The Many Errors Of Fact In Speaker Boehner's Wall Street Speech
In what was billed as a major speech to reassure Wall Street about the ongoing political battle over the debt limit and the proper approach to debt reduction, Speaker John Boehner (R-OH) threw out so many naked falsehoods that it is difficult to enumerate them concisely. Here is a table of contents to help you navigate our comprehensive fact check of the Republican leader's lies.
CLAIM: Speaker Boehner Claimed That "Government Mortgage Companies...Triggered The Whole Meltdown" In Our Economy
BOEHNER: And the government mortgage companies that triggered the whole meltdown went untouched.
FACT: Lax Oversight And Potentially Fraudulent Financial Practices Caused The Housing Bubble And Ensuing Meltdown
The Collapse Of The Housing Bubble Triggered A Banking Crisis That Lead To A Massive Recession. From Slate: "The only near consensus is on the question of what triggered the not-quite-a-depression. In 2007, the housing bubble burst, leading to a high rate of defaults on subprime mortgages. Exposure to bad mortgages doomed Bear Stearns in March 2008, then led to a banking crisis that fall. A global recession became inevitable once the government decided not to rescue Lehman Bros. from default in September 2008. Lehman's was the biggest bankruptcy in history, and it led promptly to a powerful economic contraction. Somewhere around here, agreement ends." [Slate, 1/9/10]
Subprime Mortgage Data Do Not Support Claim That Government Actions Triggered Housing Bubble. Barry Ritholtz, who wrote the book Bailout Nation about the housing bubble and ensuing financial crisis, reports:
Federal Reserve Board data show that:
-More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
-Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
-Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics. [The Big Picture, 12/16/10]
Complex Accounting Tricks By Wall Street Firms Contributed To The Magnitude Of The Recession. From Slate: "A bit farther down on the list are various contributing factors, which didn't fundamentally cause the crisis but either enabled it or made it worse than it otherwise might have been. These include: global savings imbalances, which put upward pressure on U.S. asset prices and downward pressure on interest rates during the bubble years; conflicts of interest and massive misjudgments on the part of credit rating agencies Moody's and Standard and Poor's about the risks of mortgage-backed securities; the lack of transparency about the risks borne by banks, which used off-balance-sheet entities known as SIVs to hide what they were doing; excessive reliance on mathematical models like the VAR and the dread Gaussian copula function, which led to the underpricing of unpredictable forms of risk; a flawed model of executive compensation and implicit too-big-to-fail guarantees that encouraged traders and executives at financial firms to take on excessive risk; and the non-confidence-inspiring quality of former Treasury Secretary Hank Paulson's initial responses to the crisis." [Slate, 1/9/10, emphasis added]
Bipartisan Financial Crisis Inquiry Commission Found The Financial Crisis Was Avoidable, Caused By Recklessness On Wall Street. From the Huffington Post: "In a report released today, the Financial Crisis Inquiry Commission found that 'reckless' Wall Street firms, an abundance of cheap credit and 'weak' federal regulators caused the crisis. 'This financial crisis could have been avoided. Let us be clear,' chairman Phil Angelides said at the Washington press conference marking the official release of the report. 'The record is replete with evidence of failures. None of what happened was an act of God.' Former California treasurer Angelides confirmed that the bipartisan panel appointed by Congress to investigate the financial crisis concluded that several financial industry figures appear to have broken the law and has referred multiple cases to state or federal authorities for potential prosecution. The report also revealed that Goldman Sachs collected $2.9 billion from the American International Group as payout on a speculative trade it placed for the benefit of its own account, receiving the bulk of those funds after AIG received an enormous taxpayer rescue, according to the FCIC." [Huffington Post, 1/27/11]
All Four Republican Commissioners Of The Financial Crisis Inquiry Commission Voted To BAN Words Like "Wall Street" And "Shadow Banking" From The Report On The Financial Crisis. As the Huffington Post reported: "During a private commission meeting last week, all four Republicans voted in favor of banning the phrases 'Wall Street' and 'shadow banking' and the words 'interconnection" and 'deregulation' from the panel's final report, according to a person familiar with the matter and confirmed by Brooksley E. Born, one of the six commissioners who voted against the proposal." [Huffington Post, 12/15/10]
