Obama reveals McCain’s dangerous economic plan

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Barack Obama on Monday described John McCain’s proposed tax cuts as “outrageous” and said they would amount to $5,700bn over the next decade – more than double the cost of George W. Bush’s tax cuts.

By Edward Luce in Washington

Mr Obama, whose speech in Raleigh, North Carolina, kicked off a 17-day economic tour of the key general election battleground states, also mocked Mr McCain’s policy of cutting back on earmarks – specific spending items inserted by legislators for their districts – to help pay for the tax cuts.

Earmarks typically amount to between $20bn (€12.7bn, £10bn) and $40bn a year, which is just a fraction of the overall federal budget. “His suggestion that the earmark reforms . . . will somehow make up for his enormous tax giveaway indicates that John McCain was right when he said that he doesn’t understand the economy as well as he should,” said Mr Obama. “Either that or he’s hoping you just won’t notice.”

The Democratic nominee, whose largest proposed spending items are a $1,000 tax giveaway for households earning below $150,000 and a $60bn to $70bn plan to create universal health insurance, reiterated his commitment to the “pay-go” system, where tax cuts or spending increases are paid for by concomitant spending cuts or tax increases.

Mr McCain, whose tax proposals including a reduction in the US corporate tax rate to 25 per cent and steps to make Mr Bush’s tax cuts permanent, has portrayed Mr Obama as a traditional “tax and spend liberal”. On Monday, Mr Obama’s campaign sought to turn that around by stating that his opponent had not provided the back-up numbers to show how he would pay for his tax cuts.

“John McCain takes great pride in saying that he’s a fiscal conservative,” said Mr Obama. “For all his talk of independence, the centrepiece of his economic plan amounts to a full-throated endorsement of George Bush’s policies.”

Monday’s speech marked an aggressive opening to Mr Obama’s general election campaign in which the declining US economy looks likely to play a central role. Mr Obama also called for a new $50bn stimulus on top of the $170bn tax rebate pushed through Congress earlier this year given last Friday’s 49,000 jump in unemployment.

Obama officials said 58 per cent of Mr McCain’s tax cuts would go to the top 1 per cent of US taxpayers against 31 per cent of the proceeds from Mr Bush’s 2001 and 2003 tax cuts.

Jason Furman, who on Monday started as the Obama campaign’s director of economic policy, said: “People like to say that John McCain would represent a third Bush term but that might be unfair to Mr Bush . . . John McCain’s tax policies are far more radical [than those of Mr Bush].”

A spokesman for Mr McCain’s campaign disputed Mr Obama’s calculations of the costs of the tax cuts and said the Republican nominee’s fiscal proposals would bring the US budget to balance by the end of his first term in 2013.

The Financial Times

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