Article From Fortune Mag: McCain's Econ Brain

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McCain's econ brain

Economic conservatives take heart: Phil Gramm is influencing the candidate's platform.

By Shawn Tully, editor-at-large


NEW YORK (Fortune) -- Now that the faltering economy has replaced national security as the overriding issue in the presidential campaign, John McCain is portraying himself as a budget-shrinking, flat-tax-embracing, healthcare-privatizing champion of free markets. But is this Reaganesque zealot the real John McCain?

The big question is whether McCain's radical agenda is simply designed to rally the Republican base, or would prove a blueprint for a McCain presidency. Given the Arizona Senator's maverick record, voters have every reason to distrust the new McCain. He twice opposed the Bush tax cuts and keeps dropping disturbing lines like, "I don't know as much about the economy as I should."

But economic conservatives should take heart. McCain's chief economic adviser - and perhaps his closest political friend - is the ultimate pure play in free market faith, former Texas Senator Phil Gramm. If McCain follows Gramm's counsel, and most of his current positions are vintage Gramm indeed, his policies as president would represent not just a sharp departure from the Bush years, but an assault on government growth that Republicans have boasted about, but failed to achieve, for decades.

Since retiring from the Senate in 2002, Gramm - a former economics professor at Texas A&M - has been circling the globe as an investment banker at UBS (UBS). In July, McCain called on his old friend to salvage his floundering campaign.

"The campaign was structured on the belief that McCain would be the prohibitive front-runner, so he'd have no problem raising money," Gramm told Fortune. But McCain's support among voters and contributors collapsed when the "surge" in Iraq, which McCain championed, got off to a shaky start.
"Suddenly it was 'McCain's war,'" says Gramm. With the campaign strapped for cash, Gramm swooped down on McCain headquarters in Arlington, Virginia, and spent a marathon session combing through the books. He helped McCain dramatically shrink the staff and budget. In the fall, McCain re-emerged following the Gramm strategy, as a scrappy insurgent underdog, running on a puny budget.

On the economy, McCain's most daring manifesto is his healthcare plan. Not surprisingly, it bears the Gramm imprint. In fact, McCain has been heeding Gramm's "power-to-the-consumer" approach for more than a decade. The two senators bonded when they linked arms to fight Hillary Clinton's ill-fated healthcare program in 1993. "We couldn't get any press coverage in Washington, DC, so we traveled all over the country, to the regional media markets," says Gramm. In 150 meetings at hospitals and clinics, McCain and Gramm relentlessly pounded the Clinton plan, helping fire the voter outrage that killed the plan in 1994.

Today, McCain is advocating a plan that's radically different from those of Clinton and Barack Obama, and - if he goes all the way by following Gramm - could revolutionize America's healthcare system. For McCain and Gramm, the problem with our healthcare system - and the reason why over 47 million Americans are uninsured - is that it's excessively, scandalously expensive. The solution, they say, is to let Americans shop for healthcare with their own money. McCain advocates giving tax rebates of $2500 per individual or $5000 per family. With that money, families could purchase policies on their own. What's truly radical about the plan is that it eliminates the tax exclusion for healthcare benefits offered by companies to their employees, and replaces it with the $2500 to $5000 rebates.

Consumers could then use that cash to buy their own insurance in what Gramm foresees as a vibrant, consumer-driven marketplace for healthcare packages.
By contrast, Clinton and Obama want to leave the employer-based system in place; Clinton would make big companies either fund gold-plated packages for workers, or pay a stiff tax to support a new Medicare-like system. The Democrats wouldn't allow insurers to charge lower rates for young workers who cost far less than older Americans. McCain favors allowing insurers to charge rates based on actual cost. Gramm adamantly supports that policy allowing insurers to tailor their premiums, and their packages, to their customers. Says Gramm: "Most people without coverage are young and healthy. We shouldn't penalize them by forcing them to pay for someone else's coverage."

What about taxes? McCain now advocates extending the Bush tax cuts that he twice voted against. For Gramm, McCain's strength is that, unlike Bush, he will be a relentless hawk on spending. "McCain's main objection when Congress passed the tax cuts was that we didn't have spending controls," says Gramm. "If we'd had them, we could cut taxes again and not make do with some temporary stimulus."

McCain pledges to balance the budget by 2012, not by increasing taxes, but by vetoing all pork barrel spending, and curbing outlays for Social Security and Medicare. That would accomplish the seemingly impossible, reducing federal spending as a portion of GDP, a holy grail for conservatives. Could Gramm be the Treasury Secretary who spearheads the McCain plan? He says he'd be reluctant to return to public life, but doesn't rule it out. Indeed, he says that he and McCain talk every day. Gramm even quotes Rudyard Kipling to salute his friend's grit in political combat.

McCain is a hero to Gramm but not to free-marketers. Conservatives are hoping that by embracing their hero, McCain will become one himself.

http://money.cnn.com/2008/02/18/news/newsmakers/tully_gramm.fortune/index.htm

[DCKit]

1. Is this satire? I can't tell anymore. n/t

[dtotire]

2. Article was referenced in another piece in the HUFFINGTON POST

This is not satire

McCain Owes Us More Than Gramm's Resignation

Joe Cutbirth


Phil Gramm's resignation from the McCain campaign doesn't do much for me. I'm reminded of the saying Texas football fans had about the Oklahoma Sooners during the Barry Switzer era: It's tough to drown a snake.

The ironic and frustrating thing about Gramm, whose lobbying activities have now been linked to the sub-prime mortgage crisis, is we actually may be safer when he has some sort of quasi-public job. At least that way national reporters and congressional ethics committees can keep an eye on him.

