TaxVox: Campaigns, Proposals, and Reforms

Barack Obama gave four speeches last night. The first was the same optimistic cry for change that has carried him so far in this Presidential season. The second was a tough, frontal attack on the economic and foreign policies of both George Bush and John McCain. The third was a (Bill) Clintonesque bit of social policy triangulation—we can all work together to find solutions to such hot button issues as abortion, guns, gay marriage, and immigration. The fourth was a recitation of his economic agenda—a long list of promises that is familiar to readers of TaxVox by now.

When the Tax Policy Center reported last month that Senators Obama's and McCain's tax proposals would both reduce federal revenues by trillions of dollars over the coming decade, both campaigns complained that TPC was using the wrong baseline to measure revenue changes. Instead of measuring revenue against current law, they asserted, analysts should assess the plans against "current policy." In fact, the choice of baselines is in some sense irrelevant as a gauge of our fiscal problems.

If Barack Obama gets elected President, the first thing he should do is hire Doug Holtz-Eakin to be his budget director. A highly-respected non-partisan budget wonk, who is leaning Obama’s way in the election, threw out this seemingly crazy idea at lunch the other day. And the more I thought about it, the more sense it made.

To paraphrase the oily Captain Renault of Casablanca fame, we in Washington are shocked, shocked to find that deficits are going on here. To listen to the cries of outrage and dismay, one might think the Bush Administration’s latest projection of nearly $400 billion in red ink for the fiscal year ending on Sept. 30, and almost $500 billion for next year was unexpected.