While Sen. John McCain was off touring the Middle East to emphasize his foreign policy experience, all hell was breaking loose back home on the economic front. The Federal Reserve frantically bailed out faltering giant Bear Stearns, then lowered interest rates again to rescue financial markets. McCain's timing and choice of issues were all wrong. While he might escape voter backlash for embracing President Bush's war policies, McCain risks losing the middle class if he continues to extol Bush's economic policies.
McCain used to be known as a fiscal conservative and deficit hawk who twice voted against President Bush's tax cuts. As the presumptive Republican presidential nominee, however, he did an about face and favors extending those tax cuts. Now he is getting squishy on deficit reduction.
The Arizona senator once opposed the Bush tax cuts because the benefits went mostly to the wealthy and the cuts were unaccompanied by spending reductions. He was right. That disastrous formula turned a $120-billion budget surplus into a $400-billion deficit.
Now, McCain says he not only wants to extend those tax cuts beyond their 2010 expiration date, he wants to cut the corporate tax rate from 35 percent to 25 percent. Those cuts would cost about $400-billion a year, and that's not counting another few billion in lost revenue from eliminating the alternative minimum tax, which McCain also promotes.
Won't that put more upward pressure on the deficit, and isn't that a bad thing? Yes on both counts. The economy eventually will stabilize, but the inflationary damage from burgeoning deficits could go on and on. McCain admits "no family, business or government in the world can spend more money than they take in without sooner or later paying a price for it."
He justifies such irresponsibility as necessary to stimulate the sluggish economy. His position makes little sense. Fed Chairman Ben Bernanke is already flooding the economy with easy money to try to stabilize the banking system and housing market. Some 130-million rebate checks should be arriving in the mail in May. The soonest any impact from the tax cuts would be felt is in 2010, and by then the economy could have changed direction.
Perhaps the most dishonest position McCain staked out is how he would balance tax cuts with reduced spending. His numbers are laughable. He would end congressional earmarks. While they are wasteful, they amount to only about $18-billion a year. He would eliminate some corporate tax breaks, saving perhaps another $45-billion a year. Together those are a small fraction of lost revenue from the tax cuts.
What about the cost of the wars in Iraq and Afghanistan? McCain favors fighting those out for however long it takes. At a current cost of $145-billion a year, that makes a mockery of his promised savings.
Everyone knows meaningful spending cuts will have to come from entitlements such as Social Security. McCain would reprise Bush's failed effort to replace some of the guaranteed retirement benefits with private investments, an effort that would likely add to the cost.
In short, McCain now sounds a lot like Bush on economic issues and just as clueless. He has time to clarify his position and explain why it wouldn't lead to similar results. If he doesn't, voters might wonder why they would want more of the same.