Fact Checking The Sunday Shows - October 17, 2010

October 18, 2010 9:46 am ET

This Sunday's political chatter featured Liz Cheney lying on Face the Nation about what President Obama has said about foreign money, the Chamber of Commerce, and political advertising. Obama made a point about the lack of disclosure from outside spending groups that included a reference to the possibility of foreign influence, and Cheney turned that into an outright accusation. Meanwhile, on Fox News Sunday, Sen. John Cornyn (R-TX) and Senate candidate Carly Fiorina (R-CA) each claimed that government spending has exploded in the last few years. But factoring in the recession, government spending has held steady since the beginning of 2007. Cornyn also found time to mislead about the expiring Bush tax cuts, a topic that Christine O'Donnell (R-DE) also dissembled about in an appearance on ABC's This Week. In reality, the Democrats have consistently called for extending the tax cuts for 97% of the country, and their plan would not affect small businesses the way O'Donnell suggested.

Face the Nation

CLAIM: GOP Strategist Liz Cheney Falsely Claimed President Obama Said "There Is Foreign Money From The Chamber Of Commerce Going Into This Election Cycle"

LIZ CHENEY: The president said there is foreign money from the Chamber of Commerce going into this election cycle to Republican candidates. That's not true, it's not fair, and it's an abomination and a shame that he's attempting to chill first amendment rights [crosstalk]

HOWARD DEAN: What he has said is there's foreign money going into the Chambers of Commerce, and the Chamber of Commerce is proudly stood up for giving millions and millions of dollars to the right wing of the Republican party.

CHENEY: Governor you can try to clean up what he said, but that's not what he said.

FACT: President Obama DID NOT Say That, Actually

President Obama In Maryland: Chamber Is Receiving Foreign Money And Is Active In Elections, But We Don't Know If Foreign Money Is Being Kept Separate From Election Activity. In a speech in Maryland, President Obama said: "Just this week, we learned that one of the largest groups paying for these ads regularly takes in money from foreign corporations.  So groups that receive foreign money are spending huge sums to influence American elections, and they won't tell you where the money for their ads come from. So this isn't just a threat to Democrats. All Republicans should be concerned.  Independents should be concerned.  This is a threat to our democracy.  The American people deserve to know who's trying to sway their elections. And if we just stand by and allow the special interests to silence anybody who's got the guts to stand up to them, our country is going to be a very different place." [President Obama Remarks, 10/7/10 via WhiteHouse.gov; emphasis added]

President Obama In Philadelphia: Money COULD BE Foreign, But We Don't Know Because They Won't Tell Us. In a speech in Philadelphia, President Obama said: "There is no question -- there's no question the other side sees a chance to get back in the driver's seat.  And thanks to a Supreme Court decision called Citizens United, they are being helped along this year by special interest groups that are spending unlimited amounts of money on attack ads...just attacking people without ever disclosing who's behind all these attack ads.  You don't know.  It could be the oil industry.  It could be the insurance industry.  It could even be foreign-owned corporations.  You don't know because they don't have to disclose.  Now, that's not just a threat to Democrats -- that's a threat to our democracy.  Every American business and industry deserves a seat at the table, but they don't get to a chance to buy every chair.  We've seen what happens when they do.  They put the entire economy at risk and every American might end up suffering." [President Obama Remarks, 10/10/10 via WhiteHouse.gov; emphasis added]

Fox News Sunday

CLAIM: Sen. Cornyn (R-TX) Suggested That Democrats Want "The Single Largest Tax Increase In American History"

SEN. JOHN CORNYN (R-TX): By the end of this year, the American people are looking at the single largest tax increase in American history, including on a lot of small businesses that declare their business income on an individual tax return. There couldn't be a worse message for the job creators in America during a time when unemployment is so high, than the uncertainty over what future taxes are gonna be. So I think unfortunately there's been a, uh, it's really been mishandling of the agenda. We need to deal with this in a way that, I think, keeps taxes low. The last thing we need to do is to raise taxes on small businesses and job creators during a recovery, a fragile recovery, like we're experiencing now.

FACT: Democrats Consistently Calling For Tax Cuts For 97% Of The Country

PolitiFact: Dems Consistently Say Only Tax Cuts For Wealthiest Will Be Allowed To Expire. According to the non-partisan PolitiFact.com, in their analysis of an allegation from Rep. Mike Pence that Democrats want all tax brackets to rise:

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:

taxcuts

[New York Times7/25/10]

FACT: Democrats "Determined To Act" On Tax Cuts When Congress Resumes

Congress Resumes Session On November 15. According to records of House proceedings, at 1:04 AM on September 29, 2010, "[t]he House adjourned pursuant to H. Con. Res. 321. The next meeting is scheduled for 2:00 p.m. on November 15, 2010." [Clerk.House.gov, accessed 10/7/10]

Axelrod: Democrats Determined To Act On Tax Cuts Before January Expiration. From the Washington Post:

The White House and congressional Democrats conceded Sunday that they will probably wait until after the Nov. 2 elections to vote on a plan to prevent tax rates from rising next year for the vast majority of Americans.

