Fact Checking The Sunday Shows - October 23, 2011

October 24, 2011 9:40 am ET

This week's Sunday political talk shows focused primarily on national security, with the shows' Republican guests universally condemning the administration's announcement late last week that the remaining American troops would withdraw from Iraq by the end of 2011. In the process of trashing President Obama's record on foreign policy on Fox News Sunday, Sen. Lindsey Graham (R-SC) found time to suggest that trying terrorist suspects in civilian courts was unprecedented and dangerous, even though the Bush administration successfully prosecuted a number of prominent terrorists in federal courts, which tend to hand down stricter sentences than military commissions. Later on the same show, Rep. Michele Bachmann (R-MN) misrepresented President Ronald Reagan's legacy when she explained that her economic policy proposal "takes a page out of Ronald Reagan's blueprint," which she claimed created an "economic miracle" in the 1980s. On State of the Union, Sen. Mitch McConnell (R-KY) focused on economic falsehoods, attacking proposals to tax income over $1 million by inflating the number of small businesses affected and suggesting falsely that the American people don't support such a plan. He continued misinforming the audience, suggesting their biggest concern is over-reguation despite strong evidence that lack of demand is a much more pressing issue.

Fox News Sunday

CLAIM: Sen. Graham Claimed It's Unprecedented To Try Terror Suspects In Federal Court

SEN. LINDSEY GRAHAM: We no longer allow the CIA to interrogate terror suspects. That's a huge mistake. And we're starting to try to criminalize the war by putting terrorists in federal court, unlike any other war we've ever been involved in.

FACT: Many Terrorists Have Been Successfully Tried In Federal Court

Federal Prosecution Of Terrorists Has Been "A Powerful Tool In Many Hundreds Of Cases." From a report by New York University Law School's Center on Law and Security:

The trend lines demonstrate convincingly that federal courts are capable of trying alleged terrorists and securing high rates of conviction. While we can only assess the cases that have been brought, federal prosecution has demonstrably become a powerful tool in many hundreds of cases, not only for incapacitating terrorists but also for intelligence gathering. Much of the government's knowledge of terrorist groups has come from testimony and evidence produced in grand jury investigations, including information provided by cooperators, and in the resulting trials.

Going forward, the government will continue to prosecute alleged terrorists in federal courts. Among these will be some of the Guantanamo detainees. While these cases will no doubt bring new complexities into the discussion, the overwhelming evidence suggests that the structures and procedures, as well as the substantive precedents, provide a strong and effective system of justice for alleged crimes of terrorism. [Center on Law and Security, Terrorist Trial Report Card: September 11, 2001-September 11, 2009, January 2010]

Conviction Rate On Terror-Related Charges Compares Favorably To Other Serious Charges. From a report by New York University Law School's Center on Law and Security: "Neither  Miranda  requirements nor the challenges of preserving classified information have proven to be insurmountable obstacles in terrorism cases. The rate of conviction, nearly nine in 10, compares favorably to those involving other serious charges." [Center on Law and Security, Terrorist Trial Report Card: September 11, 2001-September 11, 2009, January 2010]

President Bush Bragged About Trying Hundreds Of Terrorists In Civilian Courts. From FoxNews.com: "[I]n September 2003, on the eve of the second anniversary of the 9/11 attacks, President George W. Bush told a crowd at the FBI Academy in Virginia about his administration's 'solid results' against terrorism, including 'more than 260 suspected terrorists [who] have been charged in the United States courts, [and] more than 140 [who] have already been convicted.'" [FoxNews.com, 2/8/10]

Bush Justice Department Touted Hundreds Of Successful Terror-Related Trials In A Funding Request. From FoxNews.com: "In fact, as part of a funding request submitted in 2008, the Bush Justice Department touted its 'significant strides in the global war on terror,' noting that the department had already secured '319 convictions or guilty pleas in terrorism or terrorism-related cases' since the 9/11 attacks. Two years before that, in September 2006, the Justice Department, then under the leadership of Attorney General Alberto Gonzales, issued a 'Terror Fact Sheet' stating that '288 defendants have been convicted or have pleaded guilty in terrorism or terrorism-related cases' since the 9/11 attacks.'" [FoxNews.com, 2/8/10]

