Fact Checking The Sunday Shows - December 4, 2011

December 05, 2011 9:52 am ET

On the first Sunday of December, GOP presidential contender Rep. Michele Bachmann (MN) and RNC Chairman Reince Priebus each brought their share of falsehoods to the table. On CNN's State of the Union, Bachmann dismissed the economic significance of the payroll tax holiday even though economists explain that putting more money in the hands of workers would give an appreciable boost to the economy. She also appeared on Fox News Sunday, where she falsely claimed that businesses aren't hiring because they don't have enough money. During his appearances, Priebus did his best to attack the Obama administration's record, distorting the reasons behind November's unemployment rate drop on Meet the Press. He also tried to blame President Obama for deficits that are a legacy of Bush-era Republican policies and for a rising poverty rate that's the result of the recession.

State of the Union

CLAIM: Bachmann Argued Against Extending Payroll Tax Holiday Because "It Hasn't Helped Turn The Economy Around"

REP. MICHELE BACHMANN: And you also have to remember, Candy, the president's reason. He said he wanted to lower that — the payroll tax cut because it would create jobs. Even the administration admits it didn't create jobs. It hasn't helped to turn the economy around. As president of the United States, I know what to do to turn the economy around. I'm a former federal tax lawyer. I created and I run a successful business as a private businesswoman. I get the economy. This payroll tax deduction didn't do what President Obama promised he would deliver that it would do. 

FACT: Economist Mark Zandi Credits December 2010 Payroll Tax Cut With Helping Prevent Recession

Zandi: "Without That Payroll Tax Cut This Year, I Think We'd Be Skirting Recession Now." During a June 26, 2011, appearance on CNN's State of the Union, Moody's Analytics economist Mark Zandi stated: "On the other side of that, there are a few things I think that can be done that would make a difference in the very short term if we need it. So extending the payroll tax holiday for another year seems like a reasonable thing to do. I think that can get done politically. Without that payroll tax cut this year, I think we'd be skirting recession now because of the higher energy prices." [CNN's State of the Union, 6/26/11, emphasis added]

Moody's: Every Dollar In Reduced Revenue From Payroll Tax Cut Expands Economy by $1.27. According to the Center on Budget and Policy priorities:

The rationale for enacting the temporary payroll tax cut last December — the economy was weak and a payroll tax cut would provide a more efficient bang-for-the-buck than many other tax-cut options — has become still more compelling today, given the renewed signs of economic weakness.

At a time of soft economy-wide demand, the tax cut increases consumer purchasing power in a manner that is both substantial (boosting take-home pay by 2 percent for most workers) and modestly progressive, since the wage cap limits the benefit for higher-income families (who are more likely to save rather than spend the additional money)

Largely for these reasons, Moody's Analytics estimates that every $1 reduction in federal tax revenue resulting from an employee-side payroll tax cut expands the economy by $1.27. [CBPP.org, 9/7/11, emphasis added, internal citation removed]

CBO Director In 2010: A Payroll Tax Cut Would Add Jobs And Spur The Economy. From Congressional Budget Office Director Douglas Elmendorf's February 23, 2010, testimony before the Joint Economic Committee:

A temporary reduction in employees' portion of the payroll tax would not immediately affect employers' costs. Instead, it would have initial effects similar to those of reducing other taxes for people below the 2010 income cap. The increase in take-home pay would spur additional spending by the households receiving the higher income, and that higher spending would, in turn, increase production and employment. Those effects would be spread over time, however, and the majority of the increased take-home pay would be saved rather than spent.

CBO estimates that reducing employees' payroll taxes would raise output cumulatively between 2010 and 2015 by $0.30 to $0.90 per dollar of total budgetary cost. CBO also estimates that the policy would add 3 to 9 cumulative years of full-time-equivalent employment in 2010 and 2011 per million dollars of total budgetary cost. [Elmendorf Testimony, 2/23/10, emphasis added, via CBO.gov]

FACT: Economists Say Letting Payroll Tax Cut Expire Would Weaken Economy

CBPP: Extending Payroll Tax Cut Will Reduce Risk That The Economy Will Continue To Grow Too Slowly. From the Center on Budget and Policy Priorities:

Failure by Congress to extend the temporary payroll tax cut enacted last December would reduce all paychecks starting on January 1, withdrawing needed support from the still-weak economy. The measure, part of the tax cut-unemployment insurance deal between President Obama and Republican leaders, reduces the employee share of the Social Security payroll tax, boosting workers' take-home pay by an estimated $120 billion in 2011. The tax cut is worth $934 to the average family. (The table below gives some examples of how the tax cut's expiration would affect workers in different occupations.)