"I doubt that we will" stage a vote before adjourning next week, House Majority Leader Steny H. Hoyer (D-Md.) said. Speaking on the Sunday talk shows, he and White House senior adviser David Axelrod added that Democrats are nonetheless determined to act before the tax cuts expire in January. [Washington Post9/26/10]

Washington Post: "Both Parties Expect The Tax Cuts Will Be Extended." From the Washington Post:

Republicans would not compromise on any of the issues over the past two weeks and attacked Democrats for ending the session without voting on the tax cuts. House Republicans even tried to block the formal resolution that allows the chamber to adjourn, leading to an unusual 210-209 vote in which 39 Democrats joined nearly all the Republicans in opposition.

Tax rates will increase next year if Congress does not address the issue, although both parties expect the tax cuts to be extended when members return after the elections. [Washington Post9/30/10]

FACT: Even If All Bush Tax Cuts DID Expire, Cornyn's Still Wrong About "The Single Largest Tax Increase" In U.S. History

PolitiFact: Neither The Expiration Of All The Bush Tax Cuts Nor Those For High Earners Would "The Largest" Tax Hike In History. According to the non-partisan PolitiFact.com, in an analysis of similar claims made by Sarah Palin on Fox News Sunday:

We ran the number with some help from tax experts and found that if only the tax cuts for high earners expire, the resulting tax increases would not be the largest in history. Tax increases for high earners would be roughly 0.4 percent of GDP in the first year they take effect. That's significantly less than a 1982 tax increase signed into law by President Ronald Reagan. The tax increase resulting from the Tax Equity and Fiscal Responsibility Act of 1982 came to 1.23 percent of GDP when the tax changes were fully implemented, four years after the law's passage.

If you let all the Bush tax cuts expire, the tax increase would come to just above 2.2 percent of GDP. Clearly, that would be larger than the Reagan tax hike of 1982. But it would be smaller than one of the tax increases passed during World War II -- the Revenue Act of 1942, which is estimated at 5.04 percent of GDP." [PolitiFact.com, 8/1/10, emphasis added]

For more on the misinformation coming from the GOP on the expiring Bush tax cuts, read HERE and HERE; for the specifics on the Obama tax plan and small businesses, see HERE.

CLAIM: Sen. Cornyn (R-TX) Used An Incomplete Economic Picture To Suggest Democrats Have Exploded The Deficit

SEN. JOHN CORNYN (R-TX): Our Democratic colleagues need to look in the mirror. They need to accept responsibility for the fact that Ds have been in charge in Congress since 2007. And by the way, the deficit as a percentage of gross domestic product was 1.2 percent [in 2007]. Last year it was 9.9 percent because of the spending juggernaut that we've seen over the last two years. So we do need to work together, we need to be serious. 

CLAIM: Carly Fiorina (R-CA) Claimed Government "Spending Has Skyrocketed Out Of Control In The Last Two Years"

CARLY FIORINA: Well let's just start with the fact that as you pointed out in your last interview, spending has skyrocketed out of control in the last two years. It's true that government has grown steadily for 60 years, but the last two it's gotten really out of control. 

FACT: The Economic Downturn Means GDP Is Smaller, So "Percentage Of GDP" Statistics Are Inflated

Even If Government Spending Were Exactly The Same, It Would Look Increased As Percentage Of Shrunken GDP. As the New York Times' Paul Krugman explains, "dividing by GDP isn't quite enough, because we're still a deeply depressed economy, so government spending as a share of GDP will look high even if actual spending hasn't risen at all, simply because it's divided by a smaller number." [New York Times, 8/3/10; emphasis added]

FACT: Budget Experts At CBO And Congressional Research Service Rely On "Potential GDP" Calculation To Avoid Misleading Statistics That Arise From Fluctuations In Real GDP

Potential GDP Is "An Estimate Of The Level Of GDP Attainable" When Economy Is Using Nearly All Its Resources. The Congressional Budget Office described potential GDP in a 2001 paper on methodology: "Potential output-the trend growth in the productive capacity of the economy- is an estimate of the level of GDP attainable when the economy is operating at a high rate of resource use. It is not a technical ceiling on output that cannot be exceeded. Rather, it is a measure of maximum sustainable output-the level of real GDP in a given year that is consistent with a stable rate of inflation. If actual output rises above its potential level, then constraints on capacity begin to bind and inflationary pressures build; if output falls below potential, then resources are lying idle and inflationary pressures abate." ["CBO's Method For Estimating Potential Output: An Update," CBO.gov, August 2001; italics original]

