Fact Checking The Sunday Shows - November 7, 2010
The Sunday shows were crowded with naked falsehoods yesterday. Rep. Eric Cantor (R-VA) claimed on Fox News that President Obama "has killed jobs" despite the fact that a resurgent private sector has added 1.1 million jobs so far this year. On CBS, Sen. Mitch McConnell (R-KY) claimed that 750,000 small businesses pay income taxes in the top two brackets, but that number only works if you include massive corporations like Bechtel and PriceWaterhouseCoopers, which play accounting games to avoid corporate tax rates, in your definition of "small businesses." Sen. Jim DeMint (R-SC) absurdly claimed on NBC that Rep. Paul Ryan's (R-WI) entitlement-slashing debt reduction plan requires more sacrifice from bureaucrats than from average Americans. Worst of all, Rep. Mike Pence (R-IN) claimed on ABC that tax cuts for the wealthy are good for the economy and don't increase the deficit. In the real world, of course, Pence is wrong on both counts.
Fox News Sunday
Rep. ERIC CANTOR (R-VA): They're looking at him to try to come to the middle and set aside this extreme agenda that he's been about that has killed jobs and created the most uncertainty that businesses can even remember.
FACT: The Private Sector Has Added 1.1 MILLION Jobs In First 10 Months Of 2010
Bureau Of Labor Statistics: Private Sector Job Growth Of 1.1 Million Since December 2009. According to the most recent jobs report from the Bureau of Labor Statistics: "Private-sector payroll employment rose by 159,000 over the month; since December 2009, employment in the private sector has risen by 1.1 million." [BLS.gov, 11/5/10; emphasis added]
October Marked The Tenth Consecutive Month Of Private Sector Job Growth. As reported by the Washington Monthly's Political Animal blog:
In October, the economy added 159,000 private-sector jobs, far exceeding expectations. It's the best private-sector total since April, and the second strongest report since the start of the Great Recession in late 2007. It was also the tenth consecutive month of private-sector growth -- a streak unseen in more than three years.
All told, the economy has added more than 1.1 million private-sector jobs in 2010. For comparison purposes, note that the economy lost nearly 4.7 million private-sector jobs in 2009, and lost 3.8 million in 2008.
With that in mind, here is a different homemade chart, showing monthly job losses/gains in the private sector since the start of the Great Recession. The image makes a distinction -- red columns point to monthly job totals under the Bush administration, while blue columns point to job totals under the Obama administration. (Note: the chart reflects revised totals from August and September, per data from the Bureau of Labor Statistics.)
[WashingtonMonthly.com, 11/5/10; emphasis added]
FACT: When President Obama Was Sworn In, The Economy Was Shedding Hundreds Of Thousands Of Jobs A Month Because Of The Recession That Began Under President Bush
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:
[Washington Post, 8/12/10]
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]
Face the Nation
CLAIM: Sen. McConnell Claimed 750,000 Small Businesses Would Be Affected By Expiration Of Bush Tax Cuts For The Wealthy
Sen. MITCH McCONNELL (R-KY): I think the issue here is whether you wanna raise taxes on small businesses in the middle of what most Americans think is a recession. I and all of my members think it's a bad idea to, to do that. I do sense some flexibility on the President's part, and we are happy to talk with him about it. But lemme make sure everybody understands what we are talking about here. These aren't tax cuts, these are tax increases. Tax increases in the middle of a recession. This so-called upper income thing diverts people away from the following fact. If you do that, you raise taxes on 750,000 of our most productive small businesses, which represents 50 percent of small business income and 25 percent of the workforce, at a time when job creation is just bumping along, and we'd all like to get the private sector goin' again.
FACT: McConnell's Definition Of "Small Businesses" Includes Industry-Leading Corporations Worth Tens Of Billions
To Arrive At 750,000 Claim, Republicans Define All "Pass-Through" Entities As Small Businesses. As reported by the Washington Post, "Republicans continually define pass-through entities of all sizes as small businesses..." [Washington Post, 9/17/10; emphasis added]
By Defining All "Pass-Through" Entities As "Small Businesses," Republicans Are Counting A Wall Street Firm Worth $54 Billion As "Small." As reported by the Washington Post:
The thing is, some of those businesses are not particularly small. In fact, they're quite large.
