Fact Checking The Sunday Shows - October 3, 2010

October 04, 2010 10:43 am ET

This week, Fox News Sunday hosted an informal debate between Kentucky's Senate nominees, Rand Paul (R) and Jack Conway (D). Paul has mostly avoided the national media, and this debate suggests part of the reason why: in less than a half-hour, Paul was flagrantly dishonest a half-dozen times, about everything from economic policy to recent history to government policy. For a finale, Paul argued that Kentucky gets a raw deal in its financial relationship with Washington, when in fact Kentucky gets a dollar-fifty back for each dollar they send to D.C.

CLAIM: Rand Paul Claimed Stimulus Package Was Ineffective

RAND PAUL (R-KY): Actually, if you look at the labor statistics we've lost 17,000 jobs [in Kentucky] since the stimulus package. The stimulus package was a trillion dollars. If you divide it out and count only jobs created, it was $413,000 per job.

FACT: The Recovery Act Has Spent Far Less — $551 Billion — And Achieved Far More — Up To 3.3 Million Jobs — Than Rand Paul Imagines

The Recovery Act Has Spent $551 Billion Through End Of September 2010. As Time reported: "On Sept. 30, the Administration met its self-imposed deadline of spending 70% of the Recovery Act funds, $551 billion, by the end of the fiscal year. Almost all of the unspent stimulus money is already committed to specific projects, except for a few longer-range initiatives like high-speed rail and electronic health records." [Time, 10/1/10]

CBO: The Recovery Act Increased Employment By As Much As 3.3 Million.  According to the nonpartisan Congressional Budget Office, through the second quarter of 2010, the American Recovery and Reinvestment Act:

  • 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]

Using the most pessimistic CBO employment numbers, the Recovery Act spent $393,571 per employed person — less than Rand Paul claims. Using the more optimistic end of the CBO range, the Recovery Act spent a much lower $166,969 per employed person. And using the most optimistic statistics about full-time-equivalent jobs, the Recovery Act spent just $114,791 per full-time-equivalent job.

FACT: Since Enactment of Recovery Act, Kentucky's Unemployment Rate Has Fallen   

Kentucky's Unemployment Rate Is Down Since July 2009. The Bureau of Labor Statistics' data states that Kentucky's seasonally adjusted unemployment rate fell from 10.8 percent to 9.9 percent between July 2009 and July 2010. [Bureau of Labor Statistics, accessed 9/23/10]

  • President Obama's Policies Did Not Affect The Economy Until July 2009. 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." [Sonecon.com, 8/10/10]

FACT: Since The Recovery Act Was Enacted And Began To Take Effect, The Economy Has Added Millions Of Jobs

The Economy Shed Almost 8 Million Jobs Under Republican Policies Before The Recovery Act Was Passed.  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:

[Washington Post8/12/10]

CBO: The Recovery Act Increased Employment By As Much As 3.3 Million.  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.

[Bureau of Labor Statistics via The Gavel, 8/6/10]

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]

CLAIM: Rand Paul Suggested Deficits Are Caused By Obama Policies

RAND PAUL (R-KY): But more importantly, we have to ask, where does the money come from? Jack acts like the money's for free, just go and get it from Santa Claus in Washington. The money's not for free, the money has to be borrowed. Right now we're borrowing to the tune of 800 billion from China, 700 billion from Japan, the list goes on and on. I think that amount of debt is threatening the very foundations of our economy. It's incredibly dangerous. It's incredibly foolhardy to have a trillion-dollar stimulus, and then another trillion dollars into Obamacare.

FACT: The Deficit Is Fueled By Bush Policies And The Recession

Before Obama Took Office, The FY 2009 Deficit Was Projected At $1.2 Trillion. As reported by the Washington Times: "The Congressional Budget Office announced a projected fiscal 2009 deficit of $1.2 trillion even if Congress doesn't enact any new programs. [...] About the only person who was silent on the deficit projection was Mr. Bush, who took office facing a surplus but who saw spending balloon and the country notch the highest deficits on record." [Washington Times, 1/8/09, emphasis added]

CBPP 2005: Tax Cuts Are Half Of The $539 Billion Increase In Deficits Since 2001. Below is a chart from the Center on Budget Policy Priorities (CBPP) using Congressional Budget Office numbers to trace the origins of the deficit:

