Which Way to Prosperity?

The central question in this election is, Which candidate can most improve our wobbly economy? Here, the McCain-Obama contrast could not be sharper.

Obama has proposed increases in every major federal tax. He has proposed to increase individual income taxes, with the top rate to rise to almost 40 percent. He has proposed to increase the top capital-gains tax rate by 33 percent. He has proposed the same for the top tax rate on dividends. He has proposed to increase payroll taxes, with a rate increase of 16 percent to 32 percent a year. He has proposed to reinstate the death tax (estate tax), at a rate of 45 percent. He has proposed several increases in corporate taxes, including a so-called windfall-profits tax on oil.

Nobel Prize-winning economist Robert Mundell has written that if such tax increases are adopted, the U.S. economy will suffer “a deep recession, a nosedive,” and the dollar will decline further. Amity Shlaes, author of The Forgotten Man: A New History of the Great Depression, claims Obama has proposed the exact same policy mix that led to the depression of the 1930s.

During the primaries, Obama railed against free trade, proposing even to renegotiate free-trade agreements with our top two trading partners, Canada and Mexico. He has opposed the Columbian Free Trade Agreement, even though it primarily removes tariffs on American exports to that country, with barriers to Columbian exports to America already almost all removed under the Andean Trade Preferences Act.

In sharp contrast, McCain has promised tax cuts to promote economic growth and strengthen the U.S. dollar. The federal corporate tax rate today is 35 percent, and McCain suggests cutting it to 25 percent. This would mirror rates elsewhere: The average corporate tax rate in the European Union was slashed from 38 percent in 1996 to 24 percent by 2007. The rates in India and China are lower as well. American companies are not going to produce more jobs and higher wages with this crippling competitive disadvantage.

McCain also proposes immediate expensing for capital investment, which means that capital costs can be deducted in the year they are incurred, like all other business expenses,.. Except for the badly confused cap and trade plan, which he shares with Obama, McCain’s economic program of cutting taxes, restraining spending, balancing the budget, promoting free trade, and increasing energy production, seems to be exactly what our economy needs right now...

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