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'I believe there's more money, because of the increase in economic activity and growth,' MR McCain said. -- PHOTO: AP
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WASHINGTON - REPUBLICAN John McCain is making promises that would cost billions of United States taxpayer dollars, yet he is vague about how he would pay for them.
Mr McCain is handing around a campaign grab bag of goodies. There are little treats like a summer gas-tax holiday and new mortgages for struggling homeowners, and there are big plums like tax breaks for corporations and families with children.
The expected Republican presidential nominee has nothing on the Democrats. Mrs Hillary Rodham Clinton and Mr Barack Obama would spend billions of dollars themselves on things like paid family leave, universal health insurance and preschool for kids.
The difference? Unlike the Democrats, Mr McCain has made a career of trying to cut spending. He rails against spending in nearly every speech. Mr McCain gets laughs by singling out silly sounding projects like a federal DNA study of bears in Montana: 'I don't know if that was a paternity issue or a criminal issue.' And he gets attention when he says it was spending, not the war in Iraq, that cost Republicans their control of Congress in 2006.
'The reason why we lost that election, my dear friends, was because we let spending get out of control,' he said recently. 'We came to power in 1994 to change government, and government changed us.'
Now Mr McCain is promising ambitious cuts in spending to pay for his ideas. The cuts would not pay for all his promises, but Mr McCain says they need not.
'I strongly disagree with the view that just because you reduce the tax burden, just because you let people save and invest more of their money, that therefore there's less money that goes into government,' he told reporters last week.
Mr McCain said he is not exactly a supply-sider - someone who subscribes to the idea that some tax cuts can pay for themselves by encouraging economic growth. But he certainly leans that way.
'I believe there's more money, because of the increase in economic activity and growth,' he said.
Regardless of who wins the November election, it is vital to find a way to pay for new spending or tax cuts, because the next president will face a budget deficit of more than US$400 billion (S$545 billion). And the deficit will keep mounting as baby boomer retirements swell the cost of government retirement and health benefits.
Mr McCain has pledged to balance the federal budget, although he has backed off an earlier promise to do so in his first term and now says he would do it within eight years.
Mr McCain's tax cuts would be double the size of President George W. Bush's controversial cuts:
First, he wants to extend Mr Bush's tax cuts, which cost an estimated US$228 billion annually and are set to expire after next year, according to congressional analysts.
On top of that, he seeks new tax cuts of about US$225 billion a year, according to his own estimate.
And the cost of his tax breaks could rise even higher. Mr McCain has proposed two business tax breaks, a credit for research and first-year expensing of equipment; his campaign says they essentially would cost nothing, but the Treasury Department has estimated they could cost more than US$140 billion annually.
Those are just the tax cuts. Mr McCain also proposed a new mortgage refinancing program for struggling homeowners that could cost the government US$3 billion to US$10 billion. He proposed to suspend federal gas taxes for the summer months at a cost of US$8 billion to US$10 billion.
And Mr McCain has several proposals whose costs are unknown, such as his pledge to give all veterans a plastic card to get medical treatment anywhere they choose, a new student loan programme and tax write-offs for companies that provide Internet service to rural areas.
How would he pay for it? New user fees could pay for the gas-tax holiday, Mr McCain adviser Doug Holtz-Eakin said.
Ironically, Mr McCain said those kinds of fees were essentially tax increases when former rival Mitt Romney imposed them on businesses as governor of Massachusetts. Yet Mr McCain has said he does not want to raise taxes.
Mr McCain also has sketched out ideas for covering the costs of his US$225 billion in new tax cuts, saying he would cut spending, eliminate corporate tax loopholes and spark economic growth by that amount of money.
Yet for all the numbers he has provided, Mr McCain has been reluctant to say exactly which programmes he would cut.
He criticises 'earmarks', pet projects tucked into spending bills, like the bear study. He said on Wednesday that the collapse of a major bridge in Minnesota last year would not have happened if Congress had not wasted so much money on pork-barrel spending, despite the suspicion of federal investigators that the problem may have been design-related, not spending-related.
Even the earmarks he rails against include things he supports, such as aid to Israel. Last month, after Mr McCain promised to eliminate all earmarks as part of his economic plan, his campaign said he remains committed to aid for Israel.
Thus, the reality of cutting spending may be very different from rhetoric, as Mr McCain has found time and again.
On a swing through Alabama's rural Black Belt last week, Mr McCain rode a ferry boat from tiny Gee's Bend, a town once cut off from ferry service to keep black residents from crossing the Alabama River to push for civil rights.
Mr McCain rode across the river with several elderly black women, quilt makers from Gee's Bend, who sang gospel hymns and held his hands. Mr McCain even took a turn driving the ferry just before it docked.
The ferry came into existence with US$3 million in earmarks - the kind of spending Mr McCain says he would stop.
Mr McCain insisted he is not trying to have it both ways. The ferry spending was worthy and would have been eligible for other federal dollars, he told reporters.
'America is supposed to help people in rural settings, people like the quilters who are direct descendants of slaves,' Mr McCain said. 'It's 'give people a hand up'. That's the essence of government.' -- AP
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