Many economists have warned that letting the tax cut expire at the end of December would slow economic growth next year. To reduce the risk that the economy will continue to grow too slowly to lower unemployment or may even slide back into recession, policymakers should at a minimum extend the tax cut. [CBPP.org, 9/7/11, emphasis added, citation removed for clarity]

Failure To Extend Payroll Tax Cut Could Decrease GDP By $128 Billion And Cost Almost 1 Million Jobs. According to an issue brief from the Economic Policy Institute and The Century Foundation: "As part of December's deal to extend the Bush-era tax cuts for two years, Congress enacted a 2 percentage point reduction in the Social Security payroll tax for all workers, and it is set to expire at the end of the year. The cost of failing to extend the payroll tax cut is estimated by adjusting the cost of the 2011 payroll tax cut (JCT 2010) by CBO's projection of wage and salary growth (CBO 2011b), resulting in a cost of $117.8 billion. Applying a fiscal multiplier of 1.09 (Zandi 2010), we estimate that the failure to extend the payroll tax cut would decrease GDP by $128 billion (-0.8%) and lower nonfarm employment by 972,000 jobs. [Economic Policy Institute and The Century Foundation, 8/4/11, emphasis added]

Zandi: "Critical" To Extend Payroll Tax Holiday; Failure To Do So Will Increase Drag On Economy. According to Moody's Analytics Economist Mark Zandi: "To avoid recession, Congress and the administration must also find common ground on economic policy. If they do nothing, federal fiscal policy will shave 1.7 percentage points from real GDP growth next year. The triggers for this include the expiration of both this year's reduced payroll tax rate and emergency unemployment insurance benefits. Even a strong economy would have trouble digesting this, never mind one that is struggling to post any growth at all. [...] It is critical (and assumed in our baseline outlook) that lawmakers agree at least to extend and increase the payroll tax holiday for workers through 2012 as proposed by President Obama. This would reduce next year's fiscal drag to less than 1 percentage point-still a heavy lift for the economy, but doable. [Economy.com, 10/10/11]

Zandi: Extending Payroll Tax Cut Would Create 750,000 Jobs. From McClatchy: "The biggest contributor to job growth next year under the Obama plan would be extending the payroll tax holiday for workers, which Zandi estimates would add 750,000 jobs. The portion that is waved for employers would add another 300,000 jobs, he said. Infrastructure spending could add 400,000 jobs." [McClatchy, 9/8/11]

Fox News Sunday

CLAIM: Rep. Bachmann Claimed Businesses Aren't Hiring Because They Don't Have Enough Money

REP. MICHELE BACHMANN: When you talk about extending the current reduced tax rate on the people who are job providers, that only makes sense in a down economy. We want to create jobs. That helps to create jobs, to keep more money in the pockets of the job creator. When you pull more money out of the pockets of the job creators, you're going to have less jobs. What do we need in the United States right now? More jobs, millions of jobs, high-paying jobs. President Obama hasn't delivered. The only way to do that, Chris, is make sure businesses have all of the money they need to be able to create jobs. Right now, they don't.

FACT: Corporations Have Plenty Of Cash — They Aren't Hiring Due To Lack Of Demand

Wall Street Journal: "Corporations Have A Higher Share Of Cash On Their Balance Sheets Than At Any Time In Nearly Half A Century." According to 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.

Nonfinancial companies held more than $2 trillion in cash and other liquid assets at the end of June, the Federal Reserve reported Friday, up more than $88 billion from the end of March. Cash accounted for 7.1% of all company assets, everything from buildings to bonds, the highest level since 1963. [Wall Street Journal, 9/17/11]

Wall Street Journal: "The Main Reason" For Hiring Reluctance Is "Scant Demand." 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]

Wall Street Journal: Despite Improving Profits, It Will Take "A Burst In Demand" To "Propel Hiring." As reported by the Wall Street Journal: "Corporate profits rose an estimated 3% in the second quarter from the first, better than the 1% improvement in the first three months of the year, the Commerce Department said Friday. Profits were up more than 8% from last year's second quarter. The domestic nonfinancial sector drove most of the growth, as financial profits declined. [...]Forecasting firm Macroeconomic Advisers, which sees growth at a 2.3% pace in the second half of this year and 2.8% in 2012, expects firms to keep banking strong profits. But even if businesses remain strong enough to make it through a slowdown, they may have to wait longer for a burst in demand strong enough to propel hiring." [Wall Street Journal8/29/11, emphasis added]

