American Crossroads Ad Is "Baloney"

November 01, 2010 5:09 pm ET

Repeatedly using footage of Rep. Maurice Hinchey (D-NY) saying "shut up," American Crossroads tries to suggest that Hinchey is belligerent and out-of-touch with the opinions of his constituents. The ad cites "job-killing taxes," the "stimulus," and "devastating Medicare cuts," but manages to distort the truth about all of its claims. Hinchey's votes in favor of the Recovery Act and health care reform will actually create jobs, boost the economy, and strengthen Medicare without cutting benefits.

American Crossroads: "Hand"

[Voiceover:] They arrogantly raised taxes and spending. Debt skyrocketed. When questioned by a reporter, Congressman Maurice Hinchey lashed out. [Hinchey:] "Shut up. ... You're full of baloney." [Voiceover:] Baloney? What's baloney is Congressman Hinchey voting for Nancy Pelosi's failed agenda. [Hinchey:] "Shut up." [Voiceover:] Voting for billions in taxes that kill our jobs. [On-screen text:] Congressman Hinchey voted for $525 billion in job-killing taxes. [Hinchey:] "Shut up." [Voiceover:] Wasteful spending. [On-screen text:] Congressman Hinchey voted for wasteful $814 billion "stimulus". [Hinchey:] "Shut up." [Voiceover:] Devastating Medicare cuts. [On-screen text:] Congressman Hinchey voted for $500 billion Medicare cut. [Hinchey:] "Shut up." [Voiceover:] Maurice Hinchey's record? [Hinchey:] "...full of baloney." American Crossroads is responsible for the content of this advertising.

Job-Killing? Health Care Reform Will Create Jobs

FactCheck.org: Health Care Reform Contains "'Job-Creating' Spending." From a FactCheck.org article examining another ad's claim that health care reform contains "$525 billion in job-killing taxes":

The ad further claims that the legislation contains "$525 billion in job-killing taxes." That's not the whole story. The measure does contain a bevy of tax increases. By far the biggest is a new Medicare tax that will fall on the investment income of persons making over $200,000 a year ($250,000 for couples). In fact, CBO now estimates the increased revenue from the new law at $643 billion, having added the year 2020 to its latest 10-year forecast. And all other things being equal, classic economic theory holds that increasing taxes will cut the amount of money available for consumption and business investment, and reduce economic growth and employment.

But whether the new law is a net job-killer or not is a larger question. The bill also contains hundreds of billions of dollars in spending - or should we say, "job-creating" spending. Millions of Americans who previously lacked health insurance will, with the help of federal subsidies, be racking up more visits to doctors, purchases of medication and use of medical procedures generally, experts say. A study by the Lewin Group estimated that the newly insured, and those obtaining improved coverage under the act, would spend an additional $281.5 billion for health services over the first 10 years.

The main worry about possible job losses due to the new law has little to do with tax increases. The law contains a requirement that employers above a certain size either provide health insurance for their workers, or pay a penalty. Economists say that's likely to discourage hiring of low-wage workers, especially those at or near the minimum wage, because of the added cost. The same Lewin study estimated a job loss from this provision of "between 157,300 and 366,200 people." But that study didn't examine the likely offsetting increases in employment elsewhere. A paper by John A. Holahan, director of the Health Policy Center of the Urban Institute, weighed all the possible effects and concluded that the net effect of the law on employment is likely to be small but "slightly positive."

[FactCheck.org, 8/30/10, emphasis added, internal citation deleted]

  • Urban Institute: Health Care Reform's Effect On Employment "Slightly Positive." From the director of the Urban Institute's Health Policy Center:

PPACA is unlikely to have a major aggregate effect on the U.S. economy primarily because the changes in spending and taxes are quite small relative to the size of the economy; moreover, most of the effects offset each other. Increased spending will increase the demand for health services and the demand for labor in health sector. Cuts in Medicare and cost-containment provisions will have opposite effects. The net effect on employment is likely to be slightly positive because the health sector is labor-intensive. New taxes on insurers and medical device and pharmaceutical manufacturers could have adverse effects on those industries except for the fact that coverage expansion should provide new revenues well in excess of the new tax obligations. Cost-containment efforts, if successful, should reduce the growth in spending on Medicare and eventually on Medicaid, which would reduce the taxes or borrowing the federal government has to undertake. Cost containment that reduces the federal budget deficit would result in faster economic growth, more employment, and higher family incomes. The impacts on small businesses are likely to be insignificant, because most small businesses will be exempt from any penalties. Most firms affected by potential penalties (those employing 50 or more workers) already provide health insurance. Overall, small businesses should benefit from the availability of lower-cost plans and efforts to increase competition and contain costs within exchanges.