A Civilian Court Sentenced 9/11 Terrorist Zacarias Moussaoui To Life In Prison. From the New York Times: "A federal court jury spared the life of Zacarias Moussaoui today, voting to send him to prison for the rest of his days rather than condemn him to death for the carnage of Sept. 11, 2001." [New York Times, 5/3/06]

Shoe Bomber Richard Reid Was Sentenced To Life In Prison By A Civilian Court. From Talking Points Memo: "Remember, the AbdulMutallab case is virtually identical to the Richard Reid 'Shoe Bomber' case from December 2001 - to an uncanny degree. Same explosive, (PETN), same MO (blowing up an airliner bound for the US), same failed attempt. It's really about as close to identical cases and you get. And, of course, Reid was tried in civilian courts and is now serving a life sentence. Seemed to work fine in his case. And unless I'm misremembering, I don't remember anybody criticizing this approach at the time." [Talking Points Memo, 12/29/09]

Terrorists Who Bombed American Embassies In Africa Were Convicted In Federal Court. From the New York Times: "The four terrorists convicted of conspiring with Osama bin Laden in the 1998 bombings of two American Embassies in Africa have been moved to the most secure federal prison in the United States, the so-called Super Max in Florence, Colo., officials said. [...] The four defendants in the embassy bombings conspiracy were sentenced to life in prison with no chance of release. Two of the men could have faced execution, but received life sentences after the jury deadlocked on the death penalty." [New York Times, 10/23/11]

FACT: Civilian Trials Have Produced Longer Sentences For Terrorists Than Military Tribunals

Colin Powell: Of Three People Tried In Military Court In Eight Years, Two "Served Relatively Short Sentences And Are Free" And "One Guy Is In Jail." From the February 21, 2010, edition of CBS' Face the Nation:

POWELL: The issue about sending people to military commissions, we're not using military commissions like we should. Any time you lock somebody up or you catch a terrorist, let's give them the military commission. In eight years, the military commissions have put three people on trial. Two of them served relatively short sentences and are free. One guy is in jail.

Meanwhile the federal courts, our Article III regular legal court system has put dozens of terrorists in jail. And they're fully capable of doing it. So the suggestion that somehow a military commission is the way to go isn't born out by the history of the military commission.

I think a lot of people think just give them to the military and the military will hammer them. Well, guess what? Officers in the military are obliged to follow the Constitution. Military lawyers are obliged under their oath to give the best possible defense to the defendant no more whether he's a terrorist or not. And so you didn't get out of the military commissions what a lot of people thought at the beginning you would get and a lot of us did not think it was a good idea in the beginning. [Face the Nation, 2/21/10, accessed via Nexis, emphasis added]

Chief Military Prosecutor From Guantánamo Bay Tribunals: Even If He Receives Minimum Sentence, Terrorist Convicted In Civilian Court Will Serve Longer Than 80 Percent Of Those Convicted By Military Tribunals. In a New York Times editorial applying his experience as "chief prosecutor for the military commissions at Guantánamo Bay, Cuba, from 2005 to 2007" to the verdict in the Ahmed Ghailani trial, Air Force Cl. Morris Davis (Ret.) wrote: "In any case, Mr. Ghailani now faces a sentence of 20 years to life. Even if he gets the minimum, his sentence will be greater than those of four of the five detainees so far convicted in military commissions. Only one defendant, Ali Hamza al-Bahlul, has been sentenced to life, and this was after he boycotted his tribunal and presented no defense. Of the four detainees who participated in their military commissions, Omar Khadr, a Canadian citizen who was 15 when arrested, is serving the longest sentence after pleading guilty to murder. Yet he will serve no more than eight years behind bars, less than half of Mr. Ghailani's minimum incarceration. Salim Hamdan, Osama bin Laden's former driver, was sentenced to five and half years in 2008 but given credit for time served; five months later he was free. There is no reason to assume that a military commission sentence will be more severe than one from a federal court." [New York Times op-ed, 11/18/10, emphasis added]

CAP: "Criminal Courts Hand Out Tougher Sentences Than Military Commissions." According to the Center for American Progress:

The facts are clear: Criminal courts are a far tougher and more reliable forum for prosecuting terrorists than military commissions. [...]

