May 23, 2011 10:52 am ET
The absurd ginned-up right-wing outrage over President Obama's reiteration of a long-standing tenet of mainstream Middle East peace plans continued on Sunday morning, even as the president drew applause from the crowd at AIPAC for repeating his call for a Palestinian state based on "the 1967 lines with mutually agreed swaps." Newt Gingrich, Sen. Mitch McConnell (R-KY) and House Intelligence Committee Chairman Mike Rogers (R-MI) each misrepresented the president's words in order to attack him. Honest conservatives were no easier to find on domestic policy issues either. McConnell joined Rep. Paul Ryan (R-WI) in claiming the House GOP budget 'saves Medicare' (although it in fact replaces the program with something utterly different) and that the White House would ration seniors' care (another falsehood). McConnell also claimed tax cuts aren't driving the debt and lied about President Obama's position on the Bush tax cuts. Meanwhile, Ryan claimed the Republican Medicare scheme polls better when you explain the details (nope), insisted Democrats haven't put forth any debt reduction plans (wrong again), and said his plan cuts $6 trillion in spending when on net it only cuts $155 billion. On CBS, Gingrich repeated an exaggeration of his record as Speaker of the House. And, not to be outdone, pizza magnate Herman Cain misled Fox viewers about the Fair Tax and claimed that failing to raise the debt ceiling would increase "market confidence," even though the market is saying the opposite.
BOB SCHIEFFER (host): The president made a big speech on the Middle East last week, what'd you think of it?
NEWT GINGRICH: I think it is a disaster. I think it is extraordinarily dangerous. I think that defining the 1967 border would be an act of suicide for Israel. They are totally non-defensible. [Face the Nation, 5/22/11]
REP. MIKE ROGERS: That was the problem about establishing those borders. Much of those borders are in place because of security concerns for Israel. And so now you have somebody who doesn't want you to exist [Hamas] who now believes the standard is the '67 borders: "I don't even have to negotiate down from there, I just get to negotiate up from there." [State of the Union, 5/22/11]
SEN. MITCH MCCONNELL: Well, he certainly I think made a mistake in this comprehensive speech about the Middle East. I mean, everybody knows that the '67 lines are just not tenable. There has been a lot of movement around in the last 44 years. Everybody knows the Palestinians are not in the end going to have a right to return. It wouldn't even be a Jewish state if that happened. Everybody knows that Jerusalem in the end is not going to be divided. So I think the old maxim that the parties to the conflict need to be the parties to the settlement still holds. The U.S. ought not be trying to push Israel into a deal that's not good for Israel. I think the president made a mistake. I think he has been sort of trying to backtrack since then, as well he should. [Fox News Sunday, 5/22/11]
President Obama: "The Borders Of Israel And Palestine Should Be Based On The 1967 Lines With Mutually Agreed Swaps." From President Obama's May 19, 2011, speech on the Middle East and North Africa: "So while the core issues of the conflict must be negotiated, the basis of those negotiations is clear: a viable Palestine, a secure Israel. The United States believes that negotiations should result in two states, with permanent Palestinian borders with Israel, Jordan, and Egypt, and permanent Israeli borders with Palestine. We believe the borders of Israel and Palestine should be based on the 1967 lines with mutually agreed swaps, so that secure and recognized borders are established for both states. The Palestinian people must have the right to govern themselves, and reach their full potential, in a sovereign and contiguous state." [President Obama Remarks, 5/19/11, emphasis added]
President Obama: "Israel Must Be Able To Defend Itself — By Itself — Against Any Threat." From President Obama's May 19, 2011, speech on the Middle East and North Africa: "As for security, every state has the right to self-defense, and Israel must be able to defend itself -- by itself -- against any threat. Provisions must also be robust enough to prevent a resurgence of terrorism, to stop the infiltration of weapons, and to provide effective border security. The full and phased withdrawal of Israeli military forces should be coordinated with the assumption of Palestinian security responsibility in a sovereign, non-militarized state. And the duration of this transition period must be agreed, and the effectiveness of security arrangements must be demonstrated." [President Obama Remarks, 5/19/11, emphasis added]
In AIPAC Address Days Later, President Obama Reaffirmed His Commitment To The 1967 Lines With Land Swaps And Explained That Position Is Long-Standing And Non-Controversial. From President Obama's May 22, 2011, speech at the American Israeli Political Affairs Committee 2011 Policy Conference:
And so, in advance of a five-day trip to Europe in which the Middle East will be a topic of acute interest, I chose to speak about what peace will require.