[Urban Institute, August 2010, emphasis added]

Health Care Reform Could Create Up To 4 Million American Jobs In The Next Decade. According to the Center for American Progress, "Relative to baseline employment forecasts from the Employment Projections Program at the U.S. Department of Labor, we estimate that moderate medical savings from health care modernization as envisioned under the legislation now before Congress would lead to an average of 250,000 additional jobs created annually. Under the larger assumption about savings due to health care reform, 400,000 new jobs a year would be created on average." [Center for American Progress, New Jobs Through Better Health CareJanuary 2010]

Health Care Reform Could Create Over 12,000 Jobs In New York. According to the Center for American Progress, "the reduction in health insurance premiums caused by health care reform would create" up to 12,927 jobs in New York. [Center for American Progress, 2/24/10]

"Wasteful?" The Recovery Act Created Millions Of Jobs And Boosted The Economy

The Economy Shed Almost 8 Million Jobs Under Republican Policies Before The Recovery Act Could Affect The Economy. According to economist Robert J. Shapiro:

From December 2007 to July 2009 - the last year of the Bush second term and the first six months of the Obama presidency, before his policies could affect the economy - private sector employment crashed from 115,574,000 jobs to 107,778,000 jobs. Employment continued to fall, however, for the next six months, reaching a low of 107,107,000 jobs in December of 2009. So, out of 8,467,000 private sector jobs lost in this dismal cycle, 7,796,000 of those jobs or 92 percent were lost on the Republicans' watch or under the sway of their policies. Some 671,000 additional jobs were lost as the stimulus and other moves by the administration kicked in, but 630,000 jobs then came back in the following six months. The tally, to date: Mr. Obama can be held accountable for the net loss of 41,000 jobs (671,000 - 630,000), while the Republicans should be held responsible for the net losses of 7,796,000 jobs. [Sonecon.com, 8/10/10, emphasis added]

Based on Shapiro's research, the Washington Post's Ezra Klein created the following chart showing net job losses before and after the Recovery Act was enacted:

Klein

[Washington Post8/12/10]

PolitiFact: "True" That "Most Job Losses" Happened Before Obama Policies Took Effect. According to PolitiFact.com's analysis of President Obama's statement that "most of the jobs that we lost were lost before the economic policies we put in place had any effect": "Looking at BLS data on seasonally adjusted non-farm employment from December 2007, when the recession officially began, to January 2009, the month before the stimulus was enacted (a 25-month period), the jobs number declined by 4.4 million. ... When [Obama] refers to his economic policies, we presume he is referring to his main economic stimulus, the American Recovery and Reinvestment Act. It passed in February 2009, but it took several months before the impact of its spending was felt in the economy. Job loss didn't stop, but Obama is right that it slowed down. In the 19 months from February 2009 through September 2010, the month of the most recent preliminary data, the overall job decline in the private and public sectors was 2.6 million. And the number of jobs lost per month has declined from around 700,000 a month at the beginning of the administration to months in which there were small net gains. ... 'I watched the president on Stewart's show last night, and I thought his basic point about the timing of the employment losses was correct and ought to be noncontroversial,' Gary Burtless, a labor markets expert at the centrist-to-liberal Brookings Institution said in an e-mail." [PolitiFact.com, 10/27/10, emphasis added]

CBO: The Recovery Act Created Jobs, Lowered Unemployment, And Boosted GDP. According to the nonpartisan Congressional Budget Office, through the second quarter of 2010, the American Recovery and Reinvestment Act:

  • Raised the level of real (inflation-adjusted) gross domestic product (GDP) by between 1.7 percent and 4.5 percent,
  • Lowered the unemployment rate by between 0.7 percentage points and 1.8 percentage points,
  • Increased the number of people employed by between 1.4 million and 3.3 million, and
  • Increased the number of full-time-equivalent (FTE) jobs by 2.0 million to 4.8 million compared with what those amounts would have been otherwise.