The sample size of military commissions' sentences is very small, but there are some analogous cases in the criminal justice system to compare the length of sentences in the two forums. The allegations against David Hicks in a military trial were quite similar to those leveled against John Walker Lindh-the so-called American Taliban-in a criminal court, while comparable charges to the material support for terrorism conviction for Salim Hadman can also be found in criminal courts.

Hicks pleaded guilty to the charge of material support for terrorism with the underlying allegations that he trained at an Al Qaeda camp in Afghanistan and that he was an armed participant in numerous engagements with American and Northern Alliance forces. Lindh pleaded guilty to serving in the Taliban army and carrying weapons. Hicks received a nine-month sentence while Lindh got 20 years. Even if all of the time Hicks served prior to his plea bargain is counted, his total time in custody was only six years, less than one-third of the sentence Lindh received.

Hamdan was convicted of providing material support for terrorism for being Osama bin Laden's chauffer. In 2006, Ali Asad Chandia was convicted in a criminal court of material support for terrorism for driving a member of Pakistani extremist group Lashkar-e-Taibi from Washington National Airport and helping him ship packages containing paintball equipment back to Pakistan. Hamdan received a five-month sentence while Chandia got 15 years. Even if all of the time Hamdan served prior to his conviction in a military commission is counted, his total time in custody would be only eight years.

At most, Osama bin Laden's driver got a little more than half the sentence from a military commission that a criminal court doled out to someone for driving a low-level Pakistani extremist. [Center for American Progress, Criminal Courts Are Tougher on Terrorists than Military Detention1/20/10, emphasis added] 

CLAIM: Rep. Bachmann Credited Reagan Tax Policy With 1980s "Economic Miracle"

REP. MICHELE BACHMANN: Well, my plan is found at MicheleBachmann.com. It's called Real Jobs Right Now. I gave a major economic speech this week in San Francisco, at the Commonwealth Club. And my plan takes a page out of Ronald Reagan's blueprint. It's the economic miracle that was wrought in the 1980s.

When you flatten taxes and simplify taxes, that creates growth. I am a pro-growther. And as a former tax lawyer, what I want to do is abolish the United States tax code and have very flat tax rates that are very simple, that are the same for all Americans and for businesses across the United States, too.

FACT: Reagan Tax Policy Had Minimal Effect On 1980s Economy

Federal Reserve Policy Had More Dramatic Effects On 1980s Recession And Recovery Than Reagan Did. From Mother Jones: "It's probably hopeless to take on the Reagan economic myth at this late date, but honestly, it's long past time to put it to rest. The truth about the '80s is far more prosaic: In 1979, Jimmy Carter appointed Paul Volcker chairman of the Federal Reserve. Inflation was running at about 12 percent when he took office, and Volcker immediately slammed on the monetary brakes in order to bring it down. Whether he was targeting interest rates or monetary aggregates remains a bit murky, but it hardly matters. In the end, he engineered one minor recession in 1980, and when that didn't do the trick, he tightened Fed policy even more and threw the economy into a second recession-this one extraordinarily deep and painful-which he maintained until 1982. When he let up, the economy recovered. Reagan had very little to do with it." [Mother Jones, 10/14/11]

Changing Oil Prices, Deficit Spending, And A Weak Dollar Affected The 1980s Recovery More Than Reagan's Tax Policy. From Mother Jones:

That's most of the story of the Reagan era. The most important economic drivers of recovery, in rough order of importance, were:

1.    Paul Volcker easing up on interest rates/monetary aggregates in 1982

2.    The steep drop in oil prices after 1981

3.    Reagan's devaluation of the dollar

4.    Reagan's deficit spending

5.    Reagan's tax cuts

Other major Reagan policies were probably a wash. The tax reform act of 1986 was certainly a net positive, but sitting back and allowing the S&L crisis to spin out of control was a big net negative. But those are nits. In the end, although Reagan's tax legacy is his most celebrated accomplishment, it was distinctly secondary to Fed policy, the oil glut, deficit spending, and a weak dollar. Lowering top marginal rates may or may not have been a great thing to do, but it was no miracle. The truth was far more mundane. [Mother Jones, 10/14/11]

FACT: Reagan Created "The Biggest Tax Increase Ever Enacted During Peacetime"

Reagan Signed A Large Tax Cut Immediately After Taking Office, But Ran Into A "Burgeoning" Deficit. According to CNN:

Soon after taking office in 1981, Reagan signed into law one of the largest tax cuts in the postwar period. [...] In 1986, Reagan lowered individual income tax rates again, this time in landmark tax reform legislation.

As a result of the 1981 and 1986 bills, the top income tax rate was slashed from 70% to 28%.

So, despite his public opposition to higher taxes, Reagan ended up signing off on several measures intended to raise more revenue. 

Despite the aggressive tax cutting, Reagan couldn't ignore the budget deficit, which was burgeoning.

After Reagan's first year in office, the annual deficit was 2.6% of gross domestic product. But it hit a high of 6% in 1983, stayed in the 5% range for the next three years, and fell to 3.1% by 1988. (By comparison, this year it's projected to be 9% but is expected to drop considerably thereafter.) [CNN, 9/12/10, parentheses original]

To Combat Deficits, Reagan Passed "Biggest Tax Increase Ever Enacted During Peacetime." According to CNN:

"Reagan was certainly a tax cutter legislatively, emotionally and ideologically. But for a variety of political reasons, it was hard for him to ignore the cost of his tax cuts," said tax historian Joseph Thorndike.

Two bills passed in 1982 and 1984 together "constituted the biggest tax increase ever enacted during peacetime," Thorndike said.

The bills didn't raise more revenue by hiking individual income tax rates though. Instead they did it largely through making it tougher to evade taxes, and through "base broadening" -- that is, reducing various federal tax breaks and closing tax loopholes.

For instance, more asset sales became taxable and tax-advantaged contributions and benefits under pension plans were further limited. [CNN, 9/12/10]

Reagan Increased Business Taxes In 1982, Payroll Taxes In 1983, And Energy Taxes In 1984. Economist Robert Shapiro wrote in Forbes:

Everyone remembers Reagan's 1981 tax cuts. His admirers are less likely to tout the tax hikes he accepted as the 1981 recession and his own tax cuts began to unravel his long-term fiscal picture--a large tax increase on business in 1982, higher payroll taxes enacted in 1983 and higher energy taxes in 1984. A decade later, when a serious recession and higher spending began to upend the fiscal outlook again, the first President Bush similarly raised taxes on higher-income people in 1991; Bill Clinton doubled down and raised them again in 1993. [Forbes, 2/3/10, emphasis added]

After Cutting Taxes In 1981, President Reagan RAISED Taxes 11 Times. According to Bruce Bartlett, an official in the Reagan administration:

It may come as a surprise to some people that once upon a time in the not-too-distant past Republicans actually cared enough about budget deficits that they thought raising taxes was necessary to bring them down. Today, Republicans believe that deficits are nothing more than something to ignore when they are in power and to bludgeon Democrats with when they are out of power.

