Fact Checking The Sunday Shows - May 15, 2011
The Sunday political talk shows were full of conservatives spouting misinformation about everything from energy policy and taxes to the debt and recent economic history. Speaker John Boehner (R-OH) falsely claimed the economy isn't creating jobs, despite 2.1 million new private-sector jobs added over 14 straight months of growth. Sen. Mitch McConnell (R-KY) misled on Social Security, Sen. Jon Kyl (R-AZ) claimed the Bush tax cuts haven't hurt the national debt picture, and Rep. Paul Ryan (R-WI) exaggerated the spending cuts in the House GOP budget, which total a mere $155 billion after you factor in the deep tax cuts the plan offers to the wealthiest. Each of those three claimed that ending tax subsidies for oil companies would increase gas prices, but it won't — and Kyl had to blatantly misrepresent a Congressional Research Service report to support his claim. And in a statement that sums up GOP insincerity on a negotiated debt-reduction agreement, Ryan rewrote the last decade of Republican policy by claiming that "the whole reason we're running into this debt limit so soon is because of the spending spree that has occurred over the last two years."
State of the Union
CLAIM: Rep. Ryan Claimed "The Whole Reason" The Debt Limit Needs To Be Raised Is Spending From "The Last Two Years"
REP. PAUL RYAN: We need to address the drivers of our debt. The whole reason we're running into this debt limit so soon is because of the spending spree that has occurred over the last two years.
FACT: Congress Raised The Debt Limit 7 Times Under President Bush BECAUSE Of "The Drivers Of Our Debt" — Bush's Tax Cuts And Wars
The Bush Tax Cuts Are The Primary Driver Of Federal Budget Deficits Over The Next Decade. Below is a chart from Center on Budget and Policy Priorities showing the deficit impacts of war spending, financial recovery spending, the recession itself, and the Bush tax cuts:
Congress Raised The Debt Ceiling Seven Times While President Bush Was In Office. Businessweek prepared a graphic showing the past 12 increases in the statutory debt limit, seven of which occurred during President George W. Bush's term in office (click to enlarge):
Before Obama Took Office, The FY 2009 Deficit Was Projected At $1.2 Trillion. As reported by the Washington Times: "The Congressional Budget Office announced a projected fiscal 2009 deficit of $1.2 trillion even if Congress doesn't enact any new programs. [...] About the only person who was silent on the deficit projection was Mr. Bush, who took office facing a surplus but who saw spending balloon and the country notch the highest deficits on record." [Washington Times, 1/8/09, emphasis added]
CBPP: Deficit Grew By $3 TRILLION Because Of Policies Passed From 2001 To 2007. According to the Center on Budget and Policy Priorities: "Congressional Budget Office data show that the tax cuts have been the single largest contributor to the reemergence of substantial budget deficits in recent years. Legislation enacted since 2001 added about $3.0 trillion to deficits between 2001 and 2007, with nearly half of this deterioration in the budget due to the tax cuts (about a third was due to increases in security spending, and about a sixth to increases in domestic spending)." [CBPP.org, accessed 1/31/10, parentheses original]
Public And Foreign-Held Debt Skyrocketed While Bush Was In Office. Below are two graphs prepared by the Speaker's office showing the increase of publicly and foreign-held debt during the years Bush was in office:
[U.S. Treasury via DemocraticLeader.gov, 6/11/10]
REP. PAUL RYAN: Look, we offered over $6 trillion in cuts over the next ten years with our budget.
