McCain, Obama Offer Two Paths To Save Economy

Douglas Holtz-Eakin i i

Douglas Holtz-Eakin is an economic policy adviser to John McCain. Mandel Ngan/AFP/Getty Images hide caption

itoggle caption Mandel Ngan/AFP/Getty Images
Douglas Holtz-Eakin

Douglas Holtz-Eakin is an economic policy adviser to John McCain.

Mandel Ngan/AFP/Getty Images
Austan Goolsbee i i

Austan Goolsbee, pictured with Barack Obama in February, is the Illinois senator's economic adviser. Chip Somodevilla/Getty Images hide caption

itoggle caption Chip Somodevilla/Getty Images
Austan Goolsbee

Austan Goolsbee, pictured with Barack Obama in February, is the Illinois senator's economic adviser.

Chip Somodevilla/Getty Images

Republican John McCain and Democrat Barack Obama both have plans to improve the U.S. economy, but they propose accomplishing that in very different ways.

Taxes: McCain focuses more of his proposals on big businesses and wealthy individuals. The belief is that with lower taxes, they'll invest more and create more new jobs. He wants to cut the corporate tax rate from 35 percent to 25 percent. McCain says that will attract more businesses to the U.S. He proposes phasing out the alternative minimum tax, which can affect couples earning more than $150,000 a year. McCain also wants to reduce the estate tax to 15 percent and increase the exemption to $10 million.

Obama's proposals are focused on low- and middle-income people. He proposes raising taxes on investment income from capital gains and on incomes above $250,000 a year. He supports eliminating taxes for senior citizens who earn less than $50,000 a year. And he wants a new $50 billion program designed to jump-start the economy. Half the money would go to states to limit local program cuts and offset tax and fee increases. The other half would pay for infrastructure improvements.

401(k) Withdrawals: Obama and McCain both have proposals that would allow people to withdraw money from their 401(k)s early. Obama wants to allow withdrawals of 15 percent, up to a maximum of $10,000, without penalty, though regular income taxes would apply. McCain sets a higher limit — $50,000 — and caps the tax to be paid on such withdrawals at 10 percent for two years. But he limits this allowance to people 59 and older.

Addressing The Housing Crisis: Both candidates have plans to help homeowners with subprime mortgages who are facing foreclosure. McCain proposes spending about $300 billion to help those who are "upside down" on their mortgages — that is, they owe more than their home is now worth — renegotiate or "work out" their loans. Obama says he would ban most home foreclosures for 90 days and allow bankruptcy judges to change mortgage terms.

Energy Policy: Energy prices have been a big issue in this campaign. Both candidates say they support renewable energy as a way to reduce dependence on costly and unreliable sources of fossil fuels. Obama supports a new requirement that 25 percent of the country's electricity be produced by renewable sources by 2025. McCain proposes a wide-ranging energy plan that includes incentives for renewable energy. But he also wants to build 45 nuclear power plants by 2030 and says he would boost domestic exploration for oil and natural gas—onshore and off.

Help For The Big Three: Both candidates support loan guarantees for the auto industry. McCain supports a proposal approved by Congress that gives the companies $25 billion in low-interest loans. The money is intended for re-tooling the industry so that it can make more fuel-efficient cars. Obama thinks the government loans for auto manufacturers should be increased to $50 billion.

Reining In Federal Spending: McCain talks more than Obama about balancing the federal budget and he proposes doing that by 2013. But considering the economic downturn, accomplishing that goal is unlikely.

Still, McCain's plan calls for a one-year spending pause, in which all discretionary budgets (except the Defense Department and Veterans Affairs) are kept at the previous year's level. Then he would hold spending growth to 2.4 percent. And he says he would take a hard line against earmarks — the congressional directives that tell agencies to spend money on specific projects.

Labor Unions: Obama talks about issues that concern labor unions much more than McCain does. Obama proposes indexing the minimum wage to inflation. He says he'd create incentives for companies that choose to manufacture products in the U.S. And he supports a ban on the ability of employers to permanently replace striking workers.

Free Trade: Free trade agreements haven't been in the news as much as they were a few years back, but Obama says he opposes the Central American Free Trade Agreement and wants to amend the North American Free Trade Agreement to address concerns expressed by union leaders. McCain believes the U.S. should sign even more free trade agreements.

Making Hard Choices: Both candidates and their campaigns drafted the bulk of their economic proposals well before the current economic crisis. They've been asked what parts they'd be willing to give up; neither has provided specific answers. That suggests the proposals would add to the country's deficit, but most economists agree that in the current climate, concern over deficit spending takes a back seat to trying to improve the economy.

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