McCain's economic plan

McCain announced his plan in a speech in Pennsylvania on Tuesday. Let's see what we've got here:

I will direct the government to refinance troubled mortgages for homeowners and replace them with mortgages they can afford...

This is the $300 billion proposal he unveiled last week. The problem is he proposes buying mortgages at face value, which amounts to a handout to the mortgage issuers.

On my orders, the Department of the Treasury will guarantee one hundred percent of all savings accounts for a period of six months...

The FDIC has already temporarily expanded its deposit insurance program to cover all non-interest paying deposits. I'd be interested to know why they did not choose to insure interest-bearing deposits such as savings accounts, and why McCain thinks they should.

Current rules mandate that investors must begin to sell off their IRAs and 401Ks when they reach age 70 and one half years old. Those rules should be suspended to spare senior citizens from being forced to sell their stock just as the market is hurting the most. Under the emergency measure I propose, we will also cut the tax rate for withdrawals from tax-preferred retirement accounts to ten percent...

Fine, but this affects a small slice of the public and not necessarily those who are going to be hurt by the recession.

I will cut in half the capital gains tax on stocks purchased and held for more than a year -- from a rate of 15 to 7.5 percent...

Well, there's nothing a cut in the capital gains tax won't cure. But seriously - people are selling stocks with abandon because they think the entire world financial system is going to collapse and we're going to experience another Great Depression. Suppose while that's going on the government says, "hey, buy some stocks and we'll cut the tax rate on all the capital gains from those stocks from miniscule to infinitesimal." Would anyone respond to that incentive? I think not.

I will increase the amount of capital losses from $3,000 to $15,000, which can be deducted from your ordinary income in tax years 2008 and 2009...

To benefit from this provision you need to (a) have large capital losses from investments, and (b) have an income tax liability substantially greater than $3000. We're talking about giving a break to upper income people here.

I have proposed a one year spending freeze with certain exceptions for such things as defense and veteran care...

Um, but you just said you were going to spend $300 billion to buy up mortgages. Oh, a freeze on everything except that $300 billion. Ok. I guess that also means no help to states, so they're left to raise taxes and cut spending on things like schools and police. That, of course, will worsen the recession.

I will double the child deduction, from 3,500 dollars to 7,000 dollars. Every person in America who chooses it will receive a 5,000 dollars towards the purchase of health insurance -- health plans that will be theirs to keep, even if they change jobs or move to another state. And we will reduce the federal business tax rate from 35 percent -- the second-highest in the world -- to 25 percent. I am also proposing today that for those who are between jobs, we eliminate all taxes on unemployment benefits...

Double the child deduction, eliminate taxes on unemployment benefits - fine. $5000 tax credit for purchase of health insurance - as many people have noted many times before, this is matched by the elimination of the employer's tax deduction for employer-paid health insurance, so you're no better off. Worse off, actually, because while health care costs rise over time the tax credit does not, and you are left on your own in an unregulated insurance market in which insurance companies can cherrypick their customers and deny affordable insurance to people likely to actually need it. Corporate tax cut - silly. U.S. corporations pay far less than the official 35% rate anyway.