FACT: Ryan's Budget Will Actually Only Cut The Debt By $155 Billion
CBPP: The GOP Budget Only Cuts $4.3 Trillion Compared To Current Policy, Factoring Out The Savings From President Obama's Planned Troop Withdrawals In Afghanistan And Iraq. From the Center on Budget and Policy Priorities:
The chairman claims that his plan generates $5.8 trillion in spending cuts over ten years, relative to the Congressional Budget Office (CBO) baseline. But that number falls by $1.5 trillion - to $4.3 trillion - once one corrects for two things:
§ $1.3 trillion in "savings" from the official CBO baseline that comes merely from the fact that the Ryan plan reflects the costs of current policy in Iraq and Afghanistan. The CBO baseline contains a large anomaly related to the costs of the Iraq and Afghanistan wars. Following the rules governing budget baselines, CBO's baseline mechanically assumes that current levels of U.S. operations - and costs - in Iraq and Afghanistan will continue forever rather than phasing down in accordance with current policy. The CBO baseline figures are thus much higher than the costs of current policy. Ryan himself said earlier this year on National Public Radio - in attacking President Obama's 2012 budget proposal for not doing enough to reduce deficits - that simply showing the costs of current policy in Iraq and Afghanistan produces "phantom savings" from an anomalous baseline, not real deficit reduction.
§ $200 billion in lower interest savings due to an error by Chairman Ryan's staff in calculating interest savings." [CBPP.org, 4/8/11]
$4.3 Trillion In Real Spending Cuts From GOP Budget Are Offset By $4.2 Trillion In Tax Cuts, Leaving $155 Billion In Real Debt Reduction. From the Center on Budget and Policy Priorities:
Even some critics of House Budget Committee Chairman Paul Ryan's budget plan have praised his 'courage' and his willingness to make 'hard choices' to address looming deficits. But, upon closer inspection, Chairman Ryan's widely reported claim that his plan produces $1.6 trillion in deficit reduction proves illusory. In fact, the numbers in his plan show that his budget produces just $155 billion in real deficit reduction over ten years (see graph).
That means that, despite proposing $4.3 trillion in what would be the most severe and wrenching budget cuts in U.S. history - two-thirds of which would come from programs for people of low or moderate incomes - the plan barely reduces deficits at all over the next decade. That's because his budget cuts are offset by $4.2 trillion in tax cuts that would go disproportionately to those at the top. In essence, at least for the next decade, this plan is far less a blueprint for addressing deficits and far more a proposal to redistribute large amounts of resources from those at the bottom to those at the top.
FACT: GOP Budget INCREASES Debt As Share Of GDP Over 10-Year Period
CBO Says That Republican Budget Would Increase Debt Over 10-Year Window. As reported by Talking Points Memo: "In addition to acknowledging that seniors, disabled and elderly people would be hit with much higher out-of-pocket health care costs, the CBO finds that by the end of the 10-year budget window, public debt will actually be higher than it would be if the GOP just did nothing. Under the so-called 'extended baseline scenario' -- a.k.a. projections based on current law -- debt held by the public will grow to 67 percent of GDP by 2022. Under the GOP plan, public debt would reach 70 percent of GDP in the same window. In other words, the spending cuts Republicans would realize in the first 10 years would be outpaced by deficit increasing tax-cuts, which Ryan also proposes. After that, debt projections under the plan improve decade-by-decade relative to current law. That's because 2022 would mark the beginning of the Medicare privatization plan. That's when, CBO finds, 'most elderly people would pay more for their health care than they would pay under the current Medicare system.'" [Talking Points Memo, 4/5/11, emphasis added]
- CBO: We Are Not Confident About Long-Term Budgetary Impact Estimates, But Evaluated Proposal Impact Through 2050. From the Congressional Budget Office's analysis of Rep. Ryan's budget proposal: "CBO is providing projections for the proposal through 2050, which is a longer time period than CBO generally includes in its projections of budget proposals. However, because projections of federal health care spending under current law depend on complex interactions among many factors that are particularly difficult to predict, the difference between future spending under the proposal and that under current law is highly uncertain, as is the difference in overall budgetary effects." [CBO.gov, 4/5/11, emphasis added]
CLAIM: Rep. Ryan Claimed That Democrats Haven't Made "Counter Offers" On Debt Reduction
REP. PAUL RYAN: What we've brought to the table is our budget, which has those spending cuts, those spending reforms. We have yet to see a concrete proposal offered by either the president or the Senate Democrats. So we're the ones who've put out all the specifics and details, we've yet to see counter offers from the other side.
