Pro-growth McCain is better for economy

According to an analysis on Bloomberg (and syndicated by the Business Day), a John McCain presidency would be more beneficial for the US economy because his policies are growth-oriented, whereas Barack Obama is more preoccupied with redistribution of existing wealth (“spreading the wealth around”) which will inevitably disincentivise wealth creation, futher stymieing economic growth.

Amity Shlaes, the commentator who wrote the piece, provides six compelling reasons why McCain has the edge on the economy:

1. Cutting the corporate tax by 10 percentage points, to 25 percent: A lower corporate tax rate would be a compelling reason for foreign money to want to stay here. It would help ensure that the dollar rally endures. It would drive the cash sitting around in what proved to be unprofitable investments — subprime mortgages, for example — into potentially profitable ones, many of which are as yet unidentified.
2. Capital Gains: Preserving the 15 percent tax rate on capital gains and dividends. McCain also has said he will make permanent President George W. Bush‘s income-tax cuts.

What today’s financial crisis has revealed is that there are a lot of mediocre companies slumbering in portfolios. Many people are getting out of those companies now. More will want to make their exit in coming years, but the capital gains rate increase promised by Barack Obama and the Democrats might deter them. The result will be that cash will not flow as often to new companies that may be developing superior products.

McCain’s rates would not only speed a recovery but also improve its quality and durability.

3. Capital Goods: Letting businesses expense technology and equipment in the same year they buy it. Under the current expensing provision, companies can write off half their equipment outlays in the first year and must depreciate other costs over a longer period.

4. Building nuclear plants: This is the kind of infrastructure the U.S. really needs, and it would even be fine to use Treasury bonds to finance it. Less dependence on foreign oil means less instability in domestic markets.

5. Freezing government spending overall: A superb notion, even if most of us believe Washington isn’t capable of passing it into law.

6. Taking the long view: McCain’s advisers talk about dynamic — not static — analysis, looking at the growth and competitive environment generated by tax cuts. The Institute for Research on the Economics of Taxation finds that the McCain tax plan would add 0.5 percent to the annual growth rate for the private sector for five years. Obama’s plan would subtract 0.7 percent a year in growth for the same period.

Read the analysis in full at Bloomberg.

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1 Comment

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One response to “Pro-growth McCain is better for economy

  1. Gino

    Are you a republican? If so, good advertisement, but I don’t buy it.

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