Sen. John McCain is committed to balancing the federal budget by 2013 - a striking contrast to his opponent. Despite his voting record and ideological commitment to higher taxes, Sen. Barack Obama’s big spending plans resemble the failed strategy of the past seven years, will not lead to a balanced budget and will fuel our fiscal decline. Mr. McCain will bring the federal budget into balance by returning spending sanity to Washington and increasing revenues by spurring economic growth and job creation.
The McCain budget strategy is built on three principles:
(1) An economic surge that will restore economic growth and create jobs for American workers. A growing economy is essential to addressing the budget challenge. The greatest success in reducing deficits - such as in the late 1980s and late 1990s - took place in a time of economic expansion. But, our plan must not rest on “rosy scenarios.” That’s why the McCain strategy to balance the budget takes as its starting point the conservative Congressional Budget Office assumption of average GDP growth of 2.8 percent between 2008 and 2013.
(2) Comprehensive spending controls. Bringing the budget to balance will require across-the-board scrutiny of spending and tough choices on new spending proposals. Mr. McCain’s plan will freeze discretionary nonmilitary government spending for one year and hold spending growth to 2.4 percent per year - well below the spendthrift increases of the past seven years.
(3) Bipartisan budget efforts. The 1990s witnessed bipartisan efforts that put the nation’s fiscal house in order; the same can undo the recent spending binge. In a budget that has grown 60 percent over the past eight years, there are significant opportunities to trim spending.
Mr. McCain’s economic surge is based on making America open for business again. U.S. workers have done their job, and our firms have strived to expand and grow. But, as the rest of the world has lowered taxes on business and taken other steps to encourage job creation, our leaders have been asleep at the switch. The U.S. now has the second-highest business-tax rate in the world. It’s no wonder that we’re driving jobs overseas.
Mr. McCain will keep good jobs here and encourage even better jobs. He will provide a permanent research and development credit that encourages innovation, rewards the creation of good research jobs in the U.S., puts those innovations to work with investment incentives, draws companies to locate in the U.S. with competitive taxes, and keeps inflation low with a strong dollar.
He will also support small businesses that have created 283,000 jobs this year in the face of difficult market conditions by fighting rising energy prices, keeping tax rates on small business job creators low, providing cheap access to capital through low tax rates on dividends and capital gains, supporting affordable, portable health insurance and opening markets for U.S. products around the globe.
Mr. Obama will not cross his political backers to take these badly needed steps. His agenda of higher taxes, expensive mandates and anti-trade efforts will damage the U.S. economy.
Revealing a lack of understanding of the problems facing our nation, Mr. Obama has one answer to every challenge: more spending from Washington, more taxes on Americans. Pouring more money into broken programs will not solve congestion in Denver, Las Vegas, Detroit and other major cities - it will build more bridges to nowhere. Increasing funds for inefficient bureaucracies will not meet our obligation to educate our children - it will doom them to failing schools and uncompetitive futures. Building another unsuccessful 1970s-style energy bureaucracy will simply offer America another 30 years of failed energy leadership.
A McCain administration will provide the leadership to achieve bipartisan spending restraint. There was a time when the Democratic Party embraced the efforts of then-President Clinton, who agreed in 1997 with a Republican congress to balance the budget by restraining the growth in spending - to the tune of $800 billion - and cutting taxes over a ten-year period. With the same bipartisan effort today, with a federal budget that is now 76 percent larger, the opportunity exists for $1.6 trillion in deficit reduction by keeping the growth of spending to 2.4 percent. Unlike Congress and the executive in recent years, Mr. McCain will enforce the spending restraint to balance the budget and keep it balanced.
An economic surge, review of programs and a focus on national priorities, and a return to bipartisan budget controls is a near-term recipe to reverse the spending binge and restore faith that Washington is responsive to the needs of Americans. The budget will remain in balance over the long-term only with crucial bipartisan efforts to reform and protect Social Security and Medicare for future retirees. Reforms that restore trust and prosperity are the foundation on which to build these efforts.
Douglas J. Holtz-Eakin, an economist and a former director of the Congressional Budget Office, is a senior policy adviser to Sen. John McCain.