Could We Afford a President Edwards?

You've got to give John Edwards some credit. Unlike most of the presidential candidates of both parties, he's actually proposing some very specific economic policies--and even putting some price tags on them. (Hint to GOP candidates debating tonight in South Carolina.) Universal healthcare? Somewhere between $90 billion and $120 billion a year. Then there's his $20 billion spending program to end poverty. And his $13 billion spending program to revamp American energy use.

So where's all the money coming from to pay for all this wonderful stuff? Well, Edwards would get rid of the Bush income tax cuts on Americans making more than $200,000 a year. He might also raise capital gains taxes and eliminate the $90,000 earnings cap on Social Security taxes to make that program solvent.

A few problems immediately spring to mind. First of all, rescinding the Bush tax cuts for upper-income Americans would bring in only $50 billion a year, according to an analysis by the Urban Institute. (And that doesn't take into account any impact on economic growth from higher taxes on the most productive workers.) Not only does that $50 billion not entirely cover Edwards's plans, but it also uses the same pot of money that Democrats want to tap to pay for reform of the alternative minimum tax. And while eliminating the income cap on Social Security might bring in more money, it would also be a discouraging new tax on workers at exactly the same time that many economists are predicting a shortage of workers.

But if Edwards's numbers don't add up, I'm not sure he really cares. He has gone on record saying that he doesn't have an obsession with balanced budgets at time when he thinks America has so many unmet spending needs.

And on this issue, a President Edwards might catch a break. Given the pace of tax revenues, Uncle Sam might have a balanced budget sooner rather than later. Economist Michael Darda notes that if tax revenue growth continues to outpace spending growth by 6.1 percentage points, the budget will move into surplus by April 2008. It will be hard for fiscal hawks to argue the budget is in crisis when it's in the black. Score a point for Edwards.

But the river of money flowing into Washington, D.C., also means that tax revenues as a percentage of the whole economy are now nearly a percentage point above their historical average. Generally when that happens, taxes get cut--not raised. Higher taxes for more spending? That might be a tough case even for a skilled former litigator like Edwards to argue.