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Wednesday, June 18, 2008


is the full text of a comment I posted in answer to Paul Krugman's question
"lower and middle-income Americans would be substantially better off under the Obama plan. But where is the money for health care reform?"

Then I couldn't resist adding a long boring explanation as my next comment

To explain my brief answer (which is not work safe in Italy where Fica means ... what John McCain called Cindy McCain*), there are two puzzles in Obama's proposals
1) how does he plan to pay for both health care reform and his middle class tax cut ?
2) why is he raising the social security tax even though it is probably not needed to pay old age and disability pensions ?

I think the two questions answer each other. I think that Obama is planning to pay for health care reform with the donut FICA increase (taxing individual labor income over $250,000).

The numbers add up to, what is for a candidates fiscal promises, rounding error -- the middle class tax cut will reduce the present value of tax receipts by about $ 700 billion and the FICA increase will raise the present value of tax revenues by $ 600 billion .

(I know senator Everett Dirkson said "a billion here a billion there and soon your talking real money" but that was decades ago).

The TPC did not consider the FICA increase in scoring Obama's bout with the deficit (sorry tag tame match Obama and the deficit against the concept of a sustainable fiscal policy).

warning pdf

My personal guess about our kind host (over at that other blog which linked here once) is that prof. Krugman knows exactly what Obama is up to, and is denouncing him for an irresponsible middle class tax cut and buying Republican lies about social security being in crisis, because he knows that such criticism is will gain Obama more votes than any possible praise.

I trust that you progressive wonks who read down into the comments thread can keep a secret.

* of course I was kidding everything is work safe in Italy.

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