Obama’s War on Women, II

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun

“Absolutely outrageous” is how Senator Obama’s economic adviser, Jason Furman, described our editorial of Thursday, “Obama’s War on Women,” about the effect the Democrat’s tax plan would have in penalizing highly educated married women who work outside the home. Mr. Furman was asked about it (not by us) in a conference call of the national press corps.

“There is a feature of current law that especially for high-income people, some people get marriage bonuses, some people get marriage penalties. Those same people would continue to get those bonuses or penalties under both the McCain plan or the Obama plan. The Obama plan doesn’t add any new people,” Mr. Furman said. “What is important, though, is to look at the overall agenda that these two candidates have for working women and what they would do,” he said, speaking of, among other things, Mr. Obama’s plan to raise the minimum wage.

Mr. Furman and another economics adviser to Mr. Obama, Austan Goolsbee, followed up with a letter to the editor of the Sun, reprinted on page 8. “Your editorial today accusing Barack Obama of creating a new marriage penalty in his tax plan and declaring a ‘war on women’ was an outrageous distortion,” they wrote. “The truth is that under Obama’s tax plan not a single new couple would get a marriage penalty because they have high incomes. Not one.”

Well, speaking of distortions, we did not write in the editorial that new people would be subject to a marriage penalty under the Obama plan. What is true is that the penalty will become a lot more punitive. An analogy to the 65-mile-an-hour speed limit can help explain the issue. Suppose Mr. Obama announced a plan to punish speeders by confiscating their cars and throwing them in jail rather than simply giving them tickets. And suppose we wrote an editorial criticizing the plan. Then suppose Mr. Obama’s transportation advisers then wrote us a letter accusing us of an “outrageous distortion,” because under the Obama plan, no new people are subject to penalties for speeding, and because penalties for speeding are already a feature of current law.

It’s true Mr. Obama isn’t proposing to change the boundaries of the tax brackets, just as our hypothetical Obama speeding crackdown doesn’t change the speed limit. But the Obama tax plan does change the marginal rates, so that a married couple that had been paying a 35% rate on their income above about $357,000 a year would be subject to an increased top federal income tax rate of 39.6%. On top of that, as we pointed out last week, Mr. Obama would impose a new payroll tax on those top earners of between 2 and 4 percentage points, bringing their marginal tax rate to as high as 43.6%. Add to that the top New York City income tax rate of 3.648% and the top New York State income tax rate of 6.85%, and the nominal marginal income tax rate mounts to a staggering 54%.

The speed limit analogy is instructive in another way, as well. At least speeding is an activity the government has an arguably legitimate interest in discouraging, because it involves consuming more foreign gasoline, enriching our enemies, and because it can lead to more deaths in car accidents on our highways. In contrast, earning more than $357,000 a year is something that the government should want to encourage. It’s a sign of industriousness and prosperity, of having created something of significant value though hard work.

Now, Mr. Furman and Mr. Goolsbee are some of our favorite Democratic economic policy types. We’ve long admired Mr. Furman for his forthright defense of Wal-Mart, and Mr. Goolsbee caught our eye as the emissary Mr. Obama sent to assure the Canadians that the candidate’s anti-Nafta rhetoric in the Ohio primary was just a lot of campaign trail talk, not to be taken seriously. But on this one, all the indignant bluster mustered by Messrs. Furman and Goolsbee can’t hide the fact that a rise to 43.6% from 35% would be a 24.6% increase in the federal marginal income tax rate. And, as we predicted last week, the consequence is that a lot of highly educated working women, faced with the prospect of turning over 54% of their income to the government (not to mention the cost of child care), will just stay home.

For Messrs. Furman and Goolsbee to counter this criticism with the news that Mr. Obama favors an increase in the minimum wage is just insulting. Most of the women who are going to be paying Mr. Obama’s 54% nominal marginal income tax rate are not minimum wage earners. They are doctors and lawyers and writers and bankers and accountants and teachers and small businesswomen. It used to be the Republicans who were stereotyped as wanting women to stay home with the children. Not that there is anything wrong with such a decision, which may be the best decision for some families. But it is a decision a lot of women would prefer to make on the merits, rather than in the face of a government threatening to seize more than half of their earnings.

To add to the insult, the Obama campaign call convened to address this criticism contained, in addition to Messrs. Furman and Goolsbee, another man, Lawrence Summers. At least the McCain campaign’s tax conference call of the day included a woman, Carleton Fiorina. Mr. Summers, after serving as Treasury secretary at the end of the Clinton administration, became famous as the Harvard president who was ousted after idly disparaging women’s “intrinsic aptitude” in science and engineering. We defended Mr. Summers at the time. But it is worth noting that in the same discourse that got Mr. Summers in so much trouble back in 2005, he reported on a colleague who had told him that of 22 women in a section of the Harvard Business School class that graduated in 1994, “there were twenty-two women, of whom three are working full time at this point.”

On Thursday, Mr. Summers blithely assured questioners on behalf of the Obama campaign, “The idea that a return to the tax policies of the 1990s would harm the economy is supported by neither theory nor evidence nor the longer-term history.” Does it not harm the economy to usher 86% of Harvard Business School women graduates out of the full time workforce? Does the Obama campaign really think these women are going to be lured back into the workforce by an increase in the minimum wage?

Don’t just take our word for it. Peter Orszag is a Ph.D. economist who is the director of the Congressional Budget Office for the current Democratic-controlled Congress and who served as an economic aide to President Clinton. He wrote in a 2001 paper for the liberal Center on Budget and Policy Priorities, “Numerous economic studies have found that lower tax rates do little to encourage work effort among working-aged males — who already are generally working full time — but do provide some additional incentives for women to enter the labor force.” If the Obama camp really understood these incentives, it would be talking about lowering marginal tax rates rather than increasing them. With all due respect to Messrs. Summers, Furman, and Goolsbee, Mr. Obama may want look for advice elsewhere.

The New York Sun

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