The last two days are a reminder, as we head into tonight’s debate, how hard it is for either candidate to singlehandedly change the fundamentals, particularly the impact of the economy, that are driving this election. In my last post I suggested that McCain needed to issue an economic policy plan that appealed to middle-class voters in order to reframe the economy in a way that helped his campaign. He did just that on Tuesday by calling for a reduction in the highest tax rate on long-term capital gains from 15 percent to 7.5 percent in 2009 and 2010, and – in a bid to drum up support from senior citizens – he advocated lowering the tax rates on withdrawals from IRA and 401(k) accounts to 10 percent, the lowest rate, in 2008 and 2009 (this would apply to the first $50,000 withdrawn.) Early estimates are that this plan may cost more than $50 billion. This is on top of his earlier proposal to use some $300 billion of the $700 billion bailout money to buy up bad mortgages. The proposals are clearly directed toward lower-income middle class workers and retirees, two key voting blocs in swing states like Florida and Ohio that McCain must hold onto if he is to win this election.
The problem, from McCain’s perspective, is that evidently Obama got the memo too! On Monday, he preempted McCain by issuing his own set of economic proposals targeting the very same voters. These included giving businesses that create new jobs tax breaks, freezing bank foreclosures and a limited government-funded public works loan program for state and local governments to rebuild the nation’s infrastructure. Obama also proposed suspending penalties on retirees who begin liquidating their 401(k)’s early if the stock market has bottomed out.
Although there are significant differences in the two candidates’ economic proposals, one can understand if voters who look at the two plans do not move in significant numbers into one camp or the other. Both contain elements of an economic stimulus package, both target the middle-class and both seek to minimize hardship caused by home foreclosures and shrinking retirement nest eggs. Both, however, threaten to exacerbate the expected budget deficit by reducing tax revenues flowing into the government. Critics argue that Obama’s plan, with its estimated $60 billion price tag, threatens to throw his budget entirely out of whack and increase an already huge budget deficit. But McCain’s proposals also create a potential revenue shortfall.
I will leave it to you to parse the details of the dueling economic policy proposals. I do not mean to dismiss their substantive significance. Instead, my broader point is to remind you why political scientists find little evidence of campaign effects, and why forecast models issued in August are often quite accurate. As we see this last week, one candidate’s attempt to frame issues in ways that benefit his election chances begat a counter effort via an opposing frame. These efforts often negate one another.
It is important to remember this as we head into tonight’s final debate and the inevitable spin about what the candidates must accomplish. The odds are that, like the three previous debates, it will have little impact on either candidate’s standing among voters.