McCain's Economic Plan Will Increase U.S. Deficit

Here’s the bad news: both Obama and McCain’s proposed tax and spending policies will create a larger deficit for the U.S. The good news: the frontrunner’s proposals will create a smaller deficit than his rival would.

NY Times: While both presidential candidates enter the campaign’s final week promising to be the better fiscal steward, each has outlined tax and spending proposals that would make annual budget deficits worse, analysts say, with Senator John McCain likely to create a deeper hole than Senator Barack Obama would…

Mr. McCain, the Republican nominee, has proposed bigger tax cuts. He has also promised more in spending cuts, but he has not specified where most of them would come from. Even now that the financial crisis has given rise to one bailout package and prompted both candidates to call for billions more in stimulus spending, Mr. McCain has stuck by his promise to balance the budget by the end of his term, a pledge that fiscal analysts call unachievable.

Mr. Obama, his Democratic rival, has vowed to reduce the deficit and put it on a path to balance. He also promises an expensive effort to make health care insurance more widely available, a raft of other spending programs and tax cuts for most families and small businesses. He would raise taxes on the wealthiest households to help pay for his health care plans.

To be fair, this is all just speculation.

Neither presidential candidate has provided enough detail, especially about spending programs and what they would cut, for budget groups to put price tags on their agendas.

Nonetheless, the country’s deficit may mean the winner will have to scale back some of his proposals.

The deficit for the 2008 fiscal year, which ended Sept. 30, was $455 billion, or 3.2 per cent of total economic output. Analysts say it could reach $1 trillion in 2009, or more than 7 per cent of projected economic output, with the country in recession and fighting a two-front war. During the 1980s, the deficit peaked at about 6 per cent of economic output; economists consider anything above about 3 per cent to be a worrisome level for the deficit.

So far, both Mr. McCain and Mr. Obama have insisted they do not have to have to scale back their pre-crisis platforms.

The fiscal outlook and history suggest otherwise.

NOW WATCH: Briefing videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.