- Terms Republicans Wanted To Ban Refer To Wall Street's Unsupervised, Risky, Interdependent Way Of Managing Housing-Related Financial Instruments Ahead Of Crisis. From theHuffington Post: "The shadow banking system refers to the part of the financial system in which investors and other nonbanks like hedge funds and investment firms provide credit to borrowers, as opposed to more traditional banks. Interconnection refers to the links that bind financial institutions to one another, like derivatives, borrowings, and investments. 'I certainly felt, and I think the majority of the commission felt, that deleting those phrases would impair the commissioners' ability to give a full and fair and understandable report to the American people about the causes of the financial crisis,' [commission member Brooksley] Born said." [Huffington Post, 12/15/10]
Republican Commissioners Voted To Ban The Word "Deregulation" From Financial Crisis Inquiry Commission Findings. As reported by Accounting Today: "The four Republican members decided last week to release their own nine-page version of the report, entitled 'Financial Crisis Primer,' through a think tank called the American Action Forum. In the process, they also have effectively disowned the 'final' version of the report that the Democratic-led commission now plans to release in January. They are concerned that the final report will end up putting the blame on Wall Street for the financial crisis, whereas they believe the blame should be placed instead on government-sponsored housing agencies like Fannie Mae and Freddie Mac, and the affordable housing goals of the Clinton and second Bush administrations. The Republican commission members even voted in private to ban phrases like 'Wall Street,' 'shadow banking,' 'interconnection,' 'deregulation,' 'magic,' and 'alchemy' from the final report." [Accounting Today, 12/21/10, emphasis added]
For more on the disingenuous Republican claim that the FCIC report on the financial crisis is invalid and partisan, READ HERE.
CLAIM: Speaker Boehner Claimed The Recovery Act "Hurt Our Economy And Hampered Private Sector Job Creation"
BOEHNER: The rash of 'stimulus' legislation passed by Congress in recent years has been one of those obstacles. The recent stimulus spending binge hurt our economy and hampered private sector job creation in America. [...] Americans were told the stimulus would create millions of new jobs, and that most of them would be private sector jobs. It didn't happen.
FACT: The Spending Boehner Decries Turned The Economy Around, From Hundreds Of Thousands Of Layoffs Per Month To New Private Sector Jobs For 14 Consecutive Months
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]
BLS: The Private Sector Has Added 2.1 Million Jobs Since February 2010. According to the Bureau of Labor Statistics: "Total nonfarm payroll employment increased by 244,000 in April, and the private sector added 268,000 jobs. Employment rose in a number of service-providing industries, manufacturing, and mining. Since a recent low in February 2010, total payroll employment has grown by 1.8 million. Private sector employment has increased by 2.1 million over the same period." [BLS.gov, 5/6/11]
- Manufacturing Sector Has Added A Quarter-Million Jobs So Far In The Recovery. As reported by the New York Times: "Manufacturing has been one of the surprising pillars of the recovery, adding back 250,000 of the 2.3 million jobs it lost during the recession. In April, it grew by 29,000 jobs, up from 22,000 in March." [New York Times, 5/6/11]
Minority Leader Pelosi's office prepared a chart, based on Bureau of Labor Statistics data, showing monthly private sector job gains and losses since January 2008:
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]
FACT: While The Private Sector Grows, Government Employers Continue To Lay Off Thousands Every Month
Since Summer 2009, The Private Sector Has Added Jobs While The Public Sector Has Shrunk. Political Correction prepared a chart based on Bureau of Labor Statistics data showing cumulative job gains and losses in the public and private sectors since summer 2009 (click to enlarge):
Since July 2009, The Private Sector Has Gained Over 1.2 MILLION Net Jobs. According to Bureau of Labor Statistics data, there were 107,649,000 private sector jobs in July 2009. As of April 2011, the most recent report available, the data show that total is up to 108,862,000 — a net gain of 1,213,000 jobs in the private sector. [BLS.gov, accessed 5/10/11]
Since July 2009, The Public Sector Has Lost 378,000 Net Jobs. According to Bureau of Labor Statistics data, there were 22,544,000 jobs in the government sector in July 2009. As of April 2011, the most recent report available, the data show 22,166,000 government jobs — a net loss of 378,000. [BLS.gov, accessed 4/5/11]
CLAIM: Speaker Boehner Claimed That When The Recovery Act Passed, "Job Creators Were Looking For Certainty"
BOEHNER: Job creators were looking for certainty. You don't get long-term certainty from short-term government programs. The lesson of the stimulus era is that short-term government intervention is no substitute for long-term economic investment, private initiative, and freedom.
