Fact Checking The Sunday Shows - April 17, 2011
On Sunday morning, first-year Tea Party Rep. Renee Ellmers (R-NC) almost managed to upstage her party's budget chairman by wrongly insisting on ABC that the GOP's "Path to Prosperity" budget is not a voucher program, works just like the insurance benefits for members of Congress, and would be sufficient to cover the cost of medical care for seniors. But Rep. Paul Ryan (R-WI) still offered the biggest whopper of the morning, claiming on CBS that the GOP budget doesn't cut taxes for the rich. None of these claims is true. The Republican plan slashes income taxes for the wealthy to Herbert Hoover levels while eliminating the capital gains tax. For the non-rich, the plan would end Medicare as we know it, leaving the typical 65-year-old with over $20,000 in annual medical costs by the year 2030. Meanwhile, freshman Rep. Joe Walsh (R-IL) claimed President Obama hasn't helped grow the economy, which is demonstrably false, and Walsh joined Rep. Allen West (R-FL) and Sen. Mike Lee (R-UT) in calling for a balanced budget amendment to the Constitution that would in fact cripple Congress' ability to control spending and address recessions.
Face the Nation
BOB SCHIEFFER (host): Why do these rich people need another tax cut? I mean they're already rich, they seem to be doing pretty well as it is now, why cut their taxes some more?
REP. PAUL RYAN: First of all, we're not talking about cutting taxes, we're just not agreeing with the president's tax increases. I guess that's the new definition of tax cuts. We're saying keep tax rates where they are right now, and get rid of all those loopholes and deductions which by the way, are mostly enjoyed by wealthy people, so that you can lower tax rates.
FACT: Rep. Ryan's Proposal Would Make Bush Tax Cuts Permanent, Then Cut Taxes For The Wealthy Even Further
Rep. Ryan's Proposal Would Make The Bush Tax Cuts Permanent. In his preliminary analysis, Ezra Klein of the Washington Post wrote that Rep. Ryan's plan "[p]revents the Bush tax cuts from expiring in 2013. So the revenue-neutral tax reform locks in today's rates, which is to say it makes the Bush cuts permanent." [Washington Post, 4/5/11]
Rep. Ryan's Proposal Reduces Top Income Tax Rate From 35 Percent To 25 Percent. According to page six of Rep. Ryan's budget proposal, the plan "[s]implifies the broken tax code, lowering rates and clearing out the burdensome tangle of loopholes that distort economic activity; brings the top rate from 35 to 25 percent to promote growth and job creation." [Rep. Ryan Budget Proposal, 4/5/11, emphasis added]
For more on why cutting taxes for the wealthy will not speed the economic recovery, click here.
FACT: The Republican Budget Would Bring Taxes On The Rich Down To Rates Not Seen Since Herbert Hoover
The GOP Plan Cuts Income, Capital Gains Taxes On The Rich To Levels Not Seen Since Herbert Hoover Was President. From the Center for American Progress:
There's a nice symmetry to the House Republican budgeteers' idea of cutting the top tax rate for the very wealthy to 25 percent. The spending side of their budget would go a long way to giving us Herbert Hoover's economy, so why not have their tax rate on the rich match Hoover's? In fact, we haven't had a top rate that low since Hoover lost his re-election bid to Franklin Roosevelt in 1932.
Of course, for those today with the very highest incomes, most of their income is taxed as capital gains, which for most of our history has gotten a special low rate. The rate now is 15 percent. It was 12.5 percent under Hoover. Rep. Paul Ryan (R-WI), the chief architect of the House plan, thinks it ought to be zero. [Center for American Progress, 4/13/11]
CLAIM: Rep. Ryan Claimed That Republican Medicare Plan "Works Just Like The One That I Have As A Member Of Congress
REP. PAUL RYAN: The ideas we're talking about for reforming Medicare is a system that works just like the one that I have as a member of Congress, that federal employees have.
