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Wednesday, June 25, 2003


Dean and FICA wages

posted by B at Wednesday, June 25, 2003 permalink View blog reactions
In the recent RNC/MTP mugging of Howard Dean by Tim Russert, Dean seemed halfway to the seeing the sweet spot of the swing for 2004:

MR. RUSSERT: But you would consider increasing the payroll tax?

DR. DEAN: Absolutely. You don't have to increase the amount of the payroll tax, you increase the salary that it's applied to. You see what I mean?


DR. DEAN: You’ve got to look at expanding the amount of money that gets taxed for Social Security. You know, if you make $100,000 a year, the last $15,000 doesn’t have to pay Social Security tax for it.... $85,000, maybe you raise it to $100,000 or whatever the numbers are. We've got to look at the numbers to figure out what you do. You get the Social Security problem off the table first by fixing it...

First off, Dean eludes to something that makes his idea a bit of a non-starter. The cap on FICA wages are tied to the rise of inflation, so they are raised every year. The cap for 2002, which Dean eludes to, is $84,900. For 2003, it will $89,400. By the time of 2005, the first possible budget that Dean would have control over, it'd probably already be at $100,000 (assuming Bush II doesn't drag us into a deflationary economy).

But that's just a sidenote. The problem with this is that it is going to be shaped as Dean raising taxes to save SS; similar to how Russert and the RNC frame Dean's choice of reversing the Bush tax-cuts in order to deliver national health-care and a balanced budget.

What's missing is any argument of a stimulus to the economy. Sure, you could argue that restoring fiscal responsibility will turn the corner, eventually, but not in the short-term. Facing a $500B year deficit, and decreased revenues due to the Bush tax-cuts, Dean, and the Democratic Party as a whole are going to have to offer a short-term economic stimulus package that is not deficit-producing.

Dean's already argued for the tough medicine, in raising the cap on FICA wages. Why have a cap at all? Make FICA applicable to all wages, and further, eliminate the first 15-20K from having to pay any FICA payments at all. That's right, a tax-cut.

In essence, everyone making under ~$110k (and this is single wage earners, for married couples both working, it'd be ~$220k) would recieve a tax break, with those at ~$20k annually seeing their payroll taxes eliminated, and those individuals above ~$90k (effectively ~$110k, because the first ~$20k is eliminated) and couples above $220k seeing their taxes raised.

This would stimulate the economy, as anyone's first $20K goes right into spending; and at the same time, ensure the long-term stability of social security, by raising the taxes of the top ~10% wage-earners.

This economic agenda doesn't have to be that complicated:

Candidate A, a Democrat, pledges to cut the payroll taxes of all individuals earning under $110k, and all married couples both working and earning under $220k.

Candidate B, a Republican, claims that 90% of the people don't deserve a tax-cut, defends the elite, the rich, and... loses.

I confess, I've taken Reich's idea and dumbed it down (heaven forbid), but that doesn't matter, you get the point.


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Nation-Building was founded by Aziz Poonawalla in August 2002 under the name Dean Nation. Dean Nation was the very first weblog devoted to a presidential candidate, Howard Dean, and became the vanguard of the Dean netroot phenomenon, raising over $40,000 for the Dean campaign, pioneering the use of Meetup, and enjoying the attention of the campaign itself, with Joe Trippi a regular reader (and sometime commentor). Howard Dean himself even left a comment once. Dean Nation was a group weblog effort and counts among its alumni many of the progressive blogsphere's leading talent including Jerome Armstrong, Matthew Yglesias, and Ezra Klein. After the election in 2004, the blog refocused onto the theme of "purple politics", formally changing its name to Nation-Building in June 2006. The primary focus of the blog is on articulating purple-state policy at home and pragmatic liberal interventionism abroad.