FACT: Businesses Blamed Weak Demand, Not Economic Uncertainty, For Weak Hiring
Study By "The Most Right Wing Of The Major Business Groups" Shows Businesses Much More Afraid Of Weak Demand Than Taxes And Regulations. As Ezra Klein of the Washington Post reported:
The National Federation of Independent Businesses -- a small-business trade association that is considered the most right wing of the major business groups -- continually polls its members and releases the results. Here's what they say is their single most important problem:
As you can see, sales -- that is to say, demand for their products -- dominate the chart, while fear of taxes is lower than in the '90s. The concern over sales is understandable. Not only is the economy bad. But as the next chart shows, it keeps underperforming what the businesses assume will happen.
So, if anything, businesses have been too optimistic over the past few years. [Washington Post, 7/22/10]
Companies Anticipate Years Of Debt Reduction Instead Of Increased Spending. According to the Washington Post: "Many Democrats say the economy needs more stimulus. Business lobbyists and their Republican allies say it needs less regulation and lower taxes. But here in the heartland of America, senior executives say neither side's assessment fits. They blame their profound caution on their view that U.S. consumers are destined to disappoint for many years. As a result, they say, the economy is unlikely to see the kind of almost unbroken prosperity of the quarter-century that preceded the financial crisis. Across the industrial parks and office towers of the Chicago region, in a more than a dozen interviews, senior executives said they see Americans for years ahead paying down debts incurred during the now-ended credit boom and adjusting spending to match their often-reduced incomes." [Washington Post, 8/21/10, emphasis added]
- Washington Post: Executives Can't Draw Specific Link Between Government Actions And Hiring Decisions. According to the Washington Post: "Fundamentally, executives objected to Obama's policies on the grounds they would make the United States a less competitive place to operate in the long run. But when [manufacturing CEO Jason] Speer and other executives were pressed on the role that tax and regulatory policies play in hiring, they drew only vague connections. Speer said his decision whether to hire is driven primarily by demand for his products. Orders are coming in strong enough that he is running about 20 hours a week of overtime. So he is weighing whether to hire two or three additional manufacturing workers. None of the executives interviewed linked a specific new government initiative with a specific decision to refrain from hiring." [Washington Post, 8/21/10, emphasis added]
BOEHNER: We've also seen the arrogance of government recently in the skyrocketing gas prices our citizens and businesses are dealing with. There's a clear connection between high gas prices and the weak dollar that some in Washington have quietly welcomed over the past couple of years. It's well known that when you print tons of money, the dollar sinks, and the price of food and energy rises -- significantly. Yet the American people are told there is nothing that can be done about it. This is simply untrue.
