Social Security and Raising Taxes on the Rich: Clinton v. Obama

For me – the highlight of the debate was when one woman framed a question on fiscal responsibility in terms of some alleged Social Security and Medicare financing crisis. Obama tried this spin:

This is the kind of thing that I would expect from Mitt Romney or Rudy Giuliani, playing with numbers to make a point.

Paul Krugman says Obama has been played for a sucker. I don’t get the logic of his proposed tax increase.



Paul writes:

Mr. Obama wanted a way to distinguish himself from Hillary Clinton - and for Mr. Obama, who has said that the reason “we can’t tackle the big problems that demand solutions” is that “politics has become so bitter and partisan,” joining in the attack on Senator Clinton’s Social Security position must have seemed like a golden opportunity to sound forceful yet bipartisan. But Social Security isn’t a big problem that demands a solution; it’s a small problem, way down the list of major issues facing America, that has nonetheless become an obsession of Beltway insiders. And on Social Security, as on many other issues, what Washington means by bipartisanship is mainly that everyone should come together to give conservatives what they want. We all wish that American politics weren’t so bitter and partisan. But if you try to find common ground where none exists - which is the case for many issues today - you end up being played for a fool. And that’s what has just happened to Mr. Obama.

Maybe Obama needed to read one of Paul’s columns explaining the actual numbers involved with the future financing of the Social Security problem. Clinton’s answer was much closer to the facts than Obama’a answer – which is likely why the audience booed Obama.

Ed Kilgore approvingly notes Obama’s tax increase proposal:

With another Democratic candidate debate on tap in Nevada later today, you can bet Barack Obama is going to get questions about his proposal for modifying the cap on income subject to Social Security payroll taxes. But it's important to understand why this is such a big deal for a lot of progressive Democrats. His proposal isn't the controversial thing (though it certainly would be in a general election campaign, where it would be hammered by Republicans as a tax increase); it's his decision to raise the subject at all, and particularly his use of the word "crisis" to describe the status of the Social Security system.

I hope Ed listened to the debate when Obama criticized Clinton for not wanting to raise taxes on the rich. Obama seemed to suggest raising employment taxes is the way to sock it to high income individuals. Clinton appears to want to raise income tax rates, which would tax both labor income and capital income. Given the degree of wealth inequality, one would think that raising income tax rates is a better way of restoring a progressive tax system than raising employment taxes. This simple fact seems to be lost on Obama.

Update: Greg Mankiw chastises Paul Krugman for that criticism of Senator Obama. But I don’t get what Greg is trying to say here. OK, back in 1998 we may have been forecasting that the Trust Fund reserves would be depleted by 2029. But I hope Greg has kept up with the revised forecasts that Paul was mentioning today. And Greg should know that what President Clinton was saying in 1998 is a far cry from the rightwing spin that Paul noted. Seriously – if one wants to attack Paul Krugman for something he said, one should be more accurate with what the argument was. And one should also realize to use updated forecasts – and not some forecast from a decade ago.