The Would-Be Speaker Has No Clothes: Rep. Boehner's Dishonest Economic Speech

August 24, 2010 5:26 pm ET

House Minority Leader John Boehner (R-OH) gave a speech to the City Club of Cleveland in which he blasted President Obama and Democrats over the economy, and argued that businesses aren't hiring because they're afraid of Democrats' policies. In reality, Rep. Boehner's speech was full of dishonest claims about taxes and spending, the most egregious of which are collected below.

Rep. Boehner Blamed Government For Weak Business Hiring...

Rep. Boehner: Employers Are "Hamstrung By Uncertainty." In his speech to the City Club of Cleveland, Rep. Boehner said: "Right now, America's employers are afraid to invest in an economy stalled by 'stimulus' spending and hamstrung by uncertainty.  The prospect of higher taxes, stricter rules, and more regulations has employers sitting on their hands.  And after the pummeling they've taken from Washington over the last 18 months, who can blame them?" [Boehner Speech, 8/24/10]

...But Businesses Rightly Blame Weak Demand

Study By "The Most Right Wing Of The Major Business Groups" Shows Businesses Much More Afraid Of Weak Demand Than Taxes And Regulations. As Ezra Klein of the Washington Post reported:

The National Federation of Independent Businesses -- a small-business trade association that is considered the most right wing of the major business groups -- continually polls its members and releases the results. Here's what they say is their single most important problem:

the-problem-tax-fears-and-bad-sales.png

As you can see, sales -- that is to say, demand for their products -- dominate the chart, while fear of taxes is lower than in the '90s. The concern over sales is understandable. Not only is the economy bad. But as the next chart shows, it keeps underperforming what the businesses assume will happen.

sales-dipping-and-already-below-expectations.png

So, if anything, businesses have been too optimistic over the past few years.

[Washington Post, 7/22/10]

Companies Anticipate Years Of Debt Reduction Instead Of Increased Spending. According to the Washington Post: "Many Democrats say the economy needs more stimulus. Business lobbyists and their Republican allies say it needs less regulation and lower taxes. But here in the heartland of America, senior executives say neither side's assessment fits. They blame their profound caution on their view that U.S. consumers are destined to disappoint for many years. As a result, they say, the economy is unlikely to see the kind of almost unbroken prosperity of the quarter-century that preceded the financial crisis. Across the industrial parks and office towers of the Chicago region, in a more than a dozen interviews, senior executives said they see Americans for years ahead paying down debts incurred during the now-ended credit boom and adjusting spending to match their often-reduced incomes." [Washington Post, 8/21/10, emphasis added]

  • Washington Post: Executives Can't Draw Specific Link Between Government Actions And Hiring Decisions. According to the Washington Post: "Fundamentally, executives objected to Obama's policies on the grounds they would make the United States a less competitive place to operate in the long run. But when [manufacturing CEO Jason] Speer and other executives were pressed on the role that tax and regulatory policies play in hiring, they drew only vague connections. Speer said his decision whether to hire is driven primarily by demand for his products. Orders are coming in strong enough that he is running about 20 hours a week of overtime. So he is weighing whether to hire two or three additional manufacturing workers. None of the executives interviewed linked a specific new government initiative with a specific decision to refrain from hiring." [Washington Post, 8/21/10, emphasis added]

Rep. Boehner Claimed President Obama Wants "Job-Killing Tax Hikes On Families And Small Businesses"

Rep. Boehner: Allowing Tax Cuts For The Wealthy To Expire Is "Pitting Taxpayer Against Taxpayer." In his speech to the City Club of Cleveland, Rep. Boehner said: "First, President Obama should announce he will not carry out his plan to impose job-killing tax hikes on families and small businesses. Unless Congress acts, virtually every American will see their taxes go up on January 1, 2011.  President Obama has stated he wants to stop some tax hikes, and not others, once again putting the government in the position of picking winners and losers and pitting taxpayer against taxpayer.  According to an analysis by the non-partisan Joint Tax Committee, Congress's official tax scorekeeper, half of small business income in America - half - would face higher taxes under the president's plan." [Boehner Speech, 8/24/10]

