43.4 = 30.9?

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.

24 thoughts on “43.4 = 30.9?

  1. When you add in the Medicare payroll tax, Romney’s rate increases to 30.9 percent, while Obama’s increases to 43.4 percent. … That means Obama’s tax rate would be 40 percent higher than Romney’s. That’s a rounding error?

    The author distinctly says ‘for most Americans’, and yet you are focusing on the difference between the top marginal (!) rate the two candidates say they want. I don’t get it. I’m sure you know the difference between ‘tax rate’ and marginal rates (thus why “40 percent higher” is a nonsense number). I’m also sure you know that the top marginal rate has no effect on ‘most’ Americans. So my only question is, why do you think you are rebutting what he said in any way?

  2. I used to enjoy Planet Money, but Davidson’s knee-jerk contrarianism is so infuriating, I can’t stand reading it any more.

  3. James, I haven’t listened, but, based upon the content of your article, I would say the Mr. Davidson is simply supporting a mainstream attitude. After all, isn’t that what mainstream media is about? That is printing advocacy of a certain bogus model of truth that is being pandered by the mainstream 1%. Sorry, just one man’s opinion. After all, it’s not like he’s trying to do a public service, and, Planet Money, like everything of its genre, is promoting a world view that is probably just become evident to you as being contrary to yours in certain definite ways.

  4. James Kwak is my favorite liberal pundit, because he’s one of the few on that side of the political divide that has any smarts. even smarter than my favorite moderate Republican columinist, David Brooks.

  5. “As anyone who follows fiscal policy knows, the corporate tax rate is a sideshow. ”

    It shouldn’t be that way though, as the corporate tax rate is driving a lot of business decisions that aren’t in the best interests of the nation right now. Most individuals can’t use accounting tricks to recognize all of their income in low tax jurisdictions like businesses can.

    Regarding the ACA, I’m starting to think that the 3.8% Medicare tax on investment income was the real root of conservative ire and all of the hullabaloo about the “unconstitutional individual mandate” was just a smokescreen for the rubes.

  6. Reblogged this on The LP Record and commented:
    Great example of the importance of learning and liking make besides that it’s really cool. Numbers can speak more directly than words…

  7. Davidson is correct in that neither candidate is embracing a radical alteration of the traditional government income streams. Neither candidate is pushing for a national sales tax, elimination of corporate income taxes, elimination of the mortgage interest deduction, or anything that is substantially different from the norm.

  8. And Jim Jones Jonestown censorship is working overtime at Fineman’s Huff ‘n Post…

    A commentor suggested:

    If you think casino-like speculation on Wall Street is bad for the economy, here are two possible remedies. (1) Tax each financial transaction, including the sale of securities and homes, which would discourage “flipping.” (2) Treat capital gains as ordinary income. Neither remedy would discourage “strategic” investing, but both would slow the dangerous speculation. The end result would be to direct more money into profiting from producing things rather than from manipulating the money supply, where only those with money can play, and where the most economic damage occurs.

    And the reply that was censored was a comment about how to make it happen (“poltics” as the art of making things happen right?):

    “Maybe slip those 2 new tax laws into another bill – like the one mandating vaginal probes – and it’ll happen.”

    Yup, 24/7 psychological abuse is not “culture” or “education”. It’s not even “dumbing down”. It is predatory and criminal. Just War.

    Matt keeps on keeping on – good man:


  9. Davidson is a Toxic Ass; he once interviewed Elizabeth Warren in a very savage way saying over and over again essentially “Why should I listen to you when every respected expert disagrees with you”. He subsequently issued and apology that was not an apology. He is the worst of NPR’s stable of cutesy Fair and Balanced “reporters”.