[CBPP.org, 1/31/05]

The Bush Tax Cuts Are The Primary Driver Of Federal Budget Deficits Over The Next Decade. Below is a chart from CBPP showing the deficit impacts of war spending, financial recovery spending, the recession itself, and the Bush tax cuts:

[CBPP.org, 6/28/10]

CLAIM: Rand Paul Falsely Claimed That "Fannie Mae, Freddie Mac...Caused The Recession"

RAND PAUL (R-KY): The problem was with government banks. Fannie Mae, Freddie Mac, bad policy at the federal reserve caused the recession, caused the credit crunch.

FACT: Data Shows Private Banks, Not Fannie And Freddie, Were Main Drivers Of Subprime Housing Bubble

Fannie's And Freddie's Role In Securitized Mortgages Was Shrinking As Securitization By Private Banks Was Spiking. Paul Krugman summarized the data on the subprime mortgage bubble in the New York Times:

Just to repeat the basic facts here:

1. The Community Reinvestment Act of 1977 was irrelevant to the subprime boom, which was overwhelmingly driven by loan originators not subject to the Act.

2. The housing bubble reached its point of maximum inflation in the middle years of the naughties:

Source: Robert Shiller

3. During those same years, Fannie and Freddie were sidelined by Congressional pressure, and saw a sharp drop in their share of securitization:

Source: FCIC

while securitization by private players surged:

Source: FCICFCIC

Of course, I imagine that this post, like everything else, will fail to penetrate the cone of silence. It's convenient to believe that somehow, this is all Barney Frank's fault; and so that belief will continue.

[New York Times, 6/3/10]

CLAIM: Rand Paul Suggested President Obama Wants To Allow All Bush Tax Cuts To Expire

RAND PAUL (R-KY): What I would say about the Bush tax cuts is, businesses have made calculations on these for five or ten years. Business needs predictability. If you take away these tax cuts, if you allow Obama to have the largest tax increase in our history, it will be a disaster to our economy.

FACT: President Obama And Leading Democrats Favor Extending Tax Cuts For 97% Of Americans

PolitiFact Called Similar Pence Claim "False." According to the non-partisan PolitiFact.com, in their analysis of a similar allegation from Pence on July 20:

Do Democrats want every tax bracket to rise, as Pence suggests? In a word, no.

For many months, Democratic officials have consistently said that they intend to let only the tax cuts for the wealthiest individuals lapse. The cutoff they usually suggest is $200,000 for individuals and $250,000 for married couples filing jointly. President Obama campaigned on just such a plan, and we've logged those promises into our Obameter campaign promises database.

[...]

Pence is right that every tax bracket will go up if the law is not extended. Still, we think the claim that Democrats don't want to extend the law is inaccurate. While the legislative drafting is still in process, the Democratic majority in Congress has made clear that it plans to extend tax cuts for all but the top couple percentage points of the income distribution. So it's highly misleading for him to say that Democrats actually want to see all the bill's cuts expire. Indeed, Pence's comment verges on a scare tactic.

[PolitiFact.com, 7/22/10, emphasis original]

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]

President Obama's FY2011 Budget Calls For Extending Bush Tax Cuts For Families Making Less Than $250,000 Per Year. As Market Watch reported in February: "Facing a gaping deficit but aiming to spur job creation at the same time, President Barack Obama's fiscal year 2011 budget would hit top earners, oil companies and others while giving tax breaks to small businesses to help them hire new workers... Obama wants tax breaks proposed by President George W. Bush to expire this year. His budget would eliminate tax breaks on those making more than $250,000 a year, a move almost certain to be opposed by Republicans and perhaps some Democrats as the economy crawls out of the recession. 'We extend middle-class tax cuts in this budget,' Obama said Monday at the White House, but 'we will not continue costly tax cuts for oil companies, investment fund managers, and those making over $250,000 a year. We just can't afford it.'" [Market Watch2/1/10]