Democrats Actually Propose To Increase Taxes For Less Than 3% Of Americans

Reuters: "Two To Three Percent Of Americans" Are Affected By Democrats' Proposals. According to Reuters: "Lawmakers are mulling the renewal of tax cuts enacted in 2001 and 2003 under former president George W. Bush that expire at the end of this year. President Barack Obama and his Democratic allies in Congress want to extend the lower rates for individuals earning less than $200,000 or couples making less than $250,000. About two to three percent of Americans fit into the upper income categories." [Reuters7/21/10]

The Very Same Paragraph Boehner Cites Disproves His Exaggerated Claims About The Proposed Tax Cut Extension's Impact On Small Businesses

This morning, Boehner referred to "an analysis by the non-partisan Joint Tax Committee," an organization he cited when he first made this claim in July. At the time, we pointed out that the very next sentence of the very same Joint Committee on Taxation report Boehner cited on July 27 refutes his claim. He is still peddling the same misinformation.

Non-Partisan Joint Committee On Taxation Report Actually Says That 50% Of Total Business Income — Not "Small Business Income" — Will Be Taxed At Higher Rates. According to the non-partisan Joint Committee on Taxation report on President Obama's proposals: "The staff of the Joint Committee on Taxation estimates that in 2011 just under 750,000 taxpayers with net positive business income (three percent of all taxpayers with net positive business income) will have marginal rates of 36 or 39.6 percent under the President's proposal and that 50 percent of the approximately $1 trillion of aggregate net positive business income will be reported on returns that have a marginal rate of 36 or 39.6 percent. These figures for net positive business income do not imply that all of the income is from entities that might be considered 'small.' For example, in 2005, 12,862 S corporations and 6,658 partnerships had receipts of more than $50 million." [Joint Committee on Taxation report, 7/12/10, emphasis added]

FactCheck.org: "Only 2 Percent" Of Those Reporting Business Income Face Higher Taxes Under Demoratic Proposal. According to FactCheck.org: "[O]nly 27 percent of all upper-income tax filers report business income that accounts for more than half of their wages. It's likely that a small-business owner would make most of his or her income from the small business... In the end, it's unclear exactly what percentage of these top earners are truly small businesses. What is clear, however, is that we're not talking about all that many small businesses in the first place. The vast majority of individuals who report business income or losses are not making upwards of $200,000 a year. In fact, only 2 percent of all those reporting business income in 2009 will earn enough to fall in the top two brackets. As we explained back when Obama's tax plan was attacked on the campaign trail, the overwhelming majority of these mom-and-pop shops we hear about would not see their taxes go up under Obama's proposal." [FactCheck.org, 3/6/09, emphasis added]

Rep. Boehner Attacked Democrats For Extending Unemployment Insurance Benefits

Rep. Boehner: Extending Unemployment Insurance Benefits "Is Not A Responsible Jobs Plan." In his speech to the City Club of Cleveland, Rep. Boehner said: "Here's an example of how out-of-hand things have become:  we have recently seen Washington politicians take victory laps for spending billions of dollars to continue providing unemployment insurance[.] These benefits are held up as a 'jobs plan' and 'stimulus' for the economy. Keeping workers on the unemployment rolls instead of fostering small business and private sector growth is not a responsible jobs plan.  The American people would agree unemployment insurance is an important safety net, but it is not a responsible jobs plan. The American people know what's going on here.  They know that when the bill comes due, it's their pockets Washington will look to for a bailout.  We're seeing it right now with the president's plan to raise taxes." [Boehner Speech, 8/24/10]

Unemployment Benefit Extensions Are Highly Stimulative To Economic Recovery...

Moody's Chief Economist: Extending Unemployment Insurance Benefits Has Higher Return-On-Investment Than Any Stimulus Activity Except Food Stamps. The Economic Policy Institute prepared this graph based on testimony from Mark Zandi of Moody's Economy.com:

(figure)

[EPI.org, 10/22/08]

...Are Not "Keeping Workers On The Unemployment Rolls" Longer...