There was nothing particularly original in my proposal; this basic framework for negotiations has long been the basis for discussions among the parties, including previous U.S. administrations. Since questions have been raised, let me repeat what I actually said on Thursday -- not what I was reported to have said.
I said that the United States believes that negotiations should result in two states, with permanent Palestinian borders with Israel, Jordan, and Egypt, and permanent Israeli borders with Palestine. The borders of Israel and Palestine should be based on the 1967 lines with mutually agreed swaps -- (applause) -- so that secure and recognized borders are established for both states. [...]
Now, that is what I said. And it was my reference to the 1967 lines -- with mutually agreed swaps -- that received the lion's share of the attention, including just now. And since my position has been misrepresented several times, let me reaffirm what "1967 lines with mutually agreed swaps" means.
By definition, it means that the parties themselves -- Israelis and Palestinians -- will negotiate a border that is different than the one that existed on June 4, 1967. (Applause.) That's what mutually agreed-upon swaps means. It is a well-known formula to all who have worked on this issue for a generation. It allows the parties themselves to account for the changes that have taken place over the last 44 years. (Applause.) It allows the parties themselves to take account of those changes, including the new demographic realities on the ground, and the needs of both sides. The ultimate goal is two states for two people: Israel as a Jewish state and the homeland for the Jewish people -- (applause) -- and the State of Palestine as the homeland for the Palestinian people -- each state in joined self-determination, mutual recognition, and peace. (Applause.)
If there is a controversy, then, it's not based in substance. What I did on Thursday was to say publicly what has long been acknowledged privately. I've done so because we can't afford to wait another decade, or another two decades, or another three decades to achieve peace. [President Obama Remarks, 5/22/11, emphasis added]
REP. PAUL RYAN: This is as sensible and gradual as it gets. We're saying no changes for Medicare for people above the age of 55. And in order to keep the promise to current seniors who've already retired and organized their lives around this program, you have to reform it for the next generation. And the way in which we propose reforming for the next generation, it's in keeping with the Bill Clinton bipartisan commission that — to reform Medicare, it's an idea that's been around for a long time called premium support: guaranteed coverage options for Medicare where the government subsidizes the poor and the sick a whole lot more than the wealthy, and people get to choose. [...] We're being sensible, we're being rational, and we're saving this program. [Meet the Press, 5/22/11]
SEN. MITCH MCCONNELL: Well what Paul [Ryan] has done here is implement a premium support proposal at the end of the period, which is a very sensible way to go to try to save Medicare. [Fox News Sunday, 5/22/11]
Currently, Medicare Part A Pays Hospital Bills For Americans 65 And Older Who Paid Social Security Taxes For At Least 10 Years. From CNNMoney: "Medicare Part A provides coverage if you're hospitalized. This coverage is 'free' - meaning you pay no premiums - if you paid into the Social Security pool for at least 10 years [and are over age 65 or disabled]." [CNNMoney, accessed 4/24/11]
The GOP Budget Turns Medicare Into A Voucher System. From "The Path to Prosperity":
Save Medicare for current and future generations while making no changes for those in and near retirement. For younger workers, when they reach eligibility, Medicare will provide a Medicare payment and a list of guaranteed coverage options from which recipients can choose a plan that best suits their needs. These future Medicare beneficiaries will be able to choose a plan the same way members of Congress do. Medicare will provide additional assistance for lower-income beneficiaries and those with greater health risks. [The Path To Prosperity, 4/5/11, emphasis added]
