I just got out of the media conference call with John McCain's top economic adviser, Douglas Holtz-Eakin. And I can tell you right now that the stories about McCain's economic speech in the New York Times, Los Angeles Times, and a bunch of other newspapers tomorrow are all going to conclude that his tax ideas will worsen the budget deficit.
Although Holtz-Eakin outlined what the compensating spending cuts would be for McCain's new proposals, the reporters were not buying his approach that McCain does not need to justify paying for the Bush tax cuts, rather that Congress needs to justify getting rid of them. (Holtz-Eakin, a former head of the Congressional Budget Office, called the current way of calculating future deficits or surpluses a "budgetary fantasyland.") One reporter traveling with McCain admitted the traveling press corps was confused by the whole thing, including Holtz-Eakin's line-by-line explanation of the tax cuts and corresponding spending cuts. Two other items about McCain's speech:
1) The free-market-loving Club for Growth, often at odds with McCain, seemed to like the speech OK:
In the tax policies he put forth today, Senator McCain demonstrates an appreciation for the burden taxpayers face and the potential for increased economic growth when government interference in the private sector is restricted to a minimum. We encourage Senator McCain to apply these same principles across the board, especially when dealing with the current housing crisis.
2) And here is what one economic conservative, one who is looking for more help for families, thought of McCain's plan, as related in an E-mail to me:
I like the increase in the exemption, which will boost the tax relief associated with a typical child to about $2,000 from $1,500 at present. However, doing it through a larger exemption is somewhat of a waste as higher-income people get more (their tax rate is higher) and they are the ones not affected by the [Social Security]/Medicare bias against raising children. I like the expensing [provision] a lot but I'm not a fan of the R&D tax credit. Also, any tax reform with alternative systems means two layers of tax calculations for many people and would probably reduce the tax benefits of raising kids if it's like the House GOP plan that [Fred] Thompson endorsed earlier.
My take: It looks as if McCain has been able to pull together both conservative economic camps with his proposals.