Replies to post #44021 on Discover GOP Opprobrium

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John McCain’s hurdles are obvious: he’s running as a conservative Republican at a time when most Americans are anxious to break with conservative Republicanism. He doesn’t know anything about economics; his foreign policy vision has been completely discredited; his campaign platform includes almost nothing in the way of new ideas; and he probably won’t have a lot of money, especially compared to the Democratic nominee.

But as the Politico’s Jonathan Martin explained the other day, McCain does have an “unorthodox strategy” to persevere.

Facing the prospect of competing against a Democrat who is on track to shatter every fundraising record — and confronted by his own inability to rake in large bundles of cash — McCain and his key advisers have largely been forced into devising a three-pronged strategy that they hope can turn their general election weaknesses into strengths.

McCain will lean heavily on the well-funded Republican National Committee. He will merge key functions of his campaign hierarchy with the RNC while also relying on an unconventional structure of 10 regional campaign mangers.

And finally — and perhaps most importantly — McCain will rely on free media to an unprecedented degree to get out his message in a fashion that aims to not only minimize his financial disadvantage but also drive a triangulated contrast among himself, the Democratic nominee and President Bush.

It’s that last point that’s the most interesting. It’s premised on an interesting assumption — that McCain can distance himself from Bush, and that the media (”McCain’s base”) will help him do so.

The latter seems likely — McCain can safely assume fawning media coverage for the rest of the year — but how does one “triangulate” against an incumbent president while running on the president’s identical policy agenda?

Apparently, by ignoring the issues and focusing on style.

“People in the country are in a very bad mood, and they want to have change,” says Steve Schmidt, a senior adviser to McCain. “And the first place they evaluate change is through the prism of what kind of campaigns candidates are running. Voters will have an indication of the different kind of presidency he would preside over by looking at his campaign.” […]

McCain aides also want to paint their guy as different from an unpopular administration that prefers secrecy to transparency and friendly crowds to unpredictable ones.

“Sen. McCain believes every American should participate in the arena, and that includes people that don’t agree with him,” Schmidt says, taking care to note that such unscripted exchanges have waned “in the last decade.”

Additionally, McCain and his advisers want to pursue voters that look different than the bare majority coalition that Bush put together twice.

“We’re running a campaign that is not designed to get 50-plus-1 percent of the vote,” says Schmidt.

How very odd. McCain is promising voters a Bush-like agenda on the economy, a Bush-like agenda on foreign policy, and a Bush-like agenda on federal judges. But they’re in no way similar, the argument goes, because McCain isn’t as secretive as Bush and he won’t apply ideological litmus tests at public events.

Maybe I’m misreading the public on this, but to borrow Schmidt’s line, voters are “in a very bad mood, and they want to have change,” but the kind of change they’re looking for has very little to do with obsessive secrecy and Bush’s “Bubble Boy” policies. People are in a very bad mood because Bush’s policies don’t work.

And those are the very same policies McCain wants to continue until 2013.

“Triangulation”? I don’t think so.

[teapeebubbles]

Tony Snow Joins CNN As Political Contributor

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For all the discussion we’ve seen (and participated in) over the political trivia that dominated last week’s Democratic debate, let’s not forget that even when ABC’s Charlie Gibson was willing to ask a substantive question, he was still getting his facts wrong. Now that John McCain is repeating Gibson’s mistakes, it’s worth keeping reality in mind.

Here’s the exchange from Wednesday night in Philadelphia:

MR. GIBSON: [Sen. Obama, you have said] you would favor an increase in the capital gains tax…. But actually Bill Clinton in 1997 signed legislation that dropped the capital gains tax to 20 percent. And George Bush has taken it down to 15 percent. And in each instance, when the rate dropped, revenues from the tax increased. The government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?

SENATOR OBAMA: Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness. We saw an article today which showed that the top 50 hedge fund managers made $29 billion last year — $29 billion for 50 individuals. And part of what has happened is that those who are able to work the stock market and amass huge fortunes on capital gains are paying a lower tax rate than their secretaries. That’s not fair. And what I want is not oppressive taxation. I want businesses to thrive and I want people to be rewarded for their success. But what I also want to make sure is that our tax system is fair and that we are able to finance health care for Americans who currently don’t have it and that we’re able to invest in our infrastructure and invest in our schools.

Unsatisfied with his own mini-speech masquerading as a question, Gibson interrupted Obama’s answer to re-emphasize his belief: “But history shows that when you drop the capital gains tax, the revenues go up.”

Yesterday, on the same network, McCain repeated Gibson’s talking points, almost word for word, saying Obama “obviously doesn’t understand the economy, because history shows every time you have cut capital gains taxes, revenues have increased, going back to Jack Kennedy.”

All of this is demonstrably wrong.

Time’s Justin Fox tacked the subject today. (via Ezra)

There’s an easily observable one-year effect: Revenue almost always goes up the year after a capital gains rate cut because people can time the realization of their capital gains — and when a cut is coming they’ll delay those realizations en masse until after it becomes law. But that’s not really evidence that capital gains tax cuts increase revenue; it’s just evidence that they shift revenue from one year to another.

Beyond that, it’s much harder to say. In the chart in my previous post I measured capital gains tax receipts over the course of a business cycle, and on a real basis they were down in 2007 (which is almost certainly going to be a business cycle peak) over 2000. But that measurement too is subject to all sorts of noise and other possible reasons for the decline in tax receipts.

Which is where the “serious economists” who build models of economic behavior come in. And yeah, basically I mean professors at fancy universities. But on this particular topic I tend to rely on professors at fancy universities who have served in the current Bush administration, because I figure it’s hard to dismiss their verdict as political. The current consensus of this crowd is pretty well reflected in a 2004 paper by Greg Mankiw, the former chairman of Bush’s Council of Economic Advisers, and Matthew Weinzierl, which concluded that “for standard parameter values, half of a capital tax cut is self-financing.”

That means half of the tax cut is not self-financing–so the overall result of the cut is a revenue loss. And those “standard parameter values” include spending cuts to make up for the revenue loss from the tax cuts. If you simply do as the Bush administration has done, and make no commensurate spending cuts, you get less than half of the tax cut back.

Now that’s still a pretty good deal, and if you believe the Mankiw-Weinzierl model then it makes sense to keep capital gains taxes low and raise taxes on, say, gasoline. But it doesn’t mean that cutting capital gains tax rates will or has ever had the magical effects ascribed to it by Charlie Gibson on TV.

The Center on Budget and Policy Priorities also produced a revealing report on this.

Cutting capital gains rates reduces revenues over the long run. That’s the conclusion of the federal government’s official revenue-estimating agencies, as well as outside experts and the Bush Administration’s own Treasury Department.

The non-partisan Congressional Budget Office (CBO) and the Joint Committee on Taxation have estimated that extending the capital gains tax cut enacted in 2003 would cost $100 billion over the next decade. The Administration’s Office of Management and Budget included a similar estimate in the President’s budget.

After reviewing numerous studies of how investors respond to capital gains tax cuts, the non-partisan Congressional Research Service concluded that cutting capital gains taxes loses revenue over the long run.

The Bush Administration Treasury Department examined the economic effects of extending the capital gains and dividend tax cuts. Even under the Treasury’s most optimistic scenario about the economic effects of these tax cuts, the tax cuts would not generate anywhere close to enough added economic growth to pay for themselves — and would thus lose money.

I obviously don’t expect McCain to acknowledge he’s wrong, but Gibson, a media professional, asked a bogus question in a presidential debate. When the candidate didn’t respond the way Gibson preferred, he pressed his case further, all on a mistaken premise.

An on-air correction, at a minimum, is warranted.