McCain’s Backdoor Employment Tax Increase v. His Anti-Growth Fiscal Fiasco
Don Pedro lets loose what he really thinks about the supposed fair and balanced coverage of the fiscal policies of McCain v. Obama. I’ll let others judge whether his general commentary hits a home run or is just biased in favor of Obama, but two statements reflect precisely a couple of things I’ve been saying since I began blogging:
The only way he could make these promises add up would to largely dismantle Medicare and Social Security, while continuing to collect the payroll tax dedicated to the programs. It is inconceivable that Americans would stand for this.
Under George W. Bush, we have opened up a large and persistent General Fund deficit that is unsustainable unless it is subsidized by raiding the “lock box”. Bush’s supposed desire to save Social Security is in reality an attempt to drastically lower Social Security benefits without corresponding reductions in payroll “contributions”, which in reality is a backdoor employment tax increase designed to maintain the reductions in taxes on capital income. Some of the debate on the Social Security gets around to conceding this fundamental point, but much of it is designed to disguise what is really going on. But hey – bank robbers do not generally call in advance.
Don Pedro continues by suggesting this fiscal fraud will fail, which would mean McCain’s proposed fiscal policies will be even more of a long-run fiasco than those of Bush’s. He then adds this:
Let’s say we pretend that McCain didn’t promise to balance the budget–then his program would be if anything a net negative for growth over the long term. While some research suggests that lower taxes paired with lower spending promotes growth (although this depends on particular circumstances, etc.), there is NO evidence for the proposition that tax cuts financed by debt promote growth.
“Giving people their money back so they can consume more” as George W. Bush has suggested means less national savings, which crowds out investment. The Reagan fiscal expansion had this effect. The Bush43 fiscal expansion had this effect. Let’s not pretend that a McCain fiscal fiasco would be any different.