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Lots of attention on Fed Chairman Bernanke’s testimony today.  I don’t understand much about the mortgage market mess and how we’re trying to get out of it, because it’s more about financial vs. real economy stuff.  (Someone from the press tried to interview me about it yesterday before the AARP event, and I declined, admitting my ignorance.)

But I did understand the part where Chairman Bernanke explained that oil prices have risen because of good ol’ supply and demand:

…Our best judgment is that this surge in prices has been driven predominantly by strong growth in underlying demand and tight supply conditions in global oil markets.  Over the past several years, the world economy has expanded at its fastest pace in decades, leading to substantial increases in the demand for oil.  Moreover, growth has been concentrated in developing and emerging market economies, where energy consumption has been further stimulated by rapid industrialization and by government subsidies that hold down the price of energy faced by ultimate users.  

On the supply side, despite sharp increases in prices, the production of oil has risen only slightly in the past few years.  Much of the subdued supply response reflects inadequate investment and production shortfalls in politically volatile regions where large portions of the world’s oil reserves are located.  Additionally, many governments have been tightening their control over oil resources, impeding foreign investment and hindering efforts to boost capacity and production.  Finally, sustainable rates of production in some of the more secure and accessible oil fields, such as those in the North Sea, have been declining.  In view of these factors, estimates of long-term oil supplies have been marked down in recent months.  Long-dated oil futures prices have risen along with spot prices, suggesting that market participants also see oil supply conditions remaining tight for years to come.

The decline in the foreign exchange value of the dollar has also contributed somewhat to the increase in oil prices.  The precise size of this effect is difficult to ascertain, as the causal relationships between oil prices and the dollar are complex and run in both directions.  However, the price of oil has risen significantly in terms of all major currencies, suggesting that factors other than the dollar, notably shifts in the underlying global demand for and supply of oil, have been the principal drivers of the increase in prices.

Another concern that has been raised is that financial speculation has added markedly to upward pressures on oil prices.  Certainly, investor interest in oil and other commodities has increased substantially of late.  However, if financial speculation were pushing oil prices above the levels consistent with the fundamentals of supply and demand, we would expect inventories of crude oil and petroleum products to increase as supply rose and demand fell.  But in fact, available data on oil inventories show notable declines over the past year.  This is not to say that useful steps could not be taken to improve the transparency and functioning of futures markets, only that such steps are unlikely to substantially affect the prices of oil or other commodities in the longer term.

And I found it interesting that in response to Bernanke’s testimony, the price of oil dropped today by a (second-largest) record amount, as Bernanke hinted that consumers were actually (what?!) responding to higher gasoline prices by purchasing less of it!–a supply-demand type lesson which apparently was news to at least some of those financial speculators!

***UPDATE (Tuesday 4 pm):  Here’s the link to the video on C-SPAN.org.  I have no idea when it actually aired.  I’m sure I will cringe at a few of my words, but I’ll try to redeem myself with clarifying posts in the next few days.  AARP’s page with link to video and transcript is here.***

So, I’m speaking at an AARP lunch forum today, appearing with economic advisors from the two campaigns (Doug Holtz-Eakin for the McCain campaign, and Jeff Liebman for the Obama campaign), AARP’s policy director John Rother, and David Wessel of the Wall Street Journal. 

David plans to ask me how the candidates’ economic plans “add up” regarding the federal budget.  I plan to respond that that depends on how you define “add” as well as how you define “up.” 

I’m unable to “add” anything in a strict, quantitative sense, because I have not seen precise and definitive cost estimates of the candidates’ proposals–in fact, I haven’t seen much that would be considered a precise description of specific proposals.  In a qualitative, “sizing-up” sense, I’m looking at how the candidates’ plans seem to compare to both the official CBO (current-law) baseline, as well as a more “realistic” baseline of “current policy extended” (which can be derived from CBO estimates of the cost of policy alternatives not included in the official baseline/current law–table 1-5 in their budget outlook report).