Legislated Tax Changes by Ronald Reagan as of 1988

Tax Cuts

Billions of Dollars

Economic Recovery Tax Act of 1981

-264.4

Interest and Dividends Tax Compliance Act of 1983

-1.8

Federal Employees' Retirement System Act of 1986

-0.2

Tax Reform Act of 1986

-8.9

Total cumulative tax cuts

-275.3

Tax Increases

Billions of Dollars

Tax Equity and Fiscal Responsibility Act of 1982

+57.3

Highway Revenue Act of 1982

+4.9

Social Security Amendments of 1983

+24.6

Railroad Retirement Revenue Act of 1983

+1.2

Deficit Reduction Act of 1984

+25.4

Consolidated Omnibus Budget Reconciliation Act of 1985

+2.9

Omnibus Budget Reconciliation Act of 1985

+2.4

Superfund Amendments and Reauthorization Act of 1986

+0.6

Continuing Resolution for 1987

+2.8

Omnibus Budget Reconciliation Act of 1987

+8.6

Continuing Resolution for 1988

+2.0

Total cumulative tax increases

+132.7

 Source: Office of Management and Budget, Budget of the United States Government, Fiscal Year 1990(Washington: U.S. Government Printing Office, 1989), p. 4-4.

[CapitalGainsAndGames.com, 4/6/10]

Reagan Signed Tax-Hiking Social Security Reform Legislation That Canceled Out Much Of His Original Tax Cut. According to CNN:

There were other notable tax increases under Reagan.

In 1983, for example, he signed off on Social Security reform legislation that, among other things, accelerated an increase in the payroll tax rate, required that higher-income beneficiaries pay income tax on part of their benefits, and required the self-employed to pay the full payroll tax rate, rather than just the portion normally paid by employees.

The tax reform of 1986, meanwhile, wasn't designed to increase federal tax revenue. But that didn't mean that no one's taxes went up. Because the reform bill eliminated or reduced many tax breaks and shelters, high-income tax filers who previously paid little ended up with bigger tax bills. [...]

All told, the tax increases Reagan approved ended up canceling out much of the reduction in tax revenue that resulted from his 1981 legislation. [CNN, 9/12/10, emphasis added]

State of the Union

CLAIM: Sen. McConnell Inflated The Effect On Small Business Of Raising Taxes On Millionaires And Misrepresented Americans' Support

SEN. MITCH MCCONNELL: Look, the American people don't think, I'm sure, that it's a good idea -- four out of five of the so-called millionaires are business owners, it's over 300,000 small businesses in our country that hire people. I don't think the American people think that raising taxes on business, small business in the middle of this economic situation we find ourselves in is a particularly good idea.

FACT: Only A Tiny Fraction Of Small Businesses Fall Into The Top Tax Brackets

CAP: "Exceedingly Few Small Businesses" Fall Into Top Tax Brackets. From the Center for American Progress: "Exceedingly few small businesses will be affected if the Bush tax rates for the rich expire, and those that are will be making enough money to be paying in the top two income tax brackets. At the end of the day, just 12 percent of the revenue raised by allowing those tax breaks to expire will be paid by business people with employees, according to the Congressional Research Service." [Center for American Progress, 11/15/10]

Only 3 Percent Of People In Top Brackets Have Any Business Income At All. From the Center for American Progress: "But according to the Joint Committee on Taxation, just 3 percent of people with any business income at all-from an enterprise large or small-face either of the top two income tax brackets, which are the ones in question. Conservatives eventually conceded this point, but pivoted to the literal number of 'small businesses' that they claim will be affected if the tax cuts for the rich expire." [Center for American Progress, 11/15/10]

FactCheck.org: "Only 2 Percent" Of Those Reporting Business Income Would Face Higher Taxes With Increase On Top Earners. According to FactCheck.org: "[O]nly 27 percent of all upper-income tax filers report business income that accounts for more than half of their wages. It's likely that a small-business owner would make most of his or her income from the small business... In the end, it's unclear exactly what percentage of these top earners are truly small businesses. What is clear, however, is that we're not talking about all that many small businesses in the first place. The vast majority of individuals who report business income or losses are not making upwards of $200,000 a year. In fact, only 2 percent of all those reporting business income in 2009 will earn enough to fall in the top two brackets. As we explained back when Obama's tax plan was attacked on the campaign trail, the overwhelming majority of these mom-and-pop shops we hear about would not see their taxes go up under Obama's proposal." [FactCheck.org, 3/6/09, emphasis added]