Among the firms Republicans want to protect from new taxes, according to research by House Democrats: The management team at Wall Street buyout firm Kohlberg, Kravis and Roberts (KKR), which recently reported more than $54 billion in assets managed by 14 offices around the world. Auditing firm PricewaterhouseCoopers, a household name with operations in more than 150 countries. And the Tribune Corp., which owns the Chicago Tribune, the Los Angeles Times and the Baltimore Sun.
KKR, PricewaterhouseCoopers and the Tribune, it turns out, are organized as "pass-through" entities - companies that typically avoid corporate taxes by reporting profits on the individual tax returns of their owners, managers or shareholders. [Washington Post, 9/17/10; emphasis added]
Bush Economist: Businesses Republicans Define As "Small" Are Actually "Very Large." According to the Washington Post: "Alan Viard, an economist in the Bush White House who is now at the American Enterprise Institute, agreed that many firms represented in the top tax brackets are hardly small. Economically, that doesn't matter, he said: Obama would still be raising taxes on a significant source of jobs and economic activity. Politically, however, it's a very different matter to raise taxes on a Wall Street hedge fund than it is to tax your neighborhood dry cleaner. Which is why Republicans continually define pass-through entities of all sizes as small businesses, a position Viard called a 'fallacy.' 'How can it be that 3 percent of owners are accounting for 50 percent of small business income? Those firms they're owning can't be all that small,' Viard said. 'And that's true. They're very large.'" [Washington Post, 9/17/10; emphasis added]
Republican Definition Includes Athletes, Authors, And Other Non-Employer Tax Filers. According to Businessweek: "McConnell's 50-percent-of-income figure is based on a July 12 finding by the Joint Committee on Taxation, a House-Senate panel that analyzes tax issues, that half of about $1 trillion of business income in 2011 will be reported on some 750,000 personal tax returns filed by people who pay the top marginal rates. He calls those small businesses. Yet the report says the data 'do not imply that all of the income is from entities that might be considered 'small.'' Almost 20,000 of those businesses, for example, had receipts of more than $50 million, it says. Besides Obama, McConnell's 50 percent figure includes authors, actors, athletes, and others who employ few if any workers, as well as hedge fund firms and major law partnerships most people wouldn't consider small. 'We are being over-inclusive in our use of small business income,' says Edward D. Kleinbard, a former staff director of the Joint Committee on Taxation who is now a University of Southern California law professor." [Businessweek, 9/23/10; emphasis added]
Meet the Press
CLAIM: Sen. DeMint Claimed The "Ryan Roadmap" For Debt Reduction Doesn't Require "Sacrifice" From Average Americans
Sen. JIM DEMINT (R-SC): Well I don't think the American people are gonna have to sacrifice as much as the government bureaucrats, who get paid about twice what the American worker does. First of all, we just need to return to pre-Obama levels of spending in 2008. We need to cut earmarks so people will quit focusing on taking home the bacon. We need to defund Obamacare. And then we need to look at the entitlement programs such as, uh, the way Paul Ryan has done in the House with his Roadmap to America's Future, to fix our tax code, to fix Social Security and Medicare, and to cut the cost over time. We've got the plans, David, to do this.
CBPP: "About Three-Quarters Of Americans... Would Face Tax Increases." According to the Center on Budget and Policy Priorities:
To offset some of the cost of these massive tax cuts, the Ryan plan would place a new consumption tax on most goods and services, a measure that would increase taxes on most low- and middle-income families. CBPP finds that:
- About three-quarters of Americans - those with incomes between $20,000 and $200,000 - would face tax increases. For example, households with incomes between $50,000 and $75,000 would face an average tax increase of $900. (These estimated changes in taxes are relative to the taxes that would be paid under a continuation of current policy - i.e., what tax liabilities would be if the President and Congress make permanent the expiring 2001 and 2003 tax cuts and relief from the alternative minimum tax.)