And so how you define “up” matters a lot, because I think both candidates are explicitly (Obama) or implicitly (McCain) pitching a form of fiscal responsibility that starts from a “Bush policy extended” budget path.  That means that when the Obama campaign establishes a policy goal to “pay for” all their new initiatives, that means they’ll only not worsen the deficit relative to that “policy extended” baseline.  That’s very different from sticking to a strict pay-go rule that’s tied to the current-law baseline, because the current-law baseline gets us to budget balance at the end of a first term, but the policy-extended baseline gets us to a deficit of around 3% of GDP ($500-$600 billion in 2013).

But the McCain campaign is claiming something quite explicit and precise, saying that a McCain administration would balance the budget in four years.  Balance means zero unified deficit, so even if they’re thinking in “policy extended” pay-go terms, they’re really talking in “current law” pay-go terms.  When you pay attention to the list of new and extended tax cuts the McCain campaign is proposing, it seems like they couldn’t possibly land at much better than the policy-extended deficits of 3% of GDP–that by starting out at revenue levels even lower than the policy-extended baseline, they’ve got even more to make up on the spending side–amounts that seem far from realistic. 

The Washington Post wonders about this math, too, in today’s editorial.  (Here’s what the McCain campaign shared with them.)  I can’t wait to hear how Doug Holtz-Eakin explains it today.  Hopefully David Wessel won’t waste too much time asking me questions, because obviously I’m not the one with the answers–just more questions!

Will update you all later today on what we learned.

Just wanted to point out two new features on this website:

1. A search box, at bottom of left sidebar;
2. A “recent comments” log, around middle of left sidebar.

On those recent comments, please avoid the temptation to treat this blogsite like an IM board!  (This is a little (friendly) hint to some of those deeply engrossed in conversations about Social Security…. I feel as if I’m being baited into the conversation!  Maybe I should point out that at home I try to ignore my dogs at the backdoor if they’re pawing madly at the door, as I insist that they sit quietly and patiently before I’ll let them in…)

Oh, also, over the weekend my photographer (and “allowance trust fund”) daughter took a new photo of me, and developed it herself, and it’s now on the “about” page.  She is so darn talented! 

No deep philosophical discussion; just wanted to point out that in my print copy of the Washington Post, I’m looking at this column by Amity Shlaes in defense of Phil Gramm’s “mental recession” comment, which segues into this praise for Senator McCain’s fiscal responsibility (my emphasis added):

Social Security and Medicare also need rewriting — and Gramm put forth one of the better proposals on Social Security in the 1990s.

In short, to fix it all, we need a frank conversation about the economy. McCain, in fact, inaugurated one back in 2006 when he gave a speech that was downright Gramm-like at the Economic Club of New York.

In that speech, McCain said that on entitlements, hard choices were necessary. He concluded: “Any politician who tells you otherwise, Democrat or Republican, is lying.”

This was McCain at his best. Many voters knew it, too.

The way to strengthen the economy right now is to elect leaders who dare to talk about problems in precise and even technical terms — and then act on them. McCain has that capacity, but only if he can transcend Campaign Econ.

And just to the left, on the same page of my print edition, this cartoon by Boston Globe cartoonist Dan Wasserman appears:

Playing more catch up… I had this clarified to me (by Obama advisor Jason Furman) earlier this week, and it was also corrected in a Washington Post story:  the “donut” in Obama’s proposal to restructure Social Security taxes (lift the taxable maximum) isn’t really a symmetric “donut.”  From the corrected version of the Post story:

Under current law, income up to $102,000 a year is taxed for Social Security. Obama would create a “doughnut hole” by not imposing new Social Security taxes on income between $102,000 and $250,000. His aides said income exceeding $250,000 would be taxed at a rate of 2 percent to 4 percent, rather than the 6 percent tax that people pay toward Social Security on income below the $102,000 cutoff, which is matched by their employer’s paying a 6 percent tax. Employers would probably pay an additional tax, but the total tax paid by both employee and employer would not exceed 4 percent of the amount of income earned over $250,000. 