Cato Institute Senior Fellow: Republican Plan Replaces Medicare With A Voucher System. In a New York Post op-ed about the "Path to Prosperity," Cato Institute senior fellow Michael Tanner wrote: "Those getting close to retirement will also still go into Medicare, just as they would have before. But beginning in 2022, people who are younger than 55 today will begin to transition to a new system. Instead of going into Medicare at age 65, they will receive a voucher from the US government to help them purchase private health insurance. Initially that voucher is expected to be for roughly $15,000 per recipient. Lower income seniors and those with higher health care costs because of illness will receive a bigger subsidy. Seniors can use these vouchers, combined with whatever they wish to spend of their own money, to choose an insurance plan that has a cost and mix of benefits that best meets their needs. Instead of a one size fits all system, seniors will have many more choices than they have today." [Tanner Op-Ed, 4/10/11, emphasis added, via Cato.org]
Creator Of "Premium Support" Payment System On GOP Proposal: "It's Vouchers, Not Premium Support." In an interview with the Washington Post's Ezra Klein, Medicare expert Henry Aaron said:
Me and Bob Reischauer jointly created the idea of 'premium-support' in the mid-1990s. It was a response to what we saw as legitimate criticisms of using market forces to rein in the growth of federal health spending. The worry was the reliable savings would come from shifting costs onto patients. The savings from competition were just something we hoped would show up. So the key element was linking the amount that individuals receive to the growth of health-care spending, not to some other index that would grow less rapidly than health-care costs. The other two elements were aggressive regulation of health-care insurance offerings to prevent insurers from overwhelming people's capacities to sift alternative plans and risk adjustment. [...] In some ways, the Path to Prosperity plan improves on previous version, because the role of exchanges and risk adjustment is nearer to what we had in mind. But it is hands down the worst because it links premiums to consumer prices, which is the slowest growing index. [...] If one does the arithmetic, income grows a few percentage points faster than prices. Health-care spending grows faster than income by a couple of percentage points. So [in the GOP's Path to Prosperity] we're looking at linking to an index that grows less rapidly than health-care costs by three to four percentage points a year. Piled up over 10 years, and that's a huge erosion of coverage. It's vouchers, not premium support." [Washington Post, 4/11/11, emphasis added]
Conservative Think Tank President: I Use The Words 'Voucher' And 'Premium Support' Interchangeably. From Kaiser Health News: "Others counter that premium support and vouchers are the same thing. 'I use the words interchangeably,' said John Goodman, president of the National Center for Policy Analysis, a conservative think tank in Dallas. 'It just means that the government limits the amount of money that it puts up, and people have to add to it if market prices are higher.' It's not surprising that Republicans favor the term premium support, as the word voucher elicits a strong negative reaction from the public. A September poll conducted by Pew Research and National Journal found that 69 percent of people older than 65 opposed vouchers for Medicare. That opposition came from both Democrats and Republicans." [Kaiser Health News, 4/4/11]
In 2022, A Typical 65-Year-Old Would Be Paying Approximately Double Compared To Current Levels. The Center on Budget and Policy Priorities prepared a graphic comparing health care spending for a typical 65-year-old under the current system to the same spending under the Republican budget:
CEPR: Ryan's Budget Would Force Seniors To Spend Much Of Their Income On Health Insurance. According to Center for Economic Policy Research co-director Dean Baker:
Representative Ryan would replace the current Medicare program with a voucher for people who turn age 65 in 2022 and later. This voucher would be worth $8,000 in for someone turning age 65 in that year. It would rise in step with the consumer price index and also as people age. (Health care expenses are higher for people age 75 than age 65.)
According to the CBO analysis the benefit would cover 32 percent of the cost of a health insurance package equivalent to the current Medicare benefit. This means that the beneficiary would pay 68 percent of the cost of this package. Using the CBO assumption of 2.5 percent annual inflation, the voucher would have grown to $9,750 by 2030. This means that a Medicare type plan for someone age 65 would be $30,460 under Representative Ryan's plan, leaving seniors with a bill of $20,700. (This does not count various out of pocket medical expenditures not covered by Medicare.)
