Candidate Comparison: Economics

Since the Economic consequences is easily in my top 3 issues in the election (probably the top), I thought that I would do a rundown of the current candidate plans. I hope to take a look at this and present both sides along with my thoughts. In order to help me reach this goal, I am going to use a recent Fortune Magazine article to get views from both sides.

Style over Substance
I want to set up this analysis with what I will be the American people's decision on this subject. This is certainly from my perspective, but I think it aptly describes this election, especially on this issue.

John McCain
McCain was obviously not my first choice for the Republican nomination. That was more for social reasons and loyalty reasons than economic reasons. His economic plan calls for in general for both lower taxes and less spending. He has me hooked on those two items right away. He is against the federal government propping up failing businesses. His main crusade will be cutting spending, trimming the fat, and cutting the pork. McCain is only for tax cuts that can be linked to spending cuts. This distinction separates him from the last 8 years and shores up the biggest complaint that conservatives have had about Bush.

This sounds great to me, but I do not think that he is articulating this well enough right now. His 'straight-talk' is not going to win him many votes. This example from back in 2000 is why people are going to find it hard to vote for him:

The Senator was visiting a shuttered mill in South Carolina, talking to a worker who had lost his job. "And the guy said to him, 'I worked in this mill for 30 years. What is my son going to do?' And McCain looked at him and he gave the economist's best answer/ He said 'You know, I would have hoped that we both had higher aspirations for your son.'

Episodes like that may in fact be what people need to hear in the long run, but they certainly don't win over any votes in the short term. Now in 2008 his position with displaced auto-workers is:

To begin, they'll have to find another job.

With answers like that, he is not going to win Michigan. His 'straight-talk' needs to address the needs of people and how his plan will help them, not just tell them 'tough, move on'.

McCain's stubbornness however is just what we need as far as a spending goes. I am not sure about a lot of people, even those I like better, sticking to a no spending plan as much as I think McCain would. His temperament is perfect for trimming the budget.

McCain leaves a lot of things as they are now, so I will not argue for them as much as argue against the proposed changes from his opponent.

Barack Obama
The Obama campaign can be summed up in the following in the following quote:

What I do get frustrated with is an economy that is out of balance, that rewards a very few - with rewards that are all out of proportion to their actual success - while ordinary, hardworking Americans continue to get squeezed.

Based on this, the campaign plans on both raising taxes and spending more. Now they don't phrase it like that exactly, but here are the some of their plans.

• Raise minimum wage to $9.50
• More than 170 Billion in new spending on health care, alternative energy, homeowner foreclosure relief, and more
• Raising taxes for those earning more than $250,000 (this is phrased as removing the Bush tax cuts)
• Middle class earners would be about the same on taxes while lower class will get a large tax break
• Increase the capital gains tax by 50%
• Raise the dividends tax
• Reinstate the Inheritance tax (Death tax) at a rate of up to 45% on large estates.
• Close corporate tax loopholes

A lot of what is proposed is this: Spending more on lower class people by raising taxes on the wealthy. I for one do not like a wealth redistribution plan, such as Obama's. While I agree that the wealthy should shoulder a larger tax burden, I do not think that they don't already. The following statistics come from the IRS based on 2005 data:

• The bottom 50% of American tax payers pay 3.2% of all collected income taxes.
• People making under $61,055 per year pay a total of 15.5% of all income taxes, and that accounts for 75% of America. These same people account for 30.6% of all income earned.
• The top 5% of earners in America pay 58.8% of all collected income taxes. These people account for 37.2% of all income earned.

Based on these stats and many others, I cannot say that the rich are not putting in their fair share. And on top of this, Obama wants to swing this even more out of proportion.

I also take issue that raising capital gains and dividend taxes is a way to redistribute wealth to the lower and middle classes. This distinctly discourages investing, and investing can really help these classes. When you have little to invest, compound interest or returns take a while to develop into a nice nest egg. Taking another 10% off of gains just further elongates the time to really get going with your investments. This will affect higher earners more in the pocket book, but affect lower earners by keeping their investments from growing enough.

The death tax reinstatement is another issue that I think affects more than just wealthy elites. I get irked that I get taxes before I see my check, when I invest the income, when I spend the income, and now when I die. You say, well that is only the elite who have more than 3.5 million dollars when they die. Well there are 2 scenarios that this really hurts. Most personal is that I hope to get to that point someday. Not only that, but I can through prudent saving and investing. This is no scheme to rip off poor people, this is working hard all of my life and being responsible with my money. This will hit more middle class folks eventually than they are letting on. Secondly, this tax hits farming communities hard. The heartland works hard building up a successful business. It is hard work, but when a farm is passed on of any significant size, it is valued land and all more than this amount. Many common regular folks are forced out of their family's land by this tax. After all of that, really wealthy folks know how to use trust funds and other estate planning mechanisms to avoid a lot this tax. Therefore the super wealthy will get out of this crunch to some extent while the hard workers who get there will get squeezed.

Now, as you can tell, I am not a fan of these policies. However, I am a fan of Obama's presentation and style. He has a very warm personality that exudes thoughtfulness, caring, and leadership. This has drawn a large number of common folks to him of late. He sympathizes with the homeowner who can't pay his mortgage, the mom who can't afford gasoline, the worker whose job was outsourced. This is how you win votes. Barack Obama always gives the appearance that he is looking for a common consensus that works best for everyone. Now I don't necessarily agree with that statement, but it certainly plays very well to the average voter and the media.

Conclusion
Obama is running a campaign that is geared to winning. He attempts to give hope to the largest voter pool. McCain is geared towards telling us what we don't want to hear, but that we might need to hear. This may be what we need, but we vote what we want over what we need. The following crude chart is how I think that this issue is going:


Democrats and Independents both prefer Obama's style and presentation. Republicans and some Independents prefer McCain's policies. Republican's find it hard to get excited or on board with McCain's style. In this arena, so far Obama is winning the voters.