Obama and Romney square off on the economy

(MoneyWatch) Thanks to the hockey lockout, the New York Islanders haven't taken the ice yet, but there was plenty of verbal forechecking on Long Island last night in the second presidential debate. Here's a look at some of the economic issues raised.

Taxes

Mitt Romney said "The top 5 percent of taxpayers will continue to pay 60 percent of the income tax the nation collects. So that'll stay the same." The Tax Policy Center says that the top 5 percent have $181,000 in adjusted gross income right now (the number is expected to increase to $200,000 by 2014) and pay about 57 percent of all federal income taxes this year.

Romney's tax plan would cut all marginal tax rates by 20 percent, but he has been hard-pressed to come up with specific ways to do so without reducing taxes on the wealthiest and blowing a bigger hole in the deficit. Last night, Romney said that he would pay for all of his tax cuts, estimated to cost $5 trillion over a decade, by limiting "deductions and exemptions and credits, particularly for people at the high end." He went into more detail than he has in the past when he added "I'll pick a number -- $25,000 of deductions and credits, and you can decide which ones to use. Your home mortgage interest deduction, charity, child tax credit, and so forth; you can use those as part of filling that bucket...of deductions."

Considering that 80 percent of tax savings from itemization goes to the top 20 percent of Americans households, any limitation on deductions and credits would hit the top 5 percent right where they live. (Itemized deductions have always benefitted wealthier because the higher your tax bracket, the more each dollar deducted is worth.) According to Tax Policy Center estimates, high earners took an average of about $43,000 in itemized deductions last year, while the average is closer to $25,000.

During the debate, Romney unveiled something new for middle-income taxpayers: under his tax plan, there would no longer be a tax on interest, dividends or capital gains. This sounds great, but as noted in the chart below, most middle class taxpayers are not currently paying a ton of tax in these areas.

Energy

The candidates sparred over where the increase in U.S. oil and gas production took place. Was it on state or private lands? The Energy Information Administration notes that during the first three years of the Obama administration, oil and gas production on public lands it has increased slightly (approximately 13 percent for oil and 6 percent for gas), compared with the last three years of President George W. Bush's term.

Romney pointed out that under President Obama, the number of drilling permits was cut in half. That's about right, according to the Bureau of Land Management -- the federal government issued 42 percent fewer leases on public lands during the first three years of the Obama administration compared with the last three years of the Bush administration. Some of the drop can be attributed to the moratorium that occurred after the Deepwater Horizon oil spill.

Oil and gas prices have increased over the past three years, primarily due to the economic recovery, which allowed demand for crude oil to increase. The price of crude is by far the largest contributor to the price at the pumps. The extreme price spikes that occurred have been pinned on Middle East anxieties and U.S. refinery disruptions. Americans' gas consumption is at 11-year lows.

China

Last night, there was a lot of admonishing of China by both candidates. It's hard to argue with Mitt Romney calling China a "currency manipulator," because it is. He said that he would "label China a currency manipulator, which will allow me as president to be able to put in place, if necessary, tariffs where I believe that they are taking unfair advantage of our manufacturers."

The Obama administration has a little experience with the wisdom of such actions. After imposing a tariff on Chinese tires, China responded by imposing a tariff on American chicken parts, which cost the poultry industry an estimated $1 billion. As a result, the administration let the initial tire tariff expire.

The most substantive point on the issue of pay equity for women was Obama's explanation of the Lilly Ledbetter act, the first bill he signed as president. In short, the act updated the statute of limitations so that the clocks restarts with each new paycheck. Under the old law, unless a woman discovered the discrimination within 180 days of the first paycheck, she was out of luck.

Romney: I had "binders full of women" to staff my cabinetOf course it was Romney's "binders full of women" comment that lit up Twitter, but the discussion of the wage gap between men and women left many wondering whether either candidate thinks this is more than a way to "connect with women" on the campaign trail. According to the most recent survey by Catalyst, median annual earnings for full-time, year-round workers, women earned 82.2 percent of men's earnings in 2011. While this is a vast improvement since 1979, when women earned 62.3 percent as much as men, we have a long way to go, baby...as they say.

Jill Schlesinger

Jill Schlesinger, CFP® is the Emmy-nominated business analyst for CBS News. She covers the economy, markets, investing and anything else with a dollar sign on TV, radio (including her nationally syndicated radio show), the web and her blog, "Jill on Money." Prior to her second career at CBS, Jill spent 14 years as the co-owner and chief investment officer for an independent investment advisory firm. She began her career as a self-employed options trader on the Commodities Exchange of New York, following her graduation from Brown University.

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