On the one hand, this avoids the 50% marginal tax rate problem, but on the other hand, this:  (i) makes the new structure less progressive in the $102,000 and up range (and more regressive comparing the above-$250,000 folks with the below-$102,000 folks), and (ii) raises less revenue, which is an important consideration when one is relying on the tax side of the Social Security system in one’s plans to close the long-term gap.  Tradeoffs, tradeoffs.

Just picture my original photo of the donut hole with the chocolate frosting scraped off one half!

…Well, sort of.  I just got back from his speech and town hall meeting in Fairfax, VA, on the topic of women and economic security. 

I brought daughter #2, the daughter of “allowance trust fund” fame:

We were sitting pretty far away; here’s the view from my seat:

…but he did speak about the deficit, and I was listening. 

He didn’t speak that much about it during the speech, which laid out lots of new spending with just quick mention that every new initiative is paid for under his plan (the pay-go relative to policy baseline position)…

And I was afraid it wouldn’t come up in the Q and A, until he took the very last question, and an African American woman introduced herself as someone who had grown up in southeast DC and yet had overcome her obstacles to get into Georgetown University.  Her question surprised me–she said, “My question is about national security.  What are we going to do about the federal debt?”  (And my daughter smiled at me, and inside I was saying “hooray, hooray” and was wondering if this woman had somehow seen the I.O.U.S.A. movie.)

Obama responded that the debt was indeed a mess of a problem and that George W. Bush had managed to almost double the debt and that it was obvious the Bush Administration has failed in the fiscal stewardship department.  He mentioned that the deficit this year was over $400 billion (and I heard people gasp). 

But then he said he had to be honest with everyone–that under an Obama Administration, the deficit probably wouldn’t be eliminated in a first term, and probably not even by the end of a second term.  (He contrasted this honesty with what Senator McCain is claiming he can do by cutting earmarks.)  The crowd grew very quiet.  My daughter remarked to me that the crowd’s disappointment seemed palpable, and I agreed.

But then Senator Obama tried to cheer us up, reiterating his commitment to being fiscally responsible, using the old saying that the first thing one ought to do when in a hole is stop digging.  He listed four ways an Obama Administration would achieve deficit reduction:

1. End the war.
2. Let the Bush tax cuts for the wealthy expire.
3. Cut waste, fraud, and abuse (improve efficiency in how government operates).
4. Engage in major reform of our health care system.

My quick analysis of this list?  Senator Obama is right that even with this list of good, fiscally-responsible things to do, it’s still not realistic to expect this to add up to a shrinking budget deficit–certainly not a disappearing one.  1 is hard to do quickly, and the savings are already implicit in the (current-law, CBO) baseline.  2 is not so hard, but again, the savings are already in the baseline.  3 should be easy, but is peanuts.  And 4 is super hard but of course is the big Kahuna, with huge potential to improve the long-term outlook, so we’ve got to try really hard to land on the brighter side of the uncertain forecast range.

I guess I should try to get myself to a McCain town hall meeting next, to be fair…

Brad DeLong speaks of “real fiscal responsibility” in his post on a new policy paper/statement put out by the Center on Budget and Policy Priorities (CBPP), onto which Brad is one of the fiscal policy experts who have signed.  The paper was designed as a counterpoint to a Brookings-Heritage paper, “Taking Back Our Fiscal Future” (TBOFF) released earlier this year, signed by another large group of fiscal policy experts, including Concord’s Bob Bixby.  Brad summarizes the CBPP group’s criticism of the Brookings-Heritage paper this way:

[T]he methods set forth in the Brookings/Heritage/Concord “Taking Back Our Fiscal Future” proposal strike us as misguided.

