Marathon Pundit: Report from the McCain campaign teleconference on the economy

Monday, July 28, 2008

Report from the McCain campaign teleconference on the economy

For my entire adult life--since 1982--it's been small businesses that have been the driving force in creating jobs. Microsoft and Google--and they're not the only examples I could use--once were small businesses.

More than two-thirds of all new jobs come from small businesses. Barack Obama wants to raise the rate on capital gains, as well in a move to "bring fairness" to the tax system, on families making more than $250,000.

Many of those families, "the rich" in Obama-speak, own small businesses. As for the capital gains rate--currently at 15 percent--Obama wants it higher, but won't say how much. Why not tell us now, Barack?

John McCain wants to keep the Bush tax cuts permanent--and he wants to the capital gains tax rate the same.

This morning I listened in on a McCain campaign teleconference call with former Hewlett Packard CEO Carly Fiorina, Meg Whitman, former eBay (a onetime small business) president and CEO, and two economics professors, Martin Feldstein of Harvard, and John Taylor of Stanford.

Fiorina spoke about the sluggish economy:

And yet, one of the bright shining spots in the economy was small business that created over 230,000 thousand jobs (in the first six months of the year). That's why John McCain wants to make it easier for small business to access capital by keeping the tax rate on capital gains and dividends low. It's why he proposes a depreciation schedule that allows small business to invest in capital equipment and technology and offsets office expenses in the first year. It's why he proposes a portable affordable healthcare plan rather the saddling small businesses with a huge $12,000 payment for a government mandated health proposal for every employee with a family as Barack Obama would do.

Whitman brought up energy:

...and this will be a perfect lead in for Marty, is that you can't talk about our economy and the challenge it faces without talking about energy. Because with the high price of oil, the high price of gasoline ... it has filtered into food prices, shipping prices, everything that is driven by oil, which is just about everything we consume is. So we have got to have a national energy policy that is smart, is intact, and makes a ton of sense because if we don't, we're going to have a lot of trouble over time making sure that our economy grows again.

Then it was Feldstein's turn:

Now many people have reacted to these long-term proposals by saying now what about the price of oil today?' So what I want to focus on is the fact that policies that affect long term-supply, like the McCain strategies for increasing exploration and production, or strategies that reduce demand in the-long term, incentives for new technology for example, have an immediate impact on today's prices. Something's that going to change the supply and demand five years, ten years, twenty years from now will have an impact on today's prices. The reason for that is that if an increase in long-term supply or reduction in long-term demand is perceived by investors and by the oil industry and others as changing the future price of oil, that changes their incentives today in terms of the inventories they accumulate and the prices they charge. If the price is going to be lower in the future because of more supply and less demand that price is going to come down in the future, that gives producers and others an incentive to sell more today rather than hoarding it, inventorying it, or failing to bring it out of the ground. An that's an incentive that affects not just American firms but also the Middle East oil providers who look ahead and see policies coming into place which are going to affect the demand and supply over the long term, and we've already seen it in recent day as the price of oil has come down substantially.

I think the key thing to understand, and to communicate to readers, is that policies that aim at the long term will have this favorable short term affect on prices.

Taylor concluded:

Let me just mention some contrasts with Senator Obama. I think on the taxes it couldn't be greater. I just don't see how anybody can think of raising taxes in weak economic times like this and that's a key part of what Senator Obama has proposed. In contrast, Senator McCain wants to prevent taxes from increasing on small businesses, on capital gains, on dividends and also wants to give a reduction in taxes on a corporate level and business level so that American firms can compete abroad and create jobs.