FACT: Congressional Democrats Have Offered THREE Plans For Debt Reduction
The House Voted On Five Budget Resolutions, Three From Democrats, In April. As reported by the Christian Science Monitor:
On Friday, the House voted on five budget plans for fiscal year 2012, each with dramatically different strategies to resolve the nation's fiscal woes. Here are details of those five plans:
- The GOP leadership plan, developed by House Budget Committee chair Paul Ryan (R) of Wisconsin, lowered both individual and corporate tax rates and capped government spending as a percentage of gross domestic product. It also significantly overhauled Medicare and Medicaid, shifting costs to individuals and the states. It passed with no Democrat votes, 235 to 193.
- Democrats on the House budget panel, led by Rep. Chris Van Hollen of Maryland, aimed to bring the budget back toward "primary balance" by fiscal year 2018 by freezing nondefense spending for five years, ending tax breaks to oil and gas industries, and not renewing the Bush-era tax cuts. It failed 166 to 259, with no Republican votes.
- GOP conservatives proposed even deeper cuts in entitlement programs: They'd increase the retirement age for Social Security to 70 and raise the eligibility age for Medicare to 67. It failed 119 to 120, with no Democratic votes. (In a last-minute maneuver, all but 16 Democrats voted "present" - a move that could have allowed the measure to defeat the more moderate Ryan proposal.)
- The Congressional Black Caucus aimed to cut deficits by nearly $3.96 trillion over 10 years, mainly by increasing revenue - ending, specifically, the Bush-era tax cuts on the wealthy. It failed 103 to 303. Seventy-five Democrats voted with all Republicans in opposition.
- The Congressional Progressive Caucus outlined the reduction of deficits by $5.7 trillion over the next 10 years, mostly by increasing taxes by some $4 trillion and cutting defense spending by $2.3 trillion. The measure failed 77 to 347, with 108 Democrats joining all Republicans in opposition. [Christian Science Monitor, 4/18/11, emphasis added]
EPI: Congressional Progressive Caucus's "People's Budget" Ends Federal Deficits By 2021. According to the Economic Policy Institute: "[T]he People's Budget would reduce primary spending by $868.9 billion, increase general revenue by $2.8 trillion, and increase payroll tax receipts by $1.2 trillion over a decade relative to the adjusted CBO baseline. [...] In total, the People's Budget would reduce deficits by $5.6 trillion over 2012-21 relative to the adjusted CBO baseline. The People's Budget is projected to turn from budget deficit to budget surplus in 2021, with a surplus of $30.7 billion ... in that year." [EPI.org, 4/13/11, emphasis added]
- The Economist: Overlooked CPC Resolution Would Balance Budget A Decade Sooner Than Republican Plan. From The Economist:
Well, here's a test case. Mr Miller's column notes that "the Congressional Progressive Caucus plan wins the fiscal responsibility derby thus far; it reaches balance by 2021 largely through assorted tax hikes and defense cuts." Which is pretty interesting. Have you ever heard of the Congressional Progressive Caucus budget plan? Neither had I. The caucus's co-chairs, Raul Grijalva of Arizona and Keith Ellison of Minnesota, released it on April 6th. The budget savings come from defence cuts, including immediately withdrawing from Afghanistan and Iraq, which saves $1.6 trillion over the CBO baseline from 2012-2021. The tax hikes include restoring the estate tax, ending the Bush tax cuts, and adding new tax brackets for the extremely rich, running from 45% on income over a million a year to 49% on income over a billion a year.
