In a sane world, John McCain would just have knocked himself out of the race for the Presidency, or any other office that requires at least a vague knowledge of economics. In this world, only a few bloggers seem to have noticed:
""As a Republican, I stand before you embarrassed. Embarrassed that we let that spending get out of control," the presidential candidate told voters on the eve of the state's GOP primary.
"The economy is not good. The stock market continues down. And the indicators are not good. I'm not too astonished. ... We let spending get totally out of control, and it continues today, and I'm sorry to tell you this," McCain said at a town-hall style meeting at the Carolina Hospital East Campus in Florence.
The Republican presidential candidate has voiced apprehension over proposals for temporary tax cuts and more spending as suggested by many Democrats and Republicans alike, saying they result in additional strains on resources. McCain has proposed cuts in corporate taxes instead from 35 percent to 25 percent, extension of Bush tax cuts, and elimination of the Alternative Minimum Tax.
"People talk about a stimulus package. Fine, if that's what we want to come up with. But stop the spending first," he said."
Um: how to say this? Our economy is not good because we are going into a recession. Recessions do not happen because of excessive government spending. Spending stimulates the economy; that's why it, along with cutting taxes, are the two standard things governments try to do to help get the economy out of a recession. Saying that the economy is going into a recession because of excessive spending is like blaming someone's anorexia on her having too much food. It's just plain nuts.
Excessive spending obviously causes problems. It can contribute to inflation. If it isn't compensated for with tax increases, it will increase the deficit, contributing to long-run problems*. But it simply does not cause recessions, any more than turning up the heat in my house causes me to get frostbite.
Similarly, it's crazy to say that we can have a stimulus package, but only if we stop spending first. Spending is stimulus. It's not the only kind of stimulus, but it's a kind. Cutting spending would work directly against a different kind of stimulus package, like one built around tax cuts. To continue my previous example: saying that we can have a stimulus package, but only if we cut spending first, would be like saying to someone dying of frostbite: sure, you can turn on the heat, but only if you open all the doors and windows, take off all your clothes, and pack yourself in ice first.
Would you want someone who gave you that kind of advice to be your high-altitude mountaineering guide? I don't think so. Similarly, I don't want John McCain to be my President.
This astonishing display of ignorance comes on the heels of McCain's earlier claim that "Every time in history we have raised taxes it has cut revenues." I'll just outsource this one to Jonathan Chait, who eviscerates it. Better yet, I'll steal Chait's chart:
Can you spot the downturn in revenues that accompanied the 1993 tax increase? Neither can I. But hey: why should McCain let actual historical facts get in his way?
*Deficits can, in particular, contribute to long-run decreases in growth. Over time, they can therefore contribute to recessions. But McCain did not say that the excessive deficits we racked up under Reagan, Bush I, and Bush II contributed to the recession. He seems to have meant that our (present) out of control spending caused the recession we now seem to be entering, which is just bizarre.
For what it's worth, my best take on his remarks is that he has grasped the idea that deficits are bad, but not the idea that the best thing the government can do to avert a recession is to stimulate the economy, and that this involves cutting taxes, boosting spending, or both. If he also believes that raising taxes makes revenues drop, that might explain why he thinks that cutting taxes would be OK from the point of view of the deficit, whereas boosting spending would not.
In no case, however, is what he said consistent with his having any clue at all about economics.