Economy

John McCain

Barack Obama

*Translation

Earlier this month, McCain suspended his campaign, saying he would return to Washington to help push the $700 billion rescue package through Congress. During the second presidential debate, he said his administration would require that the secretary of the treasury “buy up” bad home mortgages then renegotiate with owners at the new, lower value. McCain says he will balance the federal budget by 2013. He would put all money "saved from victories in Iraq and Afghanistan" for reducing the deficit, and would put a one-year freeze on discretionary spending other than for defense and veterans. He would encourage globalization by engaging in "multilateral, regional and bilateral efforts to reduce barriers to trade, level the global playing field and build effective enforcement of global trading rules." He would reduce the corporate tax rate from 35 percent to 25 percent, allow one-year tax deductions for "technology and capital investments," and establish a permanent 10 percent tax credit for research and development costs to companies. Finally, McCain would institute a "summer tax holiday" on gasoline, which would suspend the 18.4-cent federal gas tax and the 24.4-cent diesel tax from Memorial Day to Labor Day.

Obama also supported the $700 billion bailout package and during the second presidential debate called for strong oversight of those companies’ spending. He also said his administration will work with states to create road and bridge projects to create jobs. Obama would enact a "windfall profits tax" on oil and gas companies and provide that money to families as a $1,000 "emergency energy rebate." He would also cut taxes by $1,000 for working families and $500 for individuals with his "Making Work Pay" program. The tax break would eliminate income taxes for 10 million families, according to Obama's campaign Web site. He would also eliminate the income tax for seniors who make less than $50,000 a year. Obama would provide $25 billion in federal funds to state assistance programs through a State Growth Fund and another $25 billion for infrastructure and schools maintenance and repairs. His administration would also encourage globalization of the economy by pressuring "the World Trade Organization to enforce trade agreements," end tax breaks for companies that relocate jobs overseas and provide tax credits to companies that keep their headquarters and jobs in America. Finally, Obama would re-institute "pay-as-you-go" limits on government spending, requiring new spending to be funded by cuts to other programs or new sources of revenue.

Both candidates have pointed to their health care and energy plans as being key to improving the economy. But the Tax Policy Center found in its projections that both candidates' tax plans would "substantially increase" the national debt over the next 10 years and that neither would "significantly increase" growth of the economy unless accompanied by spending cuts or tax increases. The center calculated that McCain’s plan would cut taxes by just more than $4 billion over the next 10 years, while Obama's plan would cut taxes by $2.9 trillion. Against President George W. Bush's push to extend the 2001 and 2003 tax cuts, McCain would lower revenue by $600 billion while Obama would raise revenue by $600 billion over the next decade. Still, McCain's spending would increase the national debt by $5 trillion and Obama’s by $3.5 trillion in 2018. The debt stands at $10 trillion. Under Obama's plan, middle-income Americans would see a 5 percent increase in income, or about $2,200 a year, by 2012. Those in the high-income bracket would see a 1.5 percent reduction in income, an average of $19,000 in increased taxes, in the same time period. In McCain's plan, income also would increase for middle-income workers, but by an average of 3 percent, or $1,400 per year. Earners in the top bracket would see their income increase by 9.5 percent under McCain, or $125,000. According to Factcheck.org, McCain's plan to buy up bad mortgages was already a component of the bailout package (see Title I, Sec. 109-110, pg 10-11), and something that Obama also supports. But McCain put a $300 billion price tag on his plan, which might require Congress to raise the borrowing limit set out in the bailout package. According to an article in the Wall Street Journal, the plan "carries big potential benefits for the troubled real-estate sector...(but) also could make winners out of investors -- including predatory mortgage lenders." Source: Tax Policy Center