FACT: While Federal Employees' Health Benefits Increase To Meet Rising Health Care Costs, Ryan's Medicare Scheme Would Not Be Flexible
Value Of Federal Benefits Adjusts According To Health Care Market But Ryan Plan For Medicare Uses Fixed Voucher Amounts. From Wonk Room: "It's the same rhetoric that Democrats used to sell the health care exchanges that are part of the Affordable Care Act, but in Ryan's case the comparison doesn't hold up. Ryan is constraining the rate of growth in Medicare by offering seniors a defined contribution, regardless of the rate of growth in health care costs. The federal government's contribution in the FEHBP program, by contrast, reflects actual increases in premium levels. As the Office of Personnel Management describes it, the FEHBP formula 'is known as the 'Fair Share' formula because it will maintain a consistent level of Government contributions, as a percentage of total program costs, regardless of which health plan enrollees elect.' The difference is that Ryan's proposal provides seniors with a set amount of money that, in order to reach the kind of savings he's advertising, would have to depreciates every successive year - even as health care costs increase." [Wonk Room, 4/5/11, emphasis added]
PolitiFact: There Are More Differences Than Similarities Between Medicare Proposal And Federal Health Care Benefit. According to a PolitiFact analysis of a similar claim from Rep. Mike Pence (R-IN):
Now let's look at how whether proposal looks like what members of Congress can buy.
- How the plan is like what members of Congress get. We contacted Pence's office to ask about how the Ryan proposal is like what members of Congress get, and they pointed us to the fact that Medicare plans from private insurers will be required to comply with a benefits standard set by the U.S. Office of Personnel Management, as do plans that cover members of Congress.
We should also note that seniors would be able to compare different plans and select from different insurance options, as members of Congress do. The government would pay part of premiums, as it does for members of Congress.
- How the plan is not like what members of Congress get. First, the plans would be created specifically for Medicare beneficiaries on newly created Medicare health insurance exchanges. (Exchanges are virtual marketplaces where people can shop for insurance.)
Second, as Van Hollen pointed out, members of Congress are protected somewhat when health insurance companies raise their rates, through a formula he mentioned known as "Fair Share." Generally speaking, the government pays for 75 percent of the average of the health insurance plans it offers. If the overall plans increase in price, the government still pays 75 percent.
Federal support for premiums in Ryan's plan, though, would not keep pace with medical inflation. Premium support instead would be pegged to the consumer price index, which historically lags health care costs.
Our final point on how the plans differ may seem obvious to some, but we feel it's important to mention: Members of Congress receive employer-based insurance. By definition, that means they receive a salary to help pay for their insurance. The base pay for members of Congress is currently $174,000.
Medicare beneficiaries, on the other hand, tend to make a lot less money, because most of them are retired. The median income for Medicare beneficiaries was $20,644 in 2010. And only 5 percent had incomes exceeding $82,695, according to an analysis by the Kaiser Family Foundation. [PolitiFact.com, 4/13/11, emphasis original]
CLAIM: Rep. Ryan Falsely Claimed That "Most Successful Small Businesses" Would Be Taxed At 44.8 Percent Under President's Plan
REP. PAUL RYAN: You have to remember, Bob, most successful small businesses file their taxes as individuals. Most of our jobs come from these small businesses. The president is proposing to raise the top tax rate on these small businesses to 44.8 percent.
