Rep. Price Continues To Mislead The Public On Spending And Taxation

July 12, 2011 9:03 am ET

Yesterday, Fox Business hosted Rep. Tom Price (R-GA) to discuss the current situation over the debt ceiling. Rep. Price blamed the nation's ails on the growth in government spending, claiming that taxing "too little" has not been a major driver of our current deficit projections and that the only way to balance the budget is by decreasing spending — without any revenue increases. As a solution for the future, Rep. Price advocated for a problematic balanced budget amendment, which would actually make it harder to balance the budget and could be unenforceable. Finally, Rep. Price regurgitated a popular Republican talking point — that the Obama administration promised unemployment would not go over 8 percent — even though that's a serious misrepresentation of the truth.

CLAIM: Rep. Price Claimed That "The Problem That We're In Right Now Is Because Washington Spends Too Much, Not Because It Taxes Too Little"

REP. TOM PRICE: I tell you it's not a joking matter across this land of the American people. They understand that the problem that we're in right now is because Washington spends too much, not because it taxes too little. And so the solution to getting out of the challenges we've got right now is to decrease spending.

FACT: Cutting Taxes Helped Create The Current Deficit And Is A Primary Driver Of Deficits 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:

[CBPP.org, 6/28/10]

Continuing Bush Tax Cuts Doom The Long-Term Fiscal Picture. As the Tax Policy Center's William Gale has explained: "The deficits we face over the next decade reflect a fundamental imbalance between spending and revenue, one that goes beyond entitlements. Based on projections by the CBO, Alan Auerbach of the University of California at Berkeley and myself, among others, even if the economy returns to full employment by 2014 and stays there for the rest of the decade, the continuation of current fiscal policies, including the Bush tax cuts, would lead to a national debt in the range of 90 percent of GDP by 2020. That's already the highest rate since just after World War II -- and Medicare, Medicaid and Social Security aren't expected to hit their steepest spending increases until after 2020." [Washington Post, 8/1/10]

Extending Bush Tax Cuts "Would Increase The Debt By An Amount Roughly Equal To The Size Of The Economy." As the Center for Budget and Policy Priorities points out, tax cuts do not pay for themselves. In fact, if an unpaid-for extension is enacted, by 2050, the national debt "would increase the debt by an amount roughly equal to the size of the economy."

[CBPP, 11/16/10]

Present "Huge Deficits" Partly Due To Bush Tax Cuts. As the Center for Budget and Policy Priorities explains: "If not for the Bush tax cuts, the deficit-financed wars in Iraq and Afghanistan, and the effects of the worst recession since the Great Depression (including the cost of policymakers' actions to combat it), we would not be facing these huge deficits in the near term." [CBPP.org, 5/10/11]

The Center for Budget and Policy Priorities prepared the following graphic showing that the Bush tax cuts and wars in Iraq and Afghanistan will account for nearly half of public debt by 2019:

[CPBB.org, 5/20/11]

FACT: Spending Cuts Must Be Accompanied By Increased Revenue

CNNMoney: Spending Cuts Alone Would Be "Too Severe To Be Palatable." According to CNNMoney:

But practically, can the country live with a regimen of spending cuts alone? It's unlikely, since the changes could end up being too severe to be palatable, fiscal experts say.

Just to keep the country's total debt where it is now -- around 60% of GDP -- without tax increases, lawmakers would need to cut spending today by 35% or about $1.2 trillion, according to the Government Accountability Office.

That's almost as much as what the country spends on defense and other discretionary spending -- i.e., nearly everything Americans expect their federal government to do outside of providing Medicare, Medicaid and Social Security benefits. [...]

Keep in mind, too, that stabilizing public debt at 60% likely won't be enough because it's still well above the country's historical average -- which is under 40%. Translation: Even more cutting would be necessary in subsequent decades. [CNNMoney, 5/12/11]

Former Bush Economic Adviser And Former Reagan Budget Director Criticize The GOP's Averseness To Raising Revenue. According to an op-ed in The Hill by Democratic strategist Mark Mellman:

Democrats and Republicans on the Simpson-Bowles Commission knew that both revenue increases and spending cuts were necessary to deal effectively with our deficit problem. 

N. Gregory Mankiw, the chairman of George Bush's Council of Economic Advisers, knows both tax increases and spending cuts are required. Indeed, Mankiw argues, "The distinction between spending and taxation is often murky and sometimes meaningless." Explaining that giving snipe hunters a tax break for every fake animal they hunt down is no different from setting up a program to pay snipe hunters for each pelt they bring in, Mankiw implicitly criticizes Republicans' unwillingness to end oil-company subsidies and explicitly advocates broadening the tax base and reducing rates to increase revenue.