- The plan would shift tax burdens so substantially from the wealthy to the middle class that people with incomes over $1 million would face much lower effective tax rates than middle-income families would. That is, they would pay much smaller percentages of their income in federal taxes." [Center on Budget and Policy Priorities, 7/7/10]
TPC: "The Roadmap's Tax Provisions Would Be Highly Regressive Compared With The Current Tax System." According to the Tax Policy Center: "The Roadmap's tax provisions would be highly regressive compared with the current tax system. Relative to current law-and assuming that taxpayers choose their preferred tax system-the Roadmap would reduce taxes for most people, but the largest reductions would go to those with the highest incomes. After-tax income would rise by 1.5 percent for households in the bottom quintile (the 20 percent with the lowest incomes) but change little for the next two quintiles and go up just 0.6 percent for the fourth quintile. In sharp contrast, the top quintile would see their after-tax income jump 11 percent. Within that group, the top 1 percent would gain an average of 26 percent and the top 0.1 percent a whopping 36 percent. The share of total taxes paid by the bottom 80 percent would rise from 35 percent to 42 percent, while the share paid by the top 1 percent would fall by nearly half from 25 percent to 13.5 percent." [Tax Policy Center, accessed 9/11/10]
Fact: The Tax Credits For Health Insurance In Rep. Ryan's "Roadmap" Are Grossly Inadequate
Rep. Ryan's "Roadmap" Would Provide A $5,700 Tax Credit Per Family For Health Insurance. According to the Congressional Budget Office's analysis of Rep. Paul Ryan's "Roadmap for America's Future" budget proposal: "In 2011, the current tax exclusion for employment-based health insurance would be replaced by a refundable tax credit for the purchase of health insurance, either through an employer or on an individual basis. The tax credit initially would be set at $2,300 per adult and $1,700 per child, not to exceed $5,700 per tax-filing unit." [Congressional Budget Office, 1/27/10]
- Health Insurance Will Cost $25,000 Per Family By 2016. According to the New America Foundation, under the current system of health care delivery in the United States, the full cost of an employer-based health plan for a family will be $24,291 by 2016. [New America Foundation, The Cost of Doing Nothing, November 2008]
Fact: Under Rep. Ryan's "Roadmap," Health Care Costs Would Continue To Skyrocket, Footing Patients With The Bill
CBO: Health Care Costs Would Increase At Twice The Rate Of Rep. Ryan's Tax Credits. According to the Congressional Budget Office: "The amounts of the Medicare voucher, the subsidy for low-income Medicare beneficiaries, the federal funding for Medicaid, and the tax credit for the purchase of health insurance would all be indexed to grow at a rate halfway between the general inflation rate, as measured by the consumer price index for all urban consumers (CPI-U), and the rate of price inflation for medical care, as measured by the consumer price index for medical care (CPI-M). Using that blended rate, CBO estimates that those amounts would increase at an average annual rate of 2.7 percent for the next 75 years, in comparison with the average annual growth rate of nearly 5 percent that CBO expects for per capita national spending for health care under current law." [Congressional Budget Office, 1/27/10]
CBPP: Rep. Ryan's "Roadmap" Would "Reduce Or Eliminate" Pooled Risk, Doesn't Control Health Care Costs. According to the Center on Budget and Policy Priorities:
The Ryan proposal thus would sharply reduce or eliminate all major forms of health insurance that spread risk by pooling healthy and less-healthy people together on a large scale. It would do so without taking significant action to create viable new pooling arrangements. Most Americans - including the poor and the elderly - would largely be left to purchase insurance on their own with a voucher or tax credit in an insurance market that would remain largely unreformed. In particular, insurance companies could continue to charge people much higher premiums based on age, gender, or health status.
