McCain vs. Obama on the United States Economy by Ravi Batra

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McCain vs. Obama on the United States Economy
byRavi Batra
I am an economist by profession and an independent voter. In the past I have voted for the Democrats, independents and Republicans in elections, and I feel I can take an objective look at the economic plans offered by John McCain and Barack Obama, especially their tax policies. I will use facts from this book to form my opinion.  This book is called The Economic Report of the President, and appeared in early 2008.
Table 1: Increase in Family Income
Bill Clinton (1993-2000)                                        $8,600
G W Bush (2001-2006)                                        - $990
GDP Growth and Job Creation
President                                GDP Growth             Job Creation         Manufacturing Jobs
                                             Per Year           
Clinton (1993-2000)                  3.7(%)               23 million                 450,000
Bush (2001-2007)                     2.8(%)               5 million                - 3.2 million
Source: Economic Report of the President, 2008
     Please take a look at Table 1. First, under Bill Clinton family income soared by $8600, and under Bush it has actually declined by $990. This information is on page 266 of the president’s own report. Second, under Clinton more than 23 million jobs were created and only 5 million under Bush. This information appears on page 280 of the president’s report.
     Why is job creation so strong under Bill Clinton and very poor under George Bush? After all, GDP growth under the two presidents is not that much different—3.7% vs. $2.8%. So the economy expands under both presidents, yet Clinton created 23 million jobs while bush only 5 million. And with manufacturing, Clinton generated almost half a million jobs, whereas bush has actually destroyed over 3 million such jobs. What is the problem?
   There are two reasons. First is outsourcing. Because of Bush’s tax relief to corporations that ship jobs overseas, American multinational companies now mostly hire workers abroad; so American output still rises but few jobs are created at home. Thus, one reason for poor job creation under Bush is the vast growth in outsourcing.
    The other reason is a huge rise in taxes on small business. The Republicans are right when they say raising taxes kills the economy and jobs, but they forget that they are the ones who raised such taxes. This perhaps comes as a shock to you.  “ What! The Republicans raising tax rates, and that too on small business?” Nobody would believe that. Aren’t they the party of tax cuts? They are, indeed, but only for the wealthy. They have crippled the small business person with the largest tax rise that occurred on self employment under President Reagan. Please take a look at Table 2.
Table 2: Trust Fund Data: Tax Rates for Self Employed Persons


Tax Rates (in percent)













1990 and later

    Source: Social Security administration:
     As you can see, in 1981, when Reagan became president, the self-employment tax was only 9.3 percent and remained more or less the same until 1983. It jumped to 14 percent in 1984, and kept rising until 1990, when Bush senior was the president. So such a giant rise in the self employment tax occurred under the watch of Republicans. This information comes from the Social Security administration.
    There is something else you should know. The tax increase was proposed by a commission headed by Alan Greenspan, the current Republican candidate John McCain voted for it in 1983, and Reagan signed it into law. All of them were prominent Republicans. So this was a Republican tax increase. How strong was this tax rise? It rose from a factor of 9 to 15 or by 66%. Can you even imagine a 66% tax rise? Such a vast tax increase has to kill the jobs machine that small businesses are, especially in a low-growth economy under George Bush.
     Historically, I find that in general the Democrats create jobs, while the Republicans destroy them. President Hoover, who created the Great Depression, after all, was a Republican. Then how come the Republicans are known as a party of tax cuts? Yes, they indeed cut taxes for the rich, but they have raised taxes on the middle class ever since 1983. And now they are also the party of outsourcing that is further killing American employment.
     John McCain wants to cut taxes for corporations and the rich again, but says nothing about the huge self-employment tax that he voted for. Obama wants to cut income taxes for the middle class while raising them on the wealthy.
    We all hate taxes, but like death they are inevitable. No government can live without them. But there are good taxes and bad taxes. Bill Clinton raised taxes on those who can afford to pay them, while John McCain voted to raise taxes on the middle class. Clinton created more jobs than Reagan, Bush senior and George Bush combined. History shows that Obama’s middle class tax cut will create millions of new jobs and raise family income, while McCain’s tax cuts for the wealthy will do what such cuts have done under George Bush—they will destroy millions of manufacturing jobs, and reduce family income even more. My humble request to Mr. McCain is this: please reconsider your giant tax increase for the middle class. My humble request for Mr. Obama is to add a small cut in the self-employment tax to his plan, from the current 15.3% to 12% over two years. After all, small businesses don’t outsource jobs; they actually create them.