President Reagan's budget director, David Stockman, knows raising revenue must be an essential component of any fiscal cure. "It is simply unrealistic to say that raising revenue isn't part of the solution. It's a measure of how far off the deep end Republicans have gone with this religious catechism about taxes," says Stockman, one of the biggest budget cutters of all time. [The Hill, 6/28/11]

After Reagan Increased Taxes, GDP Increased And Unemployment Fell. According to Republican Economist and Former Reagan Economic Advisor Bruce Bartlett:

Back in 1982, Ronald Reagan was persuaded that the deficit was such a severe impediment to growth that a tax increase to reduce it would be economically beneficial. Many in his party strenuously objected, citing research by Republican economists. For example, on August 12, 1982, U.S. Chamber of Commerce president Richard Lesher sent to Congress an analysis of the proposed tax increase. Said Lesher:

"If H.R. 4961 is passed in these troublesome economic times, we have no doubt that it will curb the economic recovery everyone wants. It will mean a lower cash flow as more businesses pay more taxes, with a depressing effect on stock prices. It will reduce incentives for the increased savings and investment so badly needed to improve productivity and create more jobs. It will mean higher prices for many products and services. It will increase government costs in caring for those who, because the economy is held down, cannot find employment."

It would be hard to find an economic forecast that was more wrong in every respect. Looking at real gross domestic product, it grew 4.5 percent in 1983 and 7.2 percent in 1984 - an exceptionally strong performance. The stock market had one of its best years ever in 1983 - both the Dow Jones Industrial Average and the S&P 500 Index rose 35 percent. There was no increase in the rate of inflation, which was exactly the same in 1983 and 1984 as it was in 1982. The unemployment rate fell from 10.6 percent in December 1982 to 8.1 percent by December 1983 and 7.1 percent in December 1984. [...]

On August 20, 1993, Laffer told his clients, "Clinton's tax bill will do about as much damage to the U.S. economy as could feasibly be done in the current political environment." He said that interest rates would rise and the stock market would fall.

Once again, it would be hard to find a forecast that was more completely wrong. The unemployment rate fell from 7.1 percent in January 1993 to 5.4 percent by December 1994. Real GDP growth rose from 2.9 percent in 1993 to 4.1 percent in 1994. Stock prices rose and interest rates fell. More importantly, the 1993 tax increase and accompanying spending controls, which were opposed by every Republican in Congress, laid the foundation for the phenomenal growth of the late 1990s that actually produced budget surpluses before Republican tax cuts in the 2000s dissipated them. [Financial Times, 6/24/11, emphasis added]

CLAIM: Rep. Price Claimed America Needs A Balanced Budget Amendment In Order To Live Within Its Means

REP. TOM PRICE: Well there is a lot of demagoguery going on right now. As you know the president has put on all of these corporate loopholes he says that are out there. The fact of the matter is if you took all of the suggestions he's had and you stretch them out for 50 years you'd cover his budget deficit — his own budget deficit — for the month of February and that's not the kind of reform we need. What we need is structural reform like a balanced budget amendment, like a spending cap, so that Washington has to live like the families across this country and the businesses across this country and that is within their means. Those are the kind of fundamental reforms we are talking about.

FACT: A Balanced Budget Amendment Would Make It Harder To Balance The Budget

House Version Of Balanced Budget Amendment Requires Two-Thirds Majorities In House And Senate To Raise Taxes. Section 4 of H.J.Res. 2 reads:

Section 4. No bill to increase Federal taxes shall become law unless approved by two-thirds of the duly chosen and sworn Members of each House of Congress by a rollcall vote. [H.J. Res. 2, 1/5/11]

In 1995, A Balanced Budget Proposal Was Introduced With A Similar Requirement. Section 2 of H.J. Res. 1 reads:

SECTION 2. No bill to increase tax revenue shall become law unless approved by a three-fifths majority of the whole number of each House of Congress. [H.J.Res. 1, 1/18/95]

Several States Have Enacted Supermajority Requirements For Tax Increases. As the Cato Institute explained in a 1996 report: "Requiring a three-fifths or two-thirds majority in both the House and the Senate to pass a tax increase would allow Congress to pass tax hikes in cases of national emergency but would make it very difficult for Uncle Sam to continue the annual ritual of peacetime tax hikes. Several states, including Arizona, California, and Oklahoma, have enacted such measures; they have stopped tax increases dead in their tracks. As one Arizona taxpayer advocate of the supermajority requirement recently told me, 'Now the legislature doesn't even bother to propose new taxes.'" [Cato Institute, July-August 1996]

Arizona, California, and Oklahoma Are Facing Huge Budget Crises

Arizona: "At the start of this fiscal year, on July 1, 2010, Arizona was looking at a deficit of about $3.4 billion. The cyclical deficit was around $1.2 billion and the structural deficit was $2.1 billion. As a percentage of the budget, Arizona has a 33 percent deficit with 12 percent of that cyclical and 21 percent of it structural." [Inside Tuscon Business, 1/21/11, emphasis added]

