Fact Checking The Sunday Shows - July 3, 2011
The pre-Fourth of July Sunday shows featured a lot of talk about America's involvement overseas, particularly in Afghanistan and Libya, but the GOP lawmakers found time to squeeze in some tired misinformation about the economy as well as a few new falsehoods. On CNN's State of the Union, Sen. John McCain (R-AZ) claimed that the American people "don't want compromise" on the budget and debt ceiling, but polling shows Americans are amenable to combinations of tax increases and spending cuts. He also minimized the dangers of a default, even though economists and the financial sector warn that even a short default could prove economically catastrophic. On Fox News Sunday, Sen. John Cornyn (R-TX) spent much of his airtime bashing President Obama, claiming that the president ignored his own bipartisan fiscal commission's report in his State of the Union address and that Obama hasn't put forward a debt reduction plan of his own. Both of these are false. In addition, Cornyn blamed "the president and his party" for the unemployment rate even though the Recovery Act has helped slowly begin to turn the unemployment picture around from a place where it was shedding hundreds of thousands of jobs each month.
State Of The Union
SEN. JOHN MCCAIN: I would argue that if we do otherwise — well, you know, the American people, as the president describes it, administered a shellacking. They don't want compromise. They want us to balance the budget. They want us to stop mortgaging our children and our grandchildren's futures. And they don't think they need their taxes raised, and I don't either.
FACT: The American People Support A Combination Of Raising Taxes And Cutting Spending
Polling Shows A Majority Of Americans Want A Deficit Reduction Package That Includes Raising Taxes. According to a June 3-6 Reuters/Ipsos poll, 46 percent of people want to address the deficit through a combination of cutting existing programs and raising taxes. Another 13 percent prefer only raising taxes. Only 26 percent favor a solution that involves only cutting programs. From the poll:
[Reuters/Ipsos Public Affairs Poll, 6/6/11]
PolitiFact: "People Don't Like Taxes, But They Are Often Okay With Increasing Specific Taxes Or Closing Loopholes." According to a PolitiFact article rating a similar claim by Speaker John Boehner (R-OH): "In conclusion, Boehner said that 'the American people don't want us to raise taxes.' In fact, polls indicate that people don't like taxes, but they are often okay with increasing specific taxes or closing loopholes. Additionally, when it's time to make hard decisions about the budget, they favor a balanced approach of spending cuts and tax increases. Finally, they tend to favor tax increases for other people — such as the wealthy or corporations — if not themselves. Overall, we rate his statement Barely True." [PolitiFact, 6/29/11]
PolitiFact: "A Number Of Polls" Show People Want The Government To Raise Taxes On The Wealthy And Corporations. According to PolitiFact:
Still, we found a number of polls that indicate people do want the government to raise taxes. That was most clearly the case when it comes to raising taxes on the wealthy and on corporations.
Several polls ask people if taxes should be increased on people who make more than $250,000. Polls show substantial majorities support the idea. We found majorities of 72 percent, 64 percent, and 59 percent. (Those are from April polls by ABC News/Washington Post, McClatchy-Marist, and USA Today/Gallup, respectively.)
On whether corporations pay enough in taxes, Gallup found that 67 percent said they pay too little. [PolitiFact, 6/29/11]
AEI Senior Fellow: "Generally, Combinations Of Tax Hikes And Spending Cuts Are Most Popular." According to PolitiFact: "We turned to Karlyn Bowman, a senior fellow at the conservative American Enterprise Institute, who studies polling and has conducted a review of polls on taxation. We asked her, why the contradiction? Here's what she had to say: 'Generally, combinations of tax hikes and spending cuts are most popular. It seems fair to most people. Spending cuts are favored in the abstract. Tax hikes are favored as long as they don't affect me. Generally, people don't think anybody should have to pay more than a quarter of their income in total taxes.'" [PolitiFact, 6/29/11]
CLAIM: Sen. McCain Minimized The Dangers Of A "Short-Term Meltdown" From Not Raising The Debt Ceiling
SEN. JOHN MCCAIN: And I think that this catastrophe or short-term meltdown that we're facing is not nearly as bad as the meltdown we're facing unless we get our deficit under control.
