Politics & Policy

When Assumptions Meet Facts

Fiction on Wall Street.

In Tuesday’s Wall Street Journal, reporter Laura Meckler provides an attack on John McCain’s economic plans in the guise of a news article. Meckler asserts that to improve tax policy, John McCain would either have to let the deficit explode or make unprecedented, huge spending curbs. However, as is usually the case, Meckler’s conclusions derive directly from her assumptions, where contrary facts are either forgotten or downplayed.

Nowhere in the article does Meckler mention that John McCain has explicitly addressed entitlement spending and the need for action to cut spending today. John McCain has promised to address Social Security by demanding that Congress deal with the problem, or he will send a bill to them for an up or down vote. Also, McCain’s health care reform plan will act to control out-of-control costs which are fueling Medicare and Medicaid spending. By addressing entitlements now, John McCain can reduce federal spending today and prevent Meckler’s doomsday scenario.

Meckler’s scenario also fails to address the basic budget situation that the United States finds itself in today. Under the current Director, Peter Orzag, the Congressional Budget Office issued a long-term budget outlook demonstrating that even under current laws for revenues (i.e., the huge Democrats’ huge tax increase planned for 2011) spending in the federal budget explodes well beyond any feasible revenues. The United States cannot tax its way out of this fiscal challenge. We must cut spending and John McCain alone has been honest about our future scenario. The basic facts are that no matter what we must cut spending.

The article’s review of “history” fails to note that John McCain’s economic proposals will fuel growth in the economy and that is central to success. Discretionary spending as a fraction of GDP fell from 10 percent in 1986 to 6.3 percent in 2000 — the equivalent of about $500 billion right now and much more than John McCain is proposing. This is proof that it is possible to restrain spending and that we must promote rapid economic growth. That is exactly what John McCain’s proposals will do. If we expand our economy, we can bring in additional revenue (as the reduction in the capital-gains tax has done).

The article suggests that these proposals represent the final form of McCain’s vision for a better tax code (even though we are a long way from November) and implicitly assumes that these fundamental reforms would be implemented overnight. That is at odds with any realistic assessment of the implantation of a tax reform.

Finally, Meckler presents “independent” sources to back up basic assumptions that are not really independent or relevant at all. The Center for Budget and Policy Priorities is liberal-leaning and the Concord Coalition has largely lost relevancy. Yet, these are the only two sources quoted. Why didn’t Meckler reach out to the Heritage Foundation, Cato Institute, or the American Enterprise Institute for a more balanced piece?

At the end of the day, John McCain’s economic plan might not satisfy this reporter’s assumptions, but it does the facts.

Douglas Holtz-Eakin is a McCain senior policy adviser.

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