Key Researcher On Unemployment Benefits Says His Old Findings On Unemployment Benefits Are Outdated. According to the bipartisan Joint Economic Committee: "While earlier research suggested that the unemployment insurance program in the 1970s and 1980s had important disincentive effects, the current consensus is that these dated studies overstated the effects of unemployment insurance benefits on job search behavior. The older studies noted a jump in the fraction of workers who found a job just before they exhausted their benefits. In contrast, in testimony before the Joint Economic Committee, the author of one of the seminal papers in this earlier wave of research, Dr. Lawrence Katz, said that 'the most compelling research shows only modest impacts of UI extensions on the search effort and duration of unemployment of unemployment insurance recipients.' [...] Katz pointed out that these studies overstate the overall impact of unemployment insurance benefits on the length of unemployment spells 'by ignoring the spillover effects of shorter unemployment spells for the other unemployed workers not receiving UI benefits.'"  ["Does Unemployment Insurance Inhibit Job Search?" Joint Economic Committee, July 2010, emphasis added]

Other Economists Who Study Unemployment Agree That Extended Benefits Do Not Significantly Prolong Unemployment. According to the bipartisan Joint Economic Committee:

Dr. Katz is not the only economist who holds these views. Dr. Till von Wachter, in testimony before the Joint Economic Committee, also shared Katz's opinion. "It is likely that in severe recessions, the benefit of extended UI outweighs the costs," argues von Wachter.Analyzing data from Germany that was of much higher quality than most other studies on the disincentive effects of unemployment insurance, von Wachter found that 'extended UI would lead to a moderate increase in the rate of unemployment.' He also inferred that the increase in the unemployment rate would be smaller in the United States right now because labor market conditions are tight and jobs are scarce. Another prominent economist who has studied unemployment insurance and other social insurance programs, Dr. Raj Chetty, has reached similar conclusions. In one paper, he and coauthors showed that even though there is a "spike" in exit rates from unemployment insurance at the time of benefit exhaustion, the probability of reemployment doesn't change significantly. In other words, many of those who exit the unemployment insurance rolls as their benefits are about to expire are not moving on to another job. Furthermore, Chetty argues that "work disincentive effects" are likely to be small because people are "likely to take any job they can get" in the current economic downturn.

["Does Unemployment Insurance Inhibit Job Search?" Joint Economic Committee, July 2010, emphasis added]

Economic Policy Institute: Claim That "Unemployment Benefits Make People Less Likely To Find Jobs" Is A Myth. According to a Washington Post opinion piece by Heidi Shierholz of the Economic Policy Institute:

Unemployment insurance replaces a maximum of half of a worker's prior wages (up to a cap), and when we're not in a prolonged recession, it gives laid-off workers a little breathing room to find a job that matches their skills and experience. This is one of the goals of the unemployment insurance system, since the economy works best when people are in jobs that maximize their skills. Today, however, unemployment insurance isn't providing breathing room -- it's providing a lifeline. There are now roughly five unemployed workers for every available job. That doesn't mean there are five applicants for every job opening; there may be scores of applications for every posting, as people apply for many jobs. Instead, it means there literally aren't jobs for four out of every five unemployed workers. This is why nearly half of the unemployed have been out of work for more than six months, the maximum duration of state unemployment benefits. In this environment, allowing extended unemployment benefits to expire would indeed make workers who have exhausted their aid more desperate to find work. But it wouldn't make them more likely to find work, because the jobs don't exist.

[Washington Post7/25/10, emphasis added]

...And Have Been Relentlessly Attacked By Republicans For Supposedly Making Americans Lazy

Republicans have spent months blaming unemployment on laziness brought on by government checks. For an overview of their statements, see our full fact check HERE and read more about the GOP's rhetoric on unemployment HERE.

Rep. Boehner Smeared Expiration Of Tax Cuts As An Easy, "Haphazard" Choice...

Rep. Boehner: "Washington's Backwards Accounting Assumes Tax Relief Expires" And Causes Congress To Avoid "Tough Choices." In his speech to the City Club of Cleveland, Rep. Boehner said: "Washington's backwards accounting assumes tax relief expires, but that spending programs will continue - setting up a built-in bias for higher taxes and more spending. That is, of course, unless Congress extends the tax relief.  So instead of making tough choices, Congress ends up essentially rubberstamping a haphazard collection of 'must do' tax policies from one year to the next." [Boehner Speech, 8/24/10]

...When It Was Rep. Boehner's Republicans Who Originally Intended The Cuts To Expire

