In October of 2004, the U.S. Congress passed a monstrosity commonly known as the “Corporate Tax Bill.” It was a legislative Christmas tree, festooned with ornaments for lobbyists and their high-rolling special interest clients. Anti-pork crusaders like John McCain were outraged. “Disgraceful,” he told the Washington Post. “A classic example of the special interests prevailing over the people’s interest.”
On Thursday, McCain and Barack Obama–two candidates who say at every speech that they will end the special interest domination of Washington–voted for a bill that extended many of those same corporate tax breaks and added more, burdening our grandchildren with hundreds of millions of dollars in new federal debt. Neither one raised a significant protest over the inclusion of these unrelated Christmas ornaments. And today, lobbyists are celebrating with their clients all over Washington.
The reason McCain and Obama’s voted for the bill is no secret. Both men care more about the $700 billion bailout of U.S. creditors it was attached to than they do about a few hundred million dollars in tax breaks for arrow manufacturers, racetrack owners, Hollywood film and television studios, or “economic development in American Samoa.” And they had to make a choice. To get the bailout bill, Senate leaders forced them to also vote for things like another $400 million in tax breaks for movie makers, because, well, you know, Hollywood hurts too.
My point is not that either McCain or Obama are hypocrites. The nature of the legislative business is compromise, and it is perfectly reasonable for politicians to accept something they don’t want, if they feel it will get them something more important. But this entire episode does call into question the grand rhetoric that has become a staple of the campaign trail for both McCain and Obama.
More after the jump. . .
To hear them talk, McCain and Obama plan to “change” Washington. “It’s over for the special interests,” says McCain. “It is time to put an end to the runaway spending and the record deficits,” Obama said Wednesday in Wisconsin. “It’s time to return to fiscal responsibility and pay-as-you-go budgeting.” (Hours later, Obama flew to Washington to cast his vote for a bill that violated pay-as-you-go rules by giving tax breaks to already-rich industries.)
McCain and Obama say Washington will all be different once they make it to the White House. This is unlikely, and Wednesday’s vote shows why. Special interest tax breaks and pork-barrel boondoggles are to Congress what cheap credit is to the nation’s banks — the liquidity that allows the system to function. If you can’t get the votes on a particular bill, you just load it up with goodies for various politicians. Whichever man becomes president, he will have to play this game, whether he wants to or not. He can protest, and make improvements to the system. He can, as McCain says, make the “names famous” of those who push pork-barrel projects. He could even veto every bill that crosses his desk, until the government shuts down and the economy collapses. But the game remains the same, and as Wednesday’s vote shows, both McCain and Obama are willing to play the game when they must.
I spent some time this morning with the Joint Committee on Taxation score of the “tax extenders” portion of the bailout bill. The rough cost of the additions, which your children and grandchildren will pay, is $110 billion through 2018. This includes an Alternative Minimum Tax patch, and lots of tax subsidies for renewable energy. Some other highlights:
$2 million excise tax exemption on “certain wooden arrows designed for use by children.”
$49 million in tax breaks for people (in Alaska, mostly) receiving compensation from the litigation over the Exxon Valdez oil spill.
$100 million in tax breaks for “certain motorsports racing track facilities.”
$179 million in tax incentives for “investment in the District of Columbia.”
$49 million for a charitable deduction for corporations who donate books to libraries.
$33 million for an economic development credit in American Samoa.
$61 million in added credits for “steel industry fuel” also known as liquefied coal waste sludge.
$397 million for the “domestic production activities deduction” for film production
$81 million to extend and modify treatment of “certain film and television productions.”
None of this is change you can believe in.
UPDATE: Taxpayers for Common Sense just put out a fact sheet called “Top 10 Tax Sweeteners in the Bailout Bill.” It’s worth the read.