McCain’s Budget Would Create Largest Deficit In 25 Years, Largest Debt Since WWII
Sen. John McCain promises that, as president, he would “cut taxes and balance the budget.” But his current economic plan would create deficits as deep as 5.7% of GDP by the end of a two term presidency — the highest federal budget deficit in 25 years — and would accumulate the biggest debt since the second World War, according to a new analysis by the Center for American Progress Action Fund. McCain’s current fiscal plan would recklessly exacerbate the fiscal irresponsibility of the Bush Administration further by gutting revenues far below the average level of the past 25 years.
For the past 25 years, deficits have never been more severe than 5% of GDP, with surpluses as high as 2.4% of GDP in the year 2000. Under McCain, yearly deficits would increase sharply, beginning with $505 billion in FY2009 (3.4% of GDP) and skyrocket to $1.2 trillion (5.7% of GDP) by FY2017. In 2018 these deficits would reach 6% of GDP, tied with the largest deficits since WW2 in 1983. Current Bush policies would keep the deficit in 2017 to $660 billion (3.1% of GDP).
According to the study, McCain’s economic plan, (which includes a corporate tax cut, a full repeal of the AMT, and an extension of the Bush tax cuts) would leave a debt of $12.7 trillion (the highest since 1951 when America was still holding debt from WW2) by the last budget of a two term presidency starting in 2009 (FY2017). This debt is $3.5 trillion more severe than the one resulting from an extension of current Bush policy, which would leave a debt of $9.2 trillion (43% of projected GDP).
McCain would slash government revenues, which have averaged 18.3% of GDP for the past 25 years, to their lowest levels since before 1962. Revenues would average only 16.3 percent of GDP for the duration of his two terms. Under current Bush policy, revenues would remain above 18 percent of GDP.
This analysis currently incorporates the most generous possible savings McCain has offered thus far: an $18 billion cut of wasteful earmarks and a $15 billion “freeze” in wasteful spending, with the savings grown at the rate of GDP growth over his presidency. These “savings,” which come no where near paying for his reckless tax cuts, already include “heavy cuts in after-school programs, student aid, public broadcasting, and job training.” To fill the gaping remaining hole, McCain supporters have suggested policies that would lead to “massive cuts” in Social Security.
Read the full report.
Obama Ad Finally Draws Real Blood From McCain
Posted by: David Kiley on August 21
The Obama campaign finally put together a striking ad retort after weeks of allowing the McCain campaign to set the ad agenda and keep Obama on the defensive. McCain’s ad squad kicked it off in July with the now infamous Paris Hilton ad, which boxed Obama as a “celebrity,” and sought to make him look like a light-weight.
But Senator McCain handed the Obama campaign the equivalent of John Kerry’s “I voted for it before I voted against it” sound-bite four years ago.
Asked how many houses he and his wife owned by an interviewer, McCain couldn’t come up with the answer, and said his staff would have to get back to the reporter. Huh?
This is obvious red-meat to the Obama campaign, and too good to let go. The ad:
The effect of the ad is too make the first real cut at McCain exposing the Senator as a super-rich guy, not so much the brave POW. But it also works on a second level the Obama campaign had better be prepared to defend: reminding voters of Mccain’s almost 72 years. The whole ad and issue gives the Obama campaign Rovian deniability that it is exploiting McCain’s age and his habit of confusing facts and countries when he’s on the stump. But it’s there.
Obama’s ad efforts, though they have moved more pointed in their attacks on McCain in the last ten days, have simply not been as well executed as the McCain ads. This one, though, may start to change the scoreboard.
Not kowing how many houses you own is just the sort of event, like John Edwards’ expensive haircut, Kerry’s soundbite hell and Dan Quayle’s spelling shortcomings, which will hang around kitchen tables until November.
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New Budget Analysis Accepts Gaping Holes In McCain’s Figures
As we’ve known for quite some time, John McCain’s budget numbers just don’t add up.
A new analysis from the non-partisan New America Foundation’s U.S. Budget Watch should be read cautiously because it uncritically accepts many of John McCain campaign’s most egregious budget distortions.
Matthew Yglesias has already called out the $159 billion in “unspecified budget cuts” which the group allows McCain to claim. The Washington Post called these empty promises to slash spending McCain’s “voodoo economics, based more on wishful thinking than on hard data or carefully considered policy proposals.”
But that’s not the end of it.
U.S. Budget Watch also accepts that, in 2013:
–McCain’s tax cuts are as his adviser’s describe them, not how McCain describes them: An earlier study from the Tax Policy Center found a $2.8 trillion gap between McCain’s proposals as he describes them on the stump, and what his advisers tell analysts in private. In 2013, his plan as his stump speech would suggest costs $260 billion more than the plan as detailed by his advisers.
–McCain’s ‘high risk pools’ will only cost $8 billion: McCain’s campaign insist they will put money towards “high risk pools” to cover people with chronic conditions left out of McCain’s health care plan. Douglas Holtz-Eakin says the campaign might even spend $20 billion to fill the hole, but the Tax Policy Center says it would take at least $100 billion to adequately cover everyone who would need coverage.