  • Macroeconomic Advisers Chairman: "The Biggest Problem" For Companies "Is That Their Order Books Are Thin."As reported by the Wall Street Journal: "'The biggest problem is that their order books are thin,' said Macroeconomic Advisers chairman Joel Prakken. 'They need fat order books to add people. They need fat order books to buy machines.'" [Wall Street Journal,8/29/11]

Meet the Press

CLAIM: Priebus Attributed Entire Unemployment Rate Drop To People Giving Up On Finding Work

REINCE PRIEBUS: [T]he reason the actual percentage of people filing with the Department of Labor went down was because 300,000 people threw up their hands and said, "Guess what?  This economy's so bad that I'm not going to even file a piece of paper with the Department of Labor." Now, we all know that that's true.

FACT: Only Half The Unemployment Rate Drop Was Due To A Smaller Labor Force

In November, The Unemployment Rate Fell From 9 Percent To 8.6 Percent. According to the Bureau of Labor Statistics: "The unemployment rate fell by 0.4 percentage point to 8.6 percent in November, and nonfarm payroll employment rose by 120,000, the U.S. Bureau of Labor Statistics reported today." [BLS.gov, 12/2/11]

WSJ: The Decline In The Unemployment Rate Was Half Due To People Finding Jobs And Half People Dropping Out. According to the Wall Street Journal:

The unemployment rate is calculated based on people who are without jobs, who are available to work and who have actively sought work in the prior four weeks. The "actively looking for work" definition is fairly broad, including people who contacted an employer, employment agency, job center or friends; sent out resumes or filled out applications; or answered or placed ads, among other things. The rate is calculated by dividing that number by the total number of people in the labor force.

In October, the household survey showed the number of people unemployed fell by 594,000, but the labor force - the number of people working or looking for work - fell by a little more than half that amount. That means that though the number of employed people rose, a large group just stopped looking for work. That could be due to discouragement of the long-term unemployed or by choice over retirement or child care. So the decline in the unemployment rate to 8.6% was about half due to people finding jobs and half people dropping out. [Wall Street Journal, 12/2/11]

The Private Sector Added 140,000 New Jobs In November. According to the Bureau of Labor Statistics: "Total nonfarm payroll employment increased by 120,000 in November, in line with the average gain for the prior 12 months (+131,000). The private sector added 140,000 jobs, as employment rose in a number of service-providing industries. Government employment continued to trend down." [BLS.gov, 12/2/11]

Brookings' Haskins: If Obama's Recovery Act Had Any Effect On Poverty, It Was A Positive One. According to the Brookings Institution's economic studies senior fellow Ron Haskins: "I noticed that the Census Bureau said that the poverty rate would have been higher if it had not been for the stimulus. That may be true, but on the other hand, food stamps, unemployment insurance - all these programs are long-lasting programs. Congress has a very strong pattern in the past of whenever there's a recession they increase unemployment insurance. Maybe they wouldn't have done it as much if there had not have been the [American Recovery and Reinvestment Act] (ARRA) legislation, but even without the stimulus legislation, these programs would have been very responsive, and they were being responsive even before." [The Brookings Institution, 9/16/11]

The Private Sector Has Added Jobs For The Last 21 Consecutive Months. According to the Bureau of Labor Statistics, the private sector has added jobs in every month since March 2010. [BLS.gov, accessed 12/4/11]

A Broader Measure Of Unemployment Also Suggests Economic Improvement. According to the Wall Street Journal:

Meanwhile, the broader unemployment rate, known as the "U-6″ for its data classification by the Labor Department, dropped by a 0.6 percentage point last month. The U-6 figure includes everyone in the official rate plus "marginally attached workers" - those who are neither working nor looking for work, but say they want a job and have looked for work recently; and people who are employed part-time for economic reasons, meaning they want full-time work but took a part-time schedule instead because that's all they could find.