[CBO, 8/24/10]

Reuters: The Recovery Act May Have "Prevented The Sluggish Economy From Contracting" Between April And June. According to Reuters

The massive U.S. stimulus package put millions of people to work and boosted national output by hundreds of billions of dollars in the second quarter, the nonpartisan Congressional Budget Office said on Tuesday.

CBO's latest estimate indicates that the stimulus effort, which remains a political hot potato ahead of the November congressional elections, may have prevented the sluggish U.S. economy from contracting between April and June.

CBO said President Barack Obama's stimulus boosted real GDP in the quarter by between 1.7 percent and 4.5 percent, adding at least $200 billion in economic activity. [Reuters via ABC News, 8/24/10]

Job Statistics Trend Shows Recovery Act Is Working. Below is a graph prepared by the Speaker's office showing net private sector job gains or losses per month since December 2007.

Private Sector Employment

[Bureau of Labor Statistics via The Gavel, 10/8/10]

Princeton, Moody's Economists Say "Highly Effective" Government Response To Crisis Saved 8.5 Million Jobs. According to the New York Times: "Like a mantra, officials from both the Bush and Obama administrations have trumpeted how the government's sweeping interventions to prop up the economy since 2008 helped avert a second Depression. Now, two leading economists wielding complex quantitative models say that assertion can be empirically proved. In a new paper, the economists argue that without the Wall Street bailout, the bank stress tests, the emergency lending and asset purchases by the Federal Reserve, and the Obama administration's fiscal stimulus program, the nation's gross domestic product would be about 6.5 percent lower this year. In addition, there would be about 8.5 million fewer jobs, on top of the more than 8 million already lost; and the economy would be experiencing deflation, instead of low inflation. The paper, by Alan S. Blinder, a Princeton professor and former vice chairman of the Fed, and Mark Zandi, chief economist at Moody's Analytics, represents a first stab at comprehensively estimating the effects of the economic policy responses of the last few years. 'While the effectiveness of any individual element certainly can be debated, there is little doubt that in total, the policy response was highly effective,' they write." [New York Times7/27/10, emphasis added]

The Affordable Care Act Strengthens Medicare Without Cutting Benefits

FactCheck.org: Cost Saving Provisions "Not A Slashing Of The Current Medicare Budget Or Benefits." According to FactCheck.org: "Whatever you want to call them, it's a $500 billion reduction in the growth of future spending over 10 years, not a slashing of the current Medicare budget or benefits. It's true that those who get their coverage through Medicare Advantage's private plans (about 22 percent of Medicare enrollees) would see fewer add-on benefits; the bill aims to reduce the heftier payments made by the government to Medicare Advantage plans, compared with regular fee-for-service Medicare. The Democrats' bill also boosts certain benefits: It makes preventive care free and closes the 'doughnut hole,' a current gap in prescription drug coverage for seniors." [FactCheck.org, 3/19/10]

Changes To Medicare Advantage Come With Extra Benefits For All Medicare Enrollees. FactCheck.org reported: "The CBO has estimated that the move would change the value of the extra benefits Medicare Advantage participants get, but they would not receive fewer benefits than the rest of seniors who aren't on the Advantage plans. The bill does add some extras for Medicare beneficiaries, eliminating copays and deductibles for preventive services, for example." [FactCheck.org, 12/2/09; emphasis added]

Health Care Reform "Will Keep Paying Medical Bills For Seniors." According to PolitiFact.com: "The government-run Medicare program will keep paying medical bills for seniors, but it will begin implementing cost controls on health care providers, mostly through penalties and incentives. The legislation would reduce payments for hospital-acquired infections or preventable hospital admissions. For Medicare Advantage, the federal government intends to reduce extra payments, taking away subsidies to private insurance companies. Insurers will likely cut benefits in order to not lose profits. The bill does not address the 'doctor's fix,' an expected proposal that Congress usually passes to prevent doctors' Medicare payments from severe cuts." [PolitiFact.com, 3/18/10; emphasis in original]