FACT: Republicans' Definition Of "Small Businesses" Includes Multi-Billion-Dollar Corporations
Just 12 Percent Of Money Raised By Increasing Top Rates Comes From "Small Businesses With Actual Workers." As reported by Businessweek: "The nonpartisan Congressional Research Service, which analyzes issues for lawmakers, largely agreed with Obama in a Sept. 3 report that considered only taxpayers with employees. Its conclusion: Small businesses with actual workers would pay only about 12 percent of the higher taxes. 'Across-the-board tax cuts for high-income individuals are not efficiently targeted to small businesses,' wrote author Jane G. Gravelle." [Businessweek, 9/23/10; emphasis added]
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]
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]
CAP: "Exceedingly Few Small Businesses" Fall Into Top Tax Brackets. From the Center for American Progress: "Exceedingly few small businesses will be affected if the Bush tax rates for the rich expire, and those that are will be making enough money to be paying in the top two income tax brackets. At the end of the day, just 12 percent of the revenue raised by allowing those tax breaks to expire will be paid by business people with employees, according to the Congressional Research Service." [Center for American Progress, 11/15/10]
Only 3 Percent Of People In Top Brackets Have Any Business Income At All. From the Center for American Progress: "But according to the Joint Committee on Taxation, just 3 percent of people with any business income at all-from an enterprise large or small-face either of the top two income tax brackets, which are the ones in question. Conservatives eventually conceded this point, but pivoted to the literal number of 'small businesses' that they claim will be affected if the tax cuts for the rich expire." [Center for American Progress, 11/15/10]
FactCheck.org: "Only 2 Percent" Of Those Reporting Business Income Face Higher Taxes Under Democratic Proposal. According to FactCheck.org: "[O]nly 27 percent of all upper-income tax filers report business income that accounts for more than half of their wages. It's likely that a small-business owner would make most of his or her income from the small business... In the end, it's unclear exactly what percentage of these top earners are truly small businesses. What is clear, however, is that we're not talking about all that many small businesses in the first place. The vast majority of individuals who report business income or losses are not making upwards of $200,000 a year. In fact, only 2 percent of all those reporting business income in 2009 will earn enough to fall in the top two brackets. As we explained back when Obama's tax plan was attacked on the campaign trail, the overwhelming majority of these mom-and-pop shops we hear about would not see their taxes go up under Obama's proposal." [FactCheck.org, 3/6/09, emphasis added]
REP. RENEE ELLMERS: Medicare is an issue that we absolutely have to deal with. And as you know, you mentioned in the Ryan budget that this issue is going to be addressed. It is not a voucher system. Basically what we will be doing is allowing seniors to be able to make the choices for their health care the same that we in congress are doing. It's the very same basic plan.
FACT: The Republican Budget Proposal DOES Turn Medicare Into A Voucher System
CBO: GOP's "Path To Prosperity" Budget Would Provide "A Typical 65-Year-Old ... $8,000 In 2022" To Buy Health Insurance. According to the Congressional Budget Office's analysis of the GOP "Path to Prosperity": "After assessing the total costs that would be incurred for a typical 65-year-old, CBO estimated the government's share and the beneficiary's share of those costs under the proposal and under CBO's long-term scenarios. The proposal would set the premium support payment for a typical 65-year-old at $8,000 in 2022, approximately equal to government spending on the average 65-year-old beneficiary in Medicare under the extended-baseline scenario in that year." [CBO.gov, 4/5/11]
Cato Institute Senior Fellow: Republican Medicare Plan Is A Voucher System. In a New York Post op-ed about the "Path to Prosperity," Cato Institute senior fellow Michael Tanner wrote: "Those getting close to retirement will also still go into Medicare, just as they would have before. But beginning in 2022, people who are younger than 55 today will begin to transition to a new system. Instead of going into Medicare at age 65, they will receive a voucher from the US government to help them purchase private health insurance. Initially that voucher is expected to be for roughly $15,000 per recipient. Lower income seniors and those with higher health care costs because of illness will receive a bigger subsidy. Seniors can use these vouchers, combined with whatever they wish to spend of their own money, to choose an insurance plan that has a cost and mix of benefits that best meets their needs. Instead of a one size fits all system, seniors will have many more choices than they have today." [Tanner Op-Ed, 4/10/11, emphasis added, via Cato.org]
Creator Of "Premium Support" Payment System On GOP Proposal: "It's Vouchers, Not Premium Support." In an interview with the Washington Post's Ezra Klein, Medicare expert Henry Aaron said:
