Union Foundation, during the first session of the 110th Congress:
* McCain sponsored or cosponsored 22 bills, which would have increased federal spending by $8 billion annually.
* Obama sponsored or cosponsored 114 bills, increasing federal spending $75 billion annually.
That's a little more than $9 of government spending for Obama for every $1 for McCain.
While McCain has also suggested some troubling programs (like buying up home mortgages), his basic economic plan would be the best "economic stimulus package" the country could get.
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Hi, I agree that McCain is best for the economy. Here is an odd thought, which I think is proving itself out. We seem to have a circular cause/affect going on. The public moved towards Obama when the economy crashed, but investers may have lost even more faith at the idea that Obama would win the election, causing stocks to plummet more- even after the stimulus package.
If the economy can stabilize prior to election, polls may switch to McCain, making stocks further ralley with the hopes that he is elected.
Along this note: Since Osama Bin Laddin appears to WANT McCain to win, one must wonder if it is for the stated reasons (that we will continue the war). I believe that his endorsement may be under false pretenses. With our economy down, oil prices drop, his world-class donor sources may be drying up. The truth seems to be that our financial woes actually paralyze him worse than they paralyze us. Without US money, the Middle East dries up economically. I think his real motive for backing McCain is multi-fold. He wants us to keep chasing him, sure. Because he loves to hate us. But he also knows that if we falter financially, it will be harder to garner support to devastate us further, because we are bringing down the rest of the world economies. Oil money requires our success, as odd as that is. I think Osama needs a healthy America to fund his hatred. He may be making his endorsement sound more political than it is. I believe it stems from fundamental economic need. When we have resources- he has resources. Even if he likes Obama better than McCain, I believe he is as afraid of an Obama presidency as much as many Americans are.
I hope you are not picking economic policies based on wide fluctuations on Wall St. The market is volatile and is not capable of reasoning about such a thing. I'm glad that investors are not the only people allowed to vote in the upcoming election.
I'm not saying this should even be solely about economics. I was merely noting that the stocks appear to go up when McCain becomes more likely to win. I think the tax and policy outlook with the likely candidate affects the stock market. (since stocks give us a forward view due to analysts expectations). Would you invest seeking huge capital gains if you thought someone was headed to the white house who wanted to take those gains and give them to someone else?
Actually, stocks, economy and taxes shouldn't rule the discussion (though I think McCain wins on all counts. I don't even think external terrorism should be the determining factor- though I can't believe I am saying this. Sadly, like being at the bottom of Moslow's hierachy of human needs- I am worried about security from within our government. I never thought I would see the day when I was afraid a certain candidate would win. We are learning more and more about Obama and his alliances and passions. He is the Trojan Horse, and we are electing him... a man who wouldn't even get the security clearance to clean the restrooms in the capital. It saddens me that this Marxist, militant, black-liberation following, Nation of Islam befriending, terrorist paling man with no experience other than to run a campagn, is about to be our elected official.
No, I am more afraid of the enemy we are placing in charge of our great nation than the temporary condition of a recession. And we are willingly, and hypnotically giving him the keys. Not in any other generation...
First about capital gains: There are people who are rich enough that all their income comes from capital gains. Why should they get taxed at 15% when normal working Americans get taxed much higher? Consider that even a modest increase in that tax could have a huge payoff in terms of revenue to the government (because that segment of the population makes so much money).
Now about your tremendous fear of Barak Obama. He is not a Marxist - there is something very different between raising taxes (on only a small minority of people mind you) and Marxism. If taxes at our current level or less are the criteria for capitalism then we live in a socialist world (most of the developed world have higher taxes than we do) and the US itself has been socialist (consider how taxes have been dropping for the most part since the Great Depression).
Republican election strategy as of late has been to use fear as a way to change people's votes. Consider George Bush himself attacked McCain in the 2000 primary by saying Cindy McCain was a drug addict and that their daughter was the product of an illicit union. McCain has since called that campaign "well-fought" and hired the people that did that to them. This is what it sounds like when the Republican's are behind: a deafening scream of exaggerated and false claims of why we should be deathly afraid of the other guy.
You may disagree on policy, but Obama is not "the enemy". He's an American politician who, like John McCain, is trying to make the country better and is trying really hard to win.
