The Peculiar Economics and Republicanism It's Economics, Stupid!
of John McCain
At this writing, as we approach mid February and the Republican nominating process
for President in 2000 is shifting into second gear, what seemed a walk for Texas
Governor George W. Bush seems to be turning into a horse race between him and
Arizona Senator John Mc Cain. Steve Forbes, making only a respectable showing
in all the contests thus far dropped out of the race today, Feb 8, after spending some
$ 66 million, much of it his own, leaving it pretty much a
two man race from this point on. In the upcoming primary in
South Carolina, polls show the two men close. And
Michigan is another big prize just on the horizon only a week ahead.
McCain has been a bit strapped for money, but he will do better at raising it if he
continues to do well. Bush remains awash in campaign funds. But McCain has
had a tremendous boost from the major media, whose 'notice' of his campaign
has more than equalized the deficit he has held to Bush in campaign money.
The Arizona Senator has also won support of a substantive number of Democrat
voters in the contests so far, which has helped him in his surge.
It is no curiousity as to why more liberal political forces have gotten behind McCain.
There has been speculation that some of this support may stem from a belief on
the part of these elements that he represents a less formidable adversary for
whomever the Democrats select -- at this juncture, the momentum seems all
in Al Gore's favor. Whatever validity there may be in such cynical commentary,
(and the ability to win such support may be a barometer of a candidate's potential
-- after all, there were the Reagan Democrats) there is a
bigger reason for McCain to garner liberal support, beyond
his hero status from being a POW in Vietnam who would not
buckle in to the North Vietnamese. On a number of very
important issues, he acts and sounds more like a Democrat,
ranging from so-called campaign finance reform to taxes.
On social issues, he hedges enough to be acceptable to voters
and politicos who otherwise won't stomach more 'conservative'
positions in these areas.
In his commercials for the Michigan primary, he has been echoing the curious
economics he has been spouting since he began running. It demonstrates a
clear failure to understand the economics behind these issues.
On Tax Cuts for the Rich
Four years ago, McCain was adamant in opposition to Steve
Forbes. There was more than a tinge of class envy in his
rhetoric about Forbes' wealth. His portrayal
of Mr. Forbes was childish, but the larger concern is his entire attitude toward
wealth. He is saying that government needs to provide tax relief for the middle
class, and that is commendable, but he does in by playing them against the
wealthy, or at least by playing on their envy of wealth. Condemning tax reductions
on the wealthy demonstrates his conceptual weaknesses in economics.
It ignores a great many points. When Reagan cut marginal tax rates on the
wealthy, they actually paid more taxes at the lower rates because the incentive
to create wealth led to such an explosion in wealth generation. Similarly, when
Clinton raised the highest marginal tax rates, they 'contributed' less than they
had at lower tax rates. Each time we have raised the capital gains tax, it has
reaped less revenue, while lowering it has always enhanced revenue collected
by government. And if they are paying less taxes, who is going to take up the
slack? The middle class McCain would have us believe he wants to bring tax
relief to will bear the burden.
Just as importantly, it is the social surplus of the profit of the wealthy elements
of society that provides the fuel of economic development and growth and new
economic activity. A middle class tax cut will aid in small measure in contributing
to social surplus, but it largely a demand side measure, while it is supply side
tax policies like increasing incentives to create wealth that generates the economy.
So what Senator McCain is seeking is a decapitation of economic development.
It is no wonder he is the darling of the liberal elites.
Paying Down the Debt
It is not McCain alone who demonstrates a poverty of philosophy in economics, of
course, but he certainly is impoverished about it. Talk of paying down the debt is
at the top of this ruse, but it delves deeper than that. The
debt is really not a problem, at least as it is portrayed. The total indebtedness of the government
in proportional terms has been declining and were the deficit held in check, it
would continue to do so. But in the context of such discussion, we invariably
hear such folly as there cannot be tax cuts unless we pay for them first by
cutting spending. That does not mean that we should not seek to restrain or
roll back government spending. There is a problem in the mix though. Cutting
tax burdens, particularly at the top marginal levels, stimulates economic activity
and more revenue collection. What is the necessity of paying for a tax cut that
is going to give the government more money?
Yes, it sounds like 'trickle down' economics. And it is. The difficulty is that
trickle down economics not only works, but that it is more like surge economics.
There is an infusion, not a trickle. Indeed, the best way to stimulate jobs and
economic opportunity for lower income levels is to dramatically cut taxes on
upper incomes (other than generally reducing the share of capital pirated by
the public sector away from private sector activity).
