McCain's Economy: Where Will The Money Come From?

John McCain has variously promised to balanced by the by 2012, or by the end of his first year in office, or by the end of his presidency -- perhaps in 2016.

"He is a fiscal realist and a man of action," said Douglas Holtz-Eakin, McCain's chief economics adviser, on a conference call with reporters. "I wouldn't say it's revenue neutral, I would say it's budget neutral."

Puting aside the Bush tax code, Asked by a reporter to square McCain's long-expressed preference for a balanced budget with the cost of his tax cuts and spending proposals, Holtz-Eaken blasted what he called the "fantasy land budgeting" that goes on in Congress. "That kind of budget assumes that we're going raise taxes automatically."

He said that McCain proposed AMT fix would cost about $60b a year once it was fully integrated into the economy. (A temporary "fix" would cost more; if the AMT was fully repealed, the needed offsets would be much less.)

It would be offset by $60b worth of earmarks that McCain's team has identified. McCain's definition of earmarks is broader than most others; the most I've seen in terms of an earmarks tally has been about $20b dollars.

The corporate tax rate cut would cost $100b a year, which McCain would offset slightly by broadening the base of eligible companies and cutting $30b worth of special interest tax rates. (There's still a $60b gap here.) The DNC and the Clinton campaign are pulling the populist card on this one, with Clinton's policy adviser, Neera Tanden, estimating that Exxon-Mobil would see its taxes cut by $1.6b.

The one year discretionary spending pause would save $15b a year, and a combination of economic growth and a budgetary scrub of discretionary spending programs would account for the rest, at least through the green eye shades of the McCain economic team.

The liberal Center for American Progress believes that about $150b worth of spending is not offset; McCain's campaign believes that the proposal to deduct investments in tech and equipment would be revenue neutral; the CAP believes it would cost $70b.

Conservatives at some of the policy shops around town are pleased with McCain's proposal to begin means-testing for Medicare part D, and they like the reductions in the corporate tax rate. But they don't like McCain's gas tax holiday -- they find it foolish and they wonder where McCain would find the money for it.