The Ryan plan also largely lacks the kinds of provisions in the Senate- and House-passed health reform bills that are designed to slow health care cost growth by pushing health care providers to become more efficient and economical. Under the Ryan plan, the burden of reducing health care expenditures would fall primarily on beneficiaries, who would face steadily rising health care costs with a steadily diminishing amount of health insurance and might therefore forgo needed health care. [Center on Budget and Policy Priorities, 7/7/10]
Fact: Rep. Ryan's "Roadmap" Would Dismantle Social Security
CBPP: Ryan's "Roadmap" Would Reduce Social Security Spending To Levels When Nearly Half Of Seniors Lived In Poverty. According to the Center on Budget and Policy Priorities: "Overall, the plan's cuts in Medicare, Medicaid, and Social Security (and other programs to a much lesser degree) would be so severe that CBO estimates they would shrink total federal expenditures (other than on interest payments) from roughly 19 percent of GDP in recent years to just 13.8 percent of GDP by 2080. Federal spending has not equaled such a low level of GDP since 1950, when Medicare and Medicaid did not yet exist, Social Security failed to cover many workers, and close to half of the elderly people in the United States lived below the poverty line." [Center on Budget and Policy Priorities, 7/7/10]
Washington Post: "Ryan's Budget Proposes Reforms That Are Nothing Short Of Violent." According to the Washington Post's Ezra Klein: "As you all know by now, the long-term budget deficit is largely driven by health-care costs. To move us to surpluses, Ryan's budget proposes reforms that are nothing short of violent. Medicare is privatized. Seniors get a voucher to buy private insurance, and the voucher's growth is far slower than the expected growth of health-care costs. Medicaid is also privatized. The employer tax exclusion is fully eliminated, replaced by a tax credit that grows more slowly than medical costs. And beyond health care, Social Security gets guaranteed, private accounts that CBO says will actually cost more than the present arrangement, further underscoring how ancillary the program is to our budget problem." [Washington Post, 2/1/10]
CBO: Rep. Ryan's "Roadmap" Would Privatize Social Security. According to the Congressional Budget Office's analysis of Rep. Paul Ryan's "Roadmap for America's Future" budget proposal: "A system of individual accounts would be established in 2012. In that year, workers who are age 55 or younger would be able to participate in voluntary individual accounts, funded with a portion of their payroll taxes. As necessary, the government would make payments to account holders during their retirement to guarantee that their contributions earned a rate of return at least equal to the rate of inflation." [Congressional Budget Office, 1/27/10]
CBO: Rep. Ryan's "Roadmap" Would Cut Social Security Benefits. According to the Congressional Budget Office's analysis of Rep. Paul Ryan's "Roadmap for America's Future" budget proposal: "Traditional retirement benefits would be reduced below those scheduled under current law for many workers who are age 55 or younger in 2011. People with lower earnings would experience smaller reductions in benefits, and those with higher earnings would experience larger reductions. Current beneficiaries and workers who are age 55 or older in 2010 would experience no change in benefits." [Congressional Budget Office, 1/27/10]
- CBO: Private Social Security Accounts Would "Probably Also Increase The Economic Cost To The Government." According to the Congressional Budget Office: "Voluntary individual accounts would probably also increase the economic cost to the government relative to a plan similar to the Roadmap but without such accounts. People would tend to opt for individual accounts when it was in their economic interest to do so, which would be when the value of taxes redirected to individual accounts exceeded the present value of forgone Social Security benefits. The guarantee of a rate of return on contributions at least equal to the rate of inflation would also involve a cost to the government. Although the probability of the returns on equities and bonds falling short of inflation over a period as long as a worker's career is small, such an outcome would be more likely to occur during periods of economic stress, when resources were scarce and, hence, the guarantee most valuable." [Congressional Budget Office, 1/27/10]
Fact: Rep. Ryan's "Roadmap" Would Dismantle Medicare
CBPP: "The Ryan Plan Would Eliminate Traditional Medicare, Most Of Medicaid." According to the Center on Budget and Policy Priorities: "The Ryan plan would eliminate traditional Medicare, most of Medicaid, and all of the Children's Health Insurance Program (CHIP), converting these health programs largely to vouchers that low-income households, seniors, and people with disabilities could use to help buy insurance in the private health insurance market." [Center on Budget and Policy Priorities, 7/7/10]
CBO: Rep. Ryan's "Roadmap" Would Privatize Medicare. According to the Congressional Budget Office's analysis of Rep. Paul Ryan's "Roadmap for America's Future" budget proposal: "Starting in 2021, new enrollees would no longer receive coverage through the current program but, instead, would be given a voucher with which to purchase private health insurance.
- In 2021, when enrollees would first receive the voucher, the average voucher for 65-year-olds would be worth $5,900 (in 2010 dollars), as specified by your staff.
