Fact Checking The Sunday Shows - September 12, 2010

September 13, 2010 9:39 am ET

It was a typically dishonest Sunday for Republicans on the political talk shows. On Fox News Sunday, Newt Gingrich said businesses aren't hiring because President Obama wants to take all their money and because their health care costs are rising. In fact, studies show that a lack of consumer demand is holding down business investment, and the Affordable Care Act has its greatest cost impact on employer-based insurance. On Face the Nation, Rep. John Boehner (R-OH) conceded that just 3% of small businesses will pay higher taxes under the Obama tax plan, but insisted that 3% accounts for 50% of small business income. No matter how often he says it, it just isn't true.

Fox News Sunday

CLAIM: Newt Gingrich Falsely Claimed That Businesses Aren't Creating Jobs Because President Obama Wants To Take All Their Money

CHRISTOPHER WALLACE (host): Let's talk, though, about-because you still want to continue the Bush tax cut for the so-called wealthy, people making over a quarter-million dollars a year. Lemme just follow up on that. The nonpartisan Congressional Budget Office analyzed 11 different policy options on how to boost the economy, and they found the tax cuts for high earners would have the lowest what they called "bang for the buck" of any of them to boost the economy because they say high earners are more likely to save the money than to spend it.

NEWT GINGRICH: First of all, the bureaucrats at the Congressional Budget Office, who don't create jobs and aren't entrepreneurs, gave you their bureaucratic interpretation of reality. The thing that the President doesn't understand and the thing that Keynesian economics get wrong is simple: do you want people to have enough money to invest to create jobs? If they have a surplus of income so they can create jobs, that's somehow bad and the President wants to take away the income. That means he's leaving them with no money to create jobs. You look around this country today, virtually every entrepreneur in this country today says, and they say to me day after day, 'I'm not creating any jobs while this guy's president, because he simply wants to take away the money. So why would I go out and risk my capital to create a job so he could increase taxes, increase the cost of health care, increase government control, increase regulations.'

FACT: Contrary To Gingrich's Anecdotal Claims, Businesses Say Weak Consumer Demand Is Keeping Them From Hiring — Not Fear Of Taxes

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 Post7/22/10]

Companies Anticipate Years Of Consumer 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]

FACT: The CBO's Analysis Makes It Clear That Tax Cuts For The Wealthiest Americans Will Not Provide The Demand Boost The Economy Needs

CBO Testimony: Tax Cuts For Wealthy Have Little Impact On Business Hiring Decisions. According to CBO Director Doug Elmendorf's testimony to the Joint Economic Committee: "Because businesses' decisions on investing and hiring depend on the demand for their products, higher demand and production would lead to more investment and hiring. The size of those effects would depend largely on which households got the money. Policies that temporarily increased the after-tax income of people who are relatively well off would probably have little effect on their spending because they generally would be able finance their consumption out of their income or assets without such a change. However, policies that increased the resources of families with lower income, few assets, and poor credit would probably have a larger impact on consumption spending. Because of the extent of job losses and declines in asset prices in this recession, more families probably fit that description now than was the case in the immediate aftermath of many previous recessions." [Elmendorf Testimony, 2/23/10 via CBO.gov]

Moody's Chief Economist: Making Bush Tax Cuts Permanent Has Second-Lowest Return-On-Investment Forecasts Of Any Economic Policy Proposal Under Consideration. The Economic Policy Institute prepared this graph based on testimony from Mark Zandi of Moody's Economy.com:

[EPI.org, 10/22/08]

FACT: President Obama Has Criticized Irresponsible Business Behavior, But Believes People Should Make A Profit For "Providing A Good Product"

President Obama: Making Money For "Providing A Good Service" Is "Part Of The American Way," But Companies "That Operated Irresponsibly...Threaten The Whole Economy." In an April speech on Wall Street reform in Quincy, Illinois, President Obama said:

So [Wall Street] failed to consider that behind every dollar that they traded, all that leverage they were generating, acting like it was Monopoly money, there were real families out who were trying to finance a home, or pay for their child's college, or open a business, or save for retirement.  So what's working fine for them wasn't working for ordinary Americans.  And we've learned that clearly.  It doesn't work out fine for the country. It's got to change...

