John McCain’s fantastical pledge on Monday to balance the budget by 2013 through massive tax cuts and unidentified budget reductions deserved the bad reviews it received. But the most unfortunate element of his incoherent promise is that it’s representative of his policy agenda these days. While the McCain campaign is trying to paint Barack Obama as a flip-flopper, the Arizona Republican is making diametrically opposed policy promises to different audiences at the same time. The contradictions are often in the details, but their obscurity is evidence of the campaign’s cynicism.
Take McCain’s ambitious health care plan. It would give every family a $5,000 health insurance tax credit at a cost of $3.6 trillion, by his campaign’s own account. Despite its size, McCain aides have said, repeatedly, that McCain’s health care proposal has no net cost. That’s because it would tax workers’ health benefits, which the Joint Committee on Taxation agrees will raise $3.6 trillion (in its analysis of the Bush proposal that served as the model for McCain’s plan). Taxing health benefits solves the budget problem, but it creates another: It raises taxes on tens of millions of middle-class families, according to a Center for American Progress Action Fund report one of us co-authored.
Rather than face up to the difficult choice between higher deficits and more taxes, McCain advisors are attempting to have the best of both worlds. Jonathan Cohn noted “rumors” that McCain was actually subjecting health benefits to income taxes but not to payroll taxes--a policy that would help middle-class families but explode the deficit. And the McCain campaign told Daily Tax Report that "health benefits would only be subject to income taxes, not payroll taxes."
This makes no sense. The campaign’s own $3.6 trillion figure is based on both income and payroll taxes. To say the plan cuts taxes by $3.6 trillion, has no budget cost, and doesn’t raise payroll taxes is sort of like saying that Cindy McCain’s passion fruit mousse recipe has no fat, burns calories, and eliminates male pattern baldness: It’s impossible.
You see the same kind of doublespeak with tax policy. In June, the respected Tax Policy Center tallied up the cost of McCain’s plans. The Tax Policy Center’s report was based in part on conversations with McCain aides. It has since been cited in dozens of media reports. Yet the report’s clarifications essentially rewrite the tax policies that McCain has publicly espoused.
For example, McCain has publicly promised to “abolish” and “phase-out” the Alternative Minimum Tax, the separate tax system that falls on about 4 million high-income taxpayers each year. His web site still says he will “permanently repeal” it.
But the Center, apparently based on the details provided by McCain aides, concluded that the Arizona senator “does not plan to repeal the individual AMT” but only to exempt more families from it. As David Leonhardt of The New York Times has pointed out, this will take more upper-income families off the AMT, but it is simply not a repeal.
That’s not all. McCain proposes an enormous expansion of corporations’ ability to write off their purchases--an expansion so large that a campaign position paper calls a $1.2 trillion tax cut suggested in a Bush Treasury report “modest” by comparison. But the Center says that McCain will limit the proposal to a narrow class of investments and sunset the proposal after five years--even though McCain himself regularly says on the stump that letting the Bush tax cuts expire would be akin to a tax increase. With the Center’s limitations, the proposal becomes practically a footnote, not the game-changer McCain has suggested, costing just $18 billion over a decade.
The Center also reported that McCain would repeal a tax break for goods manufactured in the United States. Such a proposal would meet intense opposition from manufacturers in many swing states. The McCain campaign hasn’t mentioned it anywhere.
All three differences suggest that McCain would be more judicious in cutting taxes than he has pledged. That is, of course, exactly the message that the McCain campaign wanted to send the Center’s sober budget experts. But the campaign continues to describe its tax cuts in sweeping terms to voters.
It’s the same pattern on other issues as well. In March, McCain said to The Wall Street Journal that he supports “private savings accounts ... along the lines President Bush proposed,” letting workers divert some of their Social Security contributions into accounts. But McCain’s website says he supports more personal accounts only as a “supplement” to Social Security.
This is not a small difference. It was the crux of the massive fight over Social Security privatization three years ago. McCain told the Journal he would fix the website. Four months later, he hasn’t.
On education, McCain education advisor Lisa Graham Keegan in June said that McCain believes the No Child Left Behind Act is adequately funded. But a week later, McCain policy director Douglas Holtz-Eakin and his senior advisor Carly Fiorina told a group of reporters they would “fully fund” the law. This expensive pledge--about $15 billion a year--puts McCain in the odd position of simultaneously criticizing Bush for spending too much and then wanting more spending on a signature Bush initiative.
What is happening here? One explanation could be a disorganized campaign. Maybe McCain’s aides never bothered to hammer down answers to these questions, forcing them to make up responses haphazardly, resulting in missteps. But it sells short Holtz-Eakin--a former Congressional Budget Office director and a respected expert on taxes and health care--to presume that he failed to consider some of the central questions of domestic policy.
The larger problem is the contradictory ambitions of the McCain campaign. The candidate wants to stand for “leadership, courage, and choices.” Yet he also want to be both a supply-sider and a deficit-hawk. He wants to transform our health care system and Social Security without adding any money to either and without anybody getting hurt. He wants to be a tightwad on spending who doesn’t cut any spending anybody cares about. These are impossible policies to explain, because the policies themselves are impossible. No wonder he ends up talking out of both sides of his mouth.
Robert Gordon and James Kvaal are senior fellows at the Center for American Progress Action Fund.