Fanning the Flames: The Freedom Project Blog


Priming the Pump

By Shawn Healy
I wrote last Thursday about the stark contrast in approaches toward ending the war in Iraq between the two parties' presumptive nominees, Sens. John McCain and Barack Obama. I concluded that while Obama's positions are closer with a majority of the American electorate, McCain is more trusted in the realm of foreign policy. Reputable pollster Andrew Kohut sheds additional light on this distinction in his summary of current polling data. He also points to the fact that CNN seemingly illustrates every hour: the economy is now issue #1. The rift between McCain and Obama is every bit is wide on solutions to rescuing the U.S. economy from the brink of recession as the gulf on Iraq, and this post will tackle the respective plans of the two candidates, addressing both budgetary and tax plans in the overall context of articulated economic policies.

Obama begins with the presumption that the problem is stagnant wages coupled with higher prices, a phenomenon that arose in the 1970's and was labeled "stagflation." His chief culprit is the Bush tax cuts that he claims unfairly benefits the rich, while ignoring issues critical to the middle class: housing, health care and education, among others. His solution begins with targeted tax cuts to the tune of a $1,000 per family credit for "working families" (not qualified), helping to offset burdensome payroll taxes. He also offers simplified forms, with pre-generated figures provided by banks and employers. On the flip side of the coin, the balance of the Bush tax cuts will expire, meaning a tax increase for those making more than $250,000 per year, along with those who pay capital gains.

McCain, an initial opponent of the Bush tax cuts due to their budgetary implications, now calls for their extension given the gloomy economic environment. He goes further, however, in asking for the repeal of the Alternative Minimum Tax (AMT) which he claims unduly burdens middle class families. McCain also calls for doubling the dependency deduction from $3,500 to $7,000 annually, and also calls for an extension of the floor on the estate tax incidence to $10 million while cutting the rate to 15 percent. Both Obama and McCain also suggest that research and development costs incurred by businesses to be expensed, but only McCain would maintain current rates on dividend income and capital gains. McCain claims that Obama stands for $100 billion in tax increases, costing each taxpayer $700 per year, and wants to make it more difficult for Congress to raise taxes, proposing a 3/5 threshold for tax increases to pass muster.

McCain's tax cuts continue for corporations, from 35 to 25 percent, while also making permanent a ban on Internet taxes, along with any new cell phone taxes. His tax plan concludes with an alternative system which is premised on flatter rates and simplicity. Taxpayers may use this form or travel the traditional route.

While McCain's plan to stimulate a stagnant economy is mostly tax cut-based, Obama relies instead on targeted spending to "prime the pump." This comes from investment in education, training and workforce development, along with refocusing manufacturers on "green technologies." Federal workforce programs will also incorporate the latter, and disadvantaged youth will play a part. The protection and expansion of Internet access is also a key component of Obama's plan, particularly in rural areas.

Obama also boasts a lengthy list of policies specific to labor in the U.S. This includes support of the Employee Free Choice Act favored by unions to expand organizational efforts, along with cracking down on efforts to stymie this process and protection for striking workers. Moreover, he embraces the long-held Democratic Party belief that the minimum wage should be increased.

McCain, by comparison, focuses on reform of the Unemployment Insurance program, creating private accounts that reward speedy transitions to new jobs, including retraining at local community colleges. For older employees (55 and older) who are more difficult to retrain, McCain would offer supplemental assistance for those who assume lower-paying jobs within a defined time period (26 weeks).

McCain addresses the spending side of the fiscal equation at length. Indeed, he has made it one of the hallmarks of his campaign and a defining issue during his storied congressional career. At the top of his list is earmark reform, otherwise known as pork barrel spending. The GOP standard bearer is wont to lament about Congress' reputation for spending like drunken sailors. He alleges receiving an email from a real drunken sailor who is offended by the comparison. McCain, in contrast to the current occupant in the White House, promises to veto all legislation laden with pork, pledging to make the authors of such earmarks "famous." The candidate pledges to impose a one-year hold on all spending not related to the military and our troops, to cut waste and efficiency in the process, and balance the budget before leaving office. To assist with this effort, he calls for the restoration of the line item veto deemed unconstitutional by the U.S. Supreme Court.

All told, neither candidate has identified a clear path toward balancing the budget, but independent analysts give McCain a better chance of achieving this outcome, mainly because Obama has identified $210 billion of new spending and promises to pay for this and the looming budget deficits through ending the Bush tax cuts and drawing down the war in Iraq. McCain, when placed on the spot, invoked the language of his supply side hero, Ronald Reagan, who claimed tax cuts lead to economic growth and higher tax revenues. While this held true during the 1980's, the budget deficit tripled at the same time as spending continued to rise.