FACT: The Consequences Of Not Raising The Debt Ceiling Are Very Serious
"Dire Warnings From Business Leaders" Of A "Market Sell-Off" If Congress Fails To Raise Debt Ceiling. From U.S. News & World Report: "Public efforts by both House Speaker John Boehner and President Obama to convince skeptical new Republican House members to add $2 trillion to the nation's burdensome $14 trillion debt ceiling are being reinforced by dire warnings from business leaders that failing to OK the increase will lead to inflation, an immediate doubling of interest rates and a killer Wall Street crash. 'If they don't increase the debt, there will be a huge impact on the economy,' a Wall Street executive told Whispers on background. 'Interest rates would spike. S&P and Moody's would downgrade U.S. debt, raising the price of borrowing, there would be a market sell-off, it would be a disaster.'" [U.S. News & World Report, 5/10/11, emphasis added]
In Letter To Congress, 62 Business Groups Including National Association Of Manufacturers Said Debt Ceiling Increase "Critical To Ensuring Global Investors' Confidence." As reported by the Wall Street Journal: "Sixty-two business groups, including the American Gas Association, the Telecommunications Industry Association, and the National Association of Manufacturers, urged congressional leaders on Wednesday to raise the federal debt ceiling amid fears that political brinkmanship could lead to another financial crisis. 'Raising the statutory debt limit is critical to ensuring global investors' confidence in the creditworthiness of the United States,' the groups wrote to Speaker of the House John Boehner (R., Ohio), House Minority Leader Nancy Pelosi (D., Calif.), Senate Majority Leader Harry Reid (D., Nev.) and Senate Minority Leader Mitch McConnell (R., Ky.). 'With economic growth slowly picking up we cannot afford to jeopardize that growth with the massive spike in borrowing costs that would result if we defaulted on our obligations. It is critically important that the United States stands fully behind its legal obligations.'" [Wall Street Journal, 5/11/11, emphasis added]
Wall Street: Failure To Raise Debt Ceiling Could Cause 10 Percent Drop In Stock Market — Worse Than Crash In 2008. As reported by U.S. News & World Report:
Among the specifics the sources say they are telling the new members:
-- Inflation could jump, though they aren't giving any percentage growth.
-- Interest rates could double if U.S. debt is downgraded. House loans, for example, that are now below 5 percent, could surge to 9-10 percent, killing any chance of fixing the housing slump or cutting the unemployment rate, now at 9 percent.
-- The stock market could suffer a 10 percent drop, far more significant than the 778 point thrashing Wall Street took when the House rejected the government's $700 billion bank bailout plan in September 2008.
"That market sell-off will look small compared to what we'll see," said a Wall Street executive. [U.S. News & World Report, 5/10/11, emphasis added]
Coming To Brink Of Default By Delaying Debt Ceiling Increase Will Damage Market Confidence In U.S. Debt As Solid Investment. The Washington Post's Ezra Klein explains:
Throughout the financial crisis, America's great advantage was its status as the single safest investment in the world. That makes it easier for us to borrow money to ease a downturn. It makes it easier for our central bank to buy bonds to keep interest rates low. It gives us tools and flexibility that, say, Greece simply doesn't have. But all of that is based on the market's perception that our debt is, indeed, a safe investment, that we will pay it back, that we won't inflate our way out of the fiscal holes we dig, that our political system will make tough decisions when necessary.
Confidence, once lost, is hard to regain. "It's like a cat who jumps on a hot stove," says Bill Gross, co-founder of Pimco. "Burn it once, and it doesn't jump back on there." [...]
