SCOTT SIMON, host:
The next president of the United States will inherit a budget deficit that's now pegged at 482 billion dollars, and an economy that's still feeling the effects of crises in housing, financial, and energy markets. Barack Obama and John McCain have both announced economic plans earlier this year, and we have asked critics to take a look at each of them. First, Senator Obama's. Michael Boskin was chairman of the president's Council of Economic Advisers from 1989 to 1993. He's now a senior fellow at the Hoover Institution, and teaches economics at Stanford, and he joins us from there. Mr. Boskin, thanks so much for being with us.
Dr. MICHAEL BOSKIN (Economics, Stanford University): Good to be with you, Scott.
SIMON: And a little intellectual exercise. What do you see as the key elements in Senator Obama's plan to restore the U.S. economy?
Dr. BOSKIN: Well, I think Senator Obama has a more pro-government, aggressive, higher taxes, higher spending agenda than Senator McCain. He wants the government involved in many more things, more substantially. I personally think that in most of those areas that would not be money well spent, but obviously he disagrees.
SIMON: You wrote a piece in the Wall Street Journal last week that expressed particular concern over Senator Obama's plans for taxes.
Dr. BOSKIN: Well, Senator Obama has proposals to raise tax rates on wages, and interest in royalty and rent through higher tax rates on what used to be called ordinary income, and also on dividends, and capital gains at the top. He says he won't do that at the bottom, although he has a need for a lot of unspecified thus far tax increases to pay for his spending proposals. He'd also have much higher energy taxes - either explicitly or through various regulatory items that wound up raising energy prices, which would disproportionately harm lower income people. So, in terms of the taxes, higher tax rates at the top, unfortunately, would decrease the incentive to work and invest for our most productive citizens. And I think that is likely to cause some serious problems for the economy, maybe not immediately, but certainly eventually.
SIMON: Do you foresee an Obama administration as essentially pursuing a Clintonian economic policy, or do you see important differences?
Dr. BOSKIN: Well, Senator Obama certainly during the primaries started quite a bit further left on taxes, spending regulation, and trade than candidate Clinton did. And remember back in the early 1990s, President Clinton started off somewhat left in his economic policies, and suffered some defeats. Hillary healthcare went down in defeat, and he'd lost the Congress in 1994 over the attempt of this big expansion of government. And from then on, he tended to move much more to the middle. Intellectually you might say that the Lloyd Benson, Bob Rubin wing of his administration won out over the Hillary, Bob Reich, Ira Magaziner wing, and that's a good thing. So, the best hope one could have is as candidate Obama seems to be trying to hedge his quite left policies from the primaries as he moves into general election, that he might at some point have a similar conversion. Now, he'd have to move quite a bit further than Clinton to get to where Clinton wound up.
SIMON: How do you see Senator McCain offering something different?
Dr. BOSKIN: Well, Senator McCain has proposed more generally to promote free trade, which I think is the right thing to do with appropriate safeguards for health and safety in our trade laws. He also has proposed to have lower tax rates to deal with a big problem we have, which is that the American corporation income tax is the second highest among the major economies. He's also made some tax simplification proposals. And he has a very different view of spending than Senator Obama. Senator McCain wants to control, reduce, and reform spending so we get bigger bang for the buck in many of our programs. My own reading of the history is that many of these government programs have partially succeeded, but at far bigger cost than is necessary to achieve those results, and many of them are in need of reform to reduce the excess costs and burden on our taxpayers, while better serving the people who are truly needy.
SIMON: Michael Boskin, professor of economics at Stanford and senior fellow at the Hoover Institution. Thanks very much.
Dr. BOSKIN: Good to be with you, Scott. Transcript provided by NPR, Copyright NPR.
