Fact Checking The Sunday Shows - November 20, 2011
Sunday's political talk shows focused almost exclusively on the efforts of the Joint Select Committee on Deficit Reduction, with a number of the committee's members appearing on separate shows. Democratic committee member Sen. John Kerry (MA) pointed out on Meet the Press that "we are not a tax-cutting committee. We're a deficit-reduction committee." However, that point doesn't seem to have gotten through to Rep. Jeb Hensarling (R-TX) and Sens. Jon Kyl (R-AZ) and Pat Toomey (R-PA), all of whom complained that the only thing stopping a deal was a refusal by Democrats to extend the costly and regressive Bush tax cuts. For the second time in as many weeks, Hensarling argued that the Bush tax cuts were not one of the largest drivers of the debt, while Kyl claimed that not extending them would wreck the economy. Toomey went so far as to say that that the federal government does not have a revenue problem but only a spending problem.
DAVID GREGORY (HOST): The Bush tax cuts, though, I come back to because real deficit hawks, many of them happening to be Republicans — Alan Greenspan, former Fed chief; Michael Bloomberg, now the independent mayor of New York; and Democrats like Peter Orszag, who ran the Budget Office for this president, said let them all expire for everybody. For the rich, for the middle class. If you really want to get serious about the deficit, let the Bush tax cuts expire for everybody.
SEN. JON KYL: If you really want to get serious about the deficit, our country has to grow economically. We have to put people back to work. That's what creates wealth that can be taxed. We're not going to tax our way out of this, we need to grow. And you can't grow if you raise taxes in the middle of a recession. That's what President Obama said when, when unemployment was at 9 percent a few months ago. He said don't raise taxes in a recession. And he's right. That impairs job creation by taking more money from the very people, primarily small business folks, who will create most of the jobs coming out of the recession. [Meet the Press, 11/20/11]
FACT: Extending The Bush Tax Cuts Wouldn't Help Job Creation Or The Economy
Democrats Want To End Bush Tax Cuts For The Wealthy. As reported by the Huffington Post: "The real sticking point appears to be the treatment of the Bush-era tax cuts, which expire in 2012. The Democrats insist on an end to those cuts as they apply to wealthy taxpayers, and the Republicans want to keep them all. A GOP aide said the last offer was 'silent' on the cuts, but the previous Toomey offer kept them -- and indeed lowered overall rates." [Huffington Post, 11/18/11]
Democratic Super Committee Co-Chair: Bush Tax Cuts For The Wealthy Are The "One Sticking Divide." In an interview on CNN's State of the Union, super committee co-chair Sen. Patty Murray (D-WA) said: "There is one sticking divide, and that is the issue of what I call shared sacrifice, where everybody contributes in a very challenging time for our country. And that's the Bush tax cuts and making sure that any kind of package includes everybody coming to the table and the wealthiest of Americans, those who earn over a million dollars every year, have to share too. And that line in the sand, we haven't seen any Republicans willing to cross yet." [State of the Union, 11/20/11, via CNN.com]
Only "Two To Three Percent Of Americans" Fall Into The Top Tax Brackets. According to Reuters: "Lawmakers are mulling the renewal of tax cuts enacted in 2001 and 2003 under former president George W. Bush that expire at the end of this year. President Barack Obama and his Democratic allies in Congress want to extend the lower rates for individuals earning less than $200,000 or couples making less than $250,000. About two to three percent of Americans fit into the upper income categories." [Reuters, 7/21/10]
CBO: Extending Tax Cuts "Does Not Create Much Incentive ... To Hire More Workers." In a written testimony to the Joint Economic Committee, CBO director Douglas Elmendorf stated:
Deferring the scheduled increases in tax rates in 2011 would help some businesses as well as households. In particular, it would keep lower tax rates in place in that year for businesses that do not pay the corporate income tax (the pass-through entities such as sole proprietorships, partnerships, S corporations, and limited liability companies).
However, increasing the after-tax income of businesses typically does not create much incentive for them to hire more workers in order to produce more, because production depends principally on their ability to sell their products.
[Policies for Increasing Economic Growth and Employment in the Short Term, February 2010, emphasis added]
Bush Tax Cuts Followed By "The Slowest Average Annual Growth Since World War II." As the New York Times' David Leonhardt explains:
Those tax cuts passed in 2001 amid big promises about what they would do for the economy. What followed? The decade with the slowest average annual growth since World War II. Amazingly, that statement is true even if you forget about the Great Recession and simply look at 2001-7.
The competition for slowest growth is not even close, either. Growth from 2001 to 2007 averaged 2.39 percent a year (and growth from 2001 through the third quarter of 2010 averaged 1.66 percent). The decade with the second-worst showing for growth was 1971 to 1980 - the dreaded 1970s - but it still had 3.21 percent average growth.
The picture does not change if you instead look at five-year periods. Here's a chart ranking five-year periods over the past 50 years, in descending order of average annual growth:
Is there good evidence the tax cuts persuaded more people to join the work force (because they would be able to keep more of their income)? Not really. The labor-force participation rate fell in the years after 2001 and has never again approached its record in the year 2000.
