On The Bailout aka The Panic of 08 , Part 18: McCain Ideas

Here are some of his new ideas:

In an effort to seize the initiative in tackling the nation’s financial troubles, John McCain on Tuesday outlined a $52.5-billion package of new tax breaks that he said would stimulate the economy and ease the money problems of many Americans.


…said he would lower the tax rate on their withdrawals from retirement accounts to 10% this year and next.

This is a short term kludge. It does nothing to address short-term credit or long-term growth. It might get him senior citizen votes.

…proposed cutting the capital gains tax in half for two years…

How does this address short-term credit or long-term growth? Lower taxes = good. Lower capital gains tax will help investors long term. But…there is not going to be much in the way to capital gains to tax anyways.

…suspending taxes on unemployment benefits for workers making less than $100,000…

What a joke. If you are unemployed your taxes are small on that. You don’t need to pay until you file that next April.

…ordering the Treasury Department to guarantee 100% of Americans’ savings for six months to calm fears of bank failures.

How about just raising the FDIC limit? No need to involve TreasuryDept.

“If I am elected president, I will help to create jobs for Americans in the most effective way a president can do this — with tax cuts that are directed specifically to create jobs and to protect your life savings,”

At best, these proposals can be characterized as mostly harmless.

The president has limited ability to create jobs (non-USGOV jobs anyways). You can’t focus or aim job creation. It is easier for a President to destroy jobs.

The best the president can do is reduce USGOV interference and distortions, keep the negative-feedback loop of the economy in sync and promote pro-entrepreneurial public policy.

The new slate of proposals is an addendum to the Arizona senator’s already expansive tax-cutting plans and his call to use $300 billion of the $700-billion rescue package to buy up bad mortgages and reset them with more favorable terms.

The above is a terrible idea.


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