FACT: Gas Prices Are Jumping Up Around The World Due To The Widespread Unrest In The Middle East
"Oil Prices, Already Climbing As The World Economy Grew, Soared When Unrest Hit The Mideast And North Africa." As reported by the Kansas City Star: "Oil prices, already climbing as the world economy grew, soared when unrest hit the Mideast and North Africa. [...] The federal Energy Information Administration said Monday that Libyan oil production was down as much as 90 percent. The country contributes about 2 percent of the world's oil supply and little to the United States. But the agency said that the longer Libyan supplies were disrupted, the more it could affect the United States. Countries scrambling for replacement barrels could make for tighter supplies. The fear of more supply disruptions by itself has been enough to cause oil prices to soar, especially because of worry that the unrest could spread to Saudi Arabia. It has most of the world's surplus oil production capacity and provides the United States with 10 percent of its oil. 'We'll have a risk premium for the next six months to a year because of what's going on in the Mideast,' said James Williams, an analyst for WTRG Economics." [Kansas City Star, 3/7/11, emphasis added]
FACT: Gas Prices Were Artificially Low At The End Of 2008 Because Of The Recession, Making Higher Prices An "Inevitable" Component Of Recovery
GOP Economist Holtz-Eakin: "As Economies Recovered, It Was Inevitable That [Gas] Prices Were Going To Rise." In an interview with CNN, Republican economist Douglas Holtz-Eakin said: "Lesson number one is we have oil at $140 a barrel in 2008. And it went down not because we somehow discovered a lot more oil. No, it went down because we went into a massive global recession. As economies recovered, it was inevitable that prices were going to rise. And this was utterly foreseeable." [CNN State of the Union, 3/27/11]
At End Of 2008, Gas Prices Fell To Their Lowest Point Since February 2004. According to data from the Department of Energy, the average price of gas in the U.S. fell from just over $4.00 per gallon in July 2008 to $1.59 per gallon on December 29, 2008. The national average per-gallon price of gas had not been as low as $1.59 since February 2, 2004, the data show. [EIA.DOE.gov, accessed 3/13/11]
Recession Drove Rapid Decline In Gas Prices. As reported by CNNMoney.com in 2008: "If there's one bright spot in a bad economy, it's that gasoline prices have fallen, and they're expected to drop even further. As the global economy falters, demand for oil has dropped. And since the price of oil makes up about half of the cost of a gallon of gas, analysts see more relief ahead at the pump. ... The national average price for a gallon of regular, unleaded gasoline fell 2.4 cents to $3.480 from $3.504, according to a daily survey released Tuesday by AAA. That's down 18% from an all-time high of $4.114 a gallon hit on July 17." [CNNMoney.com, 10/7/08]
CLAIM: Speaker Boehner Implied That Expanded Drilling In The U.S. Would Lower Gas Prices, But That Government Has Energy Resources "Under Lock And Key"
BOEHNER: Washington has also kept most of our nation's vast energy resources under lock and key for decades, over the clear objections of the American people -- the people who own those resources. If we had listened to the people decades ago -- or even a few years ago -- many of these resources would be available to us right now to lower the price of energy.
FACT: More Drilling Would "Not Have A Large Impact On Prices"
Due To "Globally Integrated Nature Of The World Oil Market" Drilling In America Would "Not Have A Large Impact On Prices" Long Term. According to Richard Newell, Administrator of the Energy Information Administration in the U.S. Department of Energy: "Long term, we do not project additional volumes of oil that could flow from greater access to oil resources on Federal lands to have a large impact on prices given the globally integrated nature of the world oil market and the more significant long-term compared to short-term responsiveness of oil demand and supply to price movements. Given the increasing importance of OPEC supply in the global oil supply-demand balance, another key issue is how OPEC production would respond to any increase in non-OPEC supply, potentially offsetting any direct price effect." [EIA.DOE.gov, 3/17/11]
Drilling In ANWR Would See Peak Oil Production Around 2030 But Would Only Lower Prices By "Perhaps About One Percent." According to Richard Newell, Administrator of the Energy Information Administration in the U.S. Department of Energy: "Based on this timetable and the assumption that the largest ANWR fields would be the first to go into production, peak ANWR oil production could occur around 2030 at about 700,000 to 800,000 barrels per day. In this scenario, the greatest impact on crude oil prices could occur 9 around peak ANWR production with oil prices projected to be perhaps about one percent lower as a result." [EIA.DOE.gov, 3/17/11]
EIA Study Concludes That "Gas Prices Might Drop A Whopping 3 Cents A Gallon" If Areas Currently Closed To Drilling Were Opened. According to CNN:
According to a 2009 study from the government's Energy Information Administration, opening up waters that are currently closed to drilling off the East Coast, West Coast and the west coast of Florida would yield an extra 500,000 barrels a day by 2030.