Time: Congress Wrote Tax Law To Expire After 2010 Because It Made Cuts Appear Cheaper. According to Time:

Topping the list of odd features is the "sunset" provision that repeals the entire bill at the end of 2010. Budget rules require Congress to include a sunset clause in all major tax legislation, but this sunset arrives a year early--after 10 years instead of the 11 years covered by the current budget resolution. That year was shaved off to keep the total cost of the bill under $1.35 trillion. By repealing the legislation in the 10th year, Congress saved billions of dollars. Without the repeal and a few other tricks, the cost of the full 11-year plan would balloon to more than $1.8 trillion by the end of 2011, far exceeding anything the Democrats would vote for. And the cost in the second decade would reach as much as $4 trillion. Even some conservatives on Capitol Hill are dismayed by the apparent dishonesty of the early sunset. After both parties agreed to a smaller tax cut, the conference committee pulled a fast one.

[Time6/3/01, emphasis added]

American Enterprise Institute: Reconciliation "Ploy" To Pass Bush Tax Cuts Means They Expire After 10 Years. According to Norman Ornstein, resident scholar at AEI:

It is worth repeating why we are in this particular car heading toward the cliff. When the Bush tax cuts were on the agenda at the very beginning of his presidency, Republicans in Congress and the White House made a tactical choice to avoid giving Senate Democrats the leverage that a 60-vote hurdle can provide by employing reconciliation (yes, the same tool that those who applied it then condemned roundly when it was used for health care reform this year). It was tricky to use reconciliation for tax cuts, which increased deficits when reconciliation was specifically supposed to be used for revenue-neutral or deficit-reducing programs. But the decision was made to use it for this purpose--but not to violate the proviso that the plan would increase deficits outside the budget window of 10 years.

That meant a ploy of declaring that all the tax cuts would expire entirely after 10 years, including the absurd-on-its-face provision that estate taxes would gradually decline to zero in 2010--and then be fully restored in 2011. From the day after the tax cuts were signed into law, Republicans were campaigning to extend them, in effect admitting that the policy was built around a "never mind" ruse. To be fair, there were plenty of ruses in the health care reform reconciliation, so it is not as if one party is clean--this is legislative politics. But the charges now emanating from Republicans that the Democrats are going to be responsible for a huge tax hike is, shall we say, bemusing.

[AEI.org, 7/21/10, emphasis added]

Rep. Boehner Suggested — Again — That Tax Cuts Don't Cost Anything

Rep. Boehner Mocked "Washington Politicians" For "Fretting Over...The 'Cost'" Of Tax Cuts For The Wealthy. In his speech to the City Club of Cleveland, Rep. Boehner said: "Of course, as if on cue, the same Washington politicians who have spent the last 18 months borrowing and spending our economy into the ground are now fretting over whether we can afford the 'cost' of stopping job-killing tax hikes. Only in Washington would it be acceptable to think that taxpayers should have to pay for the privilege of keeping more of their own hard-earned money." [Boehner Speech, 8/24/10]

Allowing Tax Cuts For The Wealthiest To Expire Will Save Hundreds Of Billions Of Dollars

CBO Numbers Show Extending Tax Cuts For The Wealthy Would Cost Almost $700 Billion Over Ten Years. According to the Center for American Progress: "In its January report, 'The Budget and Economic Outlook: Fiscal Years 2010 to 2020,' the CBO projects that a full extension of the Bush tax cuts, plus a permanent fix to the Alternative minimum tax, will cost $3.7 trillion over 10 years, not including debt service costs. The Joint Committee on Tax estimated in a March 2010 report, "Present Law And The President's Fiscal Year 2011 Budget Proposals Related To Selected Individual Income Tax Provisions Scheduled To Expire Under The Sunset Provisions Of The Economic Growth And Tax Relief Reconciliation Act Of 2001," that the cost of extending just those cuts that affect people making less than $250,000 and permanently fixing the alternative minimum tax will cost $3 trillion. The difference-a bit less than $700 billion-is the cost of extending just those cuts for the wealthy." [AmericanProgress.org, 7/29/10]