Mr Ryan's plan adds (by its own claims) $6 trillion to the national debt over the next decade, but promises to balance the budget by sometime in the 2030s by cutting programmes for the poor and the elderly. The Progressive Caucus's plan would (by its own claims) balance the budget by 2021 by cutting defence spending and raising taxes, mainly on rich people. Mr Ryan has been fulsomely praised for his courage. The Progressive Caucus has not. [The Economist, 4/22/11, emphasis added, parentheses original]
FACT: President Obama Has Offered His Own Plan For Debt Reduction
President Obama Announced Plan To Reduce Debt By $4 Trillion Over 12 Years Compared To Current Forecasts. As reported by the Washington Post: "President Obama entered the debate about the national debt on Wednesday after months on the sidelines, offering a plan to trim borrowing by $4 trillion over the next 12 years by combining deep cuts in military and domestic spending with higher taxes on the wealthy. In a stinging rebuke to Republican budget-cutters, Obama acknowledged that the debt must be tackled faster than he has previously proposed, but he rejected GOP calls to make fundamental changes to Medicare and Medicaid and to scale back his initiative to expand health-care coverage to the uninsured." [Washington Post, 4/13/11]
- President's Plan Includes "Debt Fail-Safe Trigger" To Ensure Debt Reduction At Promised Levels. As reported by the Washington Post: "In fact, the president offered his own alternative Wednesday: a 'debt fail-safe trigger' that would cut spending across the board if lawmakers did not approve policies that would set the debt on a downward path by 2014. The trigger should spare Social Security, Medicare and programs for the poor, Obama said, and should raise taxes by cutting dozens of tax breaks that benefit people and corporations." [Washington Post, 4/13/11]
Click here for much more on Democratic proposals for reducing the debt.
CLAIM: Rep. Ryan Claimed Republican Medicare Plan Will "Save" The Program And Leave It Unchanged For Current Beneficiaries
REP. PAUL RYAN: We have a very important entitlement program, Medicare, that millions of seniors depend on. So what we're saying is, don't change those benefits for people that are in and near retirement, they've already built their lives around these benefits, but we've got to reform this program for the next generation if we're going to save it for the next generation, and that's what we're proposing to do.
FACT: Republican Medicare Plan Would Impose Higher Costs And Promote Rationing Of Health Care For Future Seniors
CBO: Under The GOP 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:
CEPR: Ryan's Budget Would Force Seniors To Spend Much Of Their Income On Health Insurance. 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 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]
CBPP: The GOP 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]
FACT: Republicans' Medicare Plan WOULD Negatively Impact Current Seniors
GOP System Would Allow Insurers To Lure Healthiest Seniors To Private Plans, Leaving Neediest On Medicare With Fewer Doctors And Higher Costs. From the Wonk Room: "In 2022, newly-eligible beneficiries [sic] would have to enroll in a private plan, but existing beneficiaries (those who are over 55 today) would also have the option of leaving traditional Medicare. As Ryan's budget put it, 'While there would be no disruptions in the current Medicare fee-for-service program for those currently enrolled or becoming eligible in the next ten years, all seniors would have the choice to opt into the new Medicare program once it begins in 2022. No senior would be forced to stay in the old program.' That opens up the possibilities of private plans trying to lure away the healthiest beneficiaries (as is currently the case in Medicare Advantage) and of health care providers abandoning traditional Medicare patients for the higher reimbursement rates of private insurers. For chronically ill seniors who are more likely to remain in fee-for-service Medicare this means two things: higher costs (as the healthier beneficiaries exit the risk pool) and fewer doctors." [Wonk Room, 4/15/11, emphasis added]
Centrist Think Tank: Despite Ryan's Claim, "Current Beneficiaries Are Not Protected In The Ryan Budget." According to a report from Third Way by David B. Kendall, Senior Fellow for Health and Fiscal Policy and Ryan McConaghy, Director of the Economic Program:
Despite promises to the contrary, current beneficiaries are not protected in the Ryan budget. Under the Republican proposal, traditional Medicare would quickly become second-class medicine. It would "wither on the vine," as then-House Speaker Newt Gingrich described a similar GOP effort in 1995.
The traditional Medicare plan, which covers three-fourths of today's beneficiaries, relies on its huge size to keep costs down. Doctors and hospitals are not required to participate in it, but they have little choice if they wish to treat any seniors, who are the nation's biggest health care consumers.
Fewer doctors would participate in the traditional Medicare plan if there were an alternative. The traditional plan pays physicians about 20% less than private health insurance plans. Today, that is essentially a discount for the large volume of Medicare patients. Under the Ryan budget, it would become a reason for doctors to leave the traditional plan.