- The voucher would be adjusted to reflect the age and health status of enrollees. If all Medicare beneficiaries (including older people with higher average expenditures) were to receive a voucher in 2021, the average voucher amount would be $11,000 (in 2010 dollars)." [Congressional Budget Office, 1/27/10]
CBPP: By 2080, Ryan's Roadmap Would Cut Medicare By 76%. According to the Center on Budget and Policy Priorities: "Under Ryan's plan, the value of the vouchers would fall further behind the rising cost of health care with each passing year, so they would purchase less health coverage over time. By 2080, Medicare would be cut 76 percent below its projected size under current policies, according to CBO. In other words, by 2080, the vouchers that would replace Medicare would receive one-quarter of the resources that Medicare would otherwise use." [Center on Budget and Policy Priorities, 7/7/10]
CBO: Rep. Ryan's "Roadmap" Would Raise Medicare Premiums & Cut Benefits. According to the Congressional Budget Office's analysis of Rep. Paul Ryan's "Roadmap for America's Future" budget proposal: "People who are age 65 or older in 2020 and other existing enrollees at that time would continue to be covered by the current program, although some higher-income enrollees would pay higher premiums, and some program payments would be reduced." [Congressional Budget Office, 1/27/10]
CBO: Rep. Ryan's "Roadmap" Would Raise The Eligibility Age For Medicare. According to the Congressional Budget Office's analysis of Rep. Paul Ryan's "Roadmap for America's Future" budget proposal: "The age of eligibility for Medicare would increase incrementally from 65 (for people born before 1956), as it is under current law, to 69 years and 6 months for people born in 2022 and later." [Congressional Budget Office, 1/27/10]
CLAIM: Sen. DeMint Falsely Claimed Government Workers Make Twice As Much As Their Private Sector Counterparts
Sen. JIM DEMINT (R-SC): ...government bureaucrats, who get paid about twice what the American worker does. [Meet the Press, 11/7/10]
CLAIM: Senator-Elect Rand Paul Implied Government Workers Make Twice What Private Employees Earn
RAND PAUL (R-KY): The average federal employee makes $120,000 a year. The average private employee makes $60,000 a year. Let's get them more in line, and let's find savings. [This Week, 11/7/10]
FACT: Government Workers Do Not Make Twice What Equivalent Private Sector Workers Make
PolitiFact: Federal Pay Claim "False" Because "It Is Not An Apples-To-Apples Comparison." PolitiFact investigated a similar 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]
Rep. MIKE PENCE (R-IN): David believes that every tax increase equals a revenue increase, but that's not true. Anybody who's familiar with the historical data from the IRS knows that raising income tax rates will likely actually reduce federal revenues. So if we raise taxes, the American people are very likely gonna, the top one percent, are gonna send less money to Washington, D.C., and that'll never get us out of this hole...Raising income tax rates on the top one percent will not increase revenues to the federal government.
The Laffer Curve Holds That Income Tax Cuts Increase Tax Revenue By Making People Work Dramatically Harder. In his paper "Snake-Oil Tax Cuts," Harvard economist Jeffrey Frankel wrote: "The Laffer Proposition is the claim that if the government cuts, say, the income tax rate, not only do people respond by working harder and earning more income, but that the increase in income is so great that it outweighs the reduction in the tax rate. The claimed result is that total tax revenue - the tax rate multiplied by income - actually increases when tax rates are cut." ["Snake-Oil Tax Cuts," Jeffrey Frankel, 9/8/08 via HKS.Harvard.edu]
Laffer Principle Only Applies When Income Tax Rates Are Extremely High. In his paper "Snake-Oil Tax Cuts," Harvard economist Jeffrey Frankel described some scenarios where the Laffer principle of income tax incentives would actually result in increased revenue from tax cuts:
There are certainly situations where this unusual phenomenon holds. Here are few examples:
- If the marginal tax rate approaches 100%, it undermines all economic incentive to work. In Britain, the top marginal tax rate was over 90% in the 1960s -- even higher at times -- until cut by Margaret Thatcher. Reportedly this is why the Beatles and other British rock groups began working outside the country more often. In reaction to Sweden's unfriendly income tax system, Ingmar Bergman in 1976 legendarily stopped making movies in his home country and went into self-imposed exile. In other words, these high-tax European countries did not take in much tax revenue from their creative stars.
