March 14, 2011 9:50 am ET
Natural disasters nearly crowded out political chatter on the Sunday talk shows, but conservative guests dutifully plugged talking points into the spaces between stories about leaking reactors and coastal devastation in Japan. Sens. Mitch McConnell (R-KY) and Jon Kyl (R-AZ) are still clinging to the notion that the Recovery Act didn't lead to the current economy recovery, and each man blamed President Obama for the spike in gas prices that's followed recent political turmoil in the Middle East. McConnell also claimed the government's done nothing to address entitlement costs, although the Affordable Care Act took a number of steps to reign in the health care spending that's darkening our fiscal horizon. Sen. Saxby Chambliss (R-TN) falsely insisted that tax cuts increase revenues on Fox News Sunday, while Gov. Mitch Daniels (R-IN) misled Meet the Press viewers about Gov. Scott Walker's (R-WI) campaign rhetoric.
SEN. MITCH MCCONNELL (R-KY): Well if government spending would create jobs we'd be in the middle of a boom because we've added $3 trillion to the national debt in the last two years with these government stimulus efforts, so, cutting spending and job creation are not mutually exclusive. [Fox News Sunday, 3/13/11]
SEN. JON KYL (R-AZ): What didn't work was the stimulus. We spent almost a billion dollars [sic] to try to quickly create jobs. You remember the shovel-ready projects, turned out they weren't ready, we didn't create jobs. [State of the Union, 3/13/11]
The Economy Shed Almost 8 Million Jobs Under Republican Policies Before The Recovery Act Could Affect The Economy. According to economist Robert J. Shapiro:
From December 2007 to July 2009 - the last year of the Bush second term and the first six months of the Obama presidency, before his policies could affect the economy - private sector employment crashed from 115,574,000 jobs to 107,778,000 jobs. Employment continued to fall, however, for the next six months, reaching a low of 107,107,000 jobs in December of 2009. So, out of 8,467,000 private sector jobs lost in this dismal cycle, 7,796,000 of those jobs or 92 percent were lost on the Republicans' watch or under the sway of their policies. Some 671,000 additional jobs were lost as the stimulus and other moves by the administration kicked in, but 630,000 jobs then came back in the following six months. The tally, to date: Mr. Obama can be held accountable for the net loss of 41,000 jobs (671,000 - 630,000), while the Republicans should be held responsible for the net losses of 7,796,000 jobs. [Sonecon.com, 8/10/10, emphasis added]
Based on Shapiro's research, the Washington Post's Ezra Klein created the following chart showing net job losses before and after the Recovery Act was enacted:
[Washington Post, 8/12/10]
Since July 2009, Private Sector Has Moved Steadily From Monthly Job Losses To Monthly Job Gains. Below is a chart of Bureau of Labor Statistics data prepared by Political Correction showing monthly job gains and losses in the private sector, shaded blue for months after Recovery Act spending began to impact the economy, purple for months after President Obama's inauguration but before his policies could affect the economy, and red for months of job losses under Bush-era policies.
CBO: The Recovery Act Created Jobs, Lowered Unemployment, And Boosted GDP. According to the nonpartisan Congressional Budget Office:
On that basis, CBO estimates that ARRA's policies had the following effects in the fourth quarter of calendar year 2010:
- They raised real (inflation-adjusted) gross domestic product (GDP) by between 1.1 percent and 3.5 percent,
- Lowered the unemployment rate by between 0.7 percentage points and 1.9 percentage points,
- Increased the number of people employed by between 1.3 million and 3.5 million, and
- Increased the number of full-time-equivalent jobs by 1.8 million to 5.0 million compared with what would have occurred otherwise, as shown in Table 1. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers). [CBO, February 2011]
February 2011: Private Sector Added 222,000 Jobs. According to the Bureau of Labor Statistics, the economy added 222,000 private sector jobs in February. [BLS.gov, accessed 3/6/11]
The Private Sector Has Added 1.5 Million Jobs Over 12 Consecutive Months Of Job Growth. Minority Leader Pelosi's office prepared a chart based on Bureau of Labor Statistics data for monthly private sector job gains and losses:
CHRIS WALLACE (HOST): Question: Is President Obama to blame for rising gas prices?