According to the Social Security trustees, the benefit for a medium wage earner who first starts collecting benefits at age 65 in 2030 would be $32,200. (This adjusts the benefit projected by the Social Security trustees [$19,652 in 2010 dollars] for the 2.5 percent annual inflation rate assumed by CBO.) For close to 70 percent of seniors, Social Security is more than half of their retirement income. Most seniors will get a benefit that is less than the medium earners benefit described here since their average earnings are less than that of a medium earner and they start collecting Social Security benefits before age 65. [CEPR.org, 4/6/11, emphasis added, all parentheses original, internal citations removed for clarity]
CBO: Under The GOP Budget, "Most Elderly People Would Pay More For Their Health Care Than They Would Pay Under The Current Medicare System." According to the Congressional Budget Office: "Under the proposal, most elderly people would pay more for their health care than they would pay under the current Medicare system. For a typical 65-year-old with average health spending enrolled in a plan with benefits similar to those currently provided by Medicare, CBO estimated the beneficiary's spending on premiums and out-of-pocket expenditures as a share of a benchmark: what total health care spending would be if a private insurer covered the beneficiary. By 2030, the beneficiary's spending would be 68 percent of that benchmark under the proposal, 25 percent under the extended-baseline scenario, and 30 percent under the alternative fiscal scenario." [CBO.gov, 4/5/11]
If Medical Costs Continued To Increase Faster Than Voucher Values, "The Average Retiree Would Be More Than $50,000 In The Hole." According to an op-ed in the Huffington Post by R.J. Eskow, Senior Fellow with The Campaign For America's Future:
Even if the voucher is given full Medicare value in Year One (which we question), things start to get really bad after that. If medical costs continued to increase at 9% each year, which isn't at all impossible, and the voucher's value continued to increase at 5%, here's what would happen 10 years later using my figures:
By 2031, the cost of Medicare-equivalent coverage would be $73,000, and the voucher would be worth $18,000. By my calculation, the average retiree would be more than $50,000 in the hole. [Eskow Op-Ed, 4/6/11 via Huffington Post, emphasis original]
Centrist Think Tank: Despite Republican Claims, "Current Beneficiaries Are Not Protected In The Ryan Budget." According to a report from Third Way by David B. Kendall, Senior Fellow for Health and Fiscal Policy and Ryan McConaghy, Director of the Economic Program:
Despite promises to the contrary, current beneficiaries are not protected in the Ryan budget. Under the Republican proposal, traditional Medicare would quickly become second-class medicine. It would "wither on the vine," as then-House Speaker Newt Gingrich described a similar GOP effort in 1995.
The traditional Medicare plan, which covers three-fourths of today's beneficiaries, relies on its huge size to keep costs down. Doctors and hospitals are not required to participate in it, but they have little choice if they wish to treat any seniors, who are the nation's biggest health care consumers.
Fewer doctors would participate in the traditional Medicare plan if there were an alternative. The traditional plan pays physicians about 20% less than private health insurance plans. Today, that is essentially a discount for the large volume of Medicare patients. Under the Ryan budget, it would become a reason for doctors to leave the traditional plan.
By 2030, only 55% of Medicare beneficiaries would still be eligible for traditional Medicare according CBO. Actual enrollment would be less than half of Medicare beneficiaries because many seniors would continue to enroll in private health care coverage under Medicare Advantage. By 2040, traditional Medicare would have only about 20% of Medicare beneficiaries. [ThirdWay.org, 4/14/11, internal citations removed for clarity, emphasis added]
REP. PAUL RYAN: As a contrary to that, the president's plan is to give the government the power to deny care to seniors by empowering a panel of 15 unelected bureaucrats to put price controls and rationing in place for current seniors. [Meet the Press, 5/22/11]
REP. PAUL RYAN: The alternative to this, David, is a rationing scheme, are the 15 bureaucrats the president's going to appoint next year on his panel to ration Medicare spending. We don't think we should give the government the power to ration spending to seniors. [Meet the Press, 5/22/11]
SEN. MITCH MCCONNELL: Several of the president's own cabinet members who make up the trustees of Medicare and Social Security declared last week that we've got to change Medicare and change it quickly. The president would do that, too. He would do it with a board to ration health care. So, let's just stipulate that nobody is trying to throw grandma off the cliff. Medicare is in serious trouble, serious trouble, and soon. The president would ration care, which will adversely impact grandma. What Paul Ryan would do is to empower grandma in the private market, to shop and get the best possible deal. [Fox News Sunday, 5/22/11]
IPAB Cannot Ration Care, Increase Taxes, Change Benefits Or Eligibility, Or Increase Premiums And Cost-Sharing Requirements. According to the Kaiser Family Foundation: "The Board is prohibited from submitting proposals that would ration care, increase taxes, change Medicare benefits or eligibility, increase beneficiary premiums and cost-sharing requirements, or reduce low-income subsidies under Part D. Prior to 2019, the Board is also prohibited from recommending changes in payments to providers and suppliers that are scheduled to receive a reduction in their payment updates in excess of a reduction due to productivity adjustments, as specified in the health reform law." [Kaiser Family Foundation, May 2010]
FactCheck.org: "It's Wrong To Say That The Advisory Board Will Ration Care." FactCheck.org addressed Rep. Paul Ryan's (R-WI) claim that IPAB rations care:
Ryan twice warns of Obama's plan to "ration" health care for the elderly. He also says, "The greatest threat to the health security of America's seniors is the President's plan to deeply and systematically ration Medicare."