Specifically:

• TBOFF subjects Social Security, Medicare, and Medicaid to the threat of automatic cuts while giving a free pass to regressive open-ended tax-loophole and tax-break entitlements.
• TBOFF thus departs from the “shared sacrifice” approach that characterized the only successful budget deficit reduction efforts–those of 1990 and 1993.
• TBOFF does not focus adequate attention on the main driver of the forthcoming budget crisis: rising health care costs everywhere, not just in the public programs.
• Thus TBOFF’s attempts to restrain public health care spending growth without taking measures to alter the dynamics of the private health care markets are misguided.
• Thus TBOFF places a large share of the burden of adjustment on the poorer members of American society: it hits the weak claimants, rather than those who have weak claims on federal spending and on tax expenditures.
• Moreover, TBOFF’s strategy relies on automatic cuts–and [C]ongress has never in the past been willing to actually let the automatic cuts written into law take effect.

We believe that rather than spending time trying to design complicated budget procedures of dubious merit and effectiveness, we should focus on concrete legislative steps: policies that raise more revenue, increase economic growth, slow the rate of health care spending systemwide and nationwide, reform Medicare, and bring Social Security expenditures into balance with Social Security resources.

I very largely agree with the policy recommendations in the CBPP paper, and I believe anyone from the Concord Coalition could have signed onto the substance in that paper just as Bob signed onto TBOFF.  (Note that Concord often gets mistakenly lumped into the Brookings-Heritage mix because of our working with both groups via the Fiscal Wake-Up Tour.)  But I have these observations…

First, it’s a lot easier to arrive at a list of more specific policy solutions when: (i) the group involved thinks alike and is not very ideologically, politically diverse, and (ii) you use an effective majority rule criterion to determine the set of “group-endorsed” proposals (what the CBPP paper seems to describe) rather than the unanimous consent criterion (”least common denominator” approach) that I think TBOFF/Brookings-Heritage used.  The CBPP group is largely (entirely?) comprised of fiscal experts who lean Democratic/left, while the TBOFF group includes a much wider spectrum of experts, most notably, the very conservative Heritage Foundation.  Having participated in the meetings of the TBOFF group in its first year (when I worked for Brookings), and having worked with Heritage in other capacities, I know that Heritage analysts must stay true to their organization’s mission, which in their own words is “to formulate and promote conservative public policies.”  When it comes to promoting fiscal responsibility and working with Heritage, there’s always been a tension between the Fiscal Wake-Up Tour’s message that everything is on the table (the need to consider both spending restraint and revenue increases to address the long-term fiscal challenge), and the (mandated) resistance of the conservative members of the tour toward tax increases.  So moving to the “least common denominator” in terms of solutions will naturally mean that the group as a whole becomes a bit too silent on tax policy.  (Note:  Nowhere in the Brookings mission does it utter the word “liberal”, suggesting that the Brookings-Heritage partnerships are naturally going to fail to be as balanced as one might wish.) 

Second, I have been surprised that people have gotten so worked up about the TBOFF paper and in particular, have attached some sort of malicious intent to the budget process proposal.  I honestly think the process proposal was a lot more a ”fallback” position, the strongest policy recommendation the group as a whole could unanimously agree on.  I think you’d find many people in the TBOFF group who would agree with the specific proposals in the CBPP paper (I would have been one of them)–in fact, probably as many as those in the CBPP group who agree with the entirety of them (vs. just most of them). 

Obviously substantive reform to the entitlement and tax programs would be better than just budget process reform–the TBOFF (Brookings-Heritage) group would agree.  But getting to specifics is difficult in practice when you have to work across the aisle, and I think that’s the lesson we should take away in comparing the TBOFF paper with the CBPP paper.  If people come to the policy negotiation table with preconditions about what they cannot bring to the table (e.g., Heritage having trouble bringing the Bush tax cuts to the table), then the “bipartisanship” won’t produce anything of heavy substance–just something like TBOFF. 

