Democratic Presidential Candidates Address Fiscal Issues in Debates

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Democratic Presidential candidates participated in debates on September 20 and September 26 that addressed taxes, Social Security, health care, and other issues.

Health Care

The candidates seem to vary in how they claim their health care reform plans would be paid for. Even if his numbers don't always add up, former Senator John Edwards is relatively honest about his plans. He cited his proposal to eliminate the Bush tax breaks for those making over $200,000 and raising the rate for capital gains to 27 percent.

Senator Hillary Clinton seemed to suggest on the 20th that increasing efficiency with electronic records and other reforms can raise billions of dollars and pay for her plan to provide families the same health insurance options that federal employees have as well as tax credits for those who cannot otherwise afford to buy these plans. New Mexico Governor Bill Richardson said he disagrees with John Edwards and that no new taxes are needed. But then he said he would "eliminate the two percent" by which we think he means ending the tax breaks for the wealthiest two percent (which sounds an awful lot like what John Edwards wants to do actually) as well as raise $77 billion by cutting corporate welfare.

Social Security

On Social Security, Richardson is slightly less confused. On the 26th, he pointed to the fact that the program may not really be in grave danger because the assumptions used to make the oft-cited projections of insolvency are overly pessimistic. The other candidates seemed more convinced that Social Security really does face a crisis. Senators Christopher Dodd and Joe Biden said the cap on wages subject to Social Security taxes should be raised, while Senator Barack Obama (who was present on the 26th but not the 20th) would rather remove the cap entirely so that all earnings are subject to Social Security taxes.

Clinton won't say what she would do for Social Security exactly. On both nights, Edwards put forth the peculiar idea of creating a donut hole in Social Security taxes. The first $97,500 of earnings would be subject to the tax as is the case currently, then earnings between that amount and $200,000 would not be, and then all earnings over $200,000 would be subject to the tax.

Besides the question of whether Congress can actually constrain itself from spending Social Security surpluses as discussed above, these proposals also raise the question of whether or not support for the program would erode to any significant degree if the funding mechanism was made this progressive. The wealthy people who would be affected by these proposals see a much smaller fraction of their wages replaced by Social Security benefits than low- and middle-income people. On the other hand, it's not clear that support for Social Security is really linked to how it's funded.

Tax Incentives

The candidates also vary in the extent to which they're willing to use the tax code to affect behavior. Senators Dodd and Gravel favor a tax on carbon to reduce emissions that contribute to global warming. Governor Richardson favors using the tax code to encourage everything from higher wages to technology companies to unionization. We would argue that Governor Richardson's proposals stray a bit from the function and purpose of the tax code, which is to fund government services.

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