Is there evidence that the tax cuts led to a lot of entrepreneurship and innovation? Again, no. The rate at which start-up businesses created jobs fell during the past decade. [New York Times, 11/18/10]
REP. JEB HENSARLING: The nation is facing a debt crisis. It's facing a jobs crisis. And the two are interrelated. And we all know — I mean, even the president will admit the great drivers of our debt are Medicare, Medicaid and health care, and nothing else comes close. And he's right. I give him an A for courage for stating that. But, unfortunately, what we haven't seen in these talks from the other side is any Democrats willing to put a proposal on the table that actually solves the problems. [Fox News Sunday, 11/20/11]
FACT: The Bush Tax Cuts Added More To Deficit Than All Of President Obama's Major Initiatives Combined
CBPP: Present "Huge Deficits" Due To Bush Tax Cuts, Wars, And Recession. 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:
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:
Major Bush Policies Cost $5.07 Billion Between Fiscal Years 2002-2009. According to the New York Times:
Budget estimates that didn't foresee the recessions in 2001 and in 2008 and 2009 also contributed to deficits. Mr. Obama's policies, taken out to 2017, add to deficits, but not by nearly as much. A few lessons can be drawn from the numbers. First, the Bush tax cuts have had a huge damaging effect. If all of them expired as scheduled at the end of 2012, future deficits would be cut by about half, to sustainable levels. Second, a healthy budget requires a healthy economy; recessions wreak havoc by reducing tax revenue. Government has to spur demand and create jobs in a deep downturn, even though doing so worsens the deficit in the short run. Third, spending cuts alone will not close the gap. The chronic revenue shortfalls from serial tax cuts are simply too deep to fill with spending cuts alone. Taxes have to go up. In future decades, when rising health costs with an aging population hit the budget in full force, deficits are projected to be far deeper than they are now. Effective health care reform, and a willingness to pay more taxes, will be the biggest factors in controlling those deficits.
[New York Times, 7/23/11]
Extending Bush Tax Cuts Would Cost $2.15 Trillion Between 2012-2021. According to Citizens for Tax Justice:
President Bush enacted a series of tax cuts in 2001, and in 2010 President Obama extended those tax cuts with a new sunset date of December 31, 2012. Some members of Congress propose making them permanent. ... With the help of Citizens for Tax Justice, National Priorities Project is tracking every dollar the U.S. Treasury loses from tax breaks for the wealthiest five percent—American families and individuals who in 2011 will make at least $176,000 and on average $477,453. [...]
$2,150,790,974,013 - The projected loss of revenue to the U.S. Treasury over the next ten years, 2012 through 2021, from tax cuts for the wealthiest five percent. [Citizens for Tax Justice, accessed 11/20/11]
Read more about the failure of the Bush tax cuts HERE.
CLAIM: Sen. Kyl Claimed Toomey Plan Raises Revenue, Pays Down Debt
SEN. JON KYL: David, yes. In fact, I think this bill, the Toomey proposal, would even pass the United States Senate, which is controlled, as you know, by the Democrats. Hear what we were saying: There would be a net new amount of revenue, $250 billion, of which would go to deficit reduction. That was our offer to the Democrats in addition to which there was other revenue, as you know. It totaled about $500 billion. This had never been proposed by Republicans before because it would mean that people in the upper brackets, whatever their tax rate was, would be paying more taxes because their loopholes, the deductions and credits that they take advantage of would no longer exist. [Meet the Press, 11/20/11]
FACT: Toomey Plan Calls For Regressive Tax Cuts In Exchange For Small Revenue Increase
CBPP: GOP Proposal Makes Only "Modest" Contribution To Deficit Reduction And Takes Future Revenue Sources "Off The Table." According to the Center on Budget and Policy Priorities:
Senator Pat Toomey and other Republicans on the Joint Select Committee on Deficit Reduction ("Supercommittee") portray their new offer to raise close to $300 billion in revenues (under a plan to reduce deficits by about $1.5 trillion over ten years) as a significant concession, and some observers have suggested it represents a welcome first step toward a balanced deficit reduction plan to put the budget on a sustainable path. But a closer examination of the proposal raises grave concerns and indicates that, in fact, it adds little balance.
It uses savings from closing tax loopholes and narrowing other tax expenditures mainly to set tax rates permanently at levels well below those of President Bush's tax cuts, and to make permanent both the highly preferential treatment of capital gains and dividend income under the Bush tax cuts and the temporary hollowing out of the estate tax for estates of the wealthiest one-quarter of 1 percent of Americans that Congress enacted in late 2010. Consequently, the proposal seems designed to make only a modest revenue contribution toward deficit reduction and then to take revenues off the table for the larger rounds of deficit reduction that must follow. Moreover, even while yielding modest savings, the revenue component would make the package less balanced by conferring large new tax cuts on the wealthiest Americans while forcing low- and middle-income Americans to bear most of the plan's budget cuts as well as its tax increases.
