MELISSA BLOCK, host:
Now, we're going to hear from top economic advisers to both campaigns. First, for the McCain campaign, Douglas Holtz-Eakin. I asked him to respond to that Democratic criticism that Senator McCain's economic proposal overwhelmingly helps the wealthiest Americans.
Mr. DOUGLAS HOLTZ-EAKIN (Senior Policy Adviser, McCain Campaign): The plan is intended to build on Senator McCain's jobs for America plan, which is a broad vision of lower energy costs, portable healthcare insurance, open markets for our products abroad, low taxes, and a smaller government. But this is really intended to target those who's been hurt most badly by the recent financial market distress, seniors, savers, homeowners, and workers, and the initiatives he announced today are intended to help them deal with the consequences of asset values that have been badly damaged.
BLOCK: But if you look at some of the proposals, the cutting of the capital gains tax in half, 15 percent to seven and a half percent, increasing the amount of capital losses that can be written off, don't those favor the wealthiest Americans?
Mr. HOLTZ-EAKIN: Well, if you look at the capital losses, these are realized losses so you would have had to sell in this market, and the only reason to do so is if you had to pay a tuition bill, need a mortgage payment or otherwise unload a damaged stock or bond in order to meet your needs. And in those circumstances, it seems like it would be the right thing to do to not have the government take even more money, but to actually allow them to write off their losses more quickly than they would otherwise. Ultimately, everyone gets to ride off their losses, but this is just at a faster pace.
And, you know, it's to be expected that the Obama campaign would demagogue the capital gains tax. But it is a proven ability to attract investors into financial markets, into investments and assets. Right now, we need to see, for the public employee pensions, the union pensions, the IRAs, the 40Ks, investors have the confidence to buy and hold. This would be for those investments held for one year or longer, into 2009 and 2010 and thus, restore some of the lost savings that individuals are counting on.
BLOCK: I want to ask you also about an idea that Senator McCain first pitched at the last debate, and that's that the government would buy troubled mortgages at face value, give homeowners a fixed rate mortgage based on a reduced value. Is it the taxpayers, ultimately, who end up paying the difference between those two mortgages?
Mr. HOLTZ-EAKIN: This would, from the individual's point of view, look like a standard refinance. They would simply ask to refinance an existing loan that is either underwater that they can't handle. And as long as they met qualifications of due diligence, a credit scrub, and some underwriting evaluation of their home, then they'd be available for an FHA mortgage. There would be a loss involved, and the taxpayers would help to share the burden of the loss...
BLOCK: Help to share the burden or would they bear the burden?
Mr. HOLTZ-EAKIN: They would bear the burden of this loss, and they, in the process, would keep about 10 million people who are underwater and three million more who are in distress from going down the road of delinquency, default, foreclosure, which would damage housing values across America, leave blighted neighborhoods, and continue the down draft that the housing market has placed on the American economy.
BLOCK: And in the meantime, if taxpayers are paying the difference between the old mortgage and the new reduced value mortgage, what's the price tag for that?
Mr. HOLTZ-EAKIN: Well, we've put a ballpark out of 300 billion. It depends on the amount of volunteer participation we get from homeowners. So, the reality is, we don't know for sure. But remember, this is one way to recapitalize the banking system. So, if we go down this route, we both save many Americans from leaving their homes. We'd get the capital into the banking system, and we don't have to do some of the other things that are being discussed underneath the other initiatives.
BLOCK: Well, Douglas Holtz-Eakin, thanks very much.
Mr. HOLTZ-EAKIN: My pleasure.
BLOCK: Douglas Holtz-Eakin is senior policy adviser to the McCain campaign. Transcript provided by NPR, Copyright NPR.