MSNBC CLIP: Discussing McCain's Faux Populism On MSNBC w/Maddow

During my trip to Rochester and now New York City, I appeared on Rachel Maddow's MSNBC show last night to review John McCain's latest economic ideas. You can watch the clip here (and if you like the discussion and appreciate them having on progressive voices like me and others, shoot the show an email at rachel@msnbc.com and let them know):

What we are seeing from McCain is old-school right-wing populism first made famous by Ronald Reagan. Package tax cuts for the wealthy as a gift to regular folks at a time of economic crisis. In the extended entry, I'll break down the key tenets of McCain's plan to see who it really benefits.

Up first is McCain's proposal to slash capital gains tax rates. Let's ignore the fact that the Wall Street meltdown means most Americans right now don't have much capital gains. Let's just look at who a capital gains tax cut benefits: namely, millionaires.

As the Center for American Progress notes, almost two-thirds of all capital gains taxes are paid by people making more than a million dollars a year. McCain said he doesn't want to incite a stock sell off, but as the New York Times noted, "a cut in capital gains tax rates in 1997 to 20 percent from 28 percent encouraged long-term holders of assets." University of Texas economist Jamie Galbraith put it this way: "It's an invitation for everyone who has stock to sell it and get out, which would collapse the market." Perhaps worst of all, capital gains tax cuts do not substantially boost investment. As the Brookings Institution reports, "cutting the top gains rate to 20 percent would raise private investment by less than 0.1 percent of GDP."

McCain's mortgage plan is much the same thing. He promises he's "not going to spend $700 billion of your money just bailing out the Wall Street bankers and brokers who got us into this mess." But buying mortgages off the books of banks without writing those mortgages down means taxpayers will almost surely be assuming huge losses. A better course of action, as I wrote in this week's column, is to buy stocks in banks and leave the bad mortgages on banks' books.

The parts of McCain's plans that aren't offensive are - at best - ineffective. For instance, he's making a lot of hay out of temporarily suspending rules that force seniors to start withdrawing their 401k and IRA money at age 70.5. But as Dean Baker notes, federal law only mandates a withdrawal of 4 percent of those monies, and with most people having less than 96 percent of their retirement savings in stocks, this change won't mean much.

Then there is McCain's plan to suspend taxes on unemployment benefits. This is a decent idea - but let's just remember, it was Ronald Reagan who created this tax in the first place.

The good news is that the economic debate is largely leaving McCain in the dust. The Treasury Department has been shamed into buying bank stock, after bailout opponents and world leaders demanded such a course. The problem is that Henry Paulson is still insisting on trying to forge a giveaway to his Wall Street buddies.

For example, Paulson is insisting on only buying nonvoting shares of banks. As the New York Times reports, "That means the banks’ current boards and current management — the same people who got the country into this mess — will still be making all of the decisions." Additionally, Paulson is only buying preferred shares that get a 5 percent interest return for taxpayers - a far lower rate than a private businessman would get in driving a hard bargain (for instance, Warren Buffett got 10 percent when he recently invested in Goldman Sachs).

So while McCain's fake populism is thankfully being relegated to irrelevance, we've still got a lot of work to do to get our government to do the right thing when it comes to this financial crisis.