California: "California's nonpartisan legislative analyst says the state's budget deficit has grown to $25.4 billion and is now more than a fifth of the general fund." [Huffington Post, 11/10/10, emphasis added]

Oklahoma: "Only a few months removed from being declared 'recession-proof' by the national press, Oklahoma faces the largest state budget deficit in the nation, according to a report by the National Conference of State Legislatures....Through the first five months of the current fiscal year, Oklahoma's general revenue fund receipts are 28.5 percent below the same period a year ago and 24.3 percent below projections - a shortfall of $577.5 million." [Tulsa World, 12/20/09, emphasis added]

Supermajority Vote To Increase Taxes Makes It Harder To Balance Budget. In an op-ed in US News and World Report, former Rep. Boehner staffer Scott Galupo wrote: "The amendment's additional requirement of a supermajority vote - two-thirds of both the House and Senate - to increase taxes gives the game away: If you're serious about balancing the budget, why would you make it much harder for Congress to balance the budget?" [US News and World Report, 8/10/10, emphasis added]

  • Without Higher Taxes, "We Would Have To Eliminate Every Discretionary Spending Program" To Balance The Budget. According to an op-ed by Bruce Bartlett in the Fiscal Times: "It's doubtful that BBA supporters really understand the composition of federal spending. In fiscal year 2009, we would have had to abolish every discretionary spending program, including national defense, to balance the budget and that still wouldn't have been enough without higher revenues. We would have had to cut more than $300 billion out of Medicare and Social Security as well." [Fiscal Times, 8/27/10, emphasis added]

FACT: The Balanced Budget Amendment Is "Effectively Unenforceable"

Former Reagan Adviser: The Balanced Budget Amendment Is "Effectively Unenforceable." According to Bruce Bartlett, a former domestic policy adviser to President Reagan:

There is no explanation for how a balanced budget amendment would be enforced. Perhaps Republicans just assume that public opinion will be sufficient. But the reality is that for such an amendment to be operational and not just a meaningless expression of intent, there has to be a point in the budgetary process when the federal courts can enjoin spending or force tax increases. This is obviously a very bad idea in principle, but it's also impractical. As a legal matter, we would have no way of knowing that the budget was in fact unbalanced until the fiscal year had ended. Even a federal court can't make people give back federal funds that have already been paid out for interest on the debt, Social Security and Medicare benefits, wages and salaries for government workers, payments for goods and services, etc. Thus a balanced budget amendment of the sort Republicans propose is effectively unenforceable. [Fiscal Times, 8/27/10, emphasis added]

Former Reagan Adviser: Amendment Could Keep United States In "Perpetual State of War": According to Bruce Bartlett, a former domestic policy adviser to President Reagan: "I can easily foresee the U.S. in a perpetual state of war to avoid the necessity of balancing the budget. This being the case, Republicans should ask themselves if they really want the Constitution of the United States to be treated in such a frivolous manner. If we pass an amendment that we know in advance is unenforceable, doesn't that debase the Constitution itself?" [Fiscal Times, 8/27/10]

There Are Numerous Ways To Circumvent A Balanced Budget Amendment. According to a CBO report on a balanced budget amendment from 1982: "Assuming that the prohibitions were effective in preventing deficits and checking expenditure growth, those desiring new or enlarged programs could resort to mechanisms outside the unified budget. Four such routes are regulation, government-sponsored corporations, off-budget agencies, and guaranteed loans." [CBO, September 1982]

A Balanced Budget Amendment Would Be Self-Defeating, Causing A Loss Of "Congressional Authority." According to the Congressional Budget Office:

The adoption and implementation of a balanced budget rule or an expenditure limitation would result in loss of Congressional authority in two ways. First, these proposals, by their very nature, seek to reduce Congressional flexibility in budget-making. As previously stated, many critics of the present budget process see flexibility, particularly in determining fiscal policy, as the cause of many of America's economic problems. Others see fiscal policy as a central function of government, whatever are the imperfections in implementing it.

Second, a stringent budget rule would, in all probability, shift the responsibility for economic policy from the Congress to the Federal Reserve, the courts, and/or the President, or all three. As discussed in Chapter V, under a balanced budget rule, fiscal policy would largely be removed as a tool of discretionary economic policy, with increasing reliance placed on monetary policy. As such, Congressional authority over economic policy would decline while that of the Federal Reserve would increase. Under these circumstances, the Congress might choose to exert greater control over the Federal Reserve." [CBO, September 1982]

Congress Could "Fudge" The Numbers In Order To Have A Higher Budget. According to economist Charles L. Schultze: "To the objection that Congress could fudge the 'high employment' budget estimates, I ask: Why swallow a camel and strain at a gnat? To operate under this amendment, Congress must make many estimates and provide a myriad of interpretations--all of which could be fudged." [National Tax Journal, "The Balanced Budget Amendment: Needed? Effective? Efficient?" September 1995]

For more on why a balanced budget amendment would hurt our country read our full fact check HERE.