[W]e're not trying to push financial reform because we begrudge success that's fairly earned.  I mean, I do think at a certain point you've made enough money.  But part of the American way is you can just keep on making it if you're providing a good product or you're providing a good service.  We don't want people to stop fulfilling the core responsibilities of the financial system to help grow the economy. 

I've said this before.  I've said this on Wall Street just last week.  I believe in the power of the free market.  And I believe in a strong financial system.  And when it's working right, financial institutions, they help make possible families buying homes, and businesses growing, and new ideas taking flight... 

So there's nothing wrong with a financial system that helps the economy expand.  And there are a lot of good people in the financial industry who are doing things the right way.  And it's in our interest when those firms are strong and when they're healthy.

But some of these institutions that operated irresponsibly, they're not just threatening themselves -- they threaten the whole economy.  And they threaten your dreams, your prospects, everything that you worked so hard to build.

So we just want them to operate in a way that's fair and honest and in the open, so that we don't have to go through what we've already gone through... We want to make sure the financial system doesn't just work for Wall Street, but it works for Main Street, too. [Remarks by President Obama, 4/28/10, emphasis added]

CLAIM: Newt Gingrich Falsely Claimed That The Affordable Care Act Will Drive Up Health Care Costs For Employers

NEWT GINGRICH: You look around this country today, virtually every entrepreneur in this country today says, and they say to me day after day, 'I'm not creating any jobs while this guy's president, because he simply wants to take away the money. So why would I go out and risk my capital to create a job so he could increase taxes, increase the cost of health care, increase government control, increase regulations.'

FACT: The Employer-Provided Health Insurance Market Will See Premiums Stay The Same Or Decrease For Over 150 Million Americans

PolitiFact: "Premiums Would Stay About The Same, Or Slightly Decrease...Especially...For People Who Get Their Insurance Through Work."  According to PolitiFact.com: "The CBO reported that, for most people, premiums would stay about the same, or slightly decrease. This was especially true for people who get their insurance through work. (Health policy wonks call these the large group and small group markets.) People who have to go out and buy insurance on their own (the individual market) would see rates increase by 10 to 13 percent. But more than half of those people -- 57 percent, in fact -- would be eligible for subsidies to help them pay for the insurance. People who get subsidies would see their premiums drop by more than half, according to the CBO. So most people would see their premiums stay the same or potentially drop." [PolitiFact.com, 1/27/10; emphasis added]

Washington Post's Ezra Klein: Prices Will Drop For Employer-Driven Health Care Market. According to the Washington Post's Ezra Klein in his analysis of CBO estimates:

The confusion comes in the CBO's analysis of the individual market, which serves about a tenth of the population. CBO expects prices in the individual market to rise by 10 or 12 percent, an expectation driven entirely by predictions that individuals will purchase policies that are much more comprehensive, and thus somewhat more expensive, then the insurance they can afford now...

Beyond that, it's important to remember that everyone has begun talking about the individual market results as if they are results for the whole of the health-care system. Sen. Mike Crapo, for instance, said that the CBO showed that Americans would see their premiums increase under reform. That's not even true in a misleadingly technical sense. It's simply false.