Ryan spokesman Conor Sweeney told us in an e-mail that the claim of rationing refers to funding for the Independent Payment Advisory Board created by the federal health care law. But it's wrong to say that the advisory board will ration care or that it will be run by bureaucrats, as we wrote when Sarah Palin made a similar claim.
The Patient Protection and Affordable Care Act says the advisory board "shall not include any recommendation to ration health care, raise revenues or Medicare beneficiary premiums." Also, the board isn't made up of Washington bureaucrats. The 15 voting members will be appointed by the president in consultation with congressional leaders; they must include doctors and other health care professionals, economists and health care finance experts, and representatives of consumers and seniors, as the American Medical Association explains. There will also be three non-voting members: the Health and Human Services secretary, and the administrators of the Centers for Medicare and Medicaid Services and the Health Resources and Services Administration. [FactCheck.org, 5/6/11, emphasis added]
IPAB Makes Recommendations To Reduce Growth Of Medicare Spending. According to the Kaiser Family Foundation: "The 2010 health reform law (the Patient Protection and Affordable Care Act, also referred to as the ACA) establishes a new Independent Payment Advisory Board (IPAB) with authority to issue recommendations to reduce the growth in Medicare spending, and provides for the Board's recommendations to be considered by Congress and implemented by the Administration on a fast-track basis." [Kaiser Family Foundation, April 2011]
Amount IPAB Can Cut Per Year Is Limited. According to the Center for American Progress: "Regardless of the [ACA Medicare spending] targets, the total amount that can be cut in any given year is limited; the annual limit starts at 0.5 percent of program spending for 2015, rising to 1.5 percent by 2018 and for later years. Both CBO and CMS project that Independent Payment Advisory Board-directed cuts through 2019 will be fairly small because other ACA provisions will produce most of the required savings. From 2020 on, CMS projects that no action by the new board will be required because the provider payment limits will achieve all the needed savings." [Center for American Progress, October 2010]
If Projected Spending For Medicare Doesn't Exceed The Targets The Board Makes No Recommendations. According to the Washington Post:
What if Medicare's projected spending doesn't exceed the targets?
In that case, the board isn't required to make the recommendations.
And in fact, the Congressional Budget Office in March said that is likely to be the situation for almost a decade. The CBO is expecting Medicare spending to remain below the threshold that requires action. [Washington Post, 5/8/11, emphasis original]
For much more, please read our full IPAB primer.
The GOP Budget "Would Effectively Result In More Rationing On The Basis Of Income." According to the Center on Budget and Policy Priorities:
Many future Medicare beneficiaries with modest incomes, such as elderly widows who must live on $15,000 or $20,000 a year, also would likely be hit by the plan's Medicare provisions; the Medicare voucher (or defined contribution) they would receive would fall farther and farther behind health care costs - and purchase less and less coverage - with each passing year. Aggravating this problem, Ryan has said that his plan calls for repeal of a key measure of the health reform law that is designed to moderate Medicare costs - the Independent Payment Advisory Board. In other words, his plan would scrap mechanisms to slow growth in the costs of health care services that Medicare beneficiaries need, even as it cuts back the portion of those costs that Medicare would cover.
Affluent Medicare beneficiaries surely would respond to shrinking Medicare coverage over time by buying more supplemental coverage. Those who could not afford to do so, however, would get less health care. This is another way that the Ryan health care changes would make ours more of a two-tier health care system and would effectively result in more rationing on the basis of income. [CBPP.org, 4/6/11]
Politico: GOP Budget "Will Control Costs By Requiring Seniors To Ration Themselves." From Politico: "The Ryan plan to privatize Medicare will control costs by requiring seniors to ration themselves, said Michael Tanner with the Cato Institute. 'Rationing is going to go on within the Medicare system. It's a fact of life' given financial constraints, he said. 'The question's going to be, is that decision going to be made by government and imposed top down under the current system? Ryan wants to shift that responsibility to individuals and from the bottom up.'" [Politico, 4/7/11]
SEN. MITCH MCCONNELL: We believe that we have a spending problem, not a taxing problem. We have this problem because we spend too much, not because we tax too little.
