McCain and Obama on the Deficit:Sure, That's the Ticket!

Instead of making snide remarks about the treatment of tax policy in the Presidential campaign, I could have spent my time at greater profit following the discourse over at Capital Gains and Games, where Pete Davis is weighing in with some helpful and apposite commentary. As a self-described deficict hawk, Davis isn’t going all hubba hubba over either candidate (link):

How much, if anything, would [Obama or McCain] do to lift the terrible $3.9 trillion of additional public debt that President Bush has incurred on behalf of our children?

Senator McCain is the champion of eliminating earmarks and curtailing government spending. However, eliminating earmarks and cutting non-defense discretionary spending, which has already declined from 5.2% of GDP in 1980 to 3.6% now, would have little impact on future deficits. McCain would continue the Iraq War well into the future at a cost of nearly $200 b. a year and would invest heavily in anti-missile defense. His proposal to expand private health insurance would do little to curtail runaway federal and private health care spending because it depends upon the development of a private health insurance market, as if we're pleased with how well health insurance works so far. Extending the Bush tax cuts and repealing the Alternative Minimum Tax would be twice as expensive as continuing the War by FY2012. McCain would lower the top corporate tax rate from 35% to 25% and expense all equipment investment to better compete around the world. He would also seek Senate and House rule changes to require a 3/5 majority to raise any taxes, which would further limit the ability to "pay for" tax cuts and entitlement increases. The deficit would rise sharply under McCain's policies. With rising interest rates around the corner, interest expense on the public debt would rise sharply as well. That's not a very pretty fiscal picture, but it's not necessarily any better under Senator Obama.

Senator Obama has an expensive tax cut for just about every voting block except for the rich. He has tax cuts for the poor, for middle class workers, and for the elderly with incomes under $50,000. He would extend most of the Bush tax cuts (the 10% bracket, $1,000 per child credit, and marriage penalty relief), as would most other Democrats. He would offset some of those costs by taxing the rich more heavily, raising the top marginal tax rate and repealing the Bush tax cuts for capital gains, dividends, and estates. He would also impose a truly massive Social Security payroll tax increase on those with incomes over $250,000 by lifting the income cap. These tax increases would have some negative effects upon the economy, as would his protectionist trade proposals. Obama would remove U.S. combat troops from Iraq within 16 months. Although that would have significant long-run savings, in the first two years or so, it would actually increase costs as the relocation costs were piled upon war costs that will be slow to decline. Meanwhile, he would increase the Army by 65,000 troops and the Marines by 27,000 troops. Obama's plan for mandatory health insurance for children and expansion for adults may be half as expensive as the war. Obama also proposes spending increases for infrastructure investment, green jobs and other job creation, fighting global disease, and increase veterans' benefits. Obama pledges to adhere to PAYGO, paying for new initiatives, but PAYGO often gets waived for "emergencies" and high priority appropriations for the War and for natural disasters. Here too, I would add additional interest expense on the public debt with higher deficits. The deficit would rise sharply under Obama's policies.

More wonkery in the same vein here. One possible source of solace: politicians, as Davis points out, rarely keep (or even remember) their promises.