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How Will McCain Handle the ‘Are You Better Off’ Issue?

Sen. John McCain (R-Ariz.) has made a good start showing he understands economics, but he still has to cope with the killer question: “Are you better off now than you were eight years ago?”

[IMGCAP(1)]In a debate at The George Washington University on Feb. 25, a team of four Democratic Congressmen led by Rep. Rahm Emanuel (Ill.) demolished a team of Republicans led by Rep. Adam Putnam (Fla.) by citing all the evidence that Americans are not better off than they were when George W. Bush became president.

Such as: Median household income in the United States rose $6,000 in the eight years of Bill Clinton’s administration, to $49,163, but fell to $48,023 during Bush’s first six years in office. Certainly, it’s still falling.

Also, the economy grew by an average of 4 percent during the Clinton years and created an average 1.8 million jobs a year. Under Bush, gross domestic product has grown just 2.7 percent a year and created 369,000 jobs a year — and a recession is probably under way to cut even those numbers.

The price of gasoline in 2001 was $1.39 per gallon. Now, it’s $4. The number of Americans lacking health insurance was 38 million; now, it’s 47 million. The national debt was $5.7 trillion in 2001; now, it’s $9.2 trillion. The dollar was worth 1.07 euro; now, it’s .68.

And so on: The poverty rate, college costs, take-home pay, personal indebtedness, foreign oil dependency and the trade deficit all are worse than they were when Bush took office.

In the GW debate, Emanuel and fellow Democrats Steve Israel (N.Y.), Artur Davis (Ala.) and Robert Andrews (N.J.) pummeled Republicans Putnam, Cathy McMorris Rodgers (Wash.), Paul Ryan (Wis.) and Eric Cantor (Va.) with the numbers, and the Republicans had no refutation to make.

Democrats will do the same to McCain, and he’d better get ready with answers. Although polls now show him running virtually even with both of his Democratic rivals, Democrats think that the 2008 update on Ronald Reagan’s famous question from 1980 — when he trounced Jimmy Carter — eventually will prove devastating to McCain, too.

Of course, McCain is not the incumbent president that Carter was, but Democrats already are asserting that McCain’s election would amount to “Bush’s third term” because he would continue Bush’s Iraq policy and extend his tax cuts. It won’t be long before they start hitting him with the numbers.

McCain has given two good economic speeches lately, including one on Tuesday at Carnegie Mellon University in Pittsburgh, that implicitly distinguished him from Bush and cast him as an activist economic reformer, but that won’t be enough to beat back the Democrats, particularly as the economy worsens.

The closest he came to distancing himself from Bush’s record was to say that “in so many ways, we need to make a clean break from the worst excesses of both political parties. For Republicans, it starts with reclaiming our good name as the party of spending restraint.

“Somewhere along the way, too many Republicans in Congress became indistinguishable from the big-spending Democrats they used to oppose. The only power of government that could stop them was the power of the veto, and it was rarely used.”

Implicitly, McCain made himself out to be different by promising, “I will lead across-the-board reforms in the federal tax code, removing myriad corporate tax loopholes that are costly, unfair and inconsistent with a free market economy.”

He promised regulatory reform to bring “transparency, accountability and persons and corporate responsibility” to the activities of investment banks and mortgage lenders and pledged “no more subsidies for special pleaders — no more corporate welfare.”

Correcting the impression that he believes in laissez-faire economics, McCain declared that “economic policy is not just some academic exercise, and we in Washington are not just passive spectators. We have a responsibility to act — and if I am elected president I intend to act quickly and decisively.”

For one thing, he proposes to reform unemployment insurance and retraining programs and create income-loss “buffer accounts” to tide workers over but encourage them to get new jobs quickly.

He also favors doubling the dependent tax exemption that will put more money in the hands of parents and called for emergency measures to lower gasoline prices and make sure student loans are available this fall.

All this is fine and there’s more. McCain courageously opposes farm subsidies, for example, that lavish billions on rich agriculture enterprises at a time of booming farm prices.

But to counter the numbers Democrats will throw at him, McCain is going to have to explain — clearly, so that ordinary Americans can understand it — why low taxes and free trade did not make Americans worse off than they were eight years ago.

He made a good case on trade in Pittsburgh, declaring that “opening new markets for American goods and services is indispensable to our future prosperity. We can compete with anyone.” But he’s going to have to keep rebutting the dominant public impression that trade is bad for workers.

It’s a harder case with Bush’s tax cuts. According to the Brookings Institution Tax Policy Center, two-thirds of Bush’s tax cuts went to those in the top 20 percent of income and left those making less than $100,000 a year paying more of the total burden of federal taxes than any other income group.

McCain’s proposals to cut the corporate tax rate from 35 percent to 25 percent, allow immediate write-offs of new manufacturing equipment and retain the capital gains tax rate at 15 percent are all defensible as job-creators, but McCain is going to have to explain why — and make it clear why his opponents’ tax-raising back to Clinton levels will hurt the economy.

McCain will have to be clear why he originally opposed Bush’s tax cuts as gifts to the rich, but now favors making them permanent.

Sen. Barack Obama (D-Ill.) hits McCain constantly on this, charging that “somewhere along the way to the Republican nomination, I guess he had to stop speaking his mind and start towing the line.”

For a candidate who allowed as how economics wasn’t his strong suit, McCain has proved a quick study. But he doesn’t just have to learn economics — he’s got to teach it. The task has barely begun.

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