The individual market sees costs go up, as people can purchase better insurance at a lower cost. And after subsidies, most people are paying less and getting more than they would absent reform. Meanwhile, the small group and employer markets sees costs go down, and those markets serve more than 150 million Americans, as opposed to the individual market's 32 million customers. So it's not only true that most Americans will see their premiums go down, but it's also true that most Americans will see their premiums go down even if you account for the better insurance plans they'll be purchasing. [Washington Post, 12/1/09, emphasis added]

CBO Report: Employer-Based Insurance Costs Will Stay About The Same Or Go Down. According to the CBO: "The legislation would have much smaller effects on premiums for employment-based coverage, which would account for about five-sixths of the total health insurance market. In the small group market, which is defined in this analysis as consisting of employers with 50 or fewer workers, CBO and JCT estimate that the change in the average premium per person resulting from the legislation could range from an increase of 1 percent to a reduction of 2 percent in 2016 (relative to current law). In the large group market, which is defined here as consisting of employers with more than 50 workers, the legislation would yield an average premium per person that is zero to 3 percent lower in 2016 (relative to current law)... By CBO and JCT's estimate, the average premium per policy in the small group market would be in the vicinity of $7,800 for single policies and $19,200 for family policies under the proposal, compared with about $7,800 and $19,300 under current law. In the large group market, average premiums would be roughly $7,300 for single policies and $20,100 for family policies under the proposal, compared with about $7,400 and $20,300 under current law." [CBO Letter, 11/30/09]

Face the Nation

CLAIM: Rep. John Boehner (R-OH) Falsely Claimed That "About Half Of Small Business Income" Will See Higher Taxes Under Obama Proposal

Rep. JOHN BOEHNER (R-OH): When you start to look at who's going to be taxed, about half of all small business income will be taxed under the President's proposal. These are the very people that we expect to invest in the economy and to begin creating jobs. Why would we wanna punish them?

BOB SCHIEFER (host): Let me just say this. The Joint Committee on Taxation, which is a, which is a nonpartisan body, says that only 3% of those small businesspeople — you keep talking about all the small businesspeople that are gonna get taxed — only 3% would be affected by that. Do you quarrel with that figure? Is that a right figure or a wrong figure?

Rep. BOEHNER: Well it may be 3%, but it's half of small business income because obviously the top 3% have half the gross income for those companies that we would term small business. And this is why you don't want— you don't wanna punish these people at a time when you have a weak economy. We need them to reinvest in their business.

FACT: Boehner Is Wrong About Small Business Taxes

While his acknowledgement of the correct 3% figure is refreshing, Rep. Boehner is still peddling the same misinformation about small business income. Boehner has made this claim repeatedly since July, including in his economic speech last month. He cites the same analysis by the Joint Committee on Taxation that Schieffer referenced on Face the Nation. In July, 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.

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]

PolitiFact: Business Income Reported On Tax Returns Often Comes From Book Royalties, Speaking Fees, And Other Non-Job-Creating Sources. According to the non-partisan PolitiFact.com: 

The U.S. Treasury Department found in 2007 that many of the wealthiest tax filers report some type of non-wage income, such as income from a sole proprietorship, a partnership or an S corporation...

Does this mean that all those wealthy taxpayers were small business owners? Probably not. This kind of income could be reported from anyone who earned money from a source other than a regular job, such as consulting or public speaking. It could also be reported by those who make most of their income from partnerships, such as law firms and medical practices. And it could include investors who have little involvement in the day-to-day operations of a company. [PolitiFact.com, 7/25/10, emphasis added]

PolitiFact: 2/3 Of Tax Filers In Top Two Brackets Report Business Income As Less Than 50% Of Their Income. According to the non-partisan PolitiFact.com:

It's impossible to know how many of these high earners are what most people think of as small business owners. One indication, however, might be if these wealthy taxpayers reported that most of their income was from this business-type income. The nonpartisan Tax Policy Center analyzed IRS data in March 2009, looking to see how many wealthy tax filers could say that half of their income or more came from business income. The center found that, among the wealthiest filers -- the top 1 percent -- only 25 percent earned more than half their income from business-type income. The percentages for non-wage income were even smaller among taxpayers earning less. (Editor's note: After we initially published this item, the Tax Policy Center released a new analysis looking at business income by tax bracket. They found that in the top bracket, only 32.5 percent earned more than half their income that way.) [PolitiFact.com, 7/25/10, emphasis added, parentheses original]

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