- If a single city, or a small country or state, cuts taxes, it is more likely than a large country to experience a large supply response, because it is easy for households and firms to move across the borders. High taxes in New York have driven some to the suburbs, and low-tax jurisdictions like New Hampshire thrive as a haven for those seeking to escape high income taxes. The same principle applies to more specialized tax havens such as the Cayman Islands.
- Even in the United States at the federal level, marginal tax rates in the 1970s were so high that they didn't bring in much revenue. It is not that the top-earners gave up working. Rather they hired expensive lawyers and accountants, who successfully sheltered their clients' incomes. Thus when Ronald Reagan in 1981 cut the top marginal tax rate, it indeed may well have brought in more tax revenue subsequently within that tax bracket. In any case it cut down on a lot of wasteful legal and accounting tax-avoidance activity. ["Snake-Oil Tax Cuts," Jeffrey Frankel, 9/8/08 via HKS.Harvard.edu; emphasis added; internal citations removed for clarity]
FACT: Tax Rates Are Historically Low In 2010, Even On Top Earners
Top Tax Brackets Over Time:
Tax Policy Center Co-Director: With Taxes At 60-Year Low, "The Rise Of The Tea Party...Is Really Hard To Understand." As reported by CBSNews.com: "Meanwhile, taxes are at their lowest levels in 60 years, according to William Gale, co-director of the Tax Policy Center and director of the Retirement Security Project at the Brookings Institution. The relation between what is said in the tax debate and what is true about tax policy is often quite tenuous,' Gale told Hotsheet. 'The rise of the Tea Party at at time when taxes are literally at their lowest in decades is really hard to understand.'" [CBSNews.com, 4/15/10; emphasis added]
GOP Rep. McHenry: "Marginal Tax Rates Are The Lowest They've Been In Generations, And All We Can Talk About Is Tax Cuts." As reported by Time Magazine, North Carolina Republican Patrick McHenry said: "Marginal tax rates are the lowest they've been in generations, and all we can talk about is tax cuts... The people's desires have changed, but we're still stuck in our old issue set." [Time Magazine, 5/7/09]
FACT: Expert Consensus, Even Among Conservatives, Is That 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." [Time, 12/6/07, emphasis added]
2006: Bush's Chief Economic Adviser Conceded Tax Cuts Do Not Pay For Themselves. In testimony to the Senate Budget Committee, Council of Economic Advisers Chairman Edward Lazear testified: "Will the tax cuts pay for themselves? As a general rule, we do not think tax cuts pay for themselves. Certainly, the data presented above do not support this claim." [Senate Budget Committee Hearing, 9/28/06, via WhiteHouse.Archive.gov]
American Enterprise Institute (AEI) Economist: "There's No Evidence" That Bush Tax Cuts "Come Anywhere Close" To Paying For Themselves. In 2006, the Washington Post asked former Bush economist and AEI Resident Scholar Alan Viard if the Bush tax cuts paid for themselves: "Economists said Bush was claiming credit where little is due. The economy has grown and tax receipts have risen at historic rates over the past two years, but the Bush tax cuts played a small role in that process, they said, and cost the Treasury more in lost taxes than it gained from the resulting economic stimulus. 'Federal revenue is lower today than it would have been without the tax cuts. There's really no dispute among economists about that,' said Alan D. Viard, a former Bush White House economist now at the nonpartisan American Enterprise Institute. 'It's logically possible' that a tax cut could spur sufficient economic growth to pay for itself, Viard said. 'But there's no evidence that these tax cuts would come anywhere close to that.'" [Washington Post, 10/17/06, emphasis added]
Wall Street Journal: Bush Tax Cuts Return Less Than 10% Of Their Cost In Added Tax Revenue From Economic Growth. In a 2006 editorial, the Wall Street Journal wrote: "The congressional Joint Committee on Taxation, using conventional analyses, says making the president's tax cuts permanent would reduce federal revenues in 2016 by $314 billion. That is more than 10 times what the Treasury analysis suggests tax cuts would generate by prompting more hours of work, more savings and investment and more efficient use of resources." [Wall Street Journal, 7/11/06]