Health Care Reform Fills The "Doughnut Hole." According to the Kaiser Family Foundation: "In 2010, Part D enrollees with any spending in the coverage gap will receive a $250 rebate. Beginning in 2011, enrollees with spending in the coverage gap will receive a 50 percent discount on brand-name drugs, provided by the pharmaceutical industry. The law phases in Medicare coverage in the gap for generic drugs beginning in 2011, and for brand-name drugs beginning in 2013. By 2020, Part D enrollees will be responsible for 25 percent of the cost of both brands and generics in the gap, down from 100 percent in 2010." [Kaiser Family Foundation, accessed 8/25/10]

Health Care Reform Improves Medicare's Coverage Of Preventive Benefits. According to the Kaiser Family Foundation: "Beginning in 2011, no coinsurance or deductibles will be charged in traditional Medicare for preventive services that are rated A or B by the U.S. Preventive Services Task Force (USPSTF). Medicare will cover a free annual comprehensive wellness visit and personalized prevention plan." [Kaiser Family Foundation, accessed 8/25/10]

Click HERE for details on the trillions of dollars Republicans have voted to cut from Medicare.

Medicare "Cuts" Are Actually Savings From Phasing Out "Substantial Overpayment" To Medicare Advantage

CBO: Cost Changes To Medicare Made From Savings. According to the Congressional Budget Office: "Changes to the Medicare program and changes to Medicaid and CHIP other than those associated directly with expanded insurance coverage: Savings from those provisions are estimated to total $93 billion in 2019, and CBO projects that, in combination, they will increase by 10 percent to 15 percent per year in the next decade." [CBO.gov, 10/7/09]

New England Journal Of Medicine: The Affordable Care Act Phases Out "Substantial Overpayments" To Medicare Advantage Plans. From the New England Journal of Medicine:

A phased elimination of the substantial overpayments to Medicare Advantage plans, which now enroll nearly 25% of Medicare beneficiaries, will produce an estimated $132 billion in savings over 10 years.

[...]

The ACA also produces nearly $200 billion in savings by assuming that providers can improve their productivity as firms in other industries have done. On the basis of this presumed improvement, the law reduces Medicare's annual "market basket" updates for most types of providers - a provision that has generated controversy. [New England Journal of Medicine7/8/10]

Cuts Would Only Affect Medicare Advantage Plans. As reported by Kaiser Health News:

The new health law will cut $136 billion in spending on the Advantage program by 2019, which currently pays private plans to administer Medicare benefits and pays them about 14 percent more than the per-patient cost of the traditional Medicare program. Plans use that subsidy to lure members with lower premium costs or extra benefits not normally paid for by Medicare, such as vision care or better prescription drug coverage. Some Democrats and analysts have argued the higher rates are wasteful. 

Even experts who support the change concede that the impact of the cuts could be evident. Robert Berenson, a scholar at the Urban Institute and former Medicare official, said some Advantage plan members will notice skimpier benefits, "but the Republicans have really exaggerated that this will wipe out the Advantage plans." 

Marsha Gold, a health policy analyst for the private research group Mathematica, said, "Over time, there will be less rich benefits or higher premiums, but it's going to be gradual," noting that the largest cuts do not begin until 2015. 

[Kaiser Health News, 4/6/10]

Medicare Advantage Costs Taxpayers 14% More Than Traditional Medicare. As reported by PolitiFact.com:

Let's back-up for a minute and explain Medicare Advantage: There are two basic ways most people get Medicare coverage. They enroll in traditional Medicare and a prescription drug plan through the government and maybe buy a supplemental policy to cover most out-of-pocket costs. Or they enroll in Medicare Advantage programs (they include drug plans), which are run by private insurers. Medicare Advantage programs typically have more generous benefits such as dental and vision coverage. Some plans even pay the patient's monthly Medicare premium, which can amount to about $100.

The Medicare Advantage program was intended to bring more efficiency from the private sector to the Medicare program, but it hasn't worked as planned. A June 2009 analysis from the Medicare Payment Advisory Commission said that the Advantage programs costs taxpayers on average of 14 percent more than the traditional Medicare plan. President Barack Obama has said repeatedly that the Medicare Advantage plan wastes public money that could be put to better use.

[PolitiFact.com, 9/20/10]

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