That’s why I’m hoping that it’s not really true that Senator Obama and Senator McCain bring nothing in common to the Social Security reform table.  (Does Obama really rule out benefit cuts, while McCain rules out tax increases?  We have a problem here.)  Or if it is true that there’s nothing currently on the common table, I hope that that’s just for the campaign season (to make clear the truly divergent philosophies of the two candidates) and won’t be the case from their future positions in the White House and (back in) the Senate, when they get down to actually negotiating and legislating.

So really, real fiscal responsibility is hard to do… unless you’re a benevolent dictator.

The media are starting to paint a contrast between the Obama and McCain economic plans in terms of fiscal responsibility, pointing out that while “McCain promises to balance budget” (the headline of Mike Allen’s Politico article on Monday), “Obama won’t try for McCain’s budget goal” (the headline of Nedra Pickler’s AP analysis filed last night).

While deeper in, both articles express skepticism about Senator McCain’s ability to come through with said pledge, citing the Obama campaign as well as fiscal experts, it still seems that the opening lines and the first few paragraphs of each story–i.e., the most noticed parts–lean favorably toward Senator McCain, suggesting the winning (at least short-term) strategy with the press is to make a claim that sounds bold and impressive, even if it might ultimately be viewed as incredible. 

The Cliff Notes take-away as you skim the openings of both stories is of a stark choice:  A McCain Administration that would (make tough choices to) eliminate the budget deficit, versus an Obama Administration that would increase government spending (on “critical investments”).

The opening lines of the AP piece seem to almost bully Obama…

Barack Obama says John McCain’s plan to balance the budget doesn’t add up. Easy for him to say: It’s not a goal he’s even trying to reach.

Not only does Obama say he won’t eliminate the deficit in his first term, as McCain aims to do, he frankly says he’s not sure he’d bring it down at all in four years, considering his own spending plans.

“I do not make a promise that we can reduce it by 2013 because I think it is important for us to make some critical investments right now in America’s families,” Obama told reporters this week when asked if he’d match McCain’s pledge.

…and then goes on to suggest the stark choice voters face:

So what is more important in tough economic times? For the government to spend more to help hard-hit Americans or to eliminate a deficit that can lead to higher borrowing costs and slow the economy?

I find this contrast a bit misleading and unfair given that in reality, the Obama proposals for new SPENDING and new tax cuts aren’t necessarily more expensive than the McCain proposals for new spending and new TAX CUTS (and at this largely-theoretical point, could be even less expensive).  It’s just that the Obama campaign is acknowledging that it’s a mathematical impossibility to both increase government spending and reduce the deficit, while the McCain campaign is claiming it’s not a mathematical impossibility to both cut taxes and reduce the deficit.

(Sidenote that really could be another post:  By the way, acknowledging the difficulty in achieving these policy goals simultaneously doesn’t mean you have to abandon any of the goals.  The Obama campaign continues to emphasize fiscal responsibility as one of their economic policy principles, and they stress that they honor that goal with specific plans on how they’ll pay for each of their new initiatives–i.e., that they follow “pay go,” at least relative to a baseline of current policy extended.  As I’ve cautioned here before though, the definition of that baseline matters.)

As I said yesterday, just claiming you will eliminate the deficit, in four (or maybe eight?) years, doesn’t make you a deficit hawk.  But the bold claim might be enough to have you play a deficit hawk in the media.

Meanwhile, admitting you can’t live up to the other guy’s claim, well, it kind of makes you look like a fiscal wimp.

So unfortunately, fiscal honesty doesn’t seem to pay, not with the press at least.  We’ll have to see how it goes over with the voters.

Today’s New York Times poses this question in a nice article by Michael Cooper.  To which I say, isn’t it obvious?  I mean, have you been listening to him at the town hall meetings or being interviewed on CNN?  Or in the article itself, just pay attention to this McCain quote, which even seems milder than what he says lately:

[W]hen Mr. McCain first outlined his tax cut proposals shortly before the South Carolina primary in January, he highlighted his new enthusiasm for supply-side economics. “Don’t listen to this siren song about cutting taxes,” Mr. McCain said then. “Every time in history we have raised taxes it has cut revenues.”