Me and Bob Reischauer jointly created the idea of 'premium-support' in the mid-1990s. It was a response to what we saw as legitimate criticisms of using market forces to rein in the growth of federal health spending. The worry was the reliable savings would come from shifting costs onto patients. The savings from competition were just something we hoped would show up. So the key element was linking the amount that individuals receive to the growth of health-care spending, not to some other index that would grow less rapidly than health-care costs. The other two elements were aggressive regulation of health-care insurance offerings to prevent insurers from overwhelming people's capacities to sift alternative plans and risk adjustment. [...] In some ways, the Path to Prosperity plan improves on previous version, because the role of exchanges and risk adjustment is nearer to what we had in mind. But it is hands down the worst because it links premiums to consumer prices, which is the slowest growing index. [...] If one does the arithmetic, income grows a few percentage points faster than prices. Health-care spending grows faster than income by a couple of percentage points. So [in the GOP's Path to Prosperity] we're looking at linking to an index that grows less rapidly than health-care costs by three to four percentage points a year. Piled up over 10 years, and that's a huge erosion of coverage. It's vouchers, not premium support." [Washington Post, 4/11/11, emphasis added]
Conservative Think Tank President: I Use The Words 'Voucher' And 'Premium Support' Interchangeably. From Kaiser Health News: "Others counter that premium support and vouchers are the same thing. 'I use the words interchangeably,' said John Goodman, president of the National Center for Policy Analysis, a conservative think tank in Dallas. 'It just means that the government limits the amount of money that it puts up, and people have to add to it if market prices are higher.' It's not surprising that Republicans favor the term premium support, as the word voucher elicits a strong negative reaction from the public. A September poll conducted by Pew Research and National Journal found that 69 percent of people older than 65 opposed vouchers for Medicare. That opposition came from both Democrats and Republicans." [Kaiser Health News, 4/4/11]
CLAIM: Rep. Ellmers Falsely Insisted That Economists Believe Republicans' Medicare Vouchers Are Sufficient To Cover Medical Costs For The Elderly
CHRISTIANE AMANPOUR (host): Most economists whether you're quibbling over numbers do actually say that seniors will not be able to keep up with the rising costs, that they will have to pay out of their pocket. I guess I'm still asking, is that fair?
REP. RENEE ELLMERS: No, actually, that is not correct.
FACT: Actually, The CBO And Many Economists DO Say The Republican Medicare Plan Would Leave Seniors To Pay The Vast Majority Of Their Health Care Costs Out Of Pocket
CBO: By 2030, Medicare Beneficiaries Would Be Paying 68 Percent Of Their Health Care Costs Under GOP Plan — Or A Much Lower Share If Medicare Remains Intact. According to the Congressional Budget Office's analysis of the GOP "Path to Prosperity": "When expressed as a percentage of the benchmark, the beneficiary's share in 2030 would be 68 percent under the [Ryan] proposal, 25 percent under the extended-baseline scenario, and 30 percent under the alternative fiscal scenario. To summarize, a typical beneficiary would spend more for health care under the proposal than under CBO's long-term scenarios for several reasons. First, private plans would cost more than traditional Medicare because of the net effect of differences in payment rates for providers, administrative costs, and utilization of health care services, as described above. Second, the government's contribution would grow more slowly than health care costs, leaving more for beneficiaries to pay. Paying more for health care would be particularly challenging for elderly people with less savings and lower income." [CBO.gov, 4/5/11, emphasis added]
CEPR: GOP's Medicare Vouchers Would Leave "Seniors With A Bill Of $20,700." According to Center for Economic Policy Research co-director Dean Baker:
Representative Ryan would replace the current Medicare program with a voucher for people who turn age 65 in 2022 and later. This voucher would be worth $8,000 in for someone turning age 65 in that year. It would rise in step with with the consumer price index and also as people age. (Health care expenses are higher for people age 75 than age 65.)
According to the CBO analysis the benefit would cover 32 percent of the cost of a health insurance package equivalent to the current Medicare benefit. This means that the beneficiary would pay 68 percent of the cost of this package. Using the CBO assumption of 2.5 percent annual inflation, the voucher would have grown to $9,750 by 2030. This means that a Medicare type plan for someone age 65 would be $30,460 under Representative Ryan's plan, leaving seniors with a bill of $20,700. (This does not count various out of pocket medical expenditures not covered by Medicare.)
