OK, McCain hasn't actually said "Drop Dead" to New York. But he's sending the same message with his economic agenda. 

Consider the latest news from Albany, where Governor David Paterson has just provided this bleak picture of the state's fiscal condition:

In a speech from the governor’s office in Manhattan, Mr. Paterson said that New York State's budget division now expects the budget gap for next year to be $12.5 billion--nearly double what it projected a few months ago, and that the deficit for this year’s budget has reached $1.5 billion.

...

The forecast Mr. Paterson laid out through 2012 was even more grim. According to the state’s estimates, the budget deficit would expand to $15.8 billion for the fiscal year starting in 2010 and $17.2 billion in 2011--for a total of $47 billion of projected shortfalls including next year’s gap.

“Don’t get me wrong, there will be hard and painful cuts,” he said in the address. “There will be no segment of this budget that will not be cut.”

balanced budget requirements

The federal government, of course, doesn't operate under the same fiscal constraints. It can run deficits--even substantial ones, as long as they don't last too long. That's why, during recessions, Washington has typically intervened by providing the states with extra money.

The good news is that this sort of deficit spending not only alleviates suffering on an individual level. It also boosts the economy. The people who benefit from state assistance programs are the ones most likely to spend money right away on basic necessities like food, clothing, and gas. What's more, giving states extra money would allow them to push ahead with infrastructure projects they'd otherwise have to delay or postpone. That creates jobs.

As economist Dean Baker, longtime champion of this approach, wrote in the Guardian earlier this month,

At this point, we should already be pushing ahead with a major stimulus package that focuses on helping the people hardest hit by the downturn through programmes such as unemployment insurance, food stamps and Medicaid. In addition, the stimulus package should include substantial aid to state and local governments so that they are not forced to layoff workers and cut back important programmes in the middle of a downturn.

Do the presidential candidates get this? It seems that one of them does. Barack Obama has proposed a new economic stimulus that would include $25 billion in aid to cities and states. I have no idea whether that's the right amount of money and whether, given the other provisions in the proposal, it's an ideal stimulus overall. But it's certainly an encouraging sign.

McCain, by contrast, continues to make spending cuts the cornerstone of his economic agenda, maintaining his call for a one-year freeze in discretionary spending. To stimulate the economy, he's relying primarily on his tax cuts--which, as you may recall, primarily benefit the wealthy. That puts money in the hands of people who need it least and, consequently, are least likely to spend it. Not only does it do less to alleviate immediate suffering; it also does less to boost the economy. This chart from Ethan Pollack at the Economic Policy Institute (h/t Ezra) captures the difference nicely:

Keep in mind that blocking spending is one of the few things that McCain, as president, could actually do on his own, since it requires only the power to veto whatever Congress sends to him.

Did I mention there's an election next week? 

Update: Lest you think I'm peddling unsubstantiated liberal propoganda, a friend notes that the source for the graph, Mark Zandi, has actually advised McCain on economic policy.

--Jonathan Cohn