Which gets to the essential irony of this whole conversation: By taking the debt ceiling hostage in a bid to address the deficit, Congress could provoke the exact calamity it's seeking to prevent. What we worry about when we worry about the deficit is that the market will lose confidence in our ability to pay back our debts and begin charging more to buy Treasuries. There's no quicker way to undercut the market's confidence in the U.S. government than for it walk up to the abyss of default. [Washington Post, 4/19/11, emphasis added]
Fed Chairman Bernanke: Even Coming Close To Default Could Harm Market Confidence. As reported by Bloomberg: "'Even if the debt is paid, there's the issue of market confidence and how the market would respond to the risk of default or even the default of non-debt obligations,' [Federal Reserve Chairman Ben Bernanke] said. 'The worst outcome would be one in which the financial system would again destabilize,' he said, adding that such an occurrence 'would have extremely dire consequences for the U.S. economy.'" [Bloomberg, 5/12/11]
Treasury Secretary Geithner: Market Confidence That Congress Will Act On Debt Ceiling Well Ahead Of Schedule Is Crucial To The Recovery. As reported by Reuters: "A delay in raising the $14.3 trillion U.S. statutory debt limit could make markets price in risks of a default and undermine economic recovery, Treasury Secretary Timothy Geithner warned lawmakers on Thursday. [...] 'I would caution everybody against taking any risk that Congress does not act to increase the limit in the time frame we need,' Geithner told the Senate Budget Committee. 'We cannot afford to let the markets lose any confidence that ultimately the Congress will act well in advance of any time that we're going to hit the limit, because that would be catastrophic, and cause grave damage to the expansion underway,' he added." [Reuters, 2/17/11, emphasis added]
FACT: Even Coming Close To Default Would Harm Investor Confidence And Economic Recovery
Plans To Avoid Default Without Raising Debt Ceiling Sound Good But Would Undermine Economy. From the Washington Post's Ezra Klein: "In short, [Rep. Michele Bachmann's] plan is that we don't raise the debt ceiling, but we use the revenue still coming in to pay off creditors first and whatever we think most important second. That way, we 'don't violate our credit rating' and 'prioritize our spending.' Makes perfect sense. At least, it makes perfect sense unless you, like me, had spent the previous few days talking to economists, investors and economic policymakers about what could happen if we start playing games with the debt ceiling. Their answers were across-the-board apocalyptic. If the U.S. government is so incapable of solving its political problems that it can't come to an agreement on the debt ceiling, they said, that's basically the end of the United States as the world's reserve currency. We won't be considered safe enough to serve as the investment of last resort. We would lose the most important advantage our economy has in the global financial system - and we'd probably lose it forever. Skyrocketing interest rates would slow our economy and, in real terms, make it even harder to pay back our debt, which would in turn send interest rates going even higher. It's an economic death spiral we associate with third-world countries, not with the United States." [Washington Post, 4/20/11, emphasis added]
Zandi: High Investor Confidence In Long-Term Value Of U.S. Debt Is "Cornerstone" Of Global Economy. As reported by Ezra Klein of the Washington Post: "'The cornerstone of the global financial system is that the United States will make good on its debt payments,' says Mark Zandi, chief economist at Moody's Analytics. 'If we don't, we've just knocked out the cornerstone, and the system will collapse into turmoil.' Throughout the financial crisis, America's great advantage was its status as the single safest investment in the world. That makes it easier for us to borrow money to ease a downturn. It makes it easier for our central bank to buy bonds to keep interest rates low. It gives us tools and flexibility that, say, Greece simply doesn't have. But all of that is based on the market's perception that our debt is, indeed, a safe investment, that we will pay it back, that we won't inflate our way out of the fiscal holes we dig, that our political system will make tough decisions when necessary." [Washington Post, 4/19/11, emphasis added]
