The Candidates on the Economy

Headlines have been consumed by news about the faltering stock market, the collapse of the banking industry and the bail out plan. The economy has quickly replaced the war in Iraq as the top concern for Americans. How do Obama and McCain intend on tackling an economy on the verge of recession?

Senator Barack Obama

Believes with economy will grow faster with…

• More government oversight of the economy
• Less enthusiasm towards free trade
• A tax system that reverses existing economic inequalities

Senator John McCain

Believes the economy will grow faster with…

• Less government regulation
• More free trade
• Lower taxes on the wealthy

The Bailout Plan

But first, what is the bailout? The bailout, proposed by President Bush, is basically the government's way of securing investments in the financial sector. Under the plan, the government will buy assets that have lost value and guarantee that people who have invested in these things will get their money. The hope is that by pumping $700 billion dollars into the financial industry further failure of banks and investment firms will be prevented.

Both Senators Barack Obama and John McCain traveled to Washington, D.C. during their campaigns to vote in favor of the bailout.

Sen. Barack Obama

• Also plans to “jumpstart” the economy and prevent job losses by providing another $50 billion to the economy.
• $25 billion would go to the State Growth Fund to provide assistance and prevent cuts in health, education, housing and heating assistance.
• $25 billion would go to the Jobs and Growth Fund to prevent cutbacks in road and bridge maintenance and fund school repair. This is in order to save jobs in danger of being cut.

Sen. John McCain

• Wants to provide immediate relief to get economy running at full strength
• Believes his tax plans will create more jobs
• Wants to embark on a nuclear energy project, which will create 700,000 new jobs
• Plans to balance the national budget by 2013

Tax Plans

Sen. Barack Obama

• Will keep the existing tax cuts for households earning less than $250,000
• Will increase taxes for those who earn more than $250,000 (from 33-35% to 36-39.6%)
• Plans to create a variety of tax credits for low to middle-income workers
• Plans to exempt old people earning less than $50,000 from paying any income tax
• Under his plan, it is estimated that about 80% of American households would pay less tax than they do now
• For the bottom 20% of Americans, their income after taxes would be 5.4% higher than it is now*
• For the top 1% of Americans, their income after taxes would be 8% lower than it is now*
• Long-term analysis:
• Tax increased on the wealthy may discourage them from earning more
• Use of tax credits might give workers less incentive to earn more – because if they did earn more, it would take away some of their credit

Sen. John McCain  

• Plans to keep Bush’s tax cuts on wages, capital gains (gains from stocks and bonds), and corporate profits
• Plans to give tax credits for each child in a household – giving $3,500 to $7,000 exemptions for children
• Plans to decrease the corporate tax rate from 35% to 25%, allowing big corporations to pay less taxes
• For the bottom 20% of Americans, their income after taxes would be .2% higher than it is now*
• For the top 1% of Americans, their income after taxes would be 2.2% higher than it is now*
• Long-term analysis:
• The Tax Policy Center believes McCain’s plan is more likely to boost long-term economic growth
• Lower taxes on capital gains (gains from stocks) and corporate profits would encourage people to invest more, which would raise worker productivity and, ultimately, wages

* = based on estimations by The Tax Policy Centre – the McCain team disputes these numbers, but did not provide estimates of their own

Pork-Barrel Politics: Earmark Spending

Sen. Barack Obama

• Has introduced and passed legislation that would require more disclosure for special-interest earmarks
• Hopes to cut earmarks levels and ensure that spending decisions are made known to the public

Sen. John McCain

• Vows to veto every “pork-laden” spending bill and make the authors of these bills known to the public
• As president he will seek to legalize the “line-item veto,” again, which was legal under Clinton
• A line-item veto allows the president to cancel specific provisions of a bill (usually the budget appropriation, typically pork-laden) part of the bill without vetoing the entire bill
• He strongly believes that adding earmarks (unrelated projects or “pork”) to a bill prevents America from addressing national priorities

Social Security

Sen. Barack Obama

• Plans to raise Social Security payroll tax on those earning more than $250,000 by 2-4 percentage points
• Plans to overhaul the program in 2019
• Opposes privatizing social security, raising the retirement age, or cutting benefits
• Plans to ask those families making more than $250,000 to contribute more to social security to “keep it sound”

Sen. John McCain

• Wants to privatize social security, so it would no longer be a government program – people would have individual social security accounts invested in different funds
• Plans to supplement system by adding personal accounts

Confused by all these financial terms? So were we so we created a glossary for you. Check it out here.

Sources: Economist.com, The Tax Policy Centre: www.taxpolicycenter.org/, JohnMcCain.com, BarackObama.com, Washingtonpost.com, Wall Street Journal.com