The world currently consumes 89 million barrels a day, and by then would likely be using over 100 million barrels.
After OPEC got done adjusting its production to reflect the increased American output, gas prices might drop a whopping 3 cents a gallon, the study said. [CNN.com, 4/25/11]
Increased Drilling Will Benefit Highest Earners But "Will Have Hardly Any Impact On Gas And Oil Prices." According to CNN:
The problem is this: While increased oil and gas drilling in the United States may create good-paying jobs, reduce reliance on foreign oil and lower the trade deficit, it will have hardly any impact on gas and oil prices.
That's because the amount of extra oil that could be produced from more drilling in this country is tiny compared to what the world consumes.
Plus, any extra oil the country did produce would likely be quickly offset by a cut in OPEC production. [CNN.com, 4/25/11, internal citations removed]
Conservative AEI Scholar: At 100 Percent Production, "We Probably Couldn't Produce Enough To Affect The World Price Of Oil." Ken Green, resident scholar with the conservative American Enterprise Institute, told the New York Times: "'The world price is the world price,' Green said. 'Even if we were producing 100 percent of our oil,' he said, if prices increase because of a shortage in China or India, 'our price would go up to the same thing. We probably couldn't produce enough to affect the world price of oil,' Green added. 'People don't understand that.'" [NYTimes.com, 1/4/11]
- The U.S. "Would Still Feel The Effects Of, Say, A Decision By Hugo Chávez or Vladimir Putin To Stop Selling Any Oil."According to Ben Adler of Newsweek's The Gaggle blog: "In a market economy such as ours, opening an area for drilling does not mean that the U.S. government controls its destination. Shell and Chevron will be perfectly happy to sell their oil to China if Chinese drivers are willing to pay more than Americans. The U.S. could produce exactly as much gasoline as it consumes and it would still feel the effects of, say, a decision by Hugo Chávez or Vladimir Putin to stop selling any oil. If global supply drops precipitously, global prices will rise, and unless we plan on nationalizing the oil industry- a move I doubt either Democrats or Republicans will endorse- the fact that we are drilling for more oil near our shores won't protect us from the price shock." [Newsweek.com, 3/31/11, emphasis added]
FACT: This Administration Hasn't "Banned Production" Of American Fossil Fuel Resources
Onshore Oil Production In The Lower 48 States Has Increased Steadily Throughout The Obama Administration. The U.S. Energy Information Administration prepared a chart showing onshore oil production in the lower 48 U.S. states in light blue:
Natural Gas Production Has Increased Steadily Throughout The Obama Administration. The U.S. Energy Information Administration prepared a chart showing natural gas production in the U.S. over time:
Despite Gulf "Moratorium," Drilling Continued In Shallow Gulf Waters And Deepwater Rigs That Were Already Producing Oil Continued To Do So
AP: Drilling Rigs In Shallow Waters Were "Allowed To Remain In Operation." As reported by the Associated Press: "The moratorium put a halt to the 33 deepwater exploratory rigs in operation in the Gulf in addition to all new deep-sea drilling permits. Platforms that are already producing oil along with rigs in shallow waters are allowed to remain in operation." [Associated Press, 6/10/10]
FactCheck.org: "Moratorium Had No Affect On Wells Already In Production." According to a fact check of the claim that President Obama's drilling policies are to blame for $4 a gallon gas prices by FactCheck.org:
The moratorium had no affect on wells already in production, according to Nicholas Pardi, a spokesman for the Bureau of Ocean Energy Management, Regulation and Enforcement. But it did affect drilling of new wells, and it's important for new wells to start producing oil as the old wells experience a natural decline in production. [FactCheck.org, 3/24/11]
