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Posted at 6:00 AM ET, 12/13/2007

Most Revealing Fibs: John McCain

By Michael Dobbs

Above the crowd in Atkinson, NH, Dec. 7.

"Tax cuts, starting with Kennedy, as we all know, increase revenues. So what's the argument for increasing taxes? If you get the opposite effect out of tax cuts?"

--John McCain, interview with the National Review, March 2007.

Some spirited arguments over supply-side economics appear to be taking place aboard the "Straight Talk Express." It is not often that you come across a presidential candidate whose talking points are contradicted by one of his own top aides. In this particular case, McCain's claim that tax cuts "increase revenues" and that tax hikes have the "opposite effect" has been disproved by his own senior domestic policy adviser, Douglas J. Holtz-Eakin. Holtz-Eakin has solid conservative credentials as a former chief economist to President George W. Bush's Council of Economic Advisers. He is also a former director of the Congressional Budget Office.

Let's go through the math. In December 2005, Holtz-Eakin supervised a CBO study that looked at the economic impact of federal income tax cuts. According to the calculations of his experts, a 10 percent tax cut would result in a revenue loss of $1.241 trillion over 10 years. Under the most optimistic assumptions, increased economic growth generated by the tax cut would offset this loss by $345 billion dollars. That is a net revenue loss of nearly $900 billion.

Asked to explain the candidate's position, the McCain campaign sent me an e-mailed statement from Holtz-Eakin claiming that the senator "has never supported the idea that tax cuts pay for themselves." He went on:

Cutting middle class taxes will generate additional growth, especially if it is accompanied by fiscally responsible spending cuts that eliminate earmarks, stop waste, and reform entitlements. John McCain believes that the improved growth will make families better off, and also happen to reduce the revenue lost by lower taxes."

That statement is consistent with Holtz-Eakin's own views, as expressed in the 2005 CBO study. But it is not consistent with the McCain quote to the National Review. The assertion that tax cuts generate economic growth that partially offsets lost revenues is not at all the same as a claim that tax cuts actually "increase revenues."

This is not the first time that Holtz-Eakin has had to clean up after his candidate. On December 5, McCain told the Boston Globe that "most economists" agreed that there had been an "increase in revenues" as a result of the Bush tax cuts of 2001 and 2003. (A highly questionable statement.) Allowing those tax cuts to expire could decrease revenues, McCain warned. The campaign and Holtz-Eakin later told the Globe that McCain did not mean to say that "tax cuts pay for themselves."

The truth is that McCain has been all over the map on taxes. He voted against the Bush tax cuts in 2001 and 2003, but now says that he is in favor of them. During the National Review interview, he was asked by Ramesh Ponnuru if there were any circumstances as president in which he would be willing to accept a tax increase.

McCain: No; no.
Ponnuru: No circumstances?
McCain: No. None. None. Tax cuts, starting with Kennedy, as we all know, increase revenues. So what's the argument for increasing taxes? If you get the opposite effect out of tax cuts?

During the Republican presidential debates, McCain has repeatedly refused to "pledge" not to raise taxes if he becomes president, saying that his record speaks for itself. "I have a 24-year record of opposing tax increases and supporting tax reductions," McCain said during the Nov. 28 CNN-YouTube debate, in response to a challenge not to raise taxes from Grover Norquist of Americans for Tax Reform. "My pledge and my record is up to the American people, not up to any other organization."

Except that he made that promise to the National Review eight months before. At least, that is what it sounded like.

The Pinocchio Test

John McCain is fortunate that I am giving the candidates a pass this week from awarding Pinocchios, as he would qualify for a few on this one. (I might revisit the issue later.) It looks as if the master of the "Straight Talk Express" is trying to have it both ways. After voting against the 2001 and 2003 Bush tax cuts in the Senate, McCain has been atoning for his supply side heresy in his latest presidential run.

McCain is quite an enigma to the Fact Checker. I previously awarded him my first Geppetto checkmark for truth-telling, but was obliged to add three Pinocchios for the claim that the Constitution established the United States as "a Christian nation."

By Michael Dobbs  | December 13, 2007; 6:00 AM ET
Categories:  Candidate Record, Candidate Watch, Economy  
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