As stock markets slide, McCain and Obama talk economics

McClatchy NewspapersOctober 6, 2008 

WASHINGTON — As stock markets around the world tumbled Monday, John McCain urged lower taxes and tough curbs on government spending, and Barack Obama pushed his plan for a quick stimulus package to help the ailing economy.

Neither presidential candidate's plan has much chance of easing the economic pain anytime soon, though. Congress adjourned without approving a stimulus package and won't reconvene until after the elections, and perhaps not until January. Analysts scoff at McCain's claim that he can balance the budget by 2013 while pushing big tax cuts and spending more on the military.

McCain, speaking in Albuquerque, said that Democratic nominee Obama would raise taxes on dividends, investments, Social Security and income.

"Senator Obama and I both have differences with how President Bush has handled the economy. But he thinks taxes are too low, and I think spending is too high," the Republican nominee said. A text was made available in Washington.

McCain wants to make key Bush 2001 and 2003 tax cuts _, which the Arizona senator voted against — made permanent instead of letting them expire on Jan. 1, 2011.

Obama has proposed having those who earn more than $250,000 pay 2 to 4 percent more in Social Security taxes. He also wants to let major Bush tax cuts expire for most individuals who earn more than $200,000 a year and families with incomes greater than $250,000.

But, Obama emphasizes, some 95 percent of taxpayers would pay less tax under his plan because of new tax credits and other breaks.

McCain has been vague in detailing how he'd reduce spending, and independent budget analysts have questioned whether he can meet his goal to balance the federal budget by the end of his term.

The Congressional Budget Office estimates that the deficit for fiscal 2008, which ended Sept. 30, will reach $407 billion, and that next year it could hit $438 billion, don't include the costs of recent federal bailouts of failed financial firms.

US Budget Watch, a nonpartisan research group, estimates that in 2013, McCain's tax cuts would add $417 billion to $485 billion to the deficit. His health care policies, including a refundable tax credit to help offset the cost of insurance, would cost a net $54 billion to $65 billion.

His spending cuts, including a lower cost for U.S. troops in Iraq and "unspecified cuts to balance the budget," would result in savings of between $291 billion to $304 billion, hardly enough to yield a balanced budget. Moreover, it's not clear whether McCain could reduce the number of American troops in Iraq and Afghanistan significantly.

Obama renewed his call for a new economic stimulus package on Monday.

"I think it is still critical for us to move forward on an economic stimulus package that can provide some people with some relief from high gas prices, food prices, help states and local governments maintain their payrolls," he said.

His plan would provide more unemployment benefits, and create a $25 billion State Growth Fund to help state and local governments pay for health, education, housing and energy assistance. Another $25 billion would be used for a Jobs and Growth Fund to help road and bridge maintenance as well as school repairs.

The jobs fund, the campaign estimates, would help "save more than 1 million jobs in danger of being cut."

Yet financial analysts see the plan as more symbolic than meaningful. Spending on highways and schools would not happen immediately, since it takes time to build the projects. As a result, said David Wyss, chief economist at Standard & Poor's, impact on Gross Domestic Product could be as little as one-tenth of 1 percent per quarter.

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