FACT: The Republican Definition Of "Small Businesses" Includes Multi-Billion-Dollar Corporations

Republican Definition 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." [Businessweek9/23/10, emphasis added]

Bloomberg: GOP Definition Of Small Business Includes "George Soros, Most Movie Stars And Obama Himself." According to Bloomberg:

Senate Republican leader Mitch McConnell says President Barack Obama wants to subject half of all small-business income to a tax increase, a move that he says would strike a blow at the U.S. job-creation engine.

McConnell's numbers only add up if you consider people like billionaire investor George Soros, most movie stars and Obama himself small-business owners, tax experts say.

That's because the lawmaker is basing his figure on a broad definition of the term that experts say includes authors, actors and athletes who employ few if any workers. It also encompasses businesses that many people wouldn't consider small, such as Soros's hedge-fund firm and major law partnerships. [Bloomberg, 9/20/10]

Republicans Define All "Pass-Through" Entities As Small Businesses. As reported by theWashington Post, "Republicans continually define pass-through entities of all sizes as small businesses..." [Washington Post9/17/10]

Tax Policy Center's Marron: Policymakers Should "Take Care Not To Equate Pass-Throughs With Small Business." From the Washington Post:

Some of these "pass-through" companies are rather large, with revenues of more than $50 million, but they represent just a small proportion of such companies. According to calculations by Donald Marron, director of the Urban-Brookings Tax Policy Center, in 2008 such companies accounted for less than one-tenth of one percent of all returns filed - but they had 40 percent of revenues and 30 percent of all profits.

"Large businesses thus account for a large share of the economic activity pass-through entities undertake," Marron recently told Congress.  "Policymakers should therefore take care not to equate pass-throughs with small business." [Washington Post4/15/11]

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 Post9/17/10, 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 Post9/17/10, emphasis added]

FACT: Americans Overwhelmingly Support Raising Taxes On Millionaires

Three Quarters Of Americans Support Raising Taxes On Millionaires. According to ABC News: "Among the elements of Obama's plan, one theme especially hits its populist mark: Seventy-five percent of Americans support raising taxes on Americans with annual incomes over $1 million. ... Taxing millionaires in fact is one of the rare political issues to draw bipartisan majority support - 57 percent from Republicans, 75 percent among independents and 89 percent among Democrats. Even among supporters of the Tea Party political movement, 55 percent support raising taxes on millionaires, although this drops to 36 percent of "strong" Tea Party backers." [ABC News, 10/5/11]

CLAIM: Sen. McConnell Suggested Business Owners' Biggest Concern Is Over-Regulation

SEN. MITCH MCCONNELL: I think they'd like to see us begin to get our house in order, which with regard to the private sector, what it needs is for us to quit spending, quit borrowing, quit over-regulating and quit threatening to raise taxes. That's the reason the private sector is all clogged up.

One final point, during the month of August, when congress was out of session, I spent about half the month in my state and the rest as Republican leader. I was around the country, unprompted, everyone I asked who was in the private sector, whether it was a small business, a medium sized business or a large business, whether they were doing well and only a few of them are doing well, they all said over-regulation was the single biggest problem.

FACT: Businesses Blame Weak Demand — Not Government Policies — For Weak Hiring

McClatchy: Small Business Owners Not Worried About Regulations. As reported by McClatchy:

Politicians and business groups often blame excessive regulation and fear of higher taxes for tepid hiring in the economy. However, little evidence of that emerged when McClatchy canvassed a random sample of small business owners across the nation.

