Applying basic economic principle and a touch of sarcasm, Mark Witte, director of undergraduate studies for Northwestern’s economics department, unraveled the presidential candidates’ economic platforms for about 50 students in Harris Hall Monday night.
According to Witte, there is much to be unraveled.
“There’s no way to get confused by a sneaky, complicated plan, right?” he said. “These plans are no more complicated than the Northwestern meal plan.”
NU Decides, a voter outreach group, hosted Witte’s lecture, “Taxation with Representation: Tax Policy and the Presidential Candidates,” to encourage students to get informed and involved in the election, said Weinberg junior Samir Pendse, an NU Decides executive board member.
“We wanted to make it fun and interesting but also very informative,” he said. “We felt that Professor Witte was the perfect guy for the job.”
Witte’s lecture made sense, said Weinberg junior Jeff Cao, program chairman for the event.
“It was interesting to hear an economist’s perspective when I feel that perspective has been lacking from the campaigns,” he said.
Cao voted early for Sen. Barack Obama, but he said listening to the lecture “opened his eyes” and made him rethink his views on the candidates.
“If I hadn’t voted already, and I was only voting on economics, I would consider voting for John McCain,” he said.
Unless people are reading the news and studying the issues, it’s easy to be misled or confused, Pendse said.
“Politics nowadays is just buzz words,” he said. “You just hear the buzz; you don’t see the detail behind it.”
Obama’s Plan
Obama’s plan leans more on taxing high-income individuals and capital by lowering income taxes on the bottom 95 percent of earners, and having higher marginal tax rates on the top 5 percent of earners, Witte said.
The biggest difference between Sen. McCain and Obama is that McCain will keep President George W. Bush’s tax rates, he said. Current tax rates under law are set to revert to what they were before Bush.
“It’s like Cinderella,” he said. “By midnight, 2011, taxes are set to go back to where they’ve been. It would be like those eight years never happened.”
Under Obama’s plan, 18.2 percent of GDP, a lower percent than now, will go to taxes, he said. The lower percentage seems odd economically, Witte said. Obama’s plan does not make the most sense in the long run, he said.
“Why does he do that?” he said. “Because he doesn’t want to be accused to raising taxes.”
Obama’s estate tax of 45 percent on an estate worth over $7 million provides an even higher incentive than McCain’s to make endowments to NU before you die, Witte joked.
His plan will also expand health insurance so all children are insured, Witte said.
McCain’s Plan
Think of McCain as a “low G, low T guy” – low government, low taxes, Witte said. His economic platform is dominated by high-income tax cuts. If enacted there will be a larger tax burden for the lower 80 percent of income earners, he said.
But McCain will keep the current low income tax rates, which will be expensive, he said.
It’s like “you borrow a bunch of money from your parents and you don’t expect them to make you pay them back,” he said.
There will also be an estate tax of 15 percent on estates worth over $10 million.
His plan also will tax employer health benefits as income, leveling the playing field for those without health benefits. Everyone will then get a $2,500 tax credit ($5,000 for a family) to buy health insurance.
An individual buying health insurance for himself is different than an employer buying insurance for a group, Witte said.
When insurance companies sell rates to employers, the rates are based on average risk of the group. When an individual wants insurance for himself, the companies are inclined to think he’s at higher risk, he said.
“The person selling you shoes doesn’t care why you want to buy shoes,” he said. “They kind of know. But when you go into buying health insurance, there’s a different game. The sellers don’t want to sell it to you if they think you’re going to use it.”
Show me the money
In the end, it won’t really matter what the candidates say they are going to do, because there won’t be any budget to do it with, Witte said.
“There’s no way,” he said. “You run on a platform, but it ain’t going to happen.”
The current economic deficit is an annual 8 percent of GDP. In the best case scenario, the U.S. can borrow its way out. In the worst-case scenario, by 2020 the country is going to run out of money, Witte said.
“Say we elect McCain, he has eight years and then his vice president runs,” he said. “At the end of her term and she runs for election. Bam. Our credit cards are canceled everywhere. Thanks, but no thanks.”