FactCheck.org: "Highly Misleading" To Say Tax Cuts Increase Revenues. According to FactCheck.org: "Republican presidential candidate Sen. John McCain has said that the major tax cuts passed in 2001 and 2003 have 'increased revenues.' He also said that tax cuts in general increase revenues. That's highly misleading. In fact, the last half-dozen years have shown us that we can't have both lower taxes and fatter government coffers. The Congressional Budget Office, the Treasury Department, the Joint Committee on Taxation, the White House's Council of Economic Advisers and a former Bush administration economist all say that tax cuts lead to revenues that are lower than they otherwise would have been - even if they spur some economic growth. And federal revenues actually declined at the beginning of this decade before rebounding." [FactCheck.org, 6/11/07; emphasis added]
- Nonpartisan Joint Committee On Taxation: Bush Tax Cuts Reduced Revenues By Hundreds Of Billions Of Dollars. According to FactCheck.org:
The Joint Committee on Taxation estimated that the 2001 tax legislation (the Economic Growth and Tax Relief Reconciliation Act) would cause government revenues to be 107.7 billion less than they would have been in the absence of the legislation in 2004, 107.4 billion less in 2005 and 135.2 billion less in 2006. The committee's estimates for the effect of the Jobs and Growth Tax Relief Reconciliation Act of 2003 were that it would reduce otherwise projected revenues by 148.7 billion in 2004, 82.2 billion in 2005 and 20.7 billion in 2006. The JCT makes its comparisons against the Congressional Budget Office's receipts baselines. [FactCheck.org, 6/11/07]
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]
Harvard Economist: Chief Republican Arguments For Cutting Taxes Are "Both Wrong." In a paper titled "Snake-Oil Tax Cuts," Harvard professor Jeffery Frankel wrote:
For years, the Republican approach to economic policy has pretty much boiled down to this message: The right response to all problems is cutting taxes. To bolster this message, they rely heavily on two arguments. On the one hand, they say, cutting taxes will increase tax revenues by generating economic growth, thus raising tax revenue and building a surplus. (This is known as the Laffer Hypthesis). On the other hand, Republicans claim, tax cuts are good because they create deficits and force the government to shrink itself. (A colloquial term for this is Starve the Beast).
The arguments are not only mutually exclusive - the weight of the economic evidence also shows that they're both wrong. The habit of Republican policymakers to invoke each of them at different points in time (or before different audiences) is politically convenient but logically dishonest. It smacks of a particularly desperate defense attorney arguing both that "my client didn't have a gun" (Laffer) and "he shot in self-defense" (Starve the Beast).
Neither proposition accurately describes US economic history, nor provides a sound basis for future economic policy. That is, choosing either proposition would harm the long-term health of the US economy. ["Snake-Oil Tax Cuts," 9/8/08, via Harvard.edu, emphasis added]
Ezra Klein: "In The Real World, Tax Cuts And Spending Increases Have The Exact Same Affect On The Budget Deficit." According to the Washington Post's Ezra Klein: "What's remarkable about Kyl's position here is that it appears to be philosophical. 'You should never have to offset cost of a deliberate decision to reduce tax rates on Americans,' he said. Never! This is much crazier than anything you hear from Democrats. Imagine if some Democrat -- and a member of the Senate Democratic leadership, no less -- said that as a matter of principle, spending should never be offset. He'd be laughed out of the room. Back in the real world, tax cuts and spending increases have the exact same affect on the budget deficit." [Washington Post, 7/12/10]
FACT: Far From Paying For Themselves, The Bush Tax Cuts Created Massive Deficits
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:
Bloomberg News: "Give The Wealthiest Americans A Tax Cut And History Suggests They Will Save The Money Rather Than Spend It." According to Bloomberg News: "Give the wealthiest Americans a tax cut and history suggests they will save the money rather than spend it. Tax cuts in 2001 and 2003 under President George W. Bush were followed by increases in the saving rate among the rich, according to data from Moody's Analytics Inc. When taxes were raised under Bill Clinton, the saving rate fell. The findings may weaken arguments by Republicans and some Democrats in Congress who say allowing the Bush-era tax cuts for the wealthiest Americans to lapse will prompt them to reduce their spending, harming the economy. President Barack Obama wants to extend the cuts for individuals earning less than $200,000 and couples earning less than $250,000 while ending them for those who earn more." [Bloomberg News, 9/14/10]
