WASHINGTON — John McCain unveiled a slew of economic initiatives Tuesday aimed at the politically potent middle class, including targeted tax cuts, more accessible student loans and temporarily lifting the federal gasoline tax over the summer months.
In his most detailed speech on the economy yet, McCain, the presumptive Republican presidential nominee, called for doubling the personal exemption for dependents on income taxes from $3,500 to $7,000, at an annual cost to the Treasury of $65 billion.
"The truest measure of prosperity in America is the success and financial security of those who earn wages and meet payrolls in this country," the Arizona senator said. "Many are waiting for their first homes . . . their first big break . . . their first shot at financial security. And helping them will be my first priority in setting the economic policies of this nation."
McCain spoke in Pittsburgh, and will pitch his ideas Wednesday at an economic summit in Milwaukee. In a new television ad airing in Pennsylvania and Ohio, he promises to "take the best ideas from both parties . . . to ignite our economy."
Like his Democratic rivals, McCain was vague on how he'd pay for all the goodies. Aides said that his proposals would cost $195 billion, but the total appears to be much higher.
His chief economic policy adviser, Douglas Holtz-Eakin, suggested that McCain's call to make President Bush's tax cuts permanent shouldn't be counted as a Treasury loss.
"The senator is not planning to raise taxes," he said repeatedly.
Under current law, a host of Bush-era tax reductions are scheduled to expire in 2010. Congress must change the law to make them permanent, at a projected annual cost to the Treasury of $100 billion.
McCain reiterated his proposed permanent repeal of the alternative minimum tax, which threatens to ensnare 25 million families. Holtz-Eakin estimated a cost to the Treasury of $60 billion a year.
The true cost would be $180 billion a year, according to the Tax Policy Center, run jointly by the Urban Institute and the Brookings Institution, both center-left research centers in Washington.
It also was unclear how McCain would pay for his proposed gas-tax holiday, which would run from Memorial Day to Labor Day. The federal gas tax is 18.4 cents per gallon; 24.4 cents for diesel. The idea would cost the federal Highway Trust Fund — already at risk of going broke next year — billions of dollars.
"That takes $11 billion away from infrastructure spending on roads and bridges, which are badly in need of help as we saw with last summer's bridge collapse," said James Kvaal, domestic policy adviser for the liberal Center for American Progress Action Fund, a Washington research group.
Holtz-Eakin said money would be taken from general funds to ensure that the Highway Trust Fund didn't run short. But the budget deficit already is projected at $500 billion.
"I think we're hearing a lot of promises that may not be viable when the rubber hits the road," said Rudy Penner, a senior fellow at the Urban Institute.
Penner, a former director of the Congressional Budget Office, said a grim budget outlook would dampen the spending plans of all three presidential candidates: "Those deficits are going to look awfully big as the new president takes office, and it will be very hard to do what President Bush did . . . claim the budget balances in 2012, or maybe ever again if you do honest projections."
To offset lost revenues, McCain offered a grab bag of nonspecific spending cuts. By far the most politically explosive one would make older Americans who earn more than $164,000 a year pay more for prescription-drug coverage under Medicare. That brings up the specter of means testing for federal benefit programs, anathema to the politically powerful seniors lobby.
Other proposed spending reductions include saving $60 billion by "budget scrubbing," or ending pork-barrel projects; $15 billion by freezing all nonmandatory government spending for one year; and $30 billion by closing unspecified tax loopholes. All would face fierce opposition in Congress.
In other new proposals, McCain would:
- Ensure that state agencies can meet their obligations as "lender of last resort" for student loans, to ensure broad access during the credit crunch.
- Introduce a simpler tax code that Americans could opt into, with only two tax rates and a "generous" — though unspecified — standard deduction.
- Lower the corporate tax rate from 35 percent to 25 percent, yielding $100 billion in lost revenue.
McCain's Democratic rivals pounced on his economic plan.
"John McCain used to oppose the Bush tax cuts to the wealthiest Americans," Sen. Barack Obama of Illinois, the Democratic front-runner, told a union conference Tuesday in Washington. "He used to say that tax cuts in a time of war were a bad idea. . . . But somewhere along the way to the Republican nomination, I guess he figured that he had to stop speaking his mind and start toeing the line, because now he wants to make those tax cuts permanent."
Neera Tanden, Democratic New York Sen. Hillary Clinton's chief policy adviser, dismissed McCain's ideas as "a George Bush redux of corporate windfalls and tax cuts for the wealthy that will bankrupt our government and leave working families with the bill."
(Margaret Talev contributed to this article.)