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:
CBO Estimates That Shift From Projected Surpluses To Actual Deficits Over 2002-2011 Period Includes $2.02 Trillion In Debt From Bush Tax Cuts, Including 2010 Extension. The Congressional Budget Office estimates that the Bush tax cuts of 2001 ("EGTRRA") and 2003 ("JGTRRA"), and the two-year extension of those tax rates signed by President Obama in December ("Tax Act of 2010"), added $2.02 trillion to the debt between 2002-2011. [CBO, 5/12/11]
Political Correction prepared a chart based on CBO's estimates, showing the debt impact of the Bush tax cuts, the Recovery Act, and all other policies combined over the 2002-2011 window:
SEN. MITCH MCCONNELL: And you cannot get anywhere if you start raising tax rates. Y'know, the way to grow out of this is to get the economy going, the worst thing you can do— and the president conceded that back in December, when he agreed with myself and others to continue the current tax rates.
President Obama In December: "I Completely Disagree" With Republican View On Taxes. From the president's announcement that he had reached a compromise on taxes with Republican leaders on December 6, 2010: "Ever since I started running for this office I've said that we should only extend the tax cuts for the middle class. These are the Americans who've taken the biggest hit not only from this recession but from nearly a decade of costs that have gone up while their paychecks have not. It would be a grave injustice to let taxes increase for these Americans right now. And it would deal a serious blow to our economic recovery. Now, Republicans have a different view. They believe that we should also make permanent the tax cuts for the wealthiest 2 percent of Americans. I completely disagree with this. A permanent extension of these tax cuts would cost us $700 billion at a time when we need to start focusing on bringing down our deficit. And economists from all across the political spectrum agree that giving tax cuts to millionaires and billionaires does very little to actually grow our economy." [President Obama Remarks, 12/6/10, emphasis added]
President Obama In December: Extensions Of High-End Tax Cuts, Estate Tax Cuts, Are Only Temporary. From the president's announcement that he had reached a compromise on taxes with Republican leaders on December 6, 2010:
At the same time, I'm not about to add $700 billion to our deficit by allowing a permanent extension of the tax cuts for the wealthiest Americans. And I won't allow any extension of these tax cuts for the wealthy, even a temporary one, without also extending unemployment insurance for Americans who've lost their jobs or additional tax cuts for working families and small businesses -- because if Republicans truly believe we shouldn't raise taxes on anyone while our economy is still recovering from the recession, then surely we shouldn't cut taxes for wealthy people while letting them rise on parents and students and small businesses.
As a result, we have arrived at a framework for a bipartisan agreement. For the next two years, every American family will keep their tax cuts -- not just the Bush tax cuts, but those that have been put in place over the last couple of years that are helping parents and students and other folks manage their bills.
In exchange for a temporary extension of the tax cuts for the wealthiest Americans, we will be able to protect key tax cuts for working families -- the Earned Income Tax Credit that helps families climb out of poverty; the Child Tax Credit that makes sure families don't see their taxes jump up to $1,000 for every child; and the American Opportunity Tax Credit that ensures over 8 million students and their families don't suddenly see the cost of college shooting up.
These are the tax cuts for some of the folks who've been hit hardest by this recession, and it would be simply unacceptable if their taxes went up while everybody else's stayed the same. [President Obama Remarks, 12/6/10, emphasis added]
President Obama In April On Bush Tax Cuts For The Wealthy: "I Refuse To Renew Them Again." From the president's April 13, 2011, address on debt reduction: "The fourth step in our approach is to reduce spending in the tax code, so-called tax expenditures. In December, I agreed to extend the tax cuts for the wealthiest Americans because it was the only way I could prevent a tax hike on middle-class Americans. But we cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society. We can't afford it. And I refuse to renew them again. Beyond that, the tax code is also loaded up with spending on things like itemized deductions. And while I agree with the goals of many of these deductions, from homeownership to charitable giving, we can't ignore the fact that they provide millionaires an average tax break of $75,000 but do nothing for the typical middle-class family that doesn't itemize. So my budget calls for limiting itemized deductions for the wealthiest 2 percent of Americans -- a reform that would reduce the deficit by $320 billion over 10 years." [President Obama Remarks, 4/13/11, emphasis added]
HERMAN CAIN: But I also think raising the debt ceiling is also going to be a negative against market confidence.
