The excellent New York Times economics reporter David Leonhardt has a profile of Douglas Holtz-Eakin, John McCain's top economic adviser, in today's newspaper that omits one very relevant fact.
Leonhardt's piece makes two important points. First, under Holtz-Eakin, the non-partisan Congressional Budget Office started engaging in "dynamic" analysis of tax cuts but found that "any new revenue that tax cuts brought in paled in comparison with their cost... As Mr. Holtz-Eakin told Congress in 2003, a dynamic analysis of the White House’s tax and spending proposals made essentially no difference." In other words, the supply-side claim that tax cuts increase revenue is false.
Second, McCain's tax and budget plans (like those of George W. Bush in 2000) do not add up. Leonhardt notes that he "spoke over the past week with several other economists who admire Mr. McCain and have advised him over the years. None would defend his current fiscal package (or be quoted)." According to Leonhardt, Holtz-Eakin's (weak) defense is that "people are making is treating the McCain platform as if it were a finished piece of work. 'It’s April,' he said. 'We have until November.'"
But Leonhardt never forces Holtz-Eakin to address the other elephant in the room -- John McCain's repeated statements that tax cuts increase revenue, which directly contradict Holtz-Eakin's findings as head of the CBO:
"[H]istory shows every time you have cut capital gains taxes, revenues have increased, going back to Jack Kennedy" (4/20/08).
"Don’t listen to this siren song about cutting taxes. Every time in history we have raised taxes it has cut revenues" (1/17/08).
"I would suggest that most economists agree that there was an increase in revenues... associated with the tax cuts" (12/5/07).
"Tax cuts—tax cuts increase revenues. The tax cuts, the revenues increased because of it. The spending outpaced the tax cuts" (11/27/07).
"Tax cuts, starting with Kennedy, as we all know, increase revenues. So what’s the argument for increasing taxes? If you get the opposite effect out of tax cuts?" (3/5/07).
This contradiction seems especially newsworthy since the current administration has made numerous statements that have been contradicted by their own economists.
Weirdly, as Media Matters pointed out at the time, the usually reliable McClatchy Newspapers made the same mistake in a McCain profile that claimed the GOP presidential candidate "listens to tax-cutters on both sides" of the supply-side debate. Do reporters know what McCain has said? Or are they ignoring his statements because they conflict with his (phony) "straight talk" persona?
Update 4/23 12:21 PM -- It turns out that Leonhardt did ask Holtz-Eakin about one of McCain's previous statements in a story published on January 9:
Mr. Greenspan provided crucial political cover to the 2003 tax cut, only to turn around and criticize it in his recent memoir. Mr. McCain went the other way, first criticizing that tax cut as fiscally irresponsible and later claiming on several occasions that tax cuts reduced deficits. “Tax cuts increase revenues,” he told Charlie Rose in November.
I asked Doug Holtz-Eakin, a former director of the Congressional Budget Office who is Mr. McCain’s top economic adviser, about these comments, and he said that Mr. McCain had misspoken. Mr. Holtz-Eakin then called Mr. McCain on the campaign trail and later gave me this statement from him: “Tax cuts don’t pay for themselves, but pro-growth tax cuts — especially along with spending restraint — spur the economy, which raises incomes, and offsets the revenue loss.”
At this point, however, Holtz-Eakin's explanation is inoperative. The long list of statements above -- including two made after Leonhardt's article -- suggest that McCain is not misspeaking.
IMHO a majority of voters are primarliy interested in whether their taxes will go up or down, rather than the accuracy of the underlying theory. I think McCain will benefit by running on a platform of tax decrease, or, at least, no increase.
Posted by: David | April 23, 2008 at 01:39 PM