Sweet promises and the sour taste of fiscal reality

DOVER, N.H.
IN A TOWN HALL, Democratic presidential candidate Barack Obama once again said, "We will cut taxes, cut taxes for 95 percent of working Americans." Even the supporters who applaud him are not quite sure what to make of this pledge, since they are also drawn to Obama by his promises to expand education and healthcare, and Obama has already said he would strengthen military efforts in Afghanistan while trimming them in Iraq. Do they really believe he can pay for it all?

"I'm an optimist, but I don't know if that's really going to happen," said George McAlpin, a limousine driver who is about to join the National Guard. "To improve the country, I would imagine you'd see taxes going up here and there."

"I don't pretend to be an economic person," said Fran Giegengack, a retired academic admissions assistant. "Will it all add up in the end? I sincerely don't know. I'm more willing to trust him than McCain."

"I don't know how he's going to do it," said stay-at-home mother Pauline W. Blake. "Our budget has been run the last eight years by a kid in a candy store. So to say you can give 95 percent of the people tax cuts, I'm thinking, good luck, buddy, if you can pull it off."

Obama is likely passing out candy of his own, a sweetness to distract Americans from the sour work ahead.

With federal support for domestic programs run into the ground by Bush, it seems implausible that Obama can right the fiscal ship by taxing only corporations and the top 5 percent of Americans. His pledge is not as bizarre as Bush urging Americans to display post-9/11 patriotism by getting on planes to Disney World, but it does steer into the arena of illusion, that all will be well with 95 percent of the people not called to sacrifice.

To be clear, there are huge differences in the tax plans of Obama and GOP nominee John McCain, according to an analysis published last week by the Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute.

Under McCain, the lowest, second, third, and fourth quintiles of Americans would receive an average 2009 tax cut of $21, $118, $325, and $994, respectively. Under Obama, the lowest, second, third, and fourth quintiles would see cuts of $567, $892, $1,118 and, $1,264.

Under McCain, the top 1 percent of Americans would receive a tax cut of about $49,000 and the upper 0.1 percent would receive a tax cut of about $291,000.

Under Obama, the top 1 percent would pay about $94,000 in new taxes and the top 0.1 percent would pay about $543,000 more.

The Tax Policy Center said the "significantly more progressive" Obama plan and the "more regressive" McCain plan "would have radically different effects on the distribution of tax burdens in the United States."

But there is another reality. The McCain proposal would leave the nation $5.1 trillion more in debt by 2018. The Obama plan would still add $3.6 trillion to the national debt.

"The short answer is no," said Len Burman, director of the Tax Policy Center, when asked if Obama could pay for it all. "We're talking about massive tax cuts, significant new spending priorities, and down the road we have enormous economic challenges, particularly on healthcare. Anyone who did first-grade math should be able to figure that out. But it appears that a significant number of people in Congress haven't."

More optimistic was Jared Bernstein, analyst for the Economic Policy Institute and an informal Obama adviser. "I think it is doable," he said, "but there are a lot of moving targets, if he can really close loopholes in the tax code, if he can end the war, if Congress signs off on his ideas . . . It already takes tremendous nerve for him just to say he's raising taxes on some of the people and nerve to do it on the richest. That is still huge."

More huge will be the day when tax cuts cease to be an artificial sweetener.

Derrick Z. Jackson can be reached at jackson@globe.com.