I just don't know if we all share the same vision for our nation. Our enemies love him- that is quite an endoresement. His budget doesn't balance without taxing us all more. We are generally very much more prosperous than since the Great Depression- which is in large part due to the lower taxes. Obama was actually surprised that Welfare Reform worked- while the rest of us knew that the welfare mentality has sharply wounded the black community over the past 50 years. That was income re-distribution, and it didn't work. The puritans tried to have communal gardens, but when so many began to get lazy, they divied up the plots and said, "you can only eat what you grow". Suddenly, everyone became much more productive. Have you read Atlas Shrugged? People are taking that seriously now.
About capital gains... I am saving for retirement and social security is failing. Obama wants to tax me more? All this talk like, "the big, bad rich people" vs "everyday folks" strikes me as appaling similiar to the talk that stirs up unions (which rob us of jobs and bankrupt companies), and the communist talks early last century. See, if you deem that 95% of all people look to the rich with animosity (or that you can cause them to have that disgust), then Obama would be sure to win. He is promoting a sort of class-warfar, the new racism. (Though many in his camp are promoting racism, I pray he isn't actually that closed minded though he speaks for "retributive re-distributionary change". I guess equal opportunity isn't enough.
And now, the press is being silenced. This is a vision of what is to come. The paper that isn't allowed to reveal the tape... A Florida paper who questioned Biden is being banned. The "Fairness Doctrine" that will kill conservative talk radio is going to be revived. The fact that Ayers worked with curriculum studies only confirms what we have seen happening in our schools for many years (the systematic political programing of our children).
You ask me to not fear, but these aren't actions that inspire trust. Obama presents himself as a polarizing force. Re-distributive change doesn't sound comforting unless you are on food stamps- and I don't think it is change we need.
Our enemies love him? Which enemies? How can you tell?
As far as the budgets go, I agree that given the faltering economy, neither of the candidates is going to be able to fulfill all of his promises. To me that signals that some of them will be dropped or postponed, not that taxes will be raised on everyone.
I have read "Atlas Shrugged". It is true that Entrepreneurs and business leaders are an important part of American society, but also so are workers. What we need is what Teddy Roosevelt, the great Republican president argued for: "A square deal". Cutting taxes is not the solution to all of our problems. Without cutting spending (witness last 8 years) you get giant debts which will only lead to more taxes down the road. And by all means, we can cut spending, but I think we need a military, and I think we need a good public school system, and I wish we all had healthcare and some money for retirement. Without some services for people who are poor, America becomes the land of opportunity for people with money only.
About class warfare: how is cutting taxes proportionally more for the rich clearly ok, but rolling that back is class warfare? Warfare seems like a bit of a strong term for it. Also calling Obama a racist is ludicrous. The word 'racist' already has a meaning. You can't just change it and get to keep the feelings that people have about it.
Obama is not silencing the press. Liberals are not re-programming your children. Read their textbooks and if you have an objection, talk to your teachers about it and your kids.
Politicians have split our country into two camps, spread a lot of fear, enshrined some words as "good" and some as "bad". Lets just debate the ideas and do what we think is best.
And why isn't it being debated? It naturally penalizes those who spend more extravagently, though "penalize" isn't really as accurate as laying an relational tax burden so that those who spend more pay more. Paying debt, investing in jobs and commerce, donating to charities- all tax free. 23% sales tax with a rebate to all tax payers based on bringing them up to a minimum level would eliminate the complex tax system we have. Our very move toward the international accounting standards will make companies report greater earnings, and therefore pay higher taxes. When we do move toward those standards, it would be a great time to implement the Fair Tax. This will make American products more competitive here and abroad, will keep jobs in America, and will waiver the tax on investment. We desperately need to build equity in this nation, on personal as well as corporate and federal levels. And the fairest thing about it is that it has a built-in luxury tax. Spend more, pay more. There are no tax loopholes, you actually just have to pay more, unless you are frugal or poor. This country would amass great wealth and improve our standing in the world markets. What would you think of that? No more IRS.
It should be debated.
On the whole I don't like the name: fair is subjective. They should call it the Consumption Tax. Lets assume that they find the right level so its revenue-neutral (so we can debate how we tax separately from how much we tax). To me there are a couple of questions that need to be asked about any new tax plan. 1) who pays more and who pays less? 2) what are the incentives?