Trade was a topic of passionate discourse this primary season, particularly on the Democratic side of the aisle. Obama and Clinton sparred over NAFTA and other trade agreements, and the former has pledged to renegotiate the treaty with Canada and Mexico, while standing against the Central American Free Trade Agreement (CAFTA) for its alleged failure to open markets for American jobs while protecting the rights of workers and the environment. Obama also pledges to work through the World Trade Organization to clamp down on illegal subsidies and other nontariff barrier on U.S. exports. While Trade Adjustment Assistance already exists for workers unduly harmed by the forces of globalization, Obama would expand it to cover employees in the ever-growing service industry.

If Obama stands for "fair trade," McCain can be classified as a proponent of "free trade." He points to the fact that 95 percent of global customers live outside of the U.S., making multilateral, bilateral and regional pacts critical. He sees them as pivotal to knocking down trade barriers, leveling the playing field and enforcing sanctions against offending countries. McCain's support and Obama's opposition to a recent deal with Colombia is a recent example of their contrasting positions.

It is clear from this exercise that American voters face a stark choice between the economic policies of McCain and Obama as we select the 44th President of the United States. The complexities of their specific policies make a simplistic comparison like that illustrated above more than difficult, and I encourage you to visit the candidates' web sites, along with those of nonpartisan organizations who conduct independent analyses of these plans and others (U.S. Budget Watch is but one example).

In the end, at least in my mind, there is little new under the sun in these scenarios. McCain offers echoes of the current President Bush and his idol Ronald Reagan with his tax cutting tendencies. He is also a foremost critic of excessive spending. Indeed, he has never sponsored a pork barrel project in his 26-year congressional career. Both Bush and Reagan struggled to get a grasp on the spending side of the fiscal equation, leading to massive budget deficits, and McCain will be challenged to divert from this well-established blue print. Simply stated, a president has few means of controlling spending other than his/her veto pen as Congress passes budgetary allocations. Presidential leadership must occur not only on the front end, but throughout the process. Vetoes of omnibus legislation can threaten critical priorities, such as overseas military endeavors. If elected, McCain will undoubtedly face such difficult choices and his principles will be tested.

Obama, despite his soaring rhetoric of change, comes to us in the tax-and-spend mold of many of his Democratic precessors, Bill Clinton for one. Clinton was able to balance the budget on the backs of tax increases at the outset of his first term and achieved many of his spending priorities at the same time. Obama, however, is unlikely to enjoy the same luxuary, as Clinton benefited from the so-called "peace dividend," or reduced defense spending as the Cold War menace ended. He would enter office with US forces fighting separate wars, and even if both were ended in the foreseeable future, Obama has committed to increasing the size of the armed forces to address modern foreign policy challenges, international terrorism among them. "Guns" and "butter" are most often presented as a trade-off, and Obama would be forced to make a choice of his own, that or continue to perpetuate ever-growing budget deficits.

In the end, at least on this issue, we are left with a choice that leaves us with more questions than answers. Both candidates offer us detailed economic plans, but their prospects of success are dictated by unknown variables like economic growth and foreign engagements. They encompass issues like health care and entitlement reform that I will address later in this series, and our candidate selection should be made by the sum of these somewhat disparate parts. With this exercise in mind, I will return on Thursday with my third installment of "Pass the Pundits," this time addressing how the candidates plan to take on government corruption.


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Managing Director

McCormick Freedom Project

Shawn is responsible for overseeing and managing the operations associated with the McCormick Freedom Project. Additionally, he serves as the in house content expert and voice of museum through public speaking and original scholarship. Before joining the Freedom Project, he taught American Government, Economics, American History, and Chicago History at Community High School in West Chicago, IL and Sheboygan North High School in Wisconsin.

Shawn is a doctoral candidate within the Political Science Department at the University of Illinois at Chicago where he received his MA in Political Science. He is a 2001 James Madison Fellow from the State of Wisconsin and holds a bachelor's degree in Political Science, History, and Secondary Education from the University of Wisconsin at Madison.

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About Fanning the Flames and the McCormick Freedom Project

Fanning the Flames is a blog of the McCormick Freedom Project, which was started in 2006 by museum managing director Shawn Healy. The blog highlights the news of the day, in hopes of engaging readers in dialogue about freedom issues. Any views or opinions expressed on this blog represent those of the writers alone and do not represent an official opinion of the McCormick Freedom Project.

Founded in 2005, the McCormick Freedom Project is part of the McCormick Foundation. The Freedom Project’s mission is to enable informed and engaged participation in our democracy by demonstrating the relevance of the First Amendment and the role it plays in the ongoing struggle to define and defend freedom. The museum offers programs and resources for teachers, students, and the general public.

First Amendment journalism initiative

The Freedom Project recently launched a new reporting initiative with professional journalists Tim McNulty and Jamie Loo. The goal is to expand and promote the benefits of lifelong civic engagement among citizens of all ages, through original reporting, commentary and news aggregation on First Amendment and freedom issues. Please visit the McCormick Freedom Project's news Web site, The Post-Exchange at

Dave Anderson
Vice President of Civic Programs
McCormick Foundation

Tim McNulty
Senior Journalist
McCormick Freedom Project

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