According to the Social Security trustees, the benefit for a medium wage earner who first starts collecting benefits at age 65 in 2030 would be $32,200. (This adjusts the benefit projected by the Social Security trustees [$19,652 in 2010 dollars] for the 2.5 percent annual inflation rate assumed by CBO.) For close to 70 percent of seniors, Social Security is more than half of their retirement income. Most seniors will get a benefit that is less than the medium earners benefit described here since their average earnings are less than that of a medium earner and they start collecting Social Security benefits before age 65. [CEPR.org, 4/6/11, emphasis added, all parentheses original, internal citations removed for clarity]
CBO: Under The Ryan Budget, "Most Elderly People Would Pay More For Their Health Care Than They Would Pay Under The Current Medicare System." According to the Congressional Budget Office: "Under the proposal, most elderly people would pay more for their health care than they would pay under the current Medicare system. For a typical 65-year-old with average health spending enrolled in a plan with benefits similar to those currently provided by Medicare, CBO estimated the beneficiary's spending on premiums and out-of-pocket expenditures as a share of a benchmark: what total health care spending would be if a private insurer covered the beneficiary. By 2030, the beneficiary's spending would be 68 percent of that benchmark under the proposal, 25 percent under the extended-baseline scenario, and 30 percent under the alternative fiscal scenario." [CBO.gov, 4/5/11]
In 2022, A Typical 65-Year-Old Would Be Paying Approximately Double Compared To Current Levels. The Center on Budget and Policy Priorities prepared a graphic comparing health care spending for a typical 65-year-old under the current system to the same spending under the Republican budget:
Ryan Budget Would Raise The Retirement Age To 67, Possibly Pricing Some Seniors Out Of The Market Or Raising Health Care Prices For All Americans. According Time magazine's Swampland blog:
Even more vexing, however, is how 65- and 66-year-olds would get coverage. Although Ryan doesn't say so in the Path to Prosperity document, which was released on Tuesday, his plan would raise the Medicare eligibility age from 65 to 67 by 2033. This would save the federal government money, but if these people shop for coverage on the open market, one of two things will happen: insurers will either price them out, or drive up prices for everyone. Again, this depends on what Ryan would propose to do with the health care law's new insurance regulations. [Time¸ 4/6/11]
If Medical Costs Continued To Increase Faster Than Voucher Values, "The Average Retiree Would Be More Than $50,000 In The Hole." According to an op-ed in the Huffington Post by R.J. Eskow, Senior Fellow with The Campaign For America's Future:
Even if the voucher is given full Medicare value in Year One (which we question), things start to get really bad after that. If medical costs continued to increase at 9% each year, which isn't at all impossible, and the voucher's value continued to increase at 5%, here's what would happen 10 years later using my figures:
By 2031, the cost of Medicare-equivalent coverage would be $73,000, and the voucher would be worth $18,000. By my calculation, the average retiree would be more than $50,000 in the hole. [Eskow Op-Ed, 4/6/11 via Huffington Post, emphasis original]
Ryan's Budget "Would Effectively Result In More Rationing On The Basis Of Income." According to the Center on Budget and Policy Priorities:
Many future Medicare beneficiaries with modest incomes, such as elderly widows who must live on $15,000 or $20,000 a year, also would likely be hit by the plan's Medicare provisions; the Medicare voucher (or defined contribution) they would receive would fall farther and farther behind health care costs - and purchase less and less coverage - with each passing year. Aggravating this problem, Ryan has said that his plan calls for repeal of a key measure of the health reform law that is designed to moderate Medicare costs - the Independent Payment Advisory Board. In other words, his plan would scrap mechanisms to slow growth in the costs of health care services that Medicare beneficiaries need, even as it cuts back the portion of those costs that Medicare would cover.
Affluent Medicare beneficiaries surely would respond to shrinking Medicare coverage over time by buying more supplemental coverage. Those who could not afford to do so, however, would get less health care. This is another way that the Ryan health care changes would make ours more of a two-tier health care system and would effectively result in more rationing on the basis of income. [CBPP.org, 4/6/11]
Politico: GOP Budget "Will Control Costs By Requiring Seniors To Ration Themselves." From Politico Pulse: "The Ryan plan to privatize Medicare will control costs by requiring seniors to ration themselves, said Michael Tanner with the Cato Institute. 'Rationing is going to go on within the Medicare system. It's a fact of life' given financial constraints, he said. 'The question's going to be, is that decision going to be made by government and imposed top down under the current system? Ryan wants to shift that responsibility to individuals and from the bottom up.'" [Politico, 4/7/11]
CLAIM: Rep. Walsh Claimed That "Everything This President Has Done The Last Two Years Has Gone Against" Economic Growth
REP. JOE WALSH: Christiane, you raise revenue by growing the economy. And everything this president has done the last two years has gone against that.