Speaker Pelosi: High-End Tax Cuts Should End. According to The Hill: "House Speaker Nancy Pelosi (D-Calif.) on Thursday rejected extending tax cuts for the wealthiest tax bracket that are set to expire at the end of the year. Pelosi took off the table a short-term extension of those cuts floated by some lawmakers in her own party. 'No,' the speaker said at her weekly press conference when asked if the cuts for the highest bracket should be extended. 'Our position has been that we support middle-class tax cuts... I believe the high-end tax cuts did not create any jobs, increased the deficit and should be repealed,' she said." [The Hill7/22/10, emphasis added]

Treasury Secretary Geithner: We Will Extend Middle- And Lower-Income Provisions Of Bush Tax Cuts. According to the Wall Street Journal: "The Obama administration will allow tax cuts for the wealthiest Americans to expire on schedule, Treasury Secretary Timothy Geithner said Thursday, setting up a clash with Republicans and a small but vocal group of Democrats who want to delay the looming tax increases. Mr. Geithner said the White House would allow taxes on top earners to increase in 2011 as part of an effort to bring down the U.S. budget deficit. He said the White House plans to extend expiring tax cuts for middle- and lower-income Americans, and expects to undertake a broader revision of the tax code next year. 'We believe it is appropriate to let those tax cuts that go to the most fortunate expire,' Mr. Geithner said at a breakfast with reporters." [Wall Street Journal7/23/10, emphasis added]

New York Times: Obama Plan Leaves Much Of The Bush Tax Cuts In Place. The New York Times prepared an infographic showing where President Obama seeks to change Bush-era tax law, and where he intends to leave it unchanged:

[New York Times, 7/25/10]

CLAIM: Rand Paul Suggested Democrats Are To Blame For 'Unpredictability' Of 2011 Tax Rates

RAND PAUL (R-KY): What I would say about the Bush tax cuts is, businesses have made calculations on these for five or ten years. Business needs predictability. If you take away these tax cuts, if you allow Obama to have the largest tax increase in our history, it will be a disaster to our economy.

FACT: 2011 Rates Only "Unpredictable" Because Republicans Wrote An Expiration Date Into Bush Tax Cuts To Hide The True Cost Of The Cuts

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]

Ezra Klein: Reconciliation Maneuver Meant "Twisting A Budget Process Meant To Reduce The Deficit." According to the Washington Post's Ezra Klein:

In order to maximize the size of the cuts, Republicans had to minimize the influence of minority Democrats on the package. So they chose to run the bill through the reconciliation process. But that posed some challenges. Budget reconciliation had never been used to increase the deficit. In fact, it specifically existed to decrease the deficit. That's why one of its rules was that you couldn't use it to increase the deficit outside the budget window. Republicans realized they could take that very literally: The budget window was 10 years. So if the tax cuts expired after 10 years, they wouldn't increase the deficit outside the budget window. They'd also have the added benefit of appearing less costly in the Congressional Budget Office's estimates, as the CBO duly scored them as expiring after 10 years, which kept the long-range budget picture from exploding.

But the plan was never to have the tax cuts expire. Instead, the idea was that people would get used to the new tax rates, and no future Congress would want to allow a big tax increase, so when the time came, either Republicans in office would extend the cuts or Republicans in the minority would hammer Democrats until they extended them. And that's where we are now: Democrats control the government, so Republicans are screaming about tax increases as a way to get Democrats to extend tax cuts.

It's really hard to know where to start with this one. It's not a tax increase passed into law by Democrats. It's a reversion to old tax rates passed into law by Republicans. It's not how law is supposed to work. It's the result of twisting a budget process meant to reduce the deficit so you could use it to massively increase the deficit.

[Washington Post7/19/10, emphasis added]

CLAIM: Rand Paul Claimed That Kentucky Is Sending Too Much Money To Washington

RAND PAUL (R-KY): What I've said repeatedly through this is what we do to help Kentucky, though, is we need to leave more money in Kentucky. All these big government schemes, Obamacare, a trillion dollars, stimulus package, a trillion dollars-the money's not for free. We're getting that money and having to borrow it or simply print it at the federal reserve.

FACT: Kentucky Receives 150% As Much From Washington As It Contributes To The Federal Government

Data Shows Kentucky Receives $1.51 For Each Dollar It Sends To Washington. VisualEconomics.com created this infographic based on Tax Foundation data showing that Kentucky receives $1.51 in federal dollars for each dollar it pays in taxes:

[VisualEconomics.com, accessed 7/12/10]

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