SEN. MITCH MCCONNELL (R-KY): Well he's certainly participated because in spite of what you just heard him say, production is up slightly, principally because of actions taken by the previous administration, but this administration the past two years has been shutting down wells. [Fox News Sunday, 3/13/11]
SEN. JON KYL (R-AZ): By the way, gas prices have doubled under Obama. And one of the reasons is because he has not issued drilling permits including in the Gulf. [State of the Union, 3/13/11]
"Oil Prices, Already Climbing As The World Economy Grew, Soared When Unrest Hit The Mideast And North Africa." As reported by the Kansas City Star: "Oil prices, already climbing as the world economy grew, soared when unrest hit the Mideast and North Africa. [...] The federal Energy Information Administration said Monday that Libyan oil production was down as much as 90 percent. The country contributes about 2 percent of the world's oil supply and little to the United States. But the agency said that the longer Libyan supplies were disrupted, the more it could affect the United States. Countries scrambling for replacement barrels could make for tighter supplies. The fear of more supply disruptions by itself has been enough to cause oil prices to soar, especially because of worry that the unrest could spread to Saudi Arabia. It has most of the world's surplus oil production capacity and provides the United States with 10 percent of its oil. 'We'll have a risk premium for the next six months to a year because of what's going on in the Mideast,' said James Williams, an analyst for WTRG Economics." [Kansas City Star, 3/7/11, emphasis added]
At End Of 2008, Gas Prices Fell To Their Lowest Point Since February 2004. According to data from the Department of Energy, the average price of gas in the U.S. fell from just over $4.00 per gallon in July 2008 to $1.59 per gallon on December 29, 2008. The national average per-gallon price of gas had not been as low as $1.59 since February 2, 2004, the data show. [EIA.DOE.gov, accessed 3/13/11]
Recession Drove Rapid Decline In Gas Prices. As reported by CNNMoney.com in 2008: "If there's one bright spot in a bad economy, it's that gasoline prices have fallen, and they're expected to drop even further. As the global economy falters, demand for oil has dropped. And since the price of oil makes up about half of the cost of a gallon of gas, analysts see more relief ahead at the pump. ... The national average price for a gallon of regular, unleaded gasoline fell 2.4 cents to $3.480 from $3.504, according to a daily survey released Tuesday by AAA. That's down 18% from an all-time high of $4.114 a gallon hit on July 17." [CNNMoney.com, 10/7/08]
Gas Prices Have Risen During Obama's Term, But Only From Recession-Fueled Lows Back To Normal. Two graphs of gas prices over time show that while prices appear to shoot upward if one looks only at 2008-2011 numbers, the longer view confirms that prior to political upheaval in the Middle East, prices had in fact returned to normal after falling dramatically during the recession:
Gas Prices 2008-Present
[EIA.DOE.gov, accessed 3/13/11]
Gas Prices 2000-Present
[Data from EIA.DOE.gov, accessed 3/13/11]
SEN. MITCH MCCONNELL (R-KY): Over and above that, we have over $50 trillion in commitments we've made that we cannot keep on entitlement programs, very popular programs like Social Security, Medicare, Medicaid. We aren't doing anything to bend the curve. Raising the debt ceiling is the perfect opportunity to do something important about the subject being raised by raising the debt ceiling, which is our debt.
While Social Security Costs Are Barely Growing, Health Care Cost Growth Threatens To Explode Medicare, Medicaid Spending. According to former Budget Director Peter Orszag: "The numbers speak for themselves. The Medicare and Social Security trustees' reports released this week show that health-care costs drive our long-term entitlement problem. An example illustrates the point: If costs per enrollee in Medicare and Medicaid grow at the same rate over the next four decades as they have over the past four, those two programs will increase from 5% of GDP today to 20% by 2050. Despite the attention often paid to Social Security, spending on that program rises much more modestly -- from 5% to 6% of GDP -- over the same time period. Over the long run, the deficit impact of every other fiscal policy variable is swamped by the impact of health-care costs." [Orszag Op-Ed via Wall Street Journal, 5/15/09]
2008 GAO Report: "Health Care Spending Is The Principal Driver" Of Long Term Deficits. According to the GAO:
Long-term fiscal simulations by GAO, the Congressional Budget Office (CBO), and others all show that despite a decline in the federal government's unified budget deficit between fiscal years 2003 and 2007, it still faces large and growing structural deficits driven primarily by rising health care costs and known demographic trends. Simply put, the federal government is on an unsustainable long-term fiscal path. Although Social Security is important because of its size, over the long term health care spending is the principal driver--Medicare and Medicaid are both large and projected to continue growing rapidly in the future. Rapidly rising health care costs are not simply a federal budget problem. Growth in health-related spending is the primary driver of the fiscal challenges facing state and local governments as well. Unsustainable growth in health care spending also threatens to erode the ability of employers to provide coverage to their workers and undercuts their ability to compete in a global marketplace. Public and private health care spending continues to rise because of several key factors: (1) increased utilization of new and existing medical technology; (2) lack of reliable comparative information on medical outcomes, quality of care, and cost; and (3) increased prevalence of risk factors such as obesity that can lead to expensive chronic conditions. [GAO.gov, 6/17/08, emphasis added]
After One-Time Spending Increase In 2014, Costs Grow More Slowly Under The Affordable Care Act Than They Would Without Reform. According to the Washington Post's Ezra Klein:
[W]e're covering about 10 percent of the country and increasing spending growth by 0.2 percent. Seems like a good deal to me. But it's actually a better deal than that. Here's what the cost curve -- or maybe I should say cost line -- looks like:
What you're seeing here isn't the cost curve bending up. It's a one-time increase in the level of spending. That's the big jump in 2014, the year the exchanges and subsidies come online. So when you compare 2014 to 2013, spending growth seems like it's gone up a bunch. But by 2016, we're back to normal. In fact, we're better than normal [according to a September CMS report]: "For 2015-19, national health spending is now projected to increase 6.7 percent per year, on average -- slightly less than the 6.8 percent average annual growth rate projected in February 2010."
In other words, 2014 is a one-time increase in spending level as we get 30 million new people covered. After 2014, costs grow more slowly than they would without the health-care reform bill. [Washington Post, 9/10/10, emphasis added, parentheses added]
Affordable Care Act "Includes Most Of The Steps That We Know How To Take Now To Reduce" Health Care Spending And Funds Research On Cost-Saving Innovations. According to Robert Greenstein, Executive Director of the Center on Budget and Policy Priorities: "Over the long run, the largest contribution to deficit reduction likely will need to come from slowing the rate of growth of health care costs throughout the U.S. health care system, in the public and private sectors alike. But major savings probably are not achievable in this area in the next five or ten years. Health reform includes most of the steps that we know how to take now to reduce expenditures in these areas. (That's how the ACA can generate modest deficit reduction while extending coverage to 32 million people.) Health reform also contains an extensive array of demonstration projects, pilots, and research to test and identify cost-saving reforms in health care delivery and payment systems, which could eventually produce substantial savings throughout the health care system. But these reforms will take time to identify, test, and then institute on a broad scale. While these reforms offer the potential for large and growing savings in future decades, they offer little realistic hope of large savings before 2020." [CBPP.org, 2/14/11, emphasis added, parentheses original]
SEN. SAXBY CHAMBLISS (R-GA): Every time we've made a significant reform in the tax code, whether it was under Reagan in '86 or Bush in 2001, what we've seen is reduction in rates and increase in revenues.
CBO: The Bush Tax Cuts Reduced Revenue. According to the Congressional Budget Office: "The baseline envisions that major provisions of EGTRRA and JGTRRA-such as the introduction of the 10 percent tax bracket, increases in the child tax credit, repeal of the estate tax, and lower rates on capital gains and dividends-will expire as scheduled at the end of 2010. On balance, the tax provisions that are set to expire during the 2008-2017 period reduce revenues; thus, under a scenario in which they were extended, projected revenues would be lower than the amount in the current baseline." [Congressional Budget Office, January 2007]
Wall Street Journal: Bush Tax Cuts Return Less Than 10% Of Their Cost In Added Tax Revenue From Economic Growth. In a 2006 editorial, the Wall Street Journal wrote: "The congressional Joint Committee on Taxation, using conventional analyses, says making the president's tax cuts permanent would reduce federal revenues in 2016 by $314 billion. That is more than 10 times what the Treasury analysis suggests tax cuts would generate by prompting more hours of work, more savings and investment and more efficient use of resources." [Wall Street Journal, 7/11/06]
Time: "If There's One Thing That Economists Agree On, It's That These Claims Are False." According to Time: "If there's one thing that Republican politicians agree on, it's that slashing taxes brings the government more money... If there's one thing that economists agree on, it's that these claims are false. We're not talking just ivory-tower lefties. Virtually every economics Ph.D. who has worked in a prominent role in the Bush Administration acknowledges that the tax cuts enacted during the past six years have not paid for themselves--and were never intended to. Harvard professor Greg Mankiw, chairman of Bush's Council of Economic Advisers from 2003 to 2005, even devotes a section of his best-selling economics textbook to debunking the claim that tax cuts increase revenues." [Time, 12/6/07, emphasis added]