FACT: President Obama's Policies — Including Roughly $300 Billion In Tax Relief For Job Creators And Middle-Class Families — Have Turned The Economy Around And Led To 13 Straight Months Of Private-Sector Job Growth
The Recovery Act Included $288 Billion In Tax Relief. According to PolitiFact.com: "Nearly a third of the cost of the stimulus, $288 billion, comes via tax breaks to individuals and businesses. The tax cuts include a refundable credit of up to $400 per individual and $800 for married couples; a temporary increase of the earned income tax credit for disadvantaged families; and an extension of a program that allows businesses to recover the costs of capital expenditures faster than usual. The tax cuts aren't so much spending as money the government won't get -- so it can stay in the economy. Of that $288 billion, the stimulus has resulted in $119 billion worth of tax breaks so far." [PolitiFact.com, 2/17/10]
HIRE Act Provided $8.5 Billion In Tax Credits To Job Creators. According to CNNMoney.com: "Businesses have hired an estimated 4.5 million Americans who have been jobless for at least eight weeks, making these firms eligible for approximately $8.5 billion in tax credits, according to a Treasury report released Monday. The tax credits are part of the $13 billion Hiring Incentives to Restore Employment (HIRE) Act, which Congress passed in March. Under the act, employers who hire workers who have been jobless for at least 60 days are exempt from the 6.2% payroll tax charged per worker -- for the rest year. In addition, companies can claim a tax credit of up to $1,000 for each employee who stays at least a year." [CNNMoney.com, 7/12/10, emphasis added]
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]
The Private Sector Has Added 1.8 Million Jobs Over 13 Consecutive Months Of Job Growth. Minority Leader Pelosi's office prepared a chart based on Bureau of Labor Statistics data for monthly private sector job gains and losses:
CBO: The Recovery Act Created Jobs, Lowered Unemployment, And Boosted GDP. According to the nonpartisan Congressional Budget Office:
On that basis, CBO estimates that ARRA's policies had the following effects in the fourth quarter of calendar year 2010:
- They raised real (inflation-adjusted) gross domestic product (GDP) by between 1.1 percent and 3.5 percent,
- Lowered the unemployment rate by between 0.7 percentage points and 1.9 percentage points,
- Increased the number of people employed by between 1.3 million and 3.5 million, and
- Increased the number of full-time-equivalent jobs by 1.8 million to 5.0 million compared with what would have occurred otherwise, as shown in Table 1. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers). [CBO, February 2011]
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]
March 2011: Private Sector Added 230,000 Jobs. According to the Bureau of Labor Statistics, the economy added 230,000 private sector jobs in March. [BLS.gov, accessed 3/6/11]
As of March 2011, the unemployment rate has fallen 1.3 percentage points from its recession-fueled high in October 2010.