For #1) Assuming that they find the right level of prebate (not necessarily an easy thing to do), the poor are going to be all right. But the middle class will be taxed more and the upper class will be taxed less. This is because the less money you have, the higher the percentage of it you spend. Some people would say its fair for those who are better able to pay taxes to pay more of them.
As far as #2 goes) I like that there would be less incentive for companies to move out of the US. I also like that there would be more incentive for people to save, but the middle class's spending on goods is a big part of what drives our economy, discouraging them from spending could cause problems. Still our economy needs to shift toward production and exports.
So I guess I'd support it in some way, I guess I'd like to see our tax burden shifted from income toward consumption. Perhaps it could be done gradually. I wouldn't do away with estate taxes though.
By the way, this should be debated on another part of the site if there is one for this.
I appreciate that though you are obviously liberal, you are willing to discuss things. I am middle class, and would love the Fair Tax. I believe it is the cure that ails us. We would move toward a production economy verses a credit/service economy.
As for all that I stated about Obama, I keep finding more and more reason to passionately support McCain. In this election, it may boil down to one candidate being potentially much more dangerous than another candidate being super-fantastic. I am disappointed that nobody has discussed the Fair Tax- but McCain's tax plan at least keeps industry in the black. That is good for America.
I get that you are not enthused with McCain but are worried about Obama. Hopefully Obama will win and you will get to see that there was nothing to worry about just lower taxes, a way out of Iraq, a steady hand on the economy, health insurance for the uninsured. There's really not much "danger" in getting Obama -- after all there are some checks and balances in government and he has assembled a crack team of advisors. The issue of consumption taxes may come up when some of the dust settles from this sub-prime mortgage mess and hopefully we'll be on the same side of the issue.
But I am fundamentally a McCain voter. I am very conservative, but would have preferred Huckabee. But like Huckabee, I have the utmost respect for McCain and Palin, who has more experience than Obama. On every single issue, I am on the polar opposite side as Obama, so if you detected that he wasn't my first choice, it is because he is closer to Obama than I really like. So, Obama found out that welfare didn't work, maybe he will be able to watch our recovery in the hands of a Republican. :) Pleasure to talk to you. Have a great weekend!
I'm not sure what the fair tax is, but from your description I think you are describing a consumption tax. There is one giant problem I have with the consumption tax, it's regressive meaning that lower income people will pay a higher percentage of their income in taxes than the wealthy. This is due to the fact that lower income people, including the middle class, spend almost their entire paycheck where as the more wealthy don't.
Here's what makes that so bad. Our government needs to generate a certain amount of revenue regardless of which tax system we use. If we switch to one that taxes lower income people at a higher percentage than the wealthy then all of us that aren't wealthy will have to see a major increase in our taxes in order for the government to generate the same amount of revenue as they do today.
A consumption tax is really a trick to reduce taxes on the wealthy and greatly increase them for the rest of us.
That is why there is a rebate check that goes to all tax players, to neutralize the tax up to a minimum spending level. The lower-class pays no tax. Middle and Upper income people can control their tax by controlling their spending. This has been tested with positive results around the world, and has been endorsed or approved as and equally viable system by all of the economic and accounting groups in the US. It does all the things that stimulate the economy.
can you link to some information on those claims. I don't know of any industrialized country that has done this.
It is regressive. The middle class will pay a higher percentage of their income than the wealthy. The tax burden will shift more to the middle class than it already is.
Keep in mind that the rich already have a heavy unjustified tax burden on them anyway:
http://www.rushlimbaugh.com/home/menu/ny_times_top_20__pay_80__of_taxes_.guest .html (this site uses non-biased sources, so no need to attack this one)
http://www.ncpa.org/sub/dpd/index.php?Article_ID=13984
http://wealthisgood.blogspot.com/2008/08/taxes-rich-pay-more-than-fair-share.html
http://www.american.com/archive/2007/november-december-magazine-contents/guess-who-really-pays-the-taxes
A system in which the top 1% of earners shovel over a trillion a year in tax revenue (over a third of the total income for the Govt.) is definitely something that needs improvement, and there is no point in my opinion for there to even be any rebates to the middle class.