The key to the drop in the broader unemployment rate was due to a 378,000 drop in the number of people employed part time but who would prefer full-time work, that comes on top of a big drop in that category last month. That number could reflect people having their hours increased or part-time workers moving on to full time work. [Wall Street Journal, 12/2/11]

CLAIM: Priebus Blamed President Obama For Current Deficits

REINCE PRIEBUS: [T]he president made some promises.  He made some pretty big promises, and you talked about them.  He made some promises in regard to the debt, which he didn't fulfill.  He made some big promises in regard to the deficit.  He said he'd cut the deficit in half by the end of his first term.  And what did he do?  He passed, or he put forward the biggest structural deficit in the history of America. 

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:

Public Debt

[CPBB.org, 5/20/11]

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:

CBPP

[CBPP.org, 5/10/11]

Major Bush Policies Cost $5.07 Trillion 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.

Policy Changes

[New York Times7/23/11]

CLAIM: Priebus Blamed President Obama's Policies For Pushing More People Below Poverty Line

REINCE PRIEBUS: [W]hat Newt Gingrich was referring to in that — in some of those remarks was the fact that, under this president we have more poor people in this country, we have more people on food stamps than ever before.  I mean, for a president that portrays himself as being the guy that's going to look out for all economic sectors in this country, including those that are less fortunate, he's provided this country, under his policies, some numbers that are pretty staggering regarding to how many more people that are poor and how many more people are on food stamps. He's failed them, too.

FACT: Higher Levels Of Poverty Are Due To Joblessness That Resulted From The Recession

Brookings: Recessions Increase Poverty Rate, Especially For The Most Disadvantaged. According to the Brookings Institution:

As the recession ends and employment levels increase, the poverty rate will begin to steadily decrease though it will not, at least over the next decade or so, reach its 2007 level. In short, our results show that recessions can have long-term scarring effects for all workers but especially for the most disadvantaged, whose skills and attachment to the work force are already somewhat marginal. A prolonged lack of jobs reduces the amount of on-the-job training or experience that people receive, discourages them from making the effort needed to climb out of poverty, and can even lead to a deterioration in their health or family life that adversely affects opportunity.

There were 37 million people in poverty in 2007, so our results indicate that the recession would increase the number of people in poverty by about 8 million, or 22 percent. Our estimates for the increase in poverty amongst children are even more dramatic. There were about 13 million children living in poverty in 2007, and we estimate that the number of poor children could increase by at least 5 million, or 38 percent. [The Brookings Institution, 9/10/09]

  • Brookings: "The Recession Is Likely To Have A Dramatic Impact On Poverty Over The Next Several Years." According to the Brookings Institution:

According to the Census Bureau, 14.3 percent of Americans were living in poverty in 2009. For the past several years, we have performed an analysis in which we simulated what would happen to the poverty rate over the next several years based on projections of the unemployment rate and the estimated relationship between the poverty rate and the unemployment rate. provide a brief update to that analysis here. The bottom line of this analysis is that the recession is likely to have a dramatic impact on poverty over the next several years.

Our earlier simulations suggested that the overall poverty rate would increase from 12.5 percent in 2007 to nearly 16 percent by 2014 and that the child poverty rate would increase from 18 percent in 2007 to nearly 26 percent in 2014, adding about 10 million people total and 6 million children to the ranks of the poor by the middle of the current decade. Despite the fact that our simulation accurately predicted the poverty rate for 2009, we emphasize that there is a strong possibility that the estimates we present for future years are conservative for several reasons. First, both CBO and OMB estimates of future unemployment rates have become somewhat more pessimistic since last year, especially for 2012 and beyond. Second, the length of the downturn in economic activity and its impact on labor force participation are likely to further exacerbate the poverty problem. [The Brookings Institution, 9/13/11, internal citation removed]

FACT: The Recession And Its Resulting Job Losses Began Under President Bush — But President Obama's Policies Have Begun To Turn Things Around

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]

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]

Since June 2009, The Private Sector Has Gained Over 1.7 Million Net Jobs. According to Bureau of Labor Statistics data, there were 107,936,000 private-sector jobs in June 2009. As of November 2011, the most recent report available, the data show that total is up to 109,719,000 — a net gain of 1,783,000 jobs in the private sector. [BLS.gov, accessed 12/4/11]

The Private Sector Has Added Jobs For 21 Straight Months. Minority Leader Pelosi's office prepared a graph based on BLS data for monthly private sector job gains and losses:

Pelosi Jobs Chart

[DemocraticLeader.gov, 12/2/11]

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