I covered Gramm's 1984 and 1990 campaigns, and he represented me and about 20 million other Texans in the U.S. Senate for 18 years, so I wasn't surprised - disgusted, but not surprised - to hear him refer to Americans who are scared and hurting in this economy as mentally confused "whiners."

The annoying thing about this story is the predictable headline "McCain Distances Himself From Gramm" in the (New York) Daily News, Houston Chronicle, Washington Times, on washingtonpost.com, CBS.com and pretty much every other news source that carried the story. (I Googled the phrase inside quotations and got 2,810 hits.)

So what? Who wouldn't "distance himself" from that statement or anyone cruel enough to make it?
That story, served with Gramm's resignation as a two-day news package about a gaffe and its aftermath, is precisely the Insider Baseball Joan Didion skewered in her seminal essay on campaign reporting 25 years ago.
McCain didn't announce he was distancing himself from an economic program designed by a man who devoted his entire career to: cutting corporate taxes, reducing the social safety net and deregulating financial markets. The only thing different is that someone else will have the silly title "national co-chairman."

Doesn't anyone in the gaggle assigned to the McCain campaign see this as a prime time to put McCain on the record discussing: 1.) Why he chose Gramm, who Fortune magazine touted as "McCain's Econ Brain," to craft his economic agenda? And 2.) How the conservative economic philosophy they share would play out in his administration?

If McCain sees Monetarism (Quantity Theory) as the key to determining inflation, he should be able to tell us how that works. If he buys Rational Expectations Theory as contemporary reason for a return to a pre-Keynesian model, he needs to say so. And if he is a true Supply-Sider, let's hear how he'll promote private savings and investment and in whose hands that capital will be stored.

Of course, I'm exaggerating for effect, but here's the point: McCain wants us to put him in charge of the world's leading economy, but he is outsourcing his intellectual and philosophical responsibilities in that area. It seems to be part of who he is, just like George W. Bush.

McCain regularly jokes that he doesn't know as much about the economy as he should, and he admitted at one Republican debate that he doesn't even know how to use the Internet.

That isn't charming or funny. It's frightening.
This is 2008. Nothing except energy policy has more potential impact on the future of our economy and our nation's place in the world than the policies we adopt in the coming decade for telecommunications and Internet commerce. Thank God Cindy is teaching him about e-mail.

Bush's disastrous presidency shows what happens when a candidate and his handlers hoodwink national reporters with a charm offensive, hoping that they will give the candidate a pass on basic cultural and intellectual curiosity because the answers to those questions could be embarrassing.

Remember the stories about Bush -- a scion of privilege whose father was ambassador to China -- having so little interest in the world that he never traveled abroad until he decided to run for president?

Bush outsourced foreign policy to Cheney and Rumsfeld, and we all know what a bum decision that turned out to be. Is the national press going to allow McCain to do the same with Gramm and our economy?

Patti Kilday Hart, one of the most respected journalists in Texas for a quarter century, hinted in her recent story "John McCain's Gramm Gamble" that Gramm's role as a national co-chairman for the McCain campaign may have been part of a larger, informal audition for Treasury secretary.

She reminds us of Gramm's toady relationship with Ken Lay, the black-hearted varmint who was Gramm's largest corporate contributor, whose company benefited from the deregulation Gramm slipped through Congress without a hearing, and then who, as the company was imploding, convinced thousands of employees to invest their future retirement in its stock while he dumped his own shares to salvage his personal fortune.
Molly Ivins, my former colleague at the Ft. Worth Star-Telegram, once dubbed Gramm "the Meanest Man in the United States" for single-handedly blocking legislation that would restore food stamps eliminated in the 1996 Welfare Reform Act to elderly legal immigrants.

It was 1998, and Gramm had the gall to issue a press release arguing that cutting that aid was a "critically important step" toward getting families "out of the welfare trap," and that reinstating that aid would constitute "a new personal tragedy" for them.

Jesus Christ.
There were 121,000 elderly people, legal immigrants and Texas residents, relying on that help to buy food when it was eliminated. They weren't faceless demand units in some textbook on economic thyeory. Like the Enron employees, they were Gramm's constituents -- people he was elected to help!

I'm not one to blindly indict all conservative thinking, and my academic research isn't in the field of economics. But I reported on and was represented by Gramm long enough to know this is the consistent result of his brand of conservatism and the economic policies he zealously represents.

Elderly legal immigrants; blue-collar workers, who saved their whole lives so they could retire with dignity and who trusted their employer to their own financial destruction; and most recently, hundreds of thousands of Americans caught in the nightmare of the sub-prime mortgage crisis.

These are the people Gramm insulted as "whiners."
Reporters covering McCain owe it to the rest of us to get past whether McCain "distanced himself" from Gramm's callous remark. The real question for the Straight Talk Express is: "Does McCain really understand -- or does he care enough about America's future to try and understand -- the fine print on the economic contract Gramm would have him sign wtih America?"
And if so, is he willing to distance himself from the message, not just the messenger?




http://www.huffingtonpost.com/joe-cutbirth/mccain-owes-us-more-than_b_113943.html

[Overseas]

3. John Sidney McCain III thinks health insurance should be handled with partial rebates.

That's the scary part of the article, aside from Mean Gramm being JSM III's mentor. They'd give me a rebate that wouldn't even cover 1/2 year of my healthcare expenses, and free our wonderful corporations from the burden of deducting healthcare expenses from their taxes.

The solution, they say, is to let Americans shop for healthcare with their own money. McCain advocates giving tax rebates of $2500 per individual or $5000 per family. With that money, families could purchase policies on their own. What's truly radical about the plan is that it eliminates the tax exclusion for healthcare benefits offered by companies to their employees, and replaces it with the $2500 to $5000 rebates.