But in the Cooper article, the best clue that McCain is indeed a “supply sider” now comes from this quote from Doug Holtz-Eakin, McCain’s economic advisor, that at least in my mind proves that even Doug, formerly known as the lonely deficit hawk among the rest of McCain’s advisors who are supply siders, is a supply sider now:

Deficit hawks believe that keeping the budget balanced will put downward pressure on interest rates, helping the economy. [I want to add that more importantly, we deficit hawks believe that reducing the deficit raises national saving and hence is good for longer-term economic growth.]  Many supply-siders believe that balancing the budget is a misguided goal, except to the extent that it shrinks government, which is a somewhat different goal. Supply-siders believe that lower taxes will spur economic growth, and that while lower taxes may lead to bigger deficits in the short term, they will eventually produce more revenue and lead to balanced budgets.

But one of Mr. McCain’s top economic advisers, Douglas Holtz-Eakin, who said on Monday that Mr. McCain’s “plan is to balance the budget by the end of his first term in 2013,” suggested that the two arguments are not incompatible. “You’ll never have successful deficit reduction,” he said, “without strong economic growth.”

Just because the McCain campaign says they plan to eliminate the deficit doesn’t make them deficit hawks, especially if the claim lacks credibility and is incompatible with the rest of their supply-side plans.  If Doug Holtz-Eakin sees any potential compatibility rather than incompatibility, his quote still reveals him to be (at least in his current incarnation) a supply sider more than a deficit hawk, through the causal relationship he describes:  strong economic growth reduces deficits.  How would I, a true “fiscal hawk,” put the compatibility differently?  This is what I would say:

“You’ll never have strong economic growth, without thoughtful deficit reduction” (EconomistMom says).

See the difference?

No time tonight to pour through the various media reports/blogs/interpretations of the McCain economic plan released today, but it doesn’t take long to go through the document itself (14 pages).  A few initial reactions, mostly from my fiscal-hawk perspective…

Even with the lack of specificity, it’s all too obvious that the plan offers far more ways of adding to the deficit than of trimming the deficit, in virtually every section of the report–including, most annoyingly, the fiscal responsibility section on pages 4-5.  Let me walk you through how I get to being so annoyed about that section…

First, there’s the gas tax holiday, proudly listed on page 2 with the validation of the press pointing out that they would have “immediate effect” and would “save motorists…taxes.”  (This reminds me of how the Bush Administration has repeatedly bragged about their tax cuts in the Economic Report of the President in terms of how much they have cost the Treasury, rather than what positive economic effects they’ve produced.)

Then there’s the “Lexington Project” (which unfortunately sounds like it could be related to the Concord Coalition, doesn’t it?…) for “energy independence” on pages 8-10, which is billed as a “comprehensive and integrated” strategy, yet instead seems to be a rather lopsided strategy of large subsidies to energy production and other subsidies (probably smaller) for consumption of cleaner technologies (i.e., policies that cost money), rather than a strategy based on policies that would discourage energy consumption (e.g., through a carbon tax that would raise revenue/reduce the deficit).

There’s the health care reform section on pages 11-12 that points out that “[w]ithin a decade, health spending will comprise twenty percent of our economy”–and yet offers no specifics and lists only vague options that sound largely focused on “waste, fraud, and abuse”-type savings, particularly in talking about the big programs of Medicare and Medicaid.  There’s one health policy mentioned that I think might actually be (or could be structured to be) a revenue raiser: the refundable tax credit for health insurance, on page 12–if it’s meant as a replacement to the current tax expenditure (the largest one in fact) for the exclusion of employer-provided health insurance.  (The McCain document doesn’t dare spell that out.) 