FactCheck.org: "Highly Misleading" To Say Tax Cuts Increase Revenues. According to FactCheck.org: "Republican presidential candidate Sen. John McCain has said that the major tax cuts passed in 2001 and 2003 have 'increased revenues.' He also said that tax cuts in general increase revenues. That's highly misleading. In fact, the last half-dozen years have shown us that we can't have both lower taxes and fatter government coffers. The Congressional Budget Office, the Treasury Department, the Joint Committee on Taxation, the White House's Council of Economic Advisers and a former Bush administration economist all say that tax cuts lead to revenues that are lower than they otherwise would have been - even if they spur some economic growth. And federal revenues actually declined at the beginning of this decade before rebounding." [FactCheck.org, 6/11/07; emphasis added]
The Joint Committee on Taxation estimated that the 2001 tax legislation (the Economic Growth and Tax Relief Reconciliation Act) would cause government revenues to be 107.7 billion less than they would have been in the absence of the legislation in 2004, 107.4 billion less in 2005 and 135.2 billion less in 2006. The committee's estimates for the effect of the Jobs and Growth Tax Relief Reconciliation Act of 2003 were that it would reduce otherwise projected revenues by 148.7 billion in 2004, 82.2 billion in 2005 and 20.7 billion in 2006. The JCT makes its comparisons against the Congressional Budget Office's receipts baselines. [FactCheck.org, 6/11/07]
2006: Bush's Chief Economic Adviser Conceded Tax Cuts Do Not Pay For Themselves. In testimony to the Senate Budget Committee, Council of Economic Advisers Chairman Edward Lazear testified: "Will the tax cuts pay for themselves? As a general rule, we do not think tax cuts pay for themselves. Certainly, the data presented above do not support this claim." [Senate Budget Committee Hearing, 9/28/06, via WhiteHouse.Archive.gov]
American Enterprise Institute (AEI) Economist: "There's No Evidence" That Bush Tax Cuts "Come Anywhere Close" To Paying For Themselves. In 2006, the Washington Post asked former Bush economist and AEI Resident Scholar Alan Viard if the Bush tax cuts paid for themselves: "Economists said Bush was claiming credit where little is due. The economy has grown and tax receipts have risen at historic rates over the past two years, but the Bush tax cuts played a small role in that process, they said, and cost the Treasury more in lost taxes than it gained from the resulting economic stimulus. 'Federal revenue is lower today than it would have been without the tax cuts. There's really no dispute among economists about that,' said Alan D. Viard, a former Bush White House economist now at the nonpartisan American Enterprise Institute. 'It's logically possible' that a tax cut could spur sufficient economic growth to pay for itself, Viard said. 'But there's no evidence that these tax cuts would come anywhere close to that.'" [Washington Post, 10/17/06, emphasis added]
Architect Of Bush Tax Cuts: Tax Cuts Without Budget Offsets Are Really "Future Taxes." According to Bloomberg: "You won't find a truer believer in the big tax cuts of the George W. Bush era than Glenn Hubbard, the 51-year-old economist who is dean of Columbia Business School. The Republican academic was instrumental in designing the tax cuts, first as a Bush campaign insider and then as the president's first chief economic adviser. The idea behind the cuts, enacted in 2001 and 2003, was to encourage work, savings, and investment, thus stimulating long-term economic growth. Hubbard is especially proud of the 2003 cut in taxes on dividends and capital gains, which he calls 'the most pro- growth tax reform that anybody did since Kennedy.' Now that the Bush tax cuts are up for renewal -- they expire on Dec. 31 unless Congress acts -- Hubbard has a queasy feeling about them, Bloomberg Businessweek reports in its Aug. 8 issue. The cuts, he says, have been undermined by years of deficits. Until the trajectory of spending changes, he says, 'deficits are just future taxes. You're just talking about taxes today vs. taxes tomorrow.'" [Bloomberg.com, 8/5/10, emphasis added]
Harvard Economist: Chief Republican Arguments For Cutting Taxes Are "Both Wrong." In a paper titled "Snake-Oil Tax Cuts," Harvard professor Jeffery Frankel wrote:
For years, the Republican approach to economic policy has pretty much boiled down to this message: The right response to all problems is cutting taxes. To bolster this message, they rely heavily on two arguments. On the one hand, they say, cutting taxes will increase tax revenues by generating economic growth, thus raising tax revenue and building a surplus. (This is known as the Laffer Hypthesis). On the other hand, Republicans claim, tax cuts are good because they create deficits and force the government to shrink itself. (A colloquial term for this is Starve the Beast).