By 2030, only 55% of Medicare beneficiaries would still be eligible for traditional Medicare according CBO. Actual enrollment would be less than half of Medicare beneficiaries because many seniors would continue to enroll in private health care coverage under Medicare Advantage. By 2040, traditional Medicare would have only about 20% of Medicare beneficiaries. [ThirdWay.org, 4/14/11, internal citations removed for clarity]
CLAIM: Sen. McConnell Claimed Social Security Is "Worse Than Anybody Thought" And Said Tax Increases Are Not A Solution
SEN. MITCH MCCONNELL: The president doesn't seem to want to do Social Security without a tax increase, which is clearly not needed, and we just heard from the trustees Friday that both Medicare and Social Security are in serious trouble and it's worse than anybody thought.
FACT: Without Any Changes, Social Security Can Pay Full Benefits Until 2036 — And 77 Percent Of Benefits After That
Social Security Trustees: Trust Fund Sufficient To Pay Full Benefits Until 2036, 77 Percent Of Benefits Thereafter. According to the 2011 annual report of the Social Security Board of Trustees: "Nevertheless, from 2010 through 2022, total trust fund income, including interest income, is more than is necessary to cover costs, so trust fund assets will continue to grow during that time period. Beginning in 2023, trust fund assets will diminish until they become exhausted in 2036. Non-interest income is projected to be sufficient to support expenditures at a level of 77 percent of scheduled benefits after trust fund exhaustion in 2036, and then to decline to 74 percent of scheduled benefits in 2085." [SSA.gov, 5/13/11]
CBPP: Trustees Report On Social Security Does Not Show Sudden, Sharp Deterioration In Program's Fiscal Outlook. According to the Center on Budget and Policy Priorities:
The size of the shortfall over the next 75 years - 0.7 percent of Gross Domestic Product, or 2.22 percent of projected taxable payroll (the total of wages and self-employment income subject to Social Security taxes) - represents somewhat of a deterioration from last year's report. In 2010, the trustees put the 75-year deficit at 1.92 percent of taxable payroll. Of the deterioration - which equals 0.30 percent of taxable payroll - the actuaries ascribe 0.05 percentage points to the change in the 75-year period under examination (from 2010-2084 to 2011-2085), and 0.25 percent to other factors, chiefly slightly lower mortality and immigration. Changes of this magnitude are well within recent bounds - in trustees' reports from 2000 through 2010, the annual change in the projected 75-year deficit ranged from negative 0.30 to positive 0.25 (as a percentage of taxable payroll).
Superficially, today's report returns us to the shortfalls that the trustees projected in the late 1990s. In the reports for 1995 through 1998, the trustees similarly estimated a 75-year gap of about 2.2 percent of payroll. (In fact, the new estimates are somewhat more sanguine that those of the late 1990s. The 1997 report, for example, focused on the period through 2071; today's report goes through 2085. In the meantime, we have moved more than a decade closer to the baby boomers' retirement and the long-term aging of America's population. Also, the 1997 report projected trust fund depletion in 2029.) [CBPP.org, 5/13/11, emphasis added]
FACT: We Only Need To Increase Social Security Revenues By 0.7 Percent Of GDP To Fully Fund Benefits For The Next 75 Years
Social Security Trustees: Total Shortfall Over Next 75 Years Is Equal To 0.7 Percent Of GDP, Just Over 2 Percent Of Projected Taxable Payroll. According to the 2011 annual report of the Social Security Board of Trustees: "Through the end of 2085, the combined funds have a present-value unfunded obligation of $6.5 trillion. This unfunded obligation represents 2.1 percent of taxable payroll and 0.7 percent of GDP during the 75-year valuation period." [SSA.gov, 5/13/11]