Just By Coming Close To Default, Congress Would Rattle Investor Confidence In Loaning To U.S. As reported by Ezra Klein of the Washington Post: "By taking the debt ceiling hostage in a bid to address the deficit, Congress could provoke the exact calamity it's seeking to prevent. What we worry about when we worry about the deficit is that the market will lose confidence in our ability to pay back our debts and begin charging more to buy Treasuries. There's no quicker way to undercut the market's confidence in the U.S. government than for it walk up to the abyss of default. The likeliest disaster here will not be caused by Congress refusing to raise the debt ceiling. And, Geithner says, Congress will raise the debt ceiling. Eventually. But there'll be a lot of partisan posturing between now and then. In 2006, then-Senator Barack Obama lodged a protest vote against an increase in the debt ceiling - a vote he's since called 'a mistake.' Our economy, however, is weaker than it was then, our deficits are more worrying and the markets are more fragile. So the normal congressional bickering could prove especially dangerous." [Washington Post, 4/19/11, emphasis added]
Even Without Default, Delay In Debt Ceiling Hike Could Harm Economic Recovery. As reported by the Fiscal Times: "The government will bump up against the $14.3 trillion annual debt ceiling sometime around mid-May. The Treasury Department has a number of accounting and borrowing strategies that can postpone running out of cash for several additional months. And that has many of the business economists who monitor events in Washington fretting that the fragile economic recovery -estimates for economic growth in the just concluded first quarter are being ratcheted down to as low as 1.5 percent - could be aborted if Republican leaders in Congress and the White House engage in three months of brinkmanship before reaching an accord." [Fiscal Times, 4/19/11, emphasis added]
Bipartisan Policy Center Analyst: Failure To Raise Debt Limit Will Cause Interest Rate Hikes That "Would Cause A Double Dip" Recession. As reported by the Fiscal Times:
A sell-off of government bonds along the lines already pursued by PIMCO, whose founder, Bill Gross, said he exited the U.S. Treasury market earlier this year, would depress bond prices and raise rates, which go up when bond prices go down. "Bond traders are a spooky bunch," said Steve Bell, a budget analyst at the Bipartisan Policy Center who spent years on Capitol Hill as well as 10 years trading bonds for the now defunct Salomon Brothers.
"If they start playing games with the debt ceiling like passing a number of short-term extensions, you'll see people exiting the market despite their desire for safety."
He estimated failure to increase the debt ceiling could raise long-term rates by 1 ½ to 2 percentage points over the next six months. "Housing is flat on its back now," Bell said. "Could you imagine what would happen if small and medium-sized businesses had to pay 2 to 3 percentage points more, or credit card debt or the rate you pay for your car went up. It seeps into every type of economic activity. It would cause a double dip." [Fiscal Times, 4/19/11, emphasis added]
Fox News Sunday
CLAIM: Sen. Cornyn Claimed President Obama Ignored His Debt Commission In The State Of The Union Address
SEN. JOHN CORNYN: Well, let's see his envelope. I haven't seen it. The president's own fiscal commission — bipartisan fiscal commission made what I thought was a sobering but important report back in the last December called "moment of truth." The president ignored it in his State of the Union.
FACT: President Obama Referred Explicitly To The Commission's Report In His State Of The Union Speech
President Obama Spoke About The Conclusions Of The Bipartisan Fiscal Commission In His State Of The Union Address. From President Obama's State of the Union Speech:
Now, the final critical step in winning the future is to make sure we aren't buried under a mountain of debt.
We are living with a legacy of deficit spending that began almost a decade ago. And in the wake of the financial crisis, some of that was necessary to keep credit flowing, save jobs, and put money in people's pockets.
But now that the worst of the recession is over, we have to confront the fact that our government spends more than it takes in. That is not sustainable. Every day, families sacrifice to live within their means. They deserve a government that does the same. [...]
Now, most of the cuts and savings I've proposed only address annual domestic spending, which represents a little more than 12 percent of our budget. To make further progress, we have to stop pretending that cutting this kind of spending alone will be enough. It won't. (Applause.)
