When they got around to talking about the war in last night’s debate (transcript here courtesy of CNN), Senator McCain accused Senator Obama of not understanding “the difference between a tactic and a strategy.” It struck me that that’s a distinction voters should make when they listen to Senators McCain and Obama talking about economic policy. Both candidates often speak of their economic plans in a way that reflects campaign “tactics.” But what we really should be listening for are the candidates’ underlying economic philosophies–and notice how what they (tactically) say (during tactical moments like a debate) actually reveals a lot about the stark differences between their fundamental “economic strategies.”
First, I stand by my comments from a couple days ago about the McCain campaign needing an “extension” on their economics assignment, and how Sarah Palin’s interview with Katie Couric was just more proof that they are really struggling with the economic issues. (If my highlighting the interview was a “cheap shot,” then it was so cheap and easy that even conservative columnist Kathleen Parker couldn’t help taking it–and seeing the significance of it–as well, in the National Review, no less.) The “suspension” of the campaign and the call to delay the debate seemed a clear stalling tactic. It wasn’t just that we knew the debate would have to focus at least a little on the economic crisis at hand, it was that the economic crisis was a minute-to-minute reminder to the public that the “Bush economy” has not worked out so well for most of us–and that there’s really not much in the McCain campaign’s economic plans that sounds any different from Bush economic policy. Senator McCain didn’t have a good, substantive response to this reality, so his campaign needed to call a “time out.”
Senator McCain’s tactical response to the economic questions last night was to: (i) emphasize his low-tax, low-spending fiscal philosophy, going so far as to call for a “spending freeze” but not giving an inch on his tax cuts for the rich; and (ii) repeatedly point to his record as the non-“Miss Congeniality” and a “maverick” against wasteful spending, even reminding the public that he considers his VP pick to be a “maverick” as well, but (unfortunately for him) also reminding the public who he picked as his VP:
MCCAIN: It’s well-known that I have not been elected Miss Congeniality in the United States Senate nor with the administration. I have opposed the president on spending…I have a long record and the American people know me very well and that is independent and a maverick of the Senate and I’m happy to say that I’ve got a partner that’s a good maverick along with me now.
Here’s where Senator McCain explains how he’d modify his economic platform to adjust to the new demands of the financial rescue plan (emphasis added):
LEHRER: Are you — what priorities would you adjust, as president, Senator McCain, because of the — because of the financial bailout cost?
MCCAIN: Look, we, no matter what, we’ve got to cut spending. We have — as I said, we’ve let government get completely out of control.
Senator Obama has the most liberal voting record in the United States Senate. It’s hard to reach across the aisle from that far to the left.
The point — the point is — the point is, we need to examine every agency of government…
[went on about cutting wasteful spending in the defense budget...]
LEHRER: What I’m trying to get at this is this. Excuse me if I may, senator. Trying to get at that you all — one of you is going to be the president of the United States come January. At the — in the middle of a huge financial crisis that is yet to be resolved. And what I’m trying to get at is how this is going to affect you not in very specific — small ways but in major ways and the approach to take as to the presidency.
MCCAIN: How about a spending freeze on everything but defense, veteran affairs and entitlement programs.
LEHRER: Spending freeze?
MCCAIN: I think we ought to seriously consider with the exceptions the caring of veterans national defense and several other vital issues.
LEHRER: Would you go for that?
OBAMA: The problem with a spending freeze is you’re using a hatchet where you need a scalpel…
The other problem with that is that it sounds like McCain is exempting most of federal spending from that “freeze,” which would mean that he’d really have to cut, not just freeze, the spending he’s not exempting, just to pay for a mere fraction of the tax cuts for the rich that he’s not willing to admit could be considered lower-priority “spending” as well. And that spending that McCain would have to cut is exactly the type of spending that Senator Obama mentioned as critical last night, which was Obama’s “tactical” response to the questions about how the bailout would affect his new administration’s budget:
OBAMA: Well, there are a range of things that are probably going to have to be delayed. We don’t yet know what our tax revenues are going to be. The economy is slowing down, so it’s hard to anticipate right now what the budget is going to look like next year.
But there’s no doubt that we’re not going to be able to do everything that I think needs to be done. There are some things that I think have to be done.
We have to have energy independence, so I’ve put forward a plan to make sure that, in 10 years’ time, we have freed ourselves from dependence on Middle Eastern oil by increasing production at home, but most importantly by starting to invest in alternative energy, solar, wind, biodiesel, making sure that we’re developing the fuel-efficient cars of the future right here in the United States, in Ohio and Michigan, instead of Japan and South Korea.
We have to fix our health care system, which is putting an enormous burden on families. Just — a report just came out that the average deductible went up 30 percent on American families.
They are getting crushed, and many of them are going bankrupt as a consequence of health care. I’m meeting folks all over the country. We have to do that now, because it will actually make our businesses and our families better off.
The third thing we have to do is we’ve got to make sure that we’re competing in education. We’ve got to invest in science and technology. China had a space launch and a space walk. We’ve got to make sure that our children are keeping pace in math and in science.
And one of the things I think we have to do is make sure that college is affordable for every young person in America.
And I also think that we’re going to have to rebuild our infrastructure, which is falling behind, our roads, our bridges, but also broadband lines that reach into rural communities.
Also, making sure that we have a new electricity grid to get the alternative energy to population centers that are using them.