- Making Bush Tax Cuts Permanent Would Cost Three Times The Total Shortfall In Social Security Funding Over The Next 75 Years. According to the Center on Budget and Policy Priorities: "The budgetary pressures that the nation will face in the decades ahead also underscore the desirability of allowing President Bush's tax cuts to expire on schedule at the end of 2012. The revenue loss over the next 75 years from making those tax cuts permanent would bethree timesthe entire Social Security shortfall over that period. Indeed, the revenue loss just from extending the tax cuts for people making over $250,000 - the top 2 percent of Americans - would itself be almost as large as the entire Social Security shortfall over the 75-year period. Members of Congress cannot simultaneously claim that the tax cuts are affordable while the Social Security shortfall constitutes a dire fiscal threat." [CBPP.org, 5/13/11, emphasis added]
FACT: By Asking High Earners To Pay Social Security Taxes On More Of Their Income, We Can Close The 75-Year Funding Shortfall For Social Security
Currently, Social Security Payroll Taxes Are Capped So That High Earners Only Pay Payroll Tax On First $107,000 Of Pay. From the National Academy of Social Insurance: "Benefits are financed by mandatory contributions paid by workers and matched by their employers, by income taxes paid on Social Security benefits, and by interest on Social Security reserves. The contribution rate for both workers and employers is 6.2 percent of earnings up to a cap ($106,800 in 2009)." [NASI.org, October 2009]
Current Payroll Tax Cap Is Significantly Lower As A Percentage Of Total Earnings Than Its Traditional Level. From the National Academy of Social Insurance: "In 2009, only earnings up to $106,800 are taxed and counted toward workers' future Social Security benefits. About 6 percent of all workers earn more than the cap. The cap is indexed to keep pace with the growth in average earnings of all workers. In the past, Congress set the level of the cap to cover 90 percent of the aggregate wages of all workers. Today, it covers only about 83 percent of such earnings. The decline occurred because those at the top of the economic ladder (who make more than the cap) have enjoyed more rapid growth in earnings than those who make less than the cap." [NASI.org, October 2009, internal citations removed for clarity, emphasis added]
Removing The Payroll Tax Cap Would Eliminate Funding Shortfall Over 75-Year Period. From the National Academy of Social Insurance:
Option #8a: Eliminate the Cap - Do Not Count the Additional Earnings toward Benefits. If all earned income above $106,800 a year were subject to Social Security contributions, but those earnings did not count toward benefits, Social Security would be solvent throughout the long-range projection period. Making this change in 2010 would be more than enough to eliminate the 75-year deficit. With this change, workers who earn far more than the tax cap would pay considerably more in taxes. For example, a person making $400,000 per year would pay $18,178 per year more and his or her employer would pay a matching amount, for a total increase of $36,356. The worker's maximum benefit would be no higher than under current law. Ever since Social Security began, all wages that are taxed have counted toward benefits. This proposal would break that traditional link.
Option #8b: Eliminate the Cap - Count the Earnings toward Benefits. If all wages above $106,800 in 2009 were taxed and counted toward benefits, the change would almost make Social Security solvent through the long-range period, eliminating about 95 percent of the 75-year shortfall. While high earners and their employers would pay considerably more, these top earners would also receive much higher benefits. [NASI.org, October 2009, emphasis original]
Face the Nation
SPEAKER JOHN BOEHNER: We've got an economy that's not producing jobs.
FACT: The Private Sector Economy Has Added Jobs Every One Of The Last 14 Months, For A Total Of 2.1 Million New Private Sector Jobs Since Last February
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:
SPEAKER JOHN BOEHNER: We're trying to get our economy moving again, and you can't do that by taxing the very small business people that we expect to invest and create jobs.
