From NBC/NJ's Adam Aigner-Treworgy
PITTSBURGH -- Revisiting a topic that has been a source of criticism for him throughout this campaign, McCain spoke at Carnegie Mellon University here this morning and laid out his plan for the future of the economy.
The plan is centered around a one-year freeze in discretionary spending -- with the exception of military and veterans programs -- to allow for a "top-to-bottom review of the effectiveness of federal programs."
"'Discretionary spending' is a term people throw around a lot in Washington, while actual discretion is seldom exercised," McCain said. "Instead, every program comes with a built-in assumption that it should go on forever, and its budget increase forever. My administration will change that way of thinking."
Beyond that, McCain's plan is an interesting mix of spending reductions and targeted federal assistance programs, including an expansion of the "lender-of-last-resort" capabilities of states and the federal government to ensure that student loans aren't affected by the current credit crisis. This would be accompanied by tax cuts for parents in the form of a gradual doubling of the personal exemption for dependants.
To curb federal spending, McCain called on wealthier Americans -- couples making more than $160,000 per year and single adults making more than $80,000 per year -- to pay for their own prescription drugs by making them ineligible for Medicare drug subsidies.
Not a spending plan but still potentially costly, McCain called for a summer vacation from all gas taxes, calling on congress to suspend the 18.4 cent federal gas tax and the 24.4 cent diesel tax "from Memorial Day to Labor Day." The total cost of such a holiday (something that Bob Dole proposed in 1996) is unclear, but (as mentioned earlier) it has the potential to diminish funds used for highway and public transportation infrastructure.
Picking up the mantle of some of GOP primary opponents, McCain also proposed the creation of an "alternative tax system" -- an idea that originated with Steve Forbes' presidential bid and was picked up again by Rudy Giuliani. McCain's "simpler…flatter…fairer tax code" would be optional, essentially creating two tax systems.
In his speech, McCain described the alternative system as "a vastly less complicated system with two tax rates and a generous standard deduction period," but numbers for the new system were not available.
The speech also included pledges to ban new cell phone and internet taxes, create a research & development tax credit, and lower Medicare premiums.
The new policies outlined this morning come in addition to McCain's home mortgage assistance plan -- which was laid out last week, and would require the federal government to guarantee loans for qualified homeowners with at-risk mortgages -- as well as the candidate's regular calls for the elimination of the Alternative Minimum Tax, a ten point reduction in the corporate tax, a permanent extension of the Bush tax cuts and the elimination of pork barrel spending.
*** UPDATE *** In a DNC-sponsored conference call, economists Jeffrey Liebman and Laura Tyson criticized the economic plan McCain unveiled today, calling it an extension of President Bush's fiscal policies (for championing tax cuts favoring the rich, not paying for the tax cuts, and favoring an open-ended military engagement in Iraq).