Next president may be hamstrung by bailout

McCain wants a 15 percent federal estate tax rate and a $5 million exemption. Obama has suggested a 45 percent federal estate tax rate and a $3.5 million exemption amount.

Obama offers expanded renewable energy and conservation tax incentives and a repeal of tax incentives for oil and gas companies. He supports energy rebates for individuals to help offset the home-heating costs.

McCain has proposed an end to ethanol subsidies and discussed a federal gas tax holiday.

Both campaigns recognize the importance of moving quickly in the beginning of a new presidency.

“I think it will be challenging to deal with the urgencies of the financial crisis and the winding down of the Iraq war, while also moving forward with major long-term agenda items like health care and climate change,” said Gene Sperling, a former top economic adviser to President Clinton who is now helping Obama.

“I think that the cost of doing nothing on health care and climate change is so high that there is no case for putting off long-term action because you’re in a short-term financial crisis,” Sperling said.

Douglas Holtz-Eakin, a top McCain economic adviser, said McCain is standing by his tax-cut proposals for now.

“Historically, we never have sustained successful deficit reduction without strong economic growth. So he’s put that first,” Holtz-Eakin said. Furthermore, “John McCain is running on a platform that does not include massive increases in spending,” he said.

McCain also has indicated he is considering putting a complete cap and freeze on discretionary, nonmilitary and nonveterans’ spending.

Of course, economic policy will be set not just by the new president but by the new Congress. Congress is in Democratic hands now, and Democrats are expected to increase their numbers in the November elections.

That could make it hard, if McCain is elected, for him to get his tax-cut proposals enacted.

“The reality of it is taxes will probably rise” no matter who is elected, said Mark Zandi, chief economist for Moody’s Economy.com and an occasional McCain adviser. “It makes it a lot more difficult to cut taxes when you have big budget deficits.”

Zandi thinks that the early days of the next presidency will be dominated by a lingering financial crisis and the need for “more government intervention, more legislation directly supporting housing and mortgage markets” beyond the $700 billion bailout.

theGrio: Black teens' unemployment rate spikes In the current economy, many Americans have had to lower their expectations for their career and work lives. And that necessity is proving to be a long-term reality. Unexpected drop in jobless rate fuels optimism Obama sees some consensus at job summit New jobless claims drop unexpectedly Bleak job scene poses challenge for Obama

On health care, Obama would have mandatory coverage for children, but no mandate for adults. He would aim for universal coverage by requiring employers to share costs of insuring workers and by offering coverage similar to that in plan for federal employees. He says the approach would cost up to $65 billion a year after unspecified savings from making the system more efficient.

McCain would have no mandate for universal coverage. He has proposed taxing for the first time employer-provided health benefits. But he also has proposed an offsetting refundable tax credit of $5,000 for families and $2,500 for individuals designed to make health insurance more affordable.

On global warming, Obama has proposed a 10-year, $150 billion program to produce “climate friendly” energy supplies. He would pay for it with a carbon auction requiring businesses to bid competitively for the right to pollute and aimed at cutting greenhouse gas emissions 80 percent by 2050.

McCain broke with Bush and led a Senate effort to cap greenhouse gas emissions. He favors a plan that would see greenhouse gas emissions fall by 66 percent by 2050.

Both Obama and McCain sponsored earlier legislation that would set mandatory caps on greenhouse gas emissions and increase federal fuel economy requirements beyond 35 miles per gallon.

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