"Bush's Tax Cuts Are Dead," declared Newsweek Senior Editor Daniel Gross one day after Super Tuesday. What's more, 'twas "McCain's victory [that] dooms them."
Gross's February 6 story was the third in a slideshow lineup on the magazine's front page today (see screencap at right). But far from merely offering a prognosis on the Bush tax cuts, Gross weaved in his own opinion about how a President McCain letting them sunset would be fiscally responsible:
For their part, Republican primary voters have slowly weeded out the candidates most committed to tax cuts and left behind the candidate(s) whose commitment to extending the Bush tax cuts is weakest. To be sure, all the candidates have sworn that they would make the Bush tax cuts permanent. (How they would square that with boosting spending on defense and restoring the mythic Republican value of fiscal conservatism has gone unaddressed.)
For his part, McCain is making the right noises in the primary. In the tax section of his platform, he commits to making the Bush income and investment tax cuts permanent. But it's not particularly convincing. After all, he's one of the few Republicans with Washington experience that can legitimately claim to be a fiscal hawk. In 2001, McCain, along with Republican apostate Lincoln Chafee, were the only two Republican senators to vote against the first Bush tax cut. In 2003, he was one of three Republicans to vote against the second round, which is one of the reasons the Club for Growth hates him so much. McCain correctly noted that it didn't make sense to cut taxes in a time of war, especially in ways that benefited the wealthy to such a large degree. He voted against the Medicare prescription-drug benefit, recognizing it as a massive unfunded entitlement. His top economic adviser is the reality-based Douglas Holtz-Eakin, former head of the Congressional Budget Office, and one of the Republican economists least complicit in the intellectual chicanery behind the Bush fiscal policy.
Let's say McCain wins the election in November, and is confronted with a Democratic Congress, and is faced with a short-term and long-term budget scenario that is worse than the Bush fantasy. Extending the tax cuts in anything approaching their entirety will be an impossibility. Will McCain go to the mat and spend his political capital urging the public to back an extension of the cuts? Would he make bargains with Democrats on subjects about which he has far deeper convictions (say, Iraq) for the sake of extending policies he didn't vote for? Or will he bow to reality and let most of the tax cuts sunset, as they were designed to do?
Gross didn't answer that question with a definite prediction, but he did offer that McCain might take aim at raising taxes on venture capital managers:
McCain isn't a creature of Wall Street. Clinton, Obama, and Giuliani have received far more cash from the financial-services industry than McCain has. Mitt Romney made his fortune in private equity. Of the three (or four) remaining serious candidates, McCain is probably the most likely to call bull on the loophole that lets private-equity and hedge-fund managers pay a 15 percent capital gains tax on wages they're paid for managing other people's money.
So plutocrats, call your accountants!