New York Times: "Research Suggests That Tax Cuts... Have Limited Ability To Bolster The Flagging Economy." According to the New York Times: "The concept of lower taxes is so appealing to voters that many embrace them as an economic cure-all. But economic research suggests that tax cuts, though difficult for politicians to resist in election season, have limited ability to bolster the flagging economy because they are essentially a supply-side remedy for a problem caused by lack of demand. The nonpartisan Congressional Budget Office this year analyzed the short-term effects of 11 policy options and found that extending the tax cuts would be the least effective way to spur the economy and reduce unemployment. The report added that tax cuts for high earners would have the smallest 'bang for the buck,' because wealthy Americans were more likely to save their money than spend it." [New York Times, 9/11/10]
CBO: Among Eleven Proposals To Spur Economic Growth, Cutting Income Taxes Ranks Last. Below is a chart created by the Congressional Budget Office to show the "cumulative effects of policy options on employment in 2010 and 2011":
[Congressional Budget Office, 2/23/10]
CLAIM: Rep. Pence Claimed Domestic Spending Has Increased 84 Percent Since President Obama Took Office
Rep. MIKE PENCE (R-IN): There's been an 84 percent increase in domestic spending since this administration took office.
FACT: Pence Is Using Accounting Gimmick To Misrepresent Spending Trajectory By Pretending Stimulus Happened In 2010
PolitiFact: "84 Percent" Claim Based On Unusual Accounting Of Stimulus Spending. According to PolitiFact.com, in its investigation of a similar claim from Rep. Paul Ryan (R-WI): "[Budget numbers] do show a big jump -- from $434 billion in 2008 to $537 billion in 2010. But that's a 24 percent increase, not the 84 percent claimed by Ryan and his colleagues. Is someone's math fuzzy? Let's dig in to find out. Ryan's calculations also include another number -- the discretionary spending portion of the American Recovery and Reinvestment Act, better known as the economic stimulus package. That adds another $259 million to the total, which brings it to $797 billion (with rounding) and the 84 percent. One problem, and it's a significant one in terms of Ryan's statement: The stimulus package was approved in February 2009. Ryan includes it in the 2010 totals, so the two-year trend under Obama looks like a rocket headed straight up. If you put it in 2009 -- when it was passed -- the two-year trend under Obama looks more like a roller-coaster ride: Up a lot, and then down some but not all the way." [PolitiFact.com, 11/2/10; emphasis added]
"84 Percent" Claim Is "Nifty Accounting Maneuver" That Misrepresents The Trajectory Of Spending. According to PolitiFact.com, in its investigation of a similar claim from Rep. Paul Ryan (R-WI): "Most experts told PolitiFact Wisconsin it's fine to include [stimulus spending], as long as it appears as a one-time blip -- creating that roller-coaster rise and fall. 'The discretionary spending in the stimulus bill has already begun to fade and no one assumes stimulus bill levels of spending will continue every year into the future,' said Joshua Gordon, policy director at The Concord Coalition, a nonpartisan group that advocates for fiscal responsibility. His group and the left-leaning Center on Budget and Policy Priorities agree the stimulus funding should be placed in 2009...Putting them in 2010 may make a stronger rhetorical point, but a shaky mathematical one... It's a nifty accounting maneuver. But still a maneuver." [PolitiFact.com, 11/2/10; emphasis added]
State of the Union
CLAIM: Gov. Rick Perry Claimed His State Gives Billions To The Federal Government But "Don't Get Much Of It Back"
Gov. RICK PERRY (R-TX): You talked about us taking stimulus dollars. We send hundreds of billions of dollars to Washington, D.C., and generally don't get much of it back.
FACT: Texas Actually Gets 94 Cents Back From Every Dollar It Sends To DC, More Than 14 Other States
According To The Tax Foundation, Texas Gets $0.94 Back For Each Dollar. VisualEconomics.com created a graphic based on the Tax Foundation's data showing what each state pays to the federal government, and receives back from Washington. Texas receives 94% of what it puts in, and 14 states have worse rates of return:
[VisualEconomics.com, accessed 11/7/10]