By permanently locking in tax rates well below the Bush levels, the plan would remove the potential to secure $800 billion in deficit reduction by letting the Bush tax cuts for households with incomes over $250,000 expire on schedule at the end of 2012, and it would remove the leverage that the scheduled expiration of these tax cuts provides to those who seek balanced deficit reduction with a substantial revenue contribution. [CBPP.org, 11/10/11, emphasis added]
CBPP: "The Republican Proposal Would Significantly Shift Tax Burden" From The Rich To Working Americans. According to the Center on Budget and Policy Priorities:
[T]he Republican proposal would significantly shift tax burdens from high-income to lower- and middle-income taxpayers. High-income taxpayers would benefit enormously from the proposed cut in tax rates, while lower- and middle-income taxpayers would suffer disproportionately from the proposed reductions in tax expenditures, since the plan shields the main tax expenditure for the highest-income Americans - the highly preferential treatment of capital gains and dividend income. Preliminary estimates by the Joint Committee on Taxation of a plan similar to the Republican proposal indicate that taxpayers with incomes above $200,000 would get tax cuts significantly larger than the already-highly-lucrative tax cuts they will get if Congress extends all of the 2001 and 2003 Bush tax cuts The new tax cuts would be the largest for people with the highest incomes - those with incomes above $1 million would get a new tax cut of more than $30,000 a year, on average, on top of the tax cuts they would get from making all of the Bush tax cuts permanent. The Urban Institute-Brookings Tax Policy Center estimates that those households are receiving an average tax cut of $129,000 this year from the existing Bush tax cuts; thus, the total tax cut for these very well-off households could exceed $150,000 a year, on average, under the Republican plan. [...]
In contrast, taxpayers with incomes below $200,000 would see their tax bills rise, on average, compared to current policies. These additional taxes on lower- and middle-income Americans would come on top of the effects of the nearly $900 billion in spending cuts over ten years under the Republican plan, which would fall disproportionately on them because they are more dependent on Medicare, Medicaid, and other programs slated for cuts than are higher-income Americans. [CBPP.org, 11/10/11, emphasis added]
SEN. PAT TOOMEY: Well, let—let's look. This is an indication of how far Republicans were willing to go to try to find a solution here. First of all, I don't think we have a tax revenue problem in Washington. We have a spending problem. As recently as 2007 with the current tax rate, we had a budget deficit that was tiny 1.2 percent of GDP. But if we just both went into our respective foxholes and weren't willing to consider the other side, we were surely not going to get an agreement. [Face the Nation, 11/20/11]
FACT: There Is A Revenue Problem
Revenues Are At Their Lowest Level Since 1950. According to the Washington Post:
Sure enough, the historical White House budget tables show that receipts (ie, taxes) in 2011 are estimated to be just 14.4 percent of GDP — the lowest level since 1950. But outlays (ie, spending) in 2011 are estimated to be 25.3 percent of GDP — the highest level since World War II. That yawning gap is the key reason why the deficit is so large-and why Republican claims that there is "no revenue problem" are worthy of a couple of Pinocchios.
The recession, of course, is a major reason why revenue has fallen so much - and why spending has soared. Obama came into office claiming he would roll back President George W. Bush's taxes for the top 2 percent of wage-earners, which would have helped with some of the revenue gap, but then he cut a deal last year with Republicans that extended the cuts for two years. [Washington Post, 4/14/11]
TPM: As A Percentage Of GDP, Revenue Has Fallen Over The Last Decade. From Talking Points Memo:
We took the numbers and put them in a slightly different context, so you can see by what percentage spending and revenues have risen and fallen on a population adjusted basis over the last decade. Makes it pretty clear what is and is not the culprit of deficits and our supposedly out-of-control spending.
[Talking Points Memo, 7/4/11]
Krugman: "Revenue Has Plunged." According to Paul Krugman's New York Times blog:
For all those commenters saying that we must have had a surge in government spending - I mean, look at the deficit! - a simple picture:
Government spending has continued to rise more or less on its pre-crisis trend. Revenue has plunged, because the economy is deeply depressed. [New York Times, 10/17/10]
GOP Congressman Asked Fellow Republicans To Face Facts, Admit That There Is A Revenue Shortage. From a speech given by Rep. Scott Rigell (R-VA) on the floor of the House of Representatives:
Now, I would say to my friends who are Democrats, let's consider this. Historically, we've been around 19 percent of expenses as a percent of our gross domestic product. Right now, we're over 24.5 percent. This is putting America on a perilous course and I believe that it threatens our country in a fundamental way. Now, to my republican colleagues, let's look at the other side. Historically, we've been around 18 percent, plus or minus, revenue as a percent of gross domestic product. And right now, we're less than 15 percent. That, too, is a problem. Any Republican who will not admit to this or to confront it and discuss it head on, is not dealing with reality. These are the numbers. It's not how you feel. It's where the numbers lead us. We need to be a leadership team here, a body that respects, seeks out, and is guided by the facts. [Rigell Remarks, 11/15/11, via Political Correction]