McCainomics

When history so clearly refutes your economic doctrine, the intelligent response is to reassess your thinking. A case in point is the Democrats. Even though their policies were pretty successful during the 1990s, particularly compared to the recent Bush record, in the last few years leading Democratic thinkers realized that they could do better still. Precisely because the economy is heading in the direction of inequality--and because, absent other forces, the poor and middle-class will struggle--Democrats today are putting more emphasis on aggressive efforts to protect average Americans, even if that means meddling with the economy in ways they thought unwise a decade ago.

But Republicans have reacted differently. Instead of taking the last few years as a cue that maybe it's time to offer something besides more Bush-style tax cuts, they decided that what the country really needs is ... more Bush-style tax cuts! And McCain's agenda indicates that he agrees wholeheartedly. After extending Bush's tax reductions, which are set to expire in 2011, McCain would trim taxes on corporate income and estates. He's also proposed creating a new, parallel tax system into which any American could opt. While he's been a bit fuzzy on the details, it, too, would cut taxes disproportionately for wealthy Americans.

If all these proposals took effect, according to the independent and highly respected Tax Policy Center, 80 percent of the McCain tax cuts would go into the pockets of the richest quintile of Americans. They would see their after-tax incomes go up by an average of 6 percent. By contrast, somebody in the middle quintile would see his or her income rise by 1.4 percent while somebody in the poorest quintile would realize a yield of just 0.6 percent. To put these statistics in human terms, a multimillionaire--say, a wealthy landowner in Sedona, Arizona--would get enough money to buy a luxury car. (The top 1 percent of taxpayers would reap an average bonus of more than $100,000 per year under McCain's plan.) But a tool-and-die maker working for a Detroit auto supplier would get about $600, maybe enough to cover half a month's mortgage. Somebody in the lowest income quintile--say, a single waitress in rural Virginia--would, with her $65 windfall, get an extra trip or two to the grocery store.

But that's just half the story. Those tax cuts would cost money--a lot of money. McCain has, at times, invoked the thoroughly discredited supply-side argument that his tax cuts can help pay for themselves by generating more growth...

More here.