"Dire Warnings From Business Leaders" Of A "Market Sell-Off" If Congress Fails To Raise Debt Ceiling. From U.S. News & World Report: "Public efforts by both House Speaker John Boehner and President Obama to convince skeptical new Republican House members to add $2 trillion to the nation's burdensome $14 trillion debt ceiling are being reinforced by dire warnings from business leaders that failing to OK the increase will lead to inflation, an immediate doubling of interest rates and a killer Wall Street crash. 'If they don't increase the debt, there will be a huge impact on the economy,' a Wall Street executive told Whispers on background. 'Interest rates would spike. S&P and Moody's would downgrade U.S. debt, raising the price of borrowing, there would be a market sell-off, it would be a disaster.'" [U.S. News & World Report, 5/10/11, emphasis added]
In Letter To Congress, 62 Business Groups Including National Association Of Manufacturers Said Debt Ceiling Increase "Critical To Ensuring Global Investors' Confidence." As reported by the Wall Street Journal: "Sixty-two business groups, including the American Gas Association, the Telecommunications Industry Association, and the National Association of Manufacturers, urged congressional leaders on Wednesday to raise the federal debt ceiling amid fears that political brinkmanship could lead to another financial crisis. 'Raising the statutory debt limit is critical to ensuring global investors' confidence in the creditworthiness of the United States,' the groups wrote to Speaker of the House John Boehner (R., Ohio), House Minority Leader Nancy Pelosi (D., Calif.), Senate Majority Leader Harry Reid (D., Nev.) and Senate Minority Leader Mitch McConnell (R., Ky.). 'With economic growth slowly picking up we cannot afford to jeopardize that growth with the massive spike in borrowing costs that would result if we defaulted on our obligations. It is critically important that the United States stands fully behind its legal obligations.'" [Wall Street Journal, 5/11/11, emphasis added]
Wall Street: Failure To Raise Debt Ceiling Could Cause 10 Percent Drop In Stock Market — Worse Than Crash In 2008. As reported by U.S. News & World Report:
Among the specifics the sources say they are telling the new members:
-- Inflation could jump, though they aren't giving any percentage growth.
-- Interest rates could double if U.S. debt is downgraded. House loans, for example, that are now below 5 percent, could surge to 9-10 percent, killing any chance of fixing the housing slump or cutting the unemployment rate, now at 9 percent.
-- The stock market could suffer a 10 percent drop, far more significant than the 778 point thrashing Wall Street took when the House rejected the government's $700 billion bank bailout plan in September 2008.
"That market sell-off will look small compared to what we'll see," said a Wall Street executive. [U.S. News & World Report, 5/10/11, emphasis added]
Coming To Brink Of Default By Delaying Debt Ceiling Increase Will Damage Market Confidence In U.S. Debt As Solid Investment. The Washington Post's Ezra Klein explains:
Throughout the financial crisis, America's great advantage was its status as the single safest investment in the world. That makes it easier for us to borrow money to ease a downturn. It makes it easier for our central bank to buy bonds to keep interest rates low. It gives us tools and flexibility that, say, Greece simply doesn't have. But all of that is based on the market's perception that our debt is, indeed, a safe investment, that we will pay it back, that we won't inflate our way out of the fiscal holes we dig, that our political system will make tough decisions when necessary.
Confidence, once lost, is hard to regain. "It's like a cat who jumps on a hot stove," says Bill Gross, co-founder of Pimco. "Burn it once, and it doesn't jump back on there." [...]
