Email
Print
Steep road faces candidates when tackling economy issues
ADVERTISEMENT
Presidential issues series • Energy and fuel Interactive |
|
On the issues Net Worth Whether it’s John McCain or Barack Obama, the next occupant of the White House will be a millionaire. A look at the presidential candidates’ wealth, how they made their money, and how they’d benefit under their tax proposals. John McCain Net Worth*: Between $28-$45 million (eighth richest senator) Where His Money Comes From: Writing books, Navy pension, wife’s beer distribution company, Senate salary, investments. How Much He’d Save Under Barack Obama’s Tax Cut Proposal: $5,641 How Much He’d Save Under His Own Tax Cut Proposal $367,788 Barack Obama Net Worth: $456,012 to $1,142,000 (67th richest senator) Where his Money Comes From: Writing books, Senate salary, investments. How Much He’d Save Under His Own Tax Cut Proposal: $6,124 How Much He’d Save Under John McCain’s Tax Cut Proposal: $43,268 *Senate financial disclosure reports list a range for dollar value of assets, not exact number. Source: Center for Responsive Politics, Senate Financial Disclosure Reports, Center for American Progress. |
Published: August 1, 2008
The economy is setting records these days, but not the kind anyone wants to boast about.
Home values are in free fall, gas prices are near an all-time high and unemployment is rising sharply. Inflation is rising faster than it has in almost two decades, the dollar continues to weaken, and economic growth has slowed.
Whether it's John McCain or Barack Obama, the next president faces a difficult challenge in repairing the troubled economy.
Both candidates have laid out sharply different economic recovery plans, centered around tax cuts they say will help create new jobs by giving Americans more money to spend and invest. Some people will benefit far more under Obama's plan than McCain's, and vice versa.
Obama wants to make the tax system more progressive, reserving the largest cuts for those at the bottom and middle of the economic ladder, while raising taxes on the very rich.
McCain would make the tax system more regressive, favoring bigger cuts for the wealthy than the middle class and the poor.
Under Obama's plan, the top fifth of income earners – those making more than $112,000 a year – would see a tax hike of about two percent, according to an analysis by the Tax Policy Center, a non-partisan think tank. The very wealthy – the top 0.1 percent, earning more than $2.9 million per year – face the largest increase, about 11 percent.
The biggest cut – a 6 percent decrease – would go to the poorest workers, those making less than $20,000 a year. Everyone else, including the bulk of middle income workers, would get between a 2 and 4 percent cut.
A major goal of Obama's tax policy is to reduce rising rates of income inequality, following a decade in which the gap between the richest and poorest Americans grew substantially larger.
Though the economy grew during much of the Bush administration, Obama and other Democrats complain that most of the benefits went to the very wealthy.
"The failures of the economy, despite the fact that we grew for seven years, to provide rising levels of income and wages for the American people, I think, indicates the degree to which we've got to fundamentally shift how we approach economic policy," Obama said Sunday on NBC's Meet the Press.
Robert Reich, an Obama economic adviser who served as Secretary of Labor under President Clinton, calls Obama's plan a "bottom up" approach to recharging the economy tax cuts, sharply contrasting McCain's "top down" approach tax proposal.
Obama's advisers argue that giving bigger cuts to poorer people with more pressing financial needs will inject cash into the economy quickly, help it recover while reducing inequality.
"The Bush policies are not the sole cause of (the economic problems, but they have not helped," Reich said on a conference call with reporters this month. "More of the same. That's what John McCain is offering."
In contrast to Obama's plan, the overarching goal of McCain's tax cut package is to spur new investment by wealthier workers. Increasing investment in new businesses will help create jobs for lower and middle income workers, McCain's campaign argues, relying on a key tenant of trickle-down economic theory.
"John McCain's policy is all around creating jobs. That is the number one priority for the tax policy," said Meg Whitman, the former CEO of eBay who is now a top economic adviser for McCain, said on a conference call with reporters this week.
McCain's plan would make the tax system more regressive. It is in many ways a mirror image of Obama's, providing major tax reductions for the very rich, while providing tiny cuts for the poor.
The top fifth of income earners would see a 3 percent cut under McCain's plan, the Tax Policy Center study found. The super-rich, the top 0.1 percent, would get the biggest cut under McCain's plan, about 5 percent.
Everyone else will see their taxes fall by much smaller amounts – 1 percent or less for anyone making less than $66,000 per year. Under McCain's plan, every income group would see a reduction.
"The choice in this election is stark and simple. Senator Obama will raise your taxes. I won't," McCain said at a town hall meeting in Ohio this month.
McCain has also pledged to balance the federal budget by the end of his first term, a promise Obama has not also made. The deficit hit a record $389 billion this year, and is projected to grow even larger – to $490 billion – during the next president's first term.
"We must deal with these large fiscal imbalances or we will not be successful," said Douglas Holtz-Eakin, McCain's chief economic adviser.
Independent economists who have analyzed both plans fear that neither candidate will be able to pay for their tax proposals without vastly increasing the national deficit, a move that could further stall economic growth.
Economists argue over the impact of government red ink on the overall economy, but many maintain that increased borrowing creates a substantial drag on economic growth.
Whether McCain will actually be able to keep his pledge, though, is an open question, because his tax proposals would increase the national deficit by $5 trillion in lost revenue over the next decade, according to the Tax Policy Center analysis. Obama's would increase the debt during the same period by $3.4 trillion, the analysis found.
"If the tax cuts substantially raise the national debt, the increase in borrowing by the federal government could crowd out private investment and consumers' purchases of homes and durable goods, which could slow the economy," the study warned.
Help for Business
John McCain has called for a substantial cut in the tax rate paid by corporations, from 35 to 25 percent. Barack Obama has said he is open to an unspecified reduction of the corporate tax rate, if tax loopholes are also eliminated.
Both candidates want to boost research and development tax incentives for businesses, and have pledged to spur investment in alternative energy companies, which they both see as an important creator of new jobs in the coming years.
Social Security
Both candidates have pledged to address the financial challenges that the Baby Boomer retirement wave is expected to create for the Social Security system. Without changes, the system could create a drag on the economy over the next few decades.
Like President Bush, McCain wants to allow younger workers to invest in the stock market some of the money they pay into the system. Obama opposes the move, saying it would worsen the system's financial health.
To shore up the system, social security experts say Social Security payroll tax must be raised, benefits cut, or some combination of the two. Currently, only the first $102,000 is subject to the Social Security tax.
In addition to that levy, Obama says he would also tax the portion of a person's income above $250,000. McCain initially opposed increasing the payroll tax to shore up Social Security, but last week indicated that he was leaving that option "on the table."
Quiz
Email
Print
ADVERTISEMENT
Advertisement