It is not always clear that Texas Governor Bush understands this, but it is absolutely
clear that McCain does not (nor do either Gore or Bradley for that matter). McCain's
prescriptions are for slowing economic progress. He is not alone in the Republican
camp suffering from such delusion. Even heralded tax champion John Kasich suffers.
But that does not excuse it. And propagating it for votes is a populist blunder that
only aggravates the problem.
Surplus! What Surplus?
Let us set the record straight. There is no surplus. Period. But John McCain doesn't
appear to be aware of that fact. He wants to use it to shore up social security and
pay down the debt, but definitely not for tax cuts, especially
for the wealthy. That there appears to be a surplus is attributable to the fact
that social security and general operating budgets are
combined. It is the case that the supposed surplus
is social security trust fund and other similar money, but that is beside the point.
The Senator talks as if one really exists. He apparently just does not know any
better.
We have moved in the direction of a balanced budget, beginning with the Reagan
Presidency. Reagan's policies had led to a falling deficit by the late 80's and the
huge deficits of the early 80's came on the snow ball effect of the Great Society
and other malfeasance of the 60's and 70's.
The deficit grew again with the recession of 1990 and the S & L bailout, but it
began to close again after that, and especially on the work of the 104th and 105th
Congresses (no, it had nothing to do with Mr. Clinton, whose unsuccessful policy
initiatives would have sent it soaring again even with the social security surplus).
(see Surplus! What Surplus? and The Origins of the Structural Deficit in earlier
issues of ejps). Barring dramatic tax reform, such as marginal tax rate reductions
on upper income levels such as would occur with a flat tax, there will be another
burgeoning of the deficit when the baby boomers retire and social security goes
bankrupt in a decade or so.
(See The Second Deficit Wave on the Horizon in previous ejps)
Saving Social Security
But social security, which McCain has been saying he will save, is not going
to be preserved by current surpluses. One can only wonder what he has in mind
-- huge increases in social security taxes? Alternatives to the current system do
not seem to be within his vision or grasp. He has opposed proposals for
fundamentally overhauling the social security system as well. The rhetoric
of politicians, particularly during campaigns, is generally not very profound.
(See Preserving Our Investment in previous issue of ejps)
Campaign Finance Reform
Lobbyists and interests are portrayed as a plaque on both
houses, and on government in general. They can be that in
that often these interests pursue
private objections that would restrain economic development. McCain wants
to put an end to soft money. What he really is advocating though is a curtailing
of First Amendment freedoms by telling people that they cannot use their money
as they would politically.
It would be a boon for liberals, of course, because they by and large have a huge
source of soft money advocacy in the mainstream media. Ending soft money would
leave such voices unchallenged. But McCain seems less concerned about those
who would spend other people's money, such as labor unions. They are exempt
from his campaign finance reform. Is it any wonder that he is a darling of the liberal
elites?
The Second Amendment
But the Senator does not stop with stomping on the First Amendment. Largely
a noneconomic matter, he also has been among those who choose to ignore
the right to bear arms of the Second Amendment, as well. It puts him in select
company of those who see little constraint in the Constitution of Bill of Rights,
as on Lawrence Tribe or the Schlesinger Thesis.
McCain Strikes Out!
Whatever else McCain says he stands for, these strikes should
be more than enough to send him back to the dugout. And
they are enough to raise questions about other serious
issues that must be in the minds of voters in choosing a new
President, not the least of which is the choices he might make for judicial
appointments. One must also wonder just how 'Republican' a McCain administration
might turn out to be in terms of its makeup, as well. One of the arguments for
supporting a candidate of 'your' party when the nominee is not your choice is that
on such matters, the fact of your party being in power can assuage many such
fears.
The Arizona Republic, which is familiar with its Senator, has been very critical of
McCain's credentials on many of his watermark issues. And their commentary
has raised serious doubts about the integrity of the Senator in the context of a
campaign in which 'character' seems to be a dominant issue in voters' minds.
It is an issue that McCain's campaign has worked well in harping their candidate
to the voters, despite McCain's record of big-time campaign contributions from
those special interests.
To be successful in American politics, especially at the Presidential level, a party
must not be a closed circus. It must be the Big Tent of Jack Kemp and the
web of V.O. Key. But Reagan did not open the Republican umbrella to the sort
of economic folly coming out of the McCain camp. Quite to the contrary. More than
eight years of such flawed economic perspective has been checked in degree by
the arrival of a more responsible Congress, especially after 1994. But there are
longer term consequences of such politics and policy. And in time, the cows do
come home, the piper comes to collect.
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