Over 5,000 Wells Continued To Pump Oil And Gas In The Gulf. As reported by McClatchy: "Interior Secretary Ken Salazar said the actions wouldn't hurt the nation's immediate need for oil and natural gas, noting that 591 deepwater wells and 4,515 shallow water wells in the Gulf will continue to pump oil and gas." [McClatchy, 5/28/10, via Pittsburgh Post-Gazette]
EIA: Crude Oil Production In The Gulf Of Mexico Remained Near Record High Levels. According to the U.S. Energy Information Agency, production of crude oil remained near its highest levels in the months following the imposition of a moratorium on new deep-water drilling, averaging approximately 48 million barrels per month. The following EIA chart shows no major drop in production throughout 2010:
[U.S. Energy Information Agency, accessed 5/5/11]
CLAIM: Speaker Boehner Suggested That "Addressing The Drivers Of Our Debt" Through Taxation Would Mean Acting "In Defiance Of The Will Of Our People"
BOEHNER: To increase the debt limit without simultaneously addressing the drivers of our debt -- in defiance of the will of our people -- would be monumentally arrogant and massively irresponsible.[...] And with the exception of tax hikes -- which will destroy jobs -- everything is on the table.
FACT: Bush's Tax Cuts For The Wealthy Are The Primary Driver Of Current Deficits — And "The Will Of The People" Is Higher Taxes On Income Over $250,000
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:
April Quinnipiac Poll: Seven In Ten Registered Voters Support Raising Taxes On Income Over $250,000. From the Quinnipiac University Polling Institute: "Voters back 69 - 28 percent raising taxes on households earning $250,000 or more. They say 60 - 34 percent that Medicare should remain as is, rather than giving seniors money to buy private health insurance beginning in 2022. [...]From April 26 - May 1, Quinnipiac University surveyed 1,408 registered voters with a margin of error of +/- 2.6 percentage points. Live interviewers call land lines and cell phones. " [Quinnipiac.edu, 5/4/11]
April Washington Post/ABC News Poll: 72 Percent Of Americans Want To Reduce The Deficit By Taxing Income Over $250,000. A poll conducted for the Washington Post/ABC News from April 14-17, 2011, found that 72 percent of American adults support "raising taxes on Americans with incomes over 250-thousand dollars a year" as a way "to reduce the national debt." [Washington Post/ABC News, April 2011]
April McClatchy/Marist Poll: 2 Out Of Every 3 American Voters Wants To Increase Taxes On Income Over $250,000 To Reduce The Debt. A poll conducted for McClatchy/Marist from April 10-14 found that 64 percent of registered voters want to "increase taxes on incomes over $250,000" to reduce the national debt. [McClatchy/Marist Poll, April 2011]
BOEHNER: I would note that my colleagues and I are not calling for tax cuts in our budget.
FACT: The Republican Budget Cuts The Top Tax Rate To Levels Not Seen Since The Great Depression
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]
For an explanation of why cutting taxes for the wealthy will not speed the economic recovery, click here.
CLAIM: Speaker Boehner Claimed The Republican Medicare Plan Mirrors The Health Care Members Of Congress Receive
BOEHNER: It's possible to make changes in a way that will ensure future beneficiaries will have access to the same kinds of options as Members of Congress currently have. The budget put forth by our Budget Committee Chairman, Paul Ryan of Wisconsin, accomplishes this.
FACT: While Federal Employees' Health Benefits Increase To Meet Rising Health Care Costs, Republican 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]
FACT: The GOP's Medicare Plan Would Double Medical Costs For Seniors By 2022
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:
FACT: The Republican Plan Would Leave Many Seniors With Over $20,000 In Annual Medical Costs By 2030
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]
For a much more detailed look at the GOP's vision for entitlement reform, READ HERE.