  • With Interest Costs, 10-Year Cost Is $830 Billion. According to the Center for American Progress: "The cost of those tax cuts is going to go straight onto our national credit card unless we raise taxes from everyone else to pay for the $690 billion in tax breaks for the rich or we find $690 billion in spending cuts. And that means increased interest payments on the debt. When we add in the costs of additional debt service, the true price of maintaining the tax cuts for the wealthy jumps by almost $140 billion. In total, keeping those cuts for the rich will cost almost $830 billion over the next 10 years." [AmericanProgress.org, 7/29/10, internal citations removed]

Tax Cuts Do Not Pay For Themselves

Time: "If There's One Thing That Economists Agree On, It's That These Claims Are False." According to Time: "If there's one thing that Republican politicians agree on, it's that slashing taxes brings the government more money... If there's one thing that economists agree on, it's that these claims are false. We're not talking just ivory-tower lefties. Virtually every economics Ph.D. who has worked in a prominent role in the Bush Administration acknowledges that the tax cuts enacted during the past six years have not paid for themselves--and were never intended to. Harvard professor Greg Mankiw, chairman of Bush's Council of Economic Advisers from 2003 to 2005, even devotes a section of his best-selling economics textbook to debunking the claim that tax cuts increase revenues." [Time12/6/07, emphasis added]

Architect Of Bush Tax Cuts: Tax Cuts Without Budget Offsets Are Really "Future Taxes." According to Bloomberg: "You won't find a truer believer in the big tax cuts of the George W. Bush era than Glenn Hubbard, the 51-year-old economist who is dean of Columbia Business School. The Republican academic was instrumental in designing the tax cuts, first as a Bush campaign insider and then as the president's first chief economic adviser. The idea behind the cuts, enacted in 2001 and 2003, was to encourage work, savings, and investment, thus stimulating long-term economic growth. Hubbard is especially proud of the 2003 cut in taxes on dividends and capital gains, which he calls 'the most pro- growth tax reform that anybody did since Kennedy.' Now that the Bush tax cuts are up for renewal -- they expire on Dec. 31 unless Congress acts -- Hubbard has a queasy feeling about them, Bloomberg Businessweek reports in its Aug. 8 issue. The cuts, he says, have been undermined by years of deficits. Until the trajectory of spending changes, he says, 'deficits are just future taxes. You're just talking about taxes today vs. taxes tomorrow.'" [Bloomberg.com, 8/5/10, emphasis added]

Rep. Boehner Claimed Federal Employees Make Twice As Much As Private Sector Workers

Rep. Boehner: Average Government Pay Is "More Than Double" Private Sector Pay. In his speech to the City Club of Cleveland, Rep. Boehner said: "We've seen not just more government jobs, but better-paying ones too.  Federal employees now make on average more than double what private sector workers take in." [Boehner Speech, 8/24/10, emphasis original]

Government Workers Do Not Make Twice What Equivalent Private Sector Workers Make

PolitiFact Rates Federal Pay Claim "False." PolitiFact investigated a claim by Sen. Scott Brown (R-MA) in January 2010:

When we checked individual jobs using the most recent Bureau of Labor Statistics employment data (from 2008), we found many federal salaries were indeed higher, but some were lower. 

Higher: A government-employed nurse makes about $74,460 on average, while someone in the same position working for the private sector makes about $65,130. A cashier working for the government makes on average $34,470 while a cashier working in a store only makes a mean of $18,880 annually. And a public-relations manager working for the government makes about $132,410 a year compared to $101,220 in the private sector.

Lower: Petroleum engineers working for the government earn an average of $93,140; in the private sector, they make an average of $119,140. An editor working for the government only makes $42,210, compared to an average of $57,180 in the private sector....

First, even if you look at the average overall, he's exaggerating the difference. The numbers he cites from the Cato study are not twice as high. Secondly, it's important to understand that a big reason for the disparity is the different mix of jobs in the federal work force. It has more higher-paying white-collar jobs, experts told us, while there are more lower-paying, blue-collar jobs in the private sector that bring the average down. So it is not an apples-to-apples comparison.

Finally, we found it's a mixed bag when comparing individual private and public sector occupations -- the "private counterparts" he spoke of. Some public jobs pay more, some pay less. And the public ones that pay more are not consistently double as he claimed.

So he's wrong to say it's double and wrong to suggest that it's always the case when comparing specific jobs. We rate his claim False.

[PolitiFact.com, 1/31/10]

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