CLAIM: Rep. Price Suggested The Obama Administration Promised Unemployment Wouldn't Go Above 8 Percent If The Stimulus Passed

REP. TOM PRICE: They were opposed — my constituents and I were opposed to the crazy stimulus bill that was passed. Remember that we were told that if we passed that as a country we wouldn't see unemployment rise above 8 percent. In fact, we are now 29 months into unemployment above 8 percent and job creation out there that is really paltry. So we know how to create jobs, it's freeing up the job creators, it's to get government out of the way not in the way, and that's where the government is right now.

FACT: Those Blaming Obama For 8 Percent Prediction Are Taking A 2009 Report Out Of Context

Washington Post: "Not An Official Government Assessment, Nor Even An Analysis Of An Actual Plan That Had Passed Congress." From a Washington Post fact check of a similar claim by Tim Pawlenty:

Pawlenty is referring to a projection issued on Jan. 9, 2009 - before Obama even took the oath of office - by two aides: Christina Romer, the nominee to head the Council of Economic Advisers, and Jared Bernstein, an incoming economic adviser to Vice President-elect Biden.

The 14-page report thus was not an official government assessment, nor even an analysis of an actual plan that had passed Congress. Instead, it was an attempt to assess the impact of a possible $775 billion stimulus package and what difference it would make compared to doing nothing. The president-elect had articulated a goal of passing a plan that would "save or create 3 million jobs by the end of 2010."

Page 5 of the report included a chart that showed that unemployment would peak at 8 percent in 2009, compared to 9 percent in 2010 if nothing was done. But the report also contained numerous caveats and warnings because, after all, it was merely a projection. At the time, other economists had similar forecasts - Romer and Bernstein were in the mid-range - but the economy turned out to be in deeper trouble than most people thought. [Washington Post, 5/26/11]

Report Included "Heavy Disclaimers" About Unemployment Projections. According to PolitiFact:

But what we saw from the administration in January 2009 was a projection, not a promise. And it was a projection that came with heavy disclaimers.

"It should be understood that all of the estimates presented in this memo are subject to significant margins of error," the report states. "There is the more fundamental uncertainty that comes with any estimate of the effects of a program. Our estimates of economic relationships and rules of thumb are derived from historical experience and so will not apply exactly in any given episode. Furthermore, the uncertainty is surely higher than normal now because the current recession is unusual both in its fundamental causes and its severity."

There's also a footnote that goes with the chart that states: "Forecasts of the unemployment rate without the recovery plan vary substantially. Some private forecasters anticipate unemployment rates as high as 11% in the absence of action." [PolitiFact.com, 2/28/11]

Higher Unemployment Reflects Economic Conditions That Were Worse Than Were Expected — Not A Failure Of The Stimulus. From a Washington Post fact check of a similar claim by Tim Pawlenty:

Romer, when she left the White House last year, said that the estimate of the impact of the stimulus bill was accurate but the 8-percent "prediction was so far off" because economic conditions were so much worse. "We, like virtually every other forecaster, failed to anticipate just how violent the recession would be in the absence of policy, and the degree to which the usual relationship between GDP [gross domestic product] and unemployment would break down," she said.

Economic projections by their nature are uncertain. It's absurd to claim that this is a presidential "promise," especially when the projection was not even about the stimulus bill that ultimately passed Congress. [Washington Post, 5/26/11]

FactCheck.org: Original Prediction Was "In Line With What Private Economists Were Forecasting." According to FactCheck.org:

Back in July of last year we wrote, "the original projections from President Obama's economic advisers on what would happen with and without the stimulus plan are still off - and significantly so." But nobody "promised" that unemployment would remain below 8 percent.

As we also wrote in June of last year, the White House explanation was simple: "They say President George Bush left them a worse mess than they realized" when Obama's advisers came up with their predictions. And that's true. The original chart - produced Jan. 9, 2009 - was based on economic projections that were in line with what private economists were forecasting. Those forecasts were being revised for the worse even before any stimulus money was spent. [FactCheck.org, 9/24/10]

PolitiFact: "There Is An Inherent Uncertainty In Economic Forecasting." According to PolitiFact: "But there is an inherent uncertainty in economic forecasting. And how can you ever prove that if the unemployment rate got to X percent, it would or would not have gotten a point or two higher if not for the stimulus? The implication of Allen's comment is that a rising unemployment rate in 2009 proves the stimulus didn't work. Many economists don't agree -- and argue that without the stimulus, unemployment would have been worse -- but it's difficult to empirically prove one way or the other. [PolitiFact, 2/28/11]

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