Whether or not last night's much-improved debate performance helps John McCain rally in the polls, at least voters finally got a clearer sense of the policy differences. For our money, the best line of the night was Mr. McCain's Freudian slip of referring to Barack Obama as "Senator Government." Neither candidate is offering policies that meet the serious economic moment. But Mr. McCain would let Americans keep more of their own income to ride out the downturn, while Mr. Obama is revealing that his default agenda is to spend money and expand the government.
Cribbing from Hillary Clinton's playbook, Mr. Obama called this week for a "90 day foreclosure moratorium for homeowners that are acting in good faith," whatever that last phrase means. When Mrs. Clinton proposed a foreclosure moratorium during the Democratic primaries, Mr. Obama had said it would lead to more expensive mortgages going forward. He was right then.
The Treasury's Hope Now program and the Federal Housing Administration are already helping to refinance homes for millions of homeowners. Anyone who isn't able to qualify for one of those voluntary programs and who still can't afford to pay a mortgage isn't likely to be any better fixed in a mere 90 days. Mr. Obama also overlooks that the banks that service the mortgages don't typically own them. They're owned by far-flung investors via a mortgage-backed security.
Mr. Obama apparently wants the feds to unilaterally rewrite contracts based on something as undefinable as "good faith." At the same time, he is repeating his proposal to change the bankruptcy code so judges can unilaterally rewrite mortgage contracts as well. All of this would make credit less available to working families in the future.
Another Obama idea is to give a $3,000 tax credit to companies that create new jobs in the U.S. over the next two years. We don't know many employers who would hire people merely because of a tax credit that barely covers administrative costs, especially if that tax credit vanishes after two years. And especially if Mr. Obama is going to hit that same business with a whopping tax increase. As he told skeptical "Joe the Plumber" -- actually Joe Wurzelbacher of Toledo -- in his own Freudian slip this week, "When you spread the wealth around, it's good for everybody." But there won't be any wealth to spread if no one creates it.
Mr. Obama is also proposing more "stimulus," by which he means more federal spending. He wants $25 billion in federal aid to states, which would merely subsidize the most profligate state politicians. He wants $25 billion more for a "jobs and growth fund" for schools, roads and other union-driven public works. And he wants $25 billion more in loan guarantees for the Detroit automakers, on top of the $25 billion they've already received.
These ideas reveal that Mr. Obama thinks economic growth derives mainly from growing the government. They merely redistribute money taxed or borrowed from the private sector to favored political constituencies. At least Bill Clinton sold his tax cut in 1993 as a way to reduce the deficit; Mr. Obama is proposing to take federal spending to heights not seen since the early 1980s. If this is his agenda to spur recovery, no wonder the stock market is tanking.
As for Mr. McCain, he is proposing to cut the capital gains tax rate to 7.5% from 15%. Mr. Obama responded by sneering that no one now has capital gains to tax, but Mr. McCain is right that lowering the after-tax return on capital could help even in a down market. He also wants to increase deductible capital losses to $15,000 from $3,000 for 2008 and 2009, another way to help the investor class ride out the bear market. While capital gains are taxed whether they are inflated or not, the $3,000 loss writeoff limit against regular income hasn't changed in 30 years.
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