The New York Times published a compelling opinion piece this weekend written by Alan Blinder, an economics professor at Princeton and Democratic advisor, titled, “Is History Siding with Obama’s Tax Plan?” In his article Blinder uses historical figures to make the statement that Obama’s tax policy will be better than McCain’s. On the other end of the spectrum, the Wall Street Journal published an opinion piece this morning by Martin Feldstein and John Taylor, economic professors at Harvard and Stanford and advisors to McCain, titled, “John McCain Has a Tax Plan to Create Jobs.” Both articles make great points, but the authors are obviously biased. So who are we to believe? Which Presidential nominee ultimately has a better tax plan?
Of course, what candidates say in a campaign and what they do in office can be completely different, but even if we assume that the winner will follow through on his tax promises, we can only make an educated guess. McCain plans to keep the existing Bush tax cuts in place, which will help wealthy Americans and investors who pay capital gains taxes. McCain also wants to cut business taxes among other things, which Feldstein and Taylor believe will create jobs, spur growth and benefit virtually everyone. That certainly sounds lovely, but Blinder makes some great points that seem to counter such praise of McCain’s plans.
Blinder makes the case in his article that Democratic Presidents have greatly outperformed Republican Presidents while in office, economically speaking. From 1948 to 2007 the U.S. economy has grown 1.64 percent per year under Republican Presidents and 2.78 per year under Democratic ones. Blinder estimates that this difference in growth over an 8 year period would mean an additional 9.33 percent of additional income for every American. Blinder then goes on to point out that income inequality widens when Republicans are in office and shrinks when Democrats are in office. This point of course is fairly obvious given the policy of Republicans and Democrats, but worth noting nonetheless.
So where exactly does this leave us? One article focuses on the future, while the other focuses on the past. Can one really look at the past as an accurate predictor the future? The past certainly does not guarantee future results, but by what other means can we make projections?
Blinder’s article had the bigger impact on me because he actually supports his points with statistical facts. Whether or not they accurately represent what the future holds for Obama or McCain, they do give us a basis for conjecture. Feldstein and Taylor claim that jobs will be created, but they don’t support this claim with anything. Though the logical side of my brain tells me that tax cuts for businesses will lead to job creation, where is the proof? After reading Blinder’s article one is certainly left to wonder.
Another interesting piece of information I learned watching I.O.U.S.A. was that the national debt has tended to increase at a much faster pace when Republicans were in office. This coincides well with the GDP growth mentioned in Blinder’s article, but also, as pointed out in the movie, is a result of tax cuts. This again leaves one to wonder and even rethink one’s perceptions about the validity of certain tax policy reforms, though one must still question whether the past performances of a few Presidents can accurately predict future results.
Are McCain and Obama likely to follow in the footsteps of past Republican and Democratic economic performance, or are their plans different? Voters must decide for themselves, and I urge anyone who hasn’t yet read these two articles to do so, as they might encourage readers to think more seriously about this issue.