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January 18, 2008

The Craziest Thing Said on the Campaign Trail 2008
Posted by Michael Cohen

I generally think that John McCain is a pretty smart guy, but today he said something so utterly insane that it may well be the "Craziest Thing Said on the Campaign Trail in 2008."

In response to a worsening economic situation and burgeoning recession, John McCain has pinpointed the root of the problem - government spending.

"The economy is not good. The stock market continues down. And the indicators are not good. I'm not too astonished. ... We let spending get totally out of control, and it continues today, and I'm sorry to tell you this," McCain said at a town-hall style meeting at the Carolina Hospital East Campus in Florence.

The fact that John McCain actually believes this should immediately disqualify him for any consideration as President of the United States. Last time I checked, government spending has a stimulating effect on the economy, indeed it is a key lever of fiscal policy. Is it possible that John McCain does not know this? (Now I know the argument that spending can increase the deficit and have a drag on the economy, but a) that's not what McCain is saying and b) the deficit has actually gone down in recent years). The notion that worsening economy and plummeting stock market is a result of government spending is not only laughable, it's downright embarrassing.

But this isn't even the craziest thing McCain said. In regards to a stimulus package, here are McCain's thoughts: "People talk about a stimulus package. Fine, if that's what we want to come up with. But stop the spending first."

Excuse me while I bang my head against a wall and stick sharp pencils in my eyes. Cutting spending would have the exact opposite intended effect of a stimulus package. In fact, I can't imagine anything stupider then cutting government spending at a time of economic downturn. Well actually I can imagine something stupider; cutting corporate income taxes from 35% to 25% and paying for it with cuts in "wasteful spending" which is of course exactly what McCain is advocating. I could be wrong, but wouldn't such changes only begin to affect tax revenue in 2009? In the short-term these steps would have almost no stimulus effect on the economy (and its even dubious if they would have a long-term effect). Indeed, McCain's own web site cites a Tax Foundation report that makes clear his tax proposals are geared toward "improving the nation's longer-term economic health." So in reality, McCain is not really presenting a stimulus package at all.

But what's even more crazy about McCain's proposal and comments is that he doesn't even seem to understand the basic principles of fiscal policy. At a time of economic downturn, there are two options at the government's disposal (besides obviously monetary policy) cutting taxes or increasing spending. While most economists would probably be supportive of spending, arguing on behalf of tax cuts is not indefensible. Yet, McCain doesn't only reject the notion of government spending he seems to not understand that spending can actually stimulate the economy and that cutting spending will have a deleterious impact.

The even crazier thing about this entire discussion is that the statements above might not be the craziest thing McCain has said about economics on the campaign trail. In South Carolina he said this, "Every time we have cut taxes we have increased revenues."  Find me a reputable economist who believes that, but even if it was true why did McCain vote against the Bush tax cuts.

I guess when McCain said “The issue of economics is not something I’ve understood as well as I should,” he wasn't kidding around.


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McCain doent want to stop the wasteful spending in Iraq since he wants the United Staes to stay there for a thousand years.

McCain doesn't want to stop the wasteful spending in Iraq since he wants the United Staes to stay there for a thousand years.

sorry for the repost

Actually in the long term tax cuts generally do increase revenues, but only to a point. Government spending is not always productive. The Bush tax cuts were good for the economy. A stimulus package is not a good idea right now. In the next decade, America will lose its triple A credit rating. The deficit has not gone down, and we're screwed until we do something about it.

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