But since people such as yourself tend to complain about rich and taxes anyways, the Fair Tax folks planned ahead:
http://www.fairtax.org/site/PageServer?pagename=about_fairtax_four #regressive
Here it is, but fixed:
http://www.rushlimbaugh.com/home/menu/ny_times_top_20__pay_80__of_taxes_.guest .html
You are right, I researched and found that consumption taxes are only part of the mix in most countries. But they have problems with their tax programs and are all seeking reform. Even a partial consumption tax (at the register, not value-added) would give us partial benefits of the Fair Tax- but I still believe in this innovative tax plan.
To answer what appears to be your primary objective, yes, if the middle class spends all of their money, they would proportionately pay a higher tax. But think it out. They would have a larger paycheck because of the no payroll taxes. The cost of goods would come down dramatically, because of the lack of corporate taxes, probably price-neutral after the consumption tax is applied. Then, they face the same dilemma they have now: spend or save. Our problem is that everyone feels entitled to big screen TV's, eating out often, Starbucks and Blackberries. I believe that there would be a built-in incentive to invest in a 401k- which will earn tax-free for a more secure future. They will choose to pay off credit cards rather than pay taxes and credit card fees on their never-ending purchasing binges. Now, sure, consumption will decrease (which is the point), and wouldn't that be bad for the economy? Well, cost of production will go down with less taxes, our goods will be more competitive abroad, and other nations' goods will be sold in America with the same tax burden as our own. This will promote a shift to buying American and selling abroad. Less consumption in general will help the environment. The rich who spend (Michael Jackson, for example), will pay much more. Rich who invest in this nation will merely be building the American equity base and investing in corporate growth, research (we might get that hydrogen car!), and jobs. But the best argument is that the middle class will be able to build wealth also- for the first time. There will be a push to invest, build, grow your future, and get ahead. Buying an extra house to grow equity and rent out tax-free would be good for our housing market, good for competitive rent rates, and good for the American investor. The middle class will be able to invest without a tax penalty, like the rich do now through tax evasive games. That will be a level playing field, and offer the fulfillment of the American dream.
And Obama doesn't add up on a balance sheet
If what you say is true wouldn't it mean that Bin Laden isn't a real threat to our nation. In fact, wouldn't it mean he is a friend of our nation? I.e. wanting us to succeed?
I'm guessing the opposite is true. He would gain far more power if he is seen as helping the demise of America. Remember that the Soviet empire came to an end largely due to spending enormous sums in a failed occupation in the afghanistan. I think Bin Laden is trying to get us to fall into the same trap, and a McCain presidency would make that likely.
Still, without finances generated by a healthy world economy (which apparently relies on a healthy US economy), he couldn't finance much of a world take-over never mind his world terror activities without US money spent on oil. It is just a suspicion, but yes, Osama is a threat. I don't have a clue as to his motives, but financial motivation is a possibility. Regardless, McCain is our best defense.
While McCain seems to be the winner on this one and is closer to a laissez faire ideal, he still intends to raise government spending instead of cutting back so in protest I will not vote in favor of him on this site.
Bob Barr/Wayne Root '08
With no government intervention we'd have little financial system (or jobs) left.
...Tell that to the former Soviet Union.
Between an economy dictated by government and one with no oversight.
One that allows for risk and rewards, but one not so volatile that the entire globe could get drawn into a depression.
Having a progressive income tax does not make America a socialist country, in fact progressive taxes were argued for by Adam Smith (the father of modern economics) and even John McCain isn't talking about getting rid of them. Obama is simply rolling back so of the tax cuts on higher income Americans while cutting taxes for lower and middle income Americans. That's not socialism.
"One that allows for risk and rewards, but one not so volatile that the entire globe could get drawn into a depression."
The free market had nothing to do with the depression; the feds screwed us over:
http://mises.org/rothbard/agd.pdf
"Having a progressive income tax does not make America a socialist country, in fact progressive taxes were argued for by Adam Smith (the father of modern economics) and even John McCain isn't talking about getting rid of them."
For economics I stick with what Friedman, Mises, Larry Elder, etc, aim for. The fact that McCain isn't talking about getting rid of them is why I feel a little sketchy in saying he has a better plan for the economy because it's still sub-standard.