FACT: A Tiny Fraction Of Actual Small Business Owners Pay Personal Income Tax In The Top Tax Brackets
CBPP: "98.1 Percent Of Small-Business Filers Have Income Too Low To Be Subject To Either Of The Top Two Tax Brackets." According to the report "Big Misconceptions About Small Business And Taxes" by the Center for Budget and Policy Priorities: "First, critics charge that allowing the 2001 tax cut's reduction in the top two marginal income tax rates for individual taxpayers to expire as scheduled would affect a large proportion of small-business owners. In fact, only 1.9 percent of filers with any small-business income are projected to face either of the top two income tax rates in 2009... In other words, 98.1 percent of small-business filers have income too low to be subject to either of the top two tax rates. By contrast, a substantial percentage of filers with small business income are in the lowest tax brackets. According to Tax Policy Center data, 34 percent of filers with small-business income either are in the 10 percent bracket or are not subject to income taxes because their incomes are too low." [CBPP.org, 2/2/09, emphasis original]
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]
- 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]
Republican Definition Of "Small Business" 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]
CLAIM: Rep. Ryan And Sen. McConnell Claimed Democrats' Plan To Eliminate Subsidies For Big Oil Companies Will Raise Gas Prices
REP. PAUL RYAN: What they're talking about is singling out the oil and gas industry and raising their tax rates compared to every other manufacturer, which would simply eliminate this tax benefit that goes to every manufacturer, and therefore raise the cost of producing American oil and gas, and make us more dependent on foreign oil and gas. I don't think that's a good idea. [State of the Union, 5/15/11]
SEN. MITCH MCCONNELL: Senate Democrats, you're right, do want to raise taxes on what they call the big five oil companies, which of course will raise the price of gas at the pump, send jobs overseas, and make us get more oil from Hugo Chavez. [State of the Union, 5/15/11]
CLAIM: Sen. Kyl Flagrantly Misrepresented A CRS Report On Democrats' Proposal To End Oil Subsidies
SEN. JON KYL: What the Democrat legislation does will not reduce gas prices one dime. In fact the Congressional Research Service notes that it will increase the cost of gas at the pump and make us more reliant on foreign sources of oil. [Fox News Sunday, 5/15/11]
FACT: CRS Says Part Of Democratic Proposal Could Encourage Oil Companies To Invest Capital In U.S. Projects Rather Than Overseas
CRS: Ending "Dual Capacity Rules" For Oil Companies Will Not Increase Gas Prices For Consumers And Might Encourage Companies To Invest In U.S. Production Over Foreign Projects. From the Congressional Research Service's May 11, 2011, letter to Sen. Majority Leader Harry Reid: "The oil industry has benefited from the ability to deduct very broadly defined foreign income tax payments from their U.S. tax liability since the 1950s. If the definition of what constituted an actual income tax payment were tightened and foreign governments did not reduce their charges correspondingly, the industries' domestic, as well as total income tax burden would likely increase. However, this provision again is a tax on profit, and in line with the economic theory of taxation, should have no effect on the firms output or pricing decisions, and therefore no effect on the price of gasoline. The incidence of the tax would appear to be on shareholders. The change in the dual capacity tax payer rules might make overseas investment that leads to foreign profits less attractive to the companies than investment in the United States. This could lead the firms to enhance domestic capital spending leading to increased domestic production and reduced oil dependency." [CRS, 5/11/11, emphasis added, internal citations removed for clarity]
FACT: The Congressional Research Service Does Not, In Fact, Think Democrats' Move To End Oil Subsidies Will Raise Pump Prices
CRS: Because "The Price Of Oil Is Determined On World Markets," Proposed Changes To Oil Company Tax Breaks Are Unlikely To Affect Gas Prices. From the Congressional Research Service's May 11, 2011, letter to Sen. Majority Leader Harry Reid: "The price of gasoline is composed of four components. The largest component of the price is crude oil, 67%, followed by federal, state, and local excise and sales taxes on gasoline sales, 13%, refining expenses, 11%, and distribution and marketing expenses, 9%. If the proposed changes in tax policy result in increases in the price of gasoline, it would generally be through an increase in the price of oil. However, the price of oil is determined on world markets and tends not to be sensitive to small cost variations experienced in regional production areas. In the recent market environment, with the price of oil averaging approximately $90 per barrel over the period December 2010 through February 2011, and the current price over $100 per barrel, prices are well in excess of costs and a small increase in taxes would be less likely to reduce oil output, and hence increase petroleum product (gasoline) prices." [CRS, 5/11/11, internal citations removed for clarity]
CRS: Proposed Repeal Of Section 199 Deduction For Oil Companies Won't Affect Pump Prices Or Production Rates. From the Congressional Research Service's May 11, 2011, letter to Sen. Majority Leader Harry Reid: "The Section 199 deduction for the oil industry is a 6% deduction from net income, capped by limitations of payroll size. For the purpose of economic analysis, the repeal of the Section 199 deduction is equivalent to an increase in the tax on corporate profit. It is widely accepted that a proportional change in taxes on profit affects neither the firm's incremental costs or revenues, and therefore does not change its behavior with respect to output. Since output does not change, there is little reason to believe that the price of oil, or gasoline, consumers face will increase. Because Section 199 provides an incentive for domestic production compared to foreign production, some have claimed that the result of repeal would be greater dependence on foreign sourced oil and natural gas. In the short-run it is unlikely that this would occur due to the nature of oil and natural gas production. Once a well is in the producing phase, production tends to be maximized, within the limits of sound oil field management techniques. With current oil prices at, or near, $100 per barrel in the United States, it is unlikely that firms will slow production, or close wells as the result of the loss of the Section 199 deduction." [CRS, 5/11/11, emphasis added, internal citations removed for clarity]
Click here for more experts explaining that ending oil subsidies won't affect pump prices for gasoline.
