By James Kwak
Adam Davidson wrote his latest New York Times Magazine column about how Barack Obama and Mitt Romney largely agree on economic questions. This is a classic example of how to mislead through deceptively selective citation.
Here’s the core assertion:
For someone who lived in the first 150 years or so of this country, it might be hard to see what’s so different about the economic policies of Barack Obama and Mitt Romney. Romney seeks a 25 percent top corporate tax rate, and Obama is proposing 28 percent. Romney wants to eliminate capital-gains taxes for the typical investor and leave the rate at 15 percent for higher earners. Obama wants to increase it to 20 percent. They differ on how to tax the highest incomes. But for most Americans, the distinctions might be mistaken for a rounding error. Both men strongly support expanding free trade and maintaining close to the same level of Social Security and welfare benefits.
As anyone who follows fiscal policy knows, the corporate tax rate is a sideshow. It’s the individual income tax and payroll taxes that bring in the big dollars, and it’s the individual income tax that has the real impact (or not) on inequality.
Mitt Romney wants to lower the top individual tax rate to 28 percent; Obama wants to let it increase to 39.6 percent. When you add in the Medicare payroll tax, Romney’s rate increases to 30.9 percent, while Obama’s increases to 43.4 percent. (Romney wants to repeal the Affordable Care Act, which would mean repealing the 0.9 percent Medicare surcharge on high-income households.) That means Obama’s tax rate would be 40 percent higher than Romney’s. That’s a rounding error?
What about capital gains taxes? Davidson says the difference is between 15 percent and 20 percent. But the Affordable Care Act imposes a Medicare tax on investment income of 3.8 percent for high earners (which, again, Romney would repeal), so the real difference is between 15 percent at 23.8 percent; Obama’s proposed tax rate is 59 percent higher than Romney’s. That’s not a significant difference?
Davidson cites agreement on Social Security and welfare. Social Security, yes, at least for now, since Romney doesn’t want to touch that rail. (His running mate, by contrast, has supported privatization in the past.) I’m not sure what he means by “welfare,” but he certainly can’t mean Medicaid, the largest anti-poverty program. Romney wants to convert Medicaid into a block grant, which in itself would have major impacts on poor people in states that, well, don’t want to help poor people. More importantly, Romney would limit growth in the size of Medicaid grants to inflation plus one percentage point, which is far less than actual health care inflation. So relative to current policy, Medicaid spending would be much lower under Romney—$1.3 trillion over nine years, according to Bloomberg. And, again, Romney wants to repeal the ACA, which includes an expansion Medicaid spending in order to increase coverage. Those all seem like big differences to me.
Finally, Davidson conveniently neglects to mention Medicare, where the differences between the candidates are greatest. Obama wants to maintain the basic structure of Medicare, where benefits are a percentage of real health care costs. Romney wants to change Medicare to a voucher program, where the growth rate of benefits is capped regardless of the growth of actual health care costs. (Obama also wants to reduce the growth rate of benefits, but that’s a target, not a cap; he isn’t proposing a change to the benefit structure.) First of all, these proposals vastly differ in the role of the private sector and how they expect to control health care costs. Even leaving that aside, however, they fundamentally differ in who bears the risk of health care inflation. Obama leaves it with Medicare, hence the federal government; Romney shifts it to individuals.
In short, there isn’t a baldly incorrect fact in the passage from Davidson’s column above, but it’s hard to see how it could be more misleading. There are huge differences between Obama and Romney when it comes to taxes and social insurance programs, and they are sitting out there for anyone to see.
I used to like Planet Money, and many of its reporting-based episodes are still excellent. But ever since the health care debates, I’ve become more and more tired of its tone of cute, isn’t-this-fascinating contrarianism. I generally avoid criticizing them because I like the people there whom I met and because they are affiliated with This American Life, my favorite show in any medium, so I give them the benefit of the doubt. But this column epitomizes everything that is wrong with the journalistic, “tell me a story” approach to economics and public policy: looking for an original angle to take through well-trodden terrain, thumbing your nose at the conventional wisdom, and backing it up with correct but incomplete facts. Sometimes the conventional wisdom is right.