  10. This whole “disagreement between the global corporatist Freidmaniac Willard Romney, and Barrack Obama is not going to work. No one, regardless of what they say, will support any kind of real tax reform. That has become patently obvious, and I think that most voters must realize it, because it has not become a core election issue. The point you make, James, is a very valid one. These guys are not going for the same thing, but only playing to their bases. Romney, in many ways, is beginning to look like a loser. His move toward the middle, seemingly apparent in the debate, is competely bogus, a simple debate ploy that can’t be supported. But, I will hand it to his advisors, since, according to the “bump” it worked to some extent. He knew he couldn’t go on the debate and preach to the choir, after all.

  11. Yes Bayard, the free trade coupled with the preexisting conditions with health care was the kicker. His wagon gravy train looks more like a herd of buffalo’s off the cliff than anything fiscal.

  12. Good commentary.

    We can’t fund schools, but wasting hundreds of millions on the kabuki theater that is the Amerikan elections process is acceptable. The entire process is a joke and as Taibi says abusive. The dems are reps play to the edges of their respective bases – but they all bow to their masters in the predatorclass advancing predatorclass interests and doing predatorclass bidding the nanosecond they (all politicians) assume their respective offices.

    Nothing is going to change until the people change it real horrorshow arabspringlike.

    Burn it all down! Reset!! It’s the only option.

  13. I agree with you, Tony. Turn it all off, it the reset button. Let’s go, torches and all.

  14. @Tony F – without getting better organized, the “Deliverance Boyz” gene pool in USA will win too many skirmishes…punch their clocks out on Nov 6 if they are preventing people from voting…

    The freakin’ global mercenary army of the Haliburtons of the world is bigger and badder than people know, but even the teddy bears in Star Wars got their licks in against Vadar’s forces – high tech usually FAILS when confronted with clever low tech :-))

  15. The President needs to hammer away in the next two debates the differences in Medicare and the replacement of this stellar program with vouchers that will serve to impoverish recipients with substantial health care expenses, if Mr. Obama is seriously interested in winning the election.

  16. Mr. Bond, I wholeheartedly agree, of course. I am currently on Medicare. However, based upon the ACA and the level at which the President supported giving the store away to Pharma, Big Providers, and the Health Insurers, it is hard to imagine him working very hard at this. After all, these folks might well gain even more in a “voucherized” system. This is the way I see it in today’s world of plutocratic politics, as the Pres has yet to firmly establish his progressive cred.

  17. You are being asked to login because rschauland@gmail.com is used by an account you are not logged into now.
    By logging in you’ll post the following comment to 43.4 = 30.9?:

    Sheesh, for all of Mr Kwak’s exasperation, you’d think there’d time to think a little more about context. The above is a good piece as counterpoint, but the conclusion that somehow he’s frighteningly misleading the public (and then bad-mouthing Planet Money by extension) is totally off-base. (I think the “y’know, I really try to avoid saying mean things about them because they’re nice people and I’m such a good person and generally beyond reproach” attitude is a little immature). After all, the point of the NYT Mag piece was that we’re talking about two candidates that are different simply by a matter of degree. Mr Kwak is trying to explain that the matter of degree is greater. That’s great. But that doesn’t undermine the greater point that our big quadrennial choice between two purportedly polar opposites is really a choice between someone on the right and someone in the center.

  18. I used to like Planet Money, too. But Adam Davidson’s pseudo intellectual attitude put me over the edge when he interviewed Elizabeth Warren several years ago. His own bias showed when he took a paternalistic, condescending tone with her as he questioned her zeal in consumer advocacy and suggested that zeal made her ineffective or somewhat less effective. Mr. Davidson was so casual and informal with Ms. Warren as he attempted to take her down; it was like he thought he was the teacher and she his student. The tone was so inappropriate I haven’t listened to Planet Money since.

  19. Rich, thanks so much for the Shame citation. It is amazing. Mr. Davidson is a “piece of work”, almost like a right wing mole, a sniveling low life with a nasty agenda. Time to shut this down. He has no place on a vernerated source like NPR. I might not always agree with them, but he is completely antithetical to their concept and message.

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