Fox News Sunday
SEN. JON KYL: Spending is the problem, not revenue. So no, we will not agree to raise tax rates in order to generate revenues to prevent us from making the savings that we need to achieve.
FACT: CBO Estimates That The Bush Tax Cuts Have Added $2.02 Trillion To The Debt Since 2002
CBO Estimates That Shift From Projected Surpluses To Actual Deficits Over 2002-2011 Period Includes $2.02 Trillion In Debt From Bush Tax Cuts, Including 2010 Extension. The Congressional Budget Office estimates that the Bush tax cuts of 2001 ("EGTRRA") and 2003 ("JGTRRA"), and the two-year extension of those tax rates signed by President Obama in December ("Tax Act of 2010"), added $2.02 trillion to the debt between 2002-2011. [CBO, 5/12/11]
Political Correction prepared a chart based on CBO's estimates, showing the debt impact of the Bush tax cuts, the Recovery Act, and all other policies combined over the 2002-2011 window:
FACT: The Bush Tax Cuts Are The Primary Driver Of The Debt Over The Next Decade
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:
CLAIM: Sen. Kyl Claimed That Drilling More Is "The Way To Get [Gas] Prices Down"
SEN. JON KYL: So I think we do need to increase production, that's the way to get prices down.
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, 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, 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." According to Ken Green, resident scholar with the conservative American Enterprise Institute, "producing 100 percent of our oil" in the U.S. still would not significantly affect the price of oil. From 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." [New York Times, 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, 3/31/11, emphasis added]
Meet the Press
CLAIM: Newt Gingrich Claimed That As Speaker Of The House He Brought Unemployment Below Four Percent
FMR. SPEAKER NEWT GINGRICH: I mean, I helped balance the budget for four straight years. We did it by cutting taxes and bringing the unemployment rate down to below four percent.
FACT: No, He Didn't — He Resigned 21 Months Before Unemployment Fell Below Four Percent
PolitiFact: Gingrich Unemployment Claim "False," Unemployment Was Above Four Percent When He Resigned The Speakership. From PolitiFact:
In January 1995, the month Gingrich took the gavel as speaker, the nation's unemployment rate was indeed 5.6 percent. The unemployment rate fell to 4.4 percent by December 1998, the month Gingrich announced he was going to resign as speaker. The rate dropped one-tenth of a percentage point by January 1999, when Gingrich resigned. Each tenth of percentage point at that time equaled about 50,000 unemployed Americans.
The unemployment rate didn't fall below 4 percent until September 2000, which was 21 months later. The lowest the unemployment rate fell during Gingrich's time as speaker was in April 1998, when it was 4.3 percent.
An e-mail to a Gingrich spokesman late Wednesday was not immediately returned.
Gingrich was correct about the unemployment rate when he became House Speaker and correct that it did go down, but he was wrong in saying it went down to 4 percent during his term as speaker. The lowest rate it hit during his tenure as speaker was 4.3 percent. He could have easily looked it up and gotten it right. We rate his claim as False. [PolitiFact.com, 5/11/11]