October 2010: Unemployment Rate Peaks At 10.1 Percent. According to the Bureau of Labor Statistics, the unemployment rate in October 2009 was 10.1 percent — the highest single-month rate since the recession began in late 2007. [BLS.gov, accessed 4/4/11]
March 2011: Unemployment Rate Falls To 8.8 Percent. According to Bureau of Labor Statistics data, the unemployment rate fell from 8.9 percent in February 2011 to 8.8 percent in March 2011, the most recent data available. [BLS.gov, accessed 4/4/11]
CLAIM: Reps. Walsh And West And Sen. Lee Each Claimed A Balanced Budget Amendment Would Be A Good Way To Address Fiscal Problems
SEN. MIKE LEE: We need structural reform. Reform like under a balanced budget amendment that will tell us, we are going to balance our budget. [Meet the Press, 4/17/11]
REP. JOE WALSH: I sponsored two weeks ago a balanced budget amendment in the House, something very structural that would make this town do what households do, what many states do. [This Week, 4/17/11]
REP. ALLEN WEST: We need to have a balanced budget amendment. [This Week, 4/17/11]
FACT: A Balanced Budget Amendment Could Worsen Recessions, Make It Harder To Balance The Budget, And Reduce "Congressional Authority" Over Budgetary Matters
A Balanced Budget Amendment Would "Make Economic Recessions Worse" By Forcing Spending Cuts During Downturns. According to Former Reagan domestic policy advisor Bruce Bartlett: "A BBA would force the federal government to make economic recessions worse. Since federal revenues fall and spending rises automatically in economic downturns, it would force spending cuts and tax increases at precisely the point when the economy is reeling, potentially turning a modest downturn into a depression." [Fiscal Times, 8/27/10]
A Balanced Budget Amendment Would Not Allow The United States To Respond To "Shocks." According to Economist Charles L. Schultze:
The combination of market adjustments and appropriate Federal Reserve policy can ensure that the absence of budget deficits, and indeed running a budget surplus of moderate size, will be consistent in the long run with the maintenance of high employment. In the short run, however, even the best run monetary policy cannot be expected to offset perfectly the aggregate demand consequences of substantial demand shocks. In particular, the mean lags of the effects of monetary policy changes on aggregate demand are long, and both the lag profile and the magnitude of those effects are variable and uncertain. Given the inherent difficulties in forecasting the appearance of shocks and in pinning down the time profile and magnitude of responses to monetary policy, the monetary authorities will be neither willing nor able to provide full offsets.
By prohibiting even temporary budget deficits, the constitutional amendment, if enforced, would lead to a situation in which the automatic stabilizing features of the federal budget would be replaced by a procyclical pattern in which any initial falloff in aggregate demand would be reinforced by immediate federal spending cuts (or, less likely, given the structure of the amendment, tax increases). [National Tax Journal, "The Balanced Budget Amendment: Needed? Effective? Efficient?", September 1995]
Supermajority Vote To Increase Taxes Makes It Harder To Balance Budget. In an op-ed in US News and World Report, former Rep. Boehner staffer Scott Galupo wrote: "The amendment's additional requirement of a supermajority vote - two-thirds of both the House and Senate - to increase taxes gives the game away: If you're serious about balancing the budget, why would you make it much harder for Congress to balance the budget?" [US News and World Report, 8/10/10, emphasis added]
- Rep. Walsh's Version Of Balanced Budget Amendment Requires 2/3 Majorities In House And Senate To Raise Taxes. Section 4 of H.J. Res. 56 reads: "Section 4. Any bill that imposes a new tax or increases the statutory rate of any tax or the aggregate amount of revenue may pass only by a two-thirds majority of the duly chosen and sworn Members of each House of Congress by a roll call vote. For the purpose of determining any increase in revenue under this section, there shall be excluded any increase resulting from the lowering of the statutory rate of any tax." [H.J.Res. 56, 4/7/11]
A Balanced Budget Amendment Would Be Self-Defeating, Causing A Loss Of "Congressional Authority." According to the CBO:
The adoption and implementation of a balanced budget rule or an expenditure limitation would result in loss of Congressional authority in two ways. First, these proposals, by their very nature, seek to reduce Congressional flexibility in budget-making. As previously stated, many critics of the present budget process see flexibility, particularly in determining fiscal policy, as the cause of many of America's economic problems. Others see fiscal policy as a central function of government, whatever are the imperfections in implementing it.
Second, a stringent budget rule would, in all probability, shift the responsibility for economic policy from the Congress to the Federal Reserve, the courts, and/or the President, or all three. As discussed in Chapter V, under a balanced budget rule, fiscal policy would largely be removed as a tool of discretionary economic policy, with increasing reliance placed on monetary policy. As such, Congressional authority over economic policy would decline while that of the Federal Reserve would increase. Under these circumstances, the Congress might choose to exert greater control over the Federal Reserve." [CBO, September 1982]
Law Could Put Congressional Budgetary Power In Hands Of Court. According to a CBO report on a Balanced Budget Amendment from 1982: "The courts would gain budgetary power because they might be asked eventually to enforce the prohibition against a possibly reluctant Congress. Several proposals, for example, include provisions stating who can sue whom in what court to enforce the proposed act." [Congressional Budget Office, September 1982]
For much more on the impacts of a balanced budget amendment to the Constitution, read our full fact check.