WASHINGTON (Reuters) - John McCain’s reputation for “straight talk” has helped him clinch the U.S. Republican presidential nomination but budget experts say his numbers do not add up.
McCain’s promises to reduce wasteful spending if elected president in November would not begin to cover the costs of his proposed tax cuts, analysts say.
He also has not yet explained how he would rein in the health-care and retirement costs expected to swamp the federal budget as some 77 million people retire from the U.S. work force in the coming decades.
On top of that, a President McCain would inherit a $400 billion budget deficit, wars in Iraq and Afghanistan that cost nearly $200 billion per year and a similar bill for interest payments on the $10 trillion national debt.
Many experts said McCain’s proposals would make the fiscal picture worse.
“This is one of the most fiscally irresponsible plans we’ve seen by a presidential candidate in a long time,” said Robert Greenstein, executive director of the liberal Center on Budget and Policy Priorities.
Vague, expensive promises are not unusual on the campaign trail and the proposals put forward by Democratic candidates Barack Obama and Hillary Clinton also would likely lead to increased deficits, analysts said.
“I don’t think anybody’s numbers add up when they run for president,” said Jared Bernstein of the liberal Economic Policy Institute. “I do fear that (McCain’s) don’t add up the most.”
As an Arizona senator, McCain has fiercely criticized the congressional pet projects known as “earmarks,” which have figured in several recent corruption scandals.
On the campaign trail, he often says he would veto any bills that contain earmarks. But the $18 billion spent on earmarks last year accounted for less than 1 percent of the federal budget, according to the watchdog group Taxpayers for Common Sense. McCain advisors say the actual figure is closer to $60 billion when spending for projects passed in earlier years is included.
Still, McCain would have a tough time cutting all of that spending because much of it would come out of the Pentagon’s budget as the United States fights in Iraq and Afghanistan, said Joshua Gordon, senior policy analyst at the Concord Coalition, a centrist budget watchdog group.
McCain’s spending cuts would be outweighed by his proposed tax cuts, experts say.
He angered conservatives when he opposed President George. W. Bush’s income-tax cuts in 2001 and 2003 on the grounds that they favored the wealthy and were fiscally irresponsible. He now supports making them permanent, echoing Bush in saying that allowing them to expire would amount to a tax increase.
McCain also wants to slash corporate tax rates from 35 percent to 25 percent and allow businesses to immediately write off capital expenses. He has called for reforming the Alternative Minimum Tax, initially targeted at the wealthy but now snaring many middle-class taxpayers.
These tax cuts would shrink annual federal revenues from $4.55 trillion today to $3.4 trillion in 2018, according to Len Burman of the Brookings Institution’s Tax Policy Center.
Federal revenues would account for 15.3 percent of U.S. gross domestic product, the lowest level since 1950.
“There’s almost no conceivable way he’ll be able to cut spending” to those levels, Gordon said.
The impact of such tax cuts could be offset somewhat if they lead to increased growth, said Brian Riedl, the conservative Heritage Foundation’s lead budget analyst.
McCain’s top economic adviser, Douglas Holtz-Eakin, says simplifying the tax code would close many loopholes. Cleaning up military procurement also would generate savings, he said.
Yet any changes in spending and taxes will be dwarfed by the ballooning costs of the Social Security retirement and Medicare health-care entitlement programs, Riedl said.
“McCain’s record on spending will be basically defined by whether or not he addresses Social Security, Medicare and Medicaid,” Riedl said.
McCain has said little about how he would rein in these programs and Holtz-Eakin said any changes would have to be worked out in a bipartisan manner with Congress.
Although some of McCain’s core proposals are not cure-alls, he said, ridding the budget of waste would give McCain the “moral authority” to tackle bigger but more sensitive problems like health and retirement spending, as well as Pentagon contracting.
Additional reporting by Caren Bohan