"Government regulations are not 'choking' our business, the hospitality business," Bernard Wolfson, the president of Hospitality Operations in Miami, told The Miami Herald. "In order to do business in today's environment, government regulations are necessary and we must deal with them. The health and safety of our guests depend on regulations. It is the government regulations that help keep things in order." [...]

McClatchy reached out to owners of small businesses, many of them mom-and-pop operations, to find out whether they indeed were being choked by regulation, whether uncertainty over taxes affected their hiring plans and whether the health care overhaul was helping or hurting their business.

Their response was surprising.

None of the business owners complained about regulation in their particular industries, and most seemed to welcome it. Some pointed to the lack of regulation in mortgage lending as a principal cause of the financial crisis that brought about the Great Recession of 2007-09 and its grim aftermath. [McClatchy, 9/1/11]

Wall Street Journal: Despite Massive Cash Reserves, Business Not Hiring Because Debt Reduction Stifling Demand. As reported by the Wall Street Journal: "Corporations have a higher share of cash on their balance sheets than at any time in nearly half a century, as businesses build up buffers rather than invest in new plants or hiring. [...] The reduction of debt could place the economy onto firmer footing in the long run. In the short term, however, the effect of consumers paying off debts and companies hoarding cash is less spending, investing and hiring. Economists call this problem the 'paradox of thrift,' when individuals and businesses need to save more to prepare for a downturn, but everyone doing so at the same time makes a downturn more likely. 'For one household or business to save money is a good thing,' said Dana Saporta, an economist with Credit Suisse in New York. 'For everyone to be doing this at the same time could serve to slow economic growth.'" [Wall Street Journal9/17/11, emphasis added]

WSJ: "The Main Reason" For Hiring Reluctance Is "Scant Demand, Rather Than Uncertainty Over Government Policies." According to the Wall Street Journal:

The main reason U.S. companies are reluctant to step up hiring is scant demand, rather than uncertainty over government policies, according to a majority of economists in a new Wall Street Journal survey.

"There is no demand," said Paul Ashworth of Capital Economics. "Businesses aren't confident enough, and the longer this goes on the harder it is to convince them that they should be."

In the survey, conducted July 8-13 and released Monday, 53 economists-not all of whom answer every question-were asked the main reason employers aren't hiring more readily. Of the 51 who responded to the question, 31 cited lack of demand (65%) and 14 (27%) cited uncertainty about government policy. The others said hiring overseas was more appealing. [Wall Street Journal7/18/11, emphasis added]

Washington Post: Executives Can't Draw Specific Link Between Government Actions And Hiring Decisions. According to the Washington Post: "Fundamentally, executives objected to Obama's policies on the grounds they would make the United States a less competitive place to operate in the long run. But when [manufacturing CEO Jason] Speer and other executives were pressed on the role that tax and regulatory policies play in hiring, they drew only vague connections. Speer said his decision whether to hire is driven primarily by demand for his products. Orders are coming in strong enough that he is running about 20 hours a week of overtime. So he is weighing whether to hire two or three additional manufacturing workers. None of the executives interviewed linked a specific new government initiative with a specific decision to refrain from hiring." [Washington Post8/21/10, emphasis added]

Study By "The Most Right Wing Of The Major Business Groups" Shows Businesses Much More Afraid Of Weak Demand Than Taxes And Regulations. As Ezra Klein of the Washington Post reported:

The National Federation of Independent Businesses -- a small-business trade association that is considered the most right wing of the major business groups -- continually polls its members and releases the results. Here's what they say is their single most important problem:

Description: http://voices.washingtonpost.com/ezra-klein/the-problem-tax-fears-and-bad-sales.png

As you can see, sales - that is to say, demand for their products - dominate the chart, while fear of taxes is lower than in the '90s. The concern over sales is understandable. Not only is the economy bad. But as the next chart shows, it keeps underperforming what the businesses assume will happen.

Description: http://voices.washingtonpost.com/ezra-klein/sales-dipping-and-already-below-expectations.png

So, if anything, businesses have been too optimistic over the past few years. [Washington Post7/22/10]

Print