To me, the document doesn’t convince me that the McCain team has figured out how to “flat line” federal health spending as a share of GDP, which leads to my real peeve about the overall “plan” in terms of how it pitches its fiscal repsonsibility.  The most annoying passage is found in the so-called “Bi-partisan Fiscal Discipline” section on page 5 (my emphasis added):

Bi-partisan Fiscal Discipline: A McCain Administration will provide the leadership to achieve bipartisan spending restraint equivalent to that in the 1997 Balanced Budget Agreement between a GOP Congress and a Democratic President.

• In 1997, President Clinton and the GOP Congress agreed to balance the budget by restraining the growth in spending and cutting taxes over a ten-year period.
• With the same bipartisan effort today, with the federal budget that is now 70 percent larger, we could keep taxes low and still balance the budget by holding overall spending growth to 2.4 percent. Unlike Congress and the Executive branch in recent years, a McCain Administration will enforce the spending restraint to balance the budget and keep it balanced.
• A McCain Administration would perform a comprehensive review of all programs, projects and activities of the federal government, and then propose a plan to modernize, streamline, consolidate, reprioritize and, where needed, terminate individual programs. McCain could use the bi-partisan commission structure used for the Defense Base Realignment and Closure Commission (BRAC). Such a commission could be required to report to the President who would then submit the recommendations to the Congress for a straight up or down vote.
• A McCain Administration will review all special spending provisions to end subsidies to high-income individuals and corporations.

First, the Clinton Administration did not achieve fiscal discipline by restraining spending and “cutting taxes.”  The Clinton Administration made the tough choices (and earlier than 1997) to restrain spending and raise taxes in order to achieve meaningful deficit reduction through both the spending and revenues side of the budget. 

Second, how is it “bipartisan” to continue to take the hard line that all the fiscal restraint has to come from the spending side of the budget?  The basic budget math says that if you insist on keeping revenues as a share of GDP at its 40-year historical average (to “keep taxes low”), then “enforcing spending restraint” means you’re going to have to do even better than ”flat-lining” government spending as a share of GDP–and that’s with all that spending on health care we know we’ll be doing and have little clue about how to control.  (That 2.4% growth must be nominal?) 

(And by the way, a lot of the fiscal restraint achieved during the Clinton Administration can’t be repeated–we can’t end the cold war again, for example.  Plus, starting from the right policy foundation of fiscal discipline and the “virtuous cycle” that came from it, we also had at least a little good luck riding on some of that “irrational exuberance” that Greenspan used to talk about…  Again, not likely to be repeated.)

Third, in referring to those “special spending provisions” and “subsidies” to those high-income individuals and corporations, does the McCain team include tax expenditures–all the spending the federal government does through the tax side of the budget?  Somehow I doubt it, based on the language in the fiscal discipline section on “keeping taxes low,” and judging from the tax policy section of the plan (page 13) that doesn’t seem to include any plan to broaden the tax base but instead allows some tax rates to be kept Bush-Administration low and others to be made even lower.  In other words, the tax proposals don’t provide for revenue-neutral, efficiency-enhancing tax changes (the types of changes characteristic of fundamental tax reforms), only revenue-losing, deficit-increasing ones–i.e., a continuation of Bush Administration tax policy.

Yet curiously, nowhere in their economic document does the McCain campaign specifically mention ”permanent extension of the Bush tax cuts”–which we know to be a key part of their economic platform, at least as constantly explained to their “base,” if not spelled out to the general public here (wink wink).   Could it be that they don’t want to call attention to the fact that the “meat” of the McCain economic plan, when you get past the fluff (distractions?) of the waste, fraud, and abuse-type spending cuts (that don’t amount to “beans”), is really just continuing the Bush tax cuts?

There’s now a list of economists who endorse the McCain economic plan up on the Jobs for America website–including at least a couple whom I greatly respect.  I would love for any of them to explain to me how they believe this plan realistically, and wisely, would eliminate the budget deficit in four years, and how any of them who might be less than thrilled with the Bush Administration’s record on fiscal policy can read between the lines (and fluff) of this McCain plan and see anything substantially different.