–McCain will cut $35 billion in earmarks: Even the conservative Heritage Foundation acknowledges that there are only about $9 billion in earmarks that could be eliminated. Even John McCain acknowledges that if the process of earmarking were eliminated, many of the same programs would still be funded, only from other parts of the budget.
–McCain’s alternative tax system will be revenue neutral: U.S. Budget Watch does acknowledges that it’s possible that “because most taxpayers will choose the system in which they pay lower taxes, significant revenue would be lost.” What they don’t mention is that the Tax Policy Center has estimated the annual cost of such a system: $115 billion in 2013. (Note: This $115 billion is included in McCain’s “rhetoric gap” described above.)
These low-ball cost estimates for McCain’s tax-cuts and spending proposals suggest that even the $159 billion in “unspecified budget cuts” that McCain needs to balance the budget is far, far too optimistic. The real cuts needed would be much more devastating.
As the Tax Policy Center says, “the promises Senator McCain makes (or implies) in his speeches could not be sustained without a radical and unprecedented downsizing of government.”
McCain’s Proposed Cuts Insufficient To Pay For McCain’s Proposed Wars
Our guest bloggers are Lawrence Korb, Senior Fellow, and Laura Conley, Special Assistant for National Security and International Policy at the Center for American Progress Action Fund.
In his two terms in office, President Bush has managed to turn a budget surplus of $236 billion in 2000 into a projected deficit of $482 billion in 2009. Last month, Douglas Holtz-Eakin, senior economic adviser to Senator John McCain (R-AZ), submitted the presumptive Republican nominee’s budget proposal to the Washington Post editorial board. In it, McCain proposes to balance the federal budget by 2013, in part by curbing defense expenditures. While there is certainly a need to cut wasteful and unnecessary spending in the Pentagon budget, this proposal is a tepid effort at best.
Holtz-Eakin suggests that McCain will achieve $470 billion in savings in the entire federal budget in 2013. He proposes to save $150 billion by reducing deployments to Iraq and Afghanistan by as much as half and another $160 billion from “slower discretionary spending in non-defense and Pentagon procurements.” While he indicates that a number of defense procurements can be terminated, he specifies only three: the C-17 Globemaster, the Airborne Laser (ABL), and the Army’s Future Combat Systems (FCS). Unfortunately for McCain, these three programs provide nowhere near enough savings to meet his proposed $160 billion reduction.
- The C-17 Globemaster, which provides the U.S. military with intercontinental airlift capabilities, should be a target for budget cuts. The Department of Defense (DOD) noted in its FY2009 budget justification that “There are sufficient C-17s to support our nation’s military airlift requirements as determined by the 2005 Mobility Capabilities Study.” Despite continued efforts by politicians and members of the Air Force to continue C-17 production, the DOD requested only $935 million in funding for support and equipment for the planes in the FY2009 budget. There is currently no money allocated in the DODs’ regular budget for FY2010 – 2013 for new aircraft, so terminating the program would yield zero savings.
- The Airborne Laser (ABL) program offers an opportunity for genuine but minimal savings. The ABL is designed to give the U.S. military the capability to destroy ballistic missiles soon after launch using a plane-mounted laser system. In FY2008, the DOD projected $970 million in spending on this program for FY2013, plus $57 million in program support funding. Thus, if McCain terminated this program in 2013, he could expect to save slightly more than $1 billion.
- The Army’s Future Combat Systems (FCS) offers the greatest potential for budget savings. FCS consists of a group of fourteen high technology manned and unmanned vehicles and systems designed to support the transition of the army to a more flexible, easily deployable force. Although completion of the FCS could consume substantial funding in the long-term, terminating funding for the project in 2013 would yield $8.1 billion in savings. This includes about $6.8 billion in saved procurement costs and approximately $1.3 billion from research and development funding in FY2013.
McCain’s plan offers unrealistic expectations for the amount that could be saved from the ABL, Globemaster, and FCS. Together, the cancellation of these initiatives would net approximately $9.1 billion dollars in FY2013. If McCain hopes to cut $160 billion in government procurement, he will have to offer to cut many more and larger defense programs, such as the National Missile Defense Program or the Joint Strike Fighter, or make more than $150 billion in reductions in non-defense discretionary programs.
Also dubious is McCain’s proposal to save $150 billion through reduced deployments of U.S. forces in Iraq and Afghanistan. According to CBO projections, about $82 billion could be saved in FY2013 if the U.S. dropped the number of troops in both countries from 200,000 to 75,000 by FY2013. This represents slightly more than half of McCain’s target savings. However, the candidate’s own policies call into question his ability to deliver these cuts. As long as McCain refuses to commit to a timetable for the withdrawal of the 140,000 U.S. troops from Iraq, it is disingenuous for him or his advisers to project any savings, much less an unjustifiable $150 billion, from their safe return home, especially since he also wants to send at least 10,000 more troops to Afghanistan.
After years of budget deficits driven by poor economic choices and failed security policies in the Middle East, the presidential candidates must address seriously how they intend to deal with America’s growing budget deficits. McCain’s proposal barely scratches the surface.
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