Friday, August 15, 2008

Obama to finance universal health care with a tax cut.

Obama's top economic advisors say in a new WSJ op-ed that if elected he will not increase taxes by nearly as much as many people expected from his earlier statements.

In fact -- invoking the name of Ronald Reagan, approvingly (!) -- they tell us Obama won't raise taxes at all on net. He will cut taxes!

Yes, taxes on the rich will go up some, but not too much. The tax rate on capital gains would go up from the current 15% to no more than 20%, and top tax rate on ordinary income would increase from 35% to no more than the pre-Bush 39.6%.

And Obama's original proposal to "uncap" the 12.4% payroll tax for Social Security and apply it to incomes over $250,000 -- later adjusted so the tax would apply at only a lower 2% to 4% rate -- now is further adjusted to apply only "a decade or more from now", that is, sometime after the end of his presumptive second term.

Obama's tax scheme is compared to Ronald Reagan's, saying it would....
reduc[e] revenues to less than 18.2% of GDP -- the level of taxes that prevailed under President Reagan ... A 20% rate [on capital gains] is almost a third lower than the rate President Reagan set in 1986...
And if that sounds nearly Republican, they take it even further! They emphasize that Obama's tax increases on the few most well-off will be more than offset by tax reductions on everybody else, to produce a net tax cut:
Sen. Obama's middle-class tax cuts are larger than his partial rollbacks for families earning over $250,000, making the proposal as a whole a net tax cut ...

The Obama plan would cut taxes for 95% of workers and their families with a tax cut of $500 for workers or $1,000 for working couples. In addition, Sen. Obama is proposing tax cuts for low- and middle-income seniors, homeowners, the uninsured, and families sending a child to college or looking to save and accumulate wealth....

As previously mentioned, the Obama plan is a net tax cut -- his middle-class tax cuts are larger than the rollbacks he has proposed for families making over $250,000.
What's going on here is politically is pretty obvious. Obama's people are striving to counter the McCain/Republican attack line that he is a typical big-spending ("national health care") big-taxing liberal Democrat. Beyond that, they are using the ancient political ploy of making tax-cut promises to the voting many at the tax-increase cost of the voting few. As far as those "95% of workers" are concerned, they are practically Reaganites -- they have tax cut fever!

So now everyone is happy, right? Even partisan Democrats, now inoculated against the "big taxers" charge, are happy? Well, no ... not all of them.

Where's the money for universal health care -- the key issue of the left?

Paul Krugman was unhappily asking this very question not long ago...

Barack Obama’s tax plan is more responsible than Mr. McCain’s ... also far more progressive ... [but] not enough to pay for universal health care, which was supposed to be the overriding progressive priority in this election. Why doesn’t Mr. Obama propose raising more money?
And Krugman then was assuming the Obama plan was raising $700 billion of revenue over a decade, not reducing revenue.

With a deficit of over $400 billion projected for next year, and Obama promising to reduce taxes ... where's the money for his universal health care plan? Well...

Sen. Obama would pay for this tax cut by cutting spending -- including responsibly ending the war in Iraq, reducing excessive payments to private plans in Medicare, limiting payments for high-income farmers, reducing subsidies for banks that make student loans, reforming earmarks, ending no-bid contracts, and eliminating other wasteful and unnecessary programs.
No mention of any money for Krugman's "overriding progressive priority in this election" in that. Cutting subsidies for student loans isn't going to cover national health care. As to limiting payments for high income farmers, after the farm bill the Democratic Congress just passed, good luck with that! (And isn't Obama himself a big supporter of ethanol subsidies?)

So it certainly looks like Obama is planning to finance his universal health care plan -- the overriding key issue for Democrats and the left -- with ... a tax cut!

And here's a bit of irony. After Obama's advisors put forth the solemn words ...
Sen. Obama believes that responsible candidates must put forward specific ideas of how they would pay for their proposals.
... they actually condemn McCain for doing just that -- telling how he would pay for his health care proposal:

Sen. McCain's plan does include one new proposal that would result in higher taxes on the middle class. As even Sen. McCain's advisers have acknowledged, his health-care plan would impose a $3.6 trillion tax increase over 10 years on workers ... Even after accounting for Sen. McCain's proposed health-care tax credits, this plan would eventually leave tens of millions of middle-class families paying higher taxes.
McCain's limited health care proposal would cost money, and doing just as Obama's advisors say "responsible candidates must", McCain tells how he would pay for it -- for which they attack him!

Obama's universal health care proposal is free, paid for with a tax cut! Nothing to attack there.

Wasn't Obama billing himself as some "new" kind of politician? That's hard to see in all this. It's hard to make out what he's really doing here.

Has he thrown Krugman and the political left overboard on universal health care? Is he ... oh ... lying to us about his fiscal tax-and-spending plans? Is he going to make up his mind later about what he is really doing now, according to what is expedient then?

Pick you choice of the options, whatever -- he's looking every day like more of the same old, same old, oldest kind of politician you can find, to one observer.

"Promise 'em all what they want. Never mention the cost."