The bipartisan fiscal commission I created last year made this crystal clear. I don't agree with all their proposals, but they made important progress. And their conclusion is that the only way to tackle our deficit is to cut excessive spending wherever we find it — in domestic spending, defense spending, health care spending, and spending through tax breaks and loopholes. [President Obama Remarks, 1/25/11, emphasis added]
SEN. JOHN CORNYN: But, this, what we — what I'm concerned about is the president by not seriously putting a proposal forward but rather just criticizing those who have, we are running up against this deadline. And they're going to try to present it as a fait accompli, nobody is going to have time to read it or consider the implications of it and it's going to say you have to pass it or the economy is going down the tubes.
FACT: President Obama Has Introduced A Plan To Cut Debt By $4 Trillion Over $12 Years
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]
CBPP: "The President's Plan Stands In Sharp Contrast" To GOP Budget Proposal. According to Robert Greenstein, founder of the Center on Budget and Policy Priorities:
The President's plan stands in sharp contrast to the budget plan that House Budget Committee Chairman Paul Ryan unveiled, and his committee approved, last week. Unlike the Ryan plan, the President's plan puts all parts of the budget on the table, including defense and revenues. Unlike the Ryan plan, which the Congressional Budget Office (CBO) has found would increase the costs of providing health care to Medicare beneficiaries, the President's plan contains measures to reduce these costs. CBO estimates that Chairman Ryan's Medicare proposals would substantially raise overall costs per beneficiary. Ryan's plan reduces federal Medicare expenditures only because it dramatically shifts more of these costs on to the backs of beneficiaries, who CBO says would see the amount they pay for health care more than double by 2022 (for people turning 65 in 2022 or subsequent years). In short, Ryan's plan doesn't lower health costs; it shifts them. The President's plan, by contrast, seeks to reduce underlying health costs themselves. [CBPP.org, 4/13/11]
SEN. JOHN CORNYN: You know, the president and his party are doing a pretty good job of undermining the economy as it is, with the unemployment at 9.1 percent — much higher than the other parts of the country. People with capital on the sidelines because they don't know whether the taxes are going to get increased, whether regulators are going to overreach, or what the cost of Obamacare are going to be to their business.
FACT: When President Obama Took Office The Economy Was Shedding Hundreds Of Thousands Of Jobs Per Month
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]
- From January 2008 Through July 2009, Economy Lost Nearly 400,000 Private Sector Jobs Per Month On Average. According to Bureau of Labor Statistics data on monthly gains and losses in private sector jobs, the private sector added 4,000 jobs in December 2008. In July 2009, the sixth full month of the Obama presidency, the private sector shed 287,000 jobs. Over that 19-month span, the private sector shed 395,950 jobs per month on average, the data show.
[BLS.gov, accessed 1/25/11]
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: Since President Obama's Policies Took Effect, The Job Market Has Turned Around
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 May 2011, the most recent report available, the data show that total is up to 108,916,000 — a net gain of 1,267,000 jobs in the private sector. [BLS.gov, accessed 6/12/11]
BLS: The Private Sector Added 2.1 Million Jobs From February 2010 To April 2011. 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]
There Have Been 15 Consecutive Months Of Private-Sector Job Growth. Below is a graph prepared by the Office of the Democratic Leader showing monthly private-sector job gains and losses:
[Office of the Democratic Leader, 6/3/11, via Flickr]
CBO: The Recovery Act Created Jobs, Lowered Unemployment, And Boosted GDP. According to the nonpartisan Congressional Budget Office:
CBO estimates that ARRA's policies had the following effects in the third quarter of calendar year 2010:
- They raised real (inflation-adjusted) gross domestic product by between 1.4 percent and 4.1 percent,
- Lowered the unemployment rate by between 0.8 percentage points and 2.0 percentage points,
- Increased the number of people employed by between 1.4 million and 3.6 million, and
- Increased the number of full-time-equivalent (FTE) jobs by 2.0 million to 5.2 million compared with what would have occurred otherwise. (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, November 2010]