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The thing about a donut hole is that it is empty. There is nothing. And that, it seems, is what is left of Barack Obama's plan to fix Social Security.
The Obama people now tell us that his proposal, which is built on a tax hike for those earning more than $250,000, won't take effect until at least 2018. You heard right: 2018.
That would not be in Obama's first term. It would not be in his second term. It would not happen until two years after his successor is elected, even if he serves a full 8 years. It would also, conveniently, be outside the budget window, allowing Obama to scale back the official size of his proposed tax hike for the wealthy.
Do the political math. Take the likelihood of any politician keeping any given promise. Discount for the time he says it will take to fulfill that pledge. Then discount it again if the effective date is scheduled for roughly the time of his post-Presidential book tour. The credibility factor is infinitesimally low. It is as if George Bush had promised in 2003 that he'd withdraw from Iraq in 2013.
Make no mistake, what Obama is really saying is that, at least for the campaign, he is walking away from Social Security and all of its problems.
In truth, his original plan was never much to write home about. He wanted to raise taxes for those making more than $250,000 but, oddly, not for those making between about $100,000 (the current Social Security payroll tax cap) and $250,000. So, someone making $60,000 would still be paying a larger chunk of their income in payroll taxes than someone making four times as much. This was the design that wags dubbed the donut hole.
To add to the muddle, Obama has never said much about what that extra tax would look like. In a Wall Street Journal article today, economic advisers Jason Furman and Austan Goolsbee now say the rate would be between 2 percent and 4 percent. But would only wages be taxed, or would other income be subject to the levy as well? Would benefits rise with contributions? Would this really turn out to be nothing more than a 2 percent income tax surcharge on the rich, as some inside the campaign have hinted? It was all a state secret.
Obama took plenty of heat from the Democratic base for suggesting that anything needed to be done to fix Social Security. At the same time, moderates and conservatives objected to solving the problem only with tax increases while ignoring the benefit side. Quietly, Obama aides say he might accept some benefit reductions as part of a deal with Congress, but he would never propose such heresy.
So, with no real plan, and no one stepping up to pin a medal on him for bravery in the face of entitlements, Obama has abandoned the field. Unlike a phased-in reduction in future benefits, in today's political environment a tax fix with a 10-year fuse is no fix at all. With John McCain saying little more than how he supports yet another bipartisan commission to repair all entitlements, it seems we have heard the last of Social Security until after next November.
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