Congressional Research Service (CRS): "Using Potential GDP...Avoids The Problem Of Cyclical Factors" Like Recessions. In a CRS paper titled "The Economics Of The Federal Budget Deficit," economist Brian Cashell wrote: "Potential GDP is an estimate of what the total value of production of goods and services would be if labor and capital resources were fully employed. Using potential GDP as a base for comparison avoids the problem of cyclical factors masking changes in fiscal policy. A decrease in the standardized budget deficit relative to potential GDP would be considered indicative of a contractionary fiscal policy. Similarly, an increase in the standardized budget deficit as a percentage of potential GDP would be indicative of a stimulative fiscal policy." ["The Economics Of The Federal Budget Deficit," Congressional Research Service, 1/28/05; emphasis added]

FACT: As A Percentage Of Our Economic Potential, Spending Has Remained More-Or-Less Flat During The Downturn

Because Of Budget Cuts At State Level, Total Government Employment Is Actually Falling Under Obama. As Paul Krugman of the New York Times wrote: "Consider, in particular, one fact that might surprise you: The total number of government workers in America has been falling, not rising, under Mr. Obama. A small increase in federal employment was swamped by sharp declines at the state and local level - most notably, by layoffs of schoolteachers. Total government payrolls have fallen by more than 350,000 since January 2009." [New York Times, 10/10/10; emphasis added]

  • Government Purchases Are Growing More Slowly Under Obama Than In Final Two Years Of Bush. As Paul Krugman of the New York Times wrote: "Now, direct employment isn't a perfect measure of the government's size, since the government also employs workers indirectly when it buys goods and services from the private sector. And government purchases of goods and services have gone up. But adjusted for inflation, they rose only 3 percent over the last two years - a pace slower than that of the previous two years, and slower than the economy's normal rate of growth. So as I said, the big government expansion everyone talks about never happened." [New York Times, 10/10/10; emphasis added]

Using Statistics That Reflect Economic Trends, Government Spending Is No Bigger A Piece Of The Economy's Potential Than When Recession Began In 2007. According to economist Menzie Chinn of EconBrowser.com:

Notice that government transfers as a share of GDP looks particularly high because of the collapse of GDP in the Great Recession which started in 2007Q4. Normalizing by potential GDP highlights the fact that, while the ratio is the highest over the last forty three years, it is only slightly higher than that recorded in the mid-1980s, during the Reagan administration.

Normalizing government consumption and investment illustrates that overall spending by the government in purchases of goods and services is not particularly high. Even dividing by nominal GDP indicates that we are only (almost) back to the levels of 1990. Normalizing by potential GDP indicates that we are still only back to the levels of the early 1990's (this spending includes defense).

ever2.gif 
Figure 2: Total government consumption and investment divided by nominal GDP (blue), and divided by nominal potential GDP. NBER defined recessions shaded gray. Source: BEA, 2010Q2 3rd release, and CBO, Historical Statistics, and author's calculations.

[EconBrowser.com, 10/13/10; emphasis added]

This Week

CLAIM: Christine O'Donnell Falsely Suggested Democrats' Tax Plan Would Impact Small Businesses More Than Billionaires

CHRISTINE O'DONNELL (R-DE): There's the scare tactic coming from the Democrats saying that these tax cuts for the rich are these billionaires who are trying to find places to dock their yachts. That's not it at all. It's the dry cleaner down the street, it's the pizza shop owner down the street, it's the hardware store owner.

FACT: It's Not A "Scare Tactic" — It's An Economic Fact Based In Empirical Research

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]

PolitiFact: "Only 3 Percent" Of Taxpayers With Business Income Would Be Affected By The Democratic Proposal.  According to the nonpartisan PolitiFact.com:

What impact would raising taxes on the top two income brackets have on small businesses? According to the Joint Committee on Taxation, the same source that Neugebauer cited in his blog post, "In 2011 just under 750,000 taxpayers with net positive business income...will have marginal rates of 36 or 39.6 percent under the president's proposal." That translates into only 3 percent of all taxpayers with positive business income. Yes, you read that right. Only 3 percent of all taxpayers who reported having positive business income will see their taxes go up under the proposed Democratic initiative.

We also consulted experts at the Tax Policy Center, a joint project from the liberal-to-centrist-leaning Brookings Institute and the liberal Urban Institute. James Nunns, a researcher at the Urban Institute, directed us to the center's July 2010 analysis of the distribution of business income by statutory marginal rate for the year 2011. The report assumes that Congress goes through with its plan to only increase taxes on individuals making over $200,000 and couples with over $250,000 in income. It turns out, 774,000 tax filers in the top two brackets --the only ones that will see a tax increase -- will have positive business income. Divide that by the roughly 36 million tax filers who report business income (positive or negative), and you get 2.1 percent. In other words, still assuming that having any amount of income from a small business means that you are actually a business owner (big assumption), only about 2.1 percent of businesses will face the prospect of higher taxes based on the Democratic proposal. [PolitiFact.com, 8/4/10, emphasis added]

Non-Partisan Joint Committee On Taxation: The Businesses Affected By President Obama's Tax Proposal Are Not Small Businesses. 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]

For more on the GOP's dishonesty about small business taxes, read HERE.

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