McCain vs. Obama on The Economy

I don't think I'm breaking any news by claiming that the United States is either on the verge of a recession or deeply embedded inside one. Ian Welsh says that this could be a replay of the Japanese "Bright Depression," where a real-estate bubble's popping led to a long period of slow to no growth, and a virutal stasis in the financial system, with the rich getting richer and the poor remaining poor. This is the type of "soft landing" that people like John McCain's economic team would die for. They want to massively cut taxes on the super-wealthy, and when pressed, simply cannot explain how to avoid deficits given that tax imbalance.

SCARBOROUGH: You’re saying we can afford, just a yes or no, we can afford to extend George W. Bush’s tax cuts?

HOLTZ-EAKIN: Yes.

SCARBOROUGH: Ok. But in 2001, when Sen. McCain voted against George Bush’s tax cuts, he said we couldn’t afford it because it would create a deficit. In 2001, we had a 155 billion dollar surplus. This year, in 2008, when he now supports the tax cuts, as you know, we are moving towards a 300 billion dollar deficit. How can we afford tax cuts in 2008 with 300 billion dollar deficit that John McCain said we couldn’t afford in 2001 when we had 155 billion dollar surplus?

The reason Holtz-Eakin refused to explain how McCain would “balance the budget” while extending and enhancing the Bush tax cuts is simple: He can’t do it.

It's a cliche, but McCain really does represent more of the same. He'll continue to bail out those who can most afford the risk and leave those at the edges of society without a safety. To those without power or connections, McCain says let them have eBay, which is not the basis for a sound and responsible economy.

On the other hand, Barack Obama moves the debate back into the mainstream. He wants to renew American competitiveness through a variety of innovations and reforms, leveling the playing field for global trade, making massive investments in renewable energy. He's put education at the top of this agenda, and that's a refreshing change considering that it's focused on giving young people the opportunity to learn through tax credits and financial aid, instead of this treadmill of "measurement" and "accountability" that seeks only to turn our kids into robots more concerned with filling in a bubble than thinking independently. This all points to a new strategy for the global economy that has a different set of values than the failed conservative ideas of the past. But Obama needs to go further.

What America needs is a clear strategy to sustain its middle class in a global economy that has just integrated over 2 billion workers in China, India and the former Soviet Union. Neither the Bush administration nor Arizona Sen. John McCain shows any sign of having ever thought seriously about this fundamental challenge to U.S. security. McCain seems satisfied to prate about the benefits of free trade, and accuse Obama of believing America can't compete.

This week in Flint, Mich., Obama called for the U.S. to develop its own national economic strategy, and began by putting forth elements of a "competitiveness agenda" for the U.S. He vowed to raise taxes on the wealthy, capture some of the money now being squandered in Iraq, and invest in a concerted drive for energy independence, seeking leadership in the green industries of the future; in education and training, from pre-school to affordable college; in a world-class modern infrastructure from broadband to fast trains; in research and development to keep the U.S. the world leader in science and invention. While conservatives were grousing about "tax and spend," sensible observers might be more worried about whether his commitments were commensurate with the size of the challenge. ($10 billion a year in an investment bank for infrastructure won't build many bridges, much less seed modern transit.) [...]

How can America benefit from the expanded trade and opportunity of a global economy, while avoiding a race to the bottom that erodes the American middle class that is the pride and the foundation of our democracy? How do we balance our relationship with China, even while engaging that country to join in the effort to address global warming? These are far more fundamental challenges to our security than the threat posed by the scattered extremists of al Qaeda.

While McCain is simply out of touch, Obama has put forth essential elements of a different course. He's called for the U.S. to get serious about developing a national strategy for the new global economy. But that can't be done without a much more candid debate about the big gorilla in the room —China, whose communist governors are happily lending us the rope to hang ourselves with.

It's very clear that the McCain strategy on the economy is to lie about Obama's plans, using a willing media that doesn't know the difference when it comes to facts and figures to muddy the waters. McCain's minions will say, and the media will repeat, that that Obama wants to raise taxes on 21 million small businesses. In actuality, the number is less by a factor of 42, only those who make over $250,000. McCain's minions will say, and the media will repeat, that individual taxes will increase if you have an IRA or a 401(k). Retirement investment income are taxed at regular rates when distributed, not capital gains. That's the whole point of retirement accounts! McCain's minions will say, and the media will repeat, that Obama wants to raise payroll taxes on the middle class, neglecting the "donut hole" that ensures nothing will change for those making less than $250,000 a year.

They have to lie because they have no vision for the future. Obama may find that his vision is unsuited to the Herculean task. But I believe that, under his Administration, for the first time in eight years reality will be a factor in the decision-making.