John McCain has ticked most of the economic boxes that conservatives like. Keep Bush tax cuts? Check. Free trade? Check. Cut spending? Check. Cut corporate taxes? Check. Here is Larry Kudlow (Maximum Friend of the Blog) on McCainomics:
Increasingly McCain is shifting his positions towards the supply-side: across-the-board tax cuts, keeping the Bush tax rates on investment, slashing the corporate tax rate, doubling the child deduction for family dependents, cutting pork-barrel spending, and producing more energy.... In general, the senator is developing a good supply-side message for economic growth, with a big focus on tax cuts and new energy production. Obama is for tax hikes and opposed to energy production. These are important contrasts. Now it's up to the Republican standard bearer to keep hammering these key points on the campaign trail.
But is that growthy platform enough to beat Barack Obama? The editors of National Review have their doubts:
It offers very little in the way of direct benefits to Americans in the middle of the income scale. Controlling spending and cutting corporate tax rates may benefit them a great deal—but only indirectly and eventually. Republicans have won on the tax issue when they have also put money in people's pockets.... One element of McCain's plan will help middle-class families directly. He would double the exemption for dependents from $3,500 to $7,000. It is not much: For a household in the 15 percent tax bracket, the increase would be worth only $525 per child per year. A more direct approach to reducing the overtaxation of families would be to expand the child tax credit, and to make it applicable against payroll as well as income taxes. But what McCain has proposed is a beginning.
Me: While cutting income taxes has been a core GOP policy for a generation, many on the right have begun to doubt its potency as a campaign issue. One big reason is that fewer and fewer Americans file income taxes or have any income tax liability if they do file. (Indeed, the top 1 percent of households now pay a record 27.6 percent of all federal taxes and a record 38.8 percent of income taxes.) So some conservatives have suggested reorienting tax policy more directly to help families. One way is through a much bigger tax credit that could be applied to both income and payroll taxes. Here is the reasoning from NR writer Ramesh Ponnuru and economist Bob Stein:
We argue that Social Security and Medicare create a large implicit tax on child-rearing: Parents make the financial sacrifices necessary to raise the children who will fund those programs tomorrow, while also paying taxes to fund them today. The tax credits would offset this bias by recognizing that parents are, in effect, making two layers of contributions.... The vast majority of the benefits of our expanded child credit would go to married couples with children. Increasing our popularity among these voters, who often feel beset by harmful social trends and the costs of child-raising, will improve the political playing field for those seeking orthodox supply-side tax cuts.
Another option, from writer Phillip Longman, is cutting Social Security payroll taxes by a third for every child a family has. Three or more kids, and your payroll tax burden is zero. As he explained in a Foreign Affairs article based on his book, The Empty Cradle:
In the United States, the direct cost of raising a middle-class child born this year through age 18, according to the Department of Agriculture, exceeds $200,000—not including college. And the cost in forgone wages can easily exceed $1 million, even for families with modest earning power. Meanwhile, although Social Security and private pension plans depend critically on the human capital created by parents, they offer the same benefits, and often more, to those who avoid the burdens of raising a family.
I have raised these interesting ideas in interviews with McCain advisers. Later, the campaign did come out with the idea to enlarge the dependent exemption. Will McCain go further? His people always say the agenda is a work in progress, so it is not out of the question. Now, supply-siders may argue that these ideas do nothing to change incentives to work, save and invest, but you have to do politics before you can do policy. And a family-first agenda might be a winning move for long-shot candidate.