So there are some — some things that we’ve got to do structurally to make sure that we can compete in this global economy. We can’t shortchange those things. We’ve got to eliminate programs that don’t work, and we’ve got to make sure that the programs that we do have are more efficient and cost less.
Despite this being an (effective) Obama “tactic” to avoid talking about the pain of specific spending or tax cuts he’d have to give up upon confronting a tighter budget, I thought the Obama campaign’s underlying economic strategy was also clarified. While Senator McCain repeated his opinion that “the worst thing we could possibly do is to raise taxes on anybody”, Obama explained that there are ways to raise revenue that don’t involve raising tax rates:
OBAMA: …John mentioned the fact that business taxes on paper are high in this country, and he’s absolutely right. Here’s the problem: There are so many loopholes that have been written into the tax code, oftentimes with support of Senator McCain, that we actually see our businesses pay effectively one of the lowest tax rates in the world.
And what that means, then, is that there are people out there who are working every day, who are not getting a tax cut, and you want to give [the rich people who are getting the Bush tax cuts] more.
It’s not like you want to close the loopholes. You just want to add an additional tax cut over the loopholes. And that’s a problem…
Obama’s economic strategy clearly leans towards raising taxes on the rich over cutting spending, and last night he emphasized that his administration would undo a lot of the Bush Administration’s economic policies, which he feels reflects the Bush Administration’s misguided priorities:
OBAMA: There’s no doubt it will affect our budgets. There is no doubt about it. Not only — Even if we get all $700 billion back, let’s assume the markets recover, we’re holding assets long enough that eventually taxpayers get it back and that happened during the Great Depression when Roosevelt purchased a whole bunch of homes, over time, home values went back up and in fact government made a profit. If we’re lucky and do it right, that could potentially happen but in the short term there’s an outlay and we may not see that money for a while.
And because of the economy’s slowing down, I think we can also expect less tax revenue so there’s no doubt that as president I’m go doing have to make some tough decision.
The only point I want to make is this, that in order to make the tough decisions we have to know what our values are and who we’re fighting for and our priorities and if we are spending $300 billion on tax cuts for people who don’t need them and weren’t even asking for them, and we are leaving out health care which is crushing on people all across the country, then I think we have made a bad decision and I want to make sure we’re not shortchanging our long term priorities…
I just want to make this point, Jim. John, it’s been your president who you said you agreed with 90 percent of the time who presided over this increase in spending. This orgy of spending and enormous deficits you voted for almost all of his budgets. So to stand here and after eight years and say that you’re going to lead on controlling spending and, you know, balancing our tax cuts so that they help middle class families when over the last eight years that hasn’t happened I think just is, you know, kind of hard to swallow.
Because after all, McCain’s economic strategy–no matter how he may tactically put it–is overwhelmingly Bush economic policy extended.
In fact, with this week’s attempted “time out,” or swooping into the “rescue” of the financial rescue plan, the McCain campaign has only underscored their alliance to Bush Administration economic policy. McCain seemed sympathetic to the House Republican (Republican Study Committee) revolt against the negotiations that seemed close to coming together between the Administration and Congress. The House Republicans have been calling for a decrease in government involvement in the bailout, which they’re labeling as a concern for American taxpayers. What the House Republicans are really asking for is less, not more, government involvement and regulation, and more deficit-financed tax cuts for the rich–to help the private sector come up with the money to do more of the “bailout” itself (not that anyone thinks that they can even with more tax cuts). The Washington Post’s Steven Pearlstein sees right through this, of course, in his “Johnny One Note” column in today’s paper. “Johnny” refers to John Boehner, the House minority leader. But it could just as well be referring to John McCain’s current alliance to the same economic philosophy/strategy (emphasis added):
Minority Leader John Boehner and his crew have never met a problem they think couldn’t be solved by attracting private capital, and never met a dollar of private capital that couldn’t be lured with a tax cut. So it should have been no surprise that they would try to use the same approach to plug the trillion dollar hole that’s been blown in the American financial system.
That’s right, my fellow Americans, we can lick this financial crisis just by offering an additional capital gains tax break to any investor or hedge fund that agrees to invest in a bank or Wall Street investment house. It seems the prospect of forfeiting a mere 15 percent on their investment profits to the government is what’s discouraging investment in financial institutions, and not that mountain of bad loans and toxic securities that are weighing down their balance sheets. What exactly the optimal capital gains tax rate would be, Republicans aren’t saying. But my suspicion is that, if they could have their way, they’d bring it down to zero.
…What we witnessed this week was the last death rattle of the Republican old guard in Congress, whose zealotry for tax cutting and deregulation, and whose hostility toward any government involvement in the economy, has now brought the global financial system to the brink of a meltdown. The ideas that brought them to power in 1994, while useful at the time, have since become so corrupt that they now are bankrupt — intellectually, politically and morally. And though they may have succeeded in delaying passage for a day of a badly needed rescue for the financial system, they failed miserably in their ultimate goal of making themselves relevant again.
Let’s remember that McCain’s economic advisor, Doug Holtz-Eakin, warned us this summer that McCain’s economic philosophy of (extremely) small government would ultimately prevail–that the folks who might be “horrified” by the drastic cuts in spending implied by a balanced budget goal coupled with trillions of dollars of tax cuts for the rich “better get ready.” This is the McCain economic strategy that went largely undisguised by the tactical remarks he made at last night’s debate.