The arguments are not only mutually exclusive - the weight of the economic evidence also shows that they're both wrong. The habit of Republican policymakers to invoke each of them at different points in time (or before different audiences) is politically convenient but logically dishonest. It smacks of a particularly desperate defense attorney arguing both that "my client didn't have a gun" (Laffer) and "he shot in self-defense" (Starve the Beast).
Neither proposition accurately describes US economic history, nor provides a sound basis for future economic policy. That is, choosing either proposition would harm the long-term health of the US economy. ["Snake-Oil Tax Cuts," 9/8/08, via Harvard.edu, emphasis added]
Ezra Klein: "In The Real World, Tax Cuts And Spending Increases Have The Exact Same Affect On The Budget Deficit." According to the Washington Post's Ezra Klein: "What's remarkable about Kyl's position here is that it appears to be philosophical. 'You should never have to offset cost of a deliberate decision to reduce tax rates on Americans,' he said. Never! This is much crazier than anything you hear from Democrats. Imagine if some Democrat -- and a member of the Senate Democratic leadership, no less -- said that as a matter of principle, spending should never be offset. He'd be laughed out of the room. Back in the real world, tax cuts and spending increases have the exact same affect on the budget deficit." [Washington Post, 7/12/10]
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:
CHUCK TODD (HOST): There were massive protests about these--this battle in Wisconsin, Republican Governor Scott Walker. He has won the legislative battle. He got what he wanted, he passed this. You made a decision on similar legislation. It wasn't quite with collective bargaining with public employees. This had to do with a right-to-work legislation, and you said something interesting. You said you chose not to pick this fight because you didn't campaign on it. And you believed if you hadn't made a case to voters about right-to-work legislation that you shouldn't be trying to do it once you've— in office and in the legislative session. Governor Walker, do you think, loses the political fight here?
GOV. MITCH DANIELS (R-IN): I have no way of knowing. I think the taxpayers of Wisconsin won. Seems to me that he committed to do the sorts of things he's trying to do, and we oughta— agree or disagree with people, we oughta respect them when they do try to live up to their words.
TODD: But he didn't campaign on the, on the collective bargaining aspect of this. He campaigned on asking public employees to contribute more, but he didn't campaign on that aspect.
PolitiFact: "False" That Gov. Walker Campaigned On Proposal To End Collective Bargaining For Public Workers. According to PolitiFact.com:
There is no dispute that Walker campaigned on getting concessions on health and pension benefits from state employees. And, to be sure, that is an important part of the measure.
But for Walker to be right, he has to be correct on the entirety of the plan. [...]
For this item, we reviewed dozens of news accounts and various proposals on Walker's campaign website to determine what he said about collective bargaining during the campaign. We talked to both campaigns in the governor's race, and union officials. [...]
Walker contends he clearly "campaigned on" his union bargaining plan.
But Walker, who offered many specific proposals during the campaign, did not go public with even the bare-bones of his multi-faceted plans to sharply curb collective bargaining rights. He could not point to any statements where he did. We could find none either.
While Walker often talked about employees paying more for pensions and health care, in his budget-repair bill he connected it to collective bargaining changes that were far different from his campaign rhetoric in terms of how far his plan goes and the way it would be accomplished.
We rate his statement False. [PolitiFact.com, 2/21/11, emphasis added]
PolitiFact: Gov. Walker Campaigned On Limited, Specific Changes To Bargaining Process - Not The Sweeping Change He's Proposing Now. According to PolitiFact.com:
He told the Appleton Post-Crescent in a lengthy question and answer session in 2009 that "you've got to free up local government officials to not be strangled by things like mediation and arbitration." As his website made clear, he was talking about a specific, significant change in teacher's union arbitration -- not the dramatic changes on the table now.
As the campaign rolled near a close, in late October 2010, Walker told the Oshkosh Northwestern that he would "ask all state workers" for wage and benefit concessions in the collective bargaining process.
After the election, he proposed imposing concessions without negotiating and eliminating benefits as a topic of collective bargaining. [PolitiFact.com, 2/21/11, emphasis added]
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