Which gets to the essential irony of this whole conversation: By taking the debt ceiling hostage in a bid to address the deficit, Congress could provoke the exact calamity it's seeking to prevent. What we worry about when we worry about the deficit is that the market will lose confidence in our ability to pay back our debts and begin charging more to buy Treasuries. There's no quicker way to undercut the market's confidence in the U.S. government than for it walk up to the abyss of default. [Washington Post, 4/19/11, emphasis added]
Fed Chairman Bernanke: Even Coming Close To Default Could Harm Market Confidence. As reported by Bloomberg: "'Even if the debt is paid, there's the issue of market confidence and how the market would respond to the risk of default or even the default of non-debt obligations,' [Federal Reserve Chairman Ben Bernanke] said. 'The worst outcome would be one in which the financial system would again destabilize,' he said, adding that such an occurrence 'would have extremely dire consequences for the U.S. economy.'" [Bloomberg, 5/12/11]
Treasury Secretary Geithner: Market Confidence That Congress Will Act On Debt Ceiling Well Ahead Of Schedule Is Crucial To The Recovery. As reported by Reuters: "A delay in raising the $14.3 trillion U.S. statutory debt limit could make markets price in risks of a default and undermine economic recovery, Treasury Secretary Timothy Geithner warned lawmakers on Thursday. [...] 'I would caution everybody against taking any risk that Congress does not act to increase the limit in the time frame we need,' Geithner told the Senate Budget Committee. 'We cannot afford to let the markets lose any confidence that ultimately the Congress will act well in advance of any time that we're going to hit the limit, because that would be catastrophic, and cause grave damage to the expansion underway,' he added." [Reuters, 2/17/11, emphasis added]
CHRIS WALLACE (host): You say, abolish the IRS, abolish the income tax, and replace it with a "Fair Tax," a national sales tax of 23 percent. Now first of all, according to the way this plan is laid out, people would have to pay a national sales tax on almost every new good or services — you buy a new home, you pay a mortgage payment, you pay rent, you gotta pay a 23 percent national sales tax. You buy food, you get medical care, you gotta pay a 23 percent national sales tax. You okay with that?
HERMAN CAIN: Of course, because also say this, Chris, every time you describe it: it replaces all federal income taxes, it replaces the payroll tax. In other words, that 23 percent will collect the same amount of tax revenue from federal income taxes, corporately and personally. It'll also collect the amount of money that is being raised through the payroll tax, such that when a person gets a pay stub, you won't have a federal tax deduction, you won't have a FICA deduction. It will be included in the 23 percent that you pay. Now part two of that, in addition to being a replacement tax, not on top of anything, in addition to that there is a prebate provision that's collected in the 23 percent such that every family will get the sales tax on basic necessities, as calculated with a formula, before you have to go to the store, before you have to go to the grocery store.
Former Reagan Adviser Bruce Bartlett: 23 Percent Figure Is "A Ruse." According to former President Reagan adviser Bruce Bartlett in a report for Tax Analysts: "...I think it is reasonable to conclude that the FairTax's emphasis on the 23 percent tax-inclusive rate rather than the 30 percent tax-exclusive rate is a ruse designed solely to increase support for the proposal above what would be the case if it were generally known that the more appropriate rate assumption is 30 percent. This conclusion is reinforced by other deceptions inherent in the FairTax proposal." [Tax Analysts, 12/24/07]
Fair Tax Levy Is Actually 30 Percent. According to Businessweek: "The FairTax is like the sales taxes that many U.S. states charge, though critics contend that the way it is calculated makes it actually a 30 percent levy, not 23 percent. The 23 percent rate is set at a level designed to raise the same amount of revenue as the taxes it would replace. Yet it assumes full compliance. If experience is any guide, that's too optimistic: The current tax code, even with safeguards such as W-2 forms and automatic withholding by employers, leaks roughly $300 billion a year due to avoidance and evasion." [Businessweek, 4/7/11]
CNN: "On Its Own, A National Sales Tax Would Be Extremely Regressive." According to CNN: "On its own, a national sales tax would be extremely regressive - that is, it would tax everyone who spent everything they earned (and that's a lot of us) at 23% of their income, while those who made enough money to set some aside would, in effect, pay a lower overall rate." [CNN, 2/21/08]
Businessweek: "The Fair Tax Would Weigh Heavier On Lower-Income Households." According to Businessweek: "The FairTax would weigh heavier on lower-income households, because they spend a larger proportion of what they earn. That's why Woodall's proposal calls for a 'prebate,' a monthly advance rebate that covers the cost of the tax up to the federal poverty level. Compared with the current system, the FairTax would be a boon to the highest earners, who spend a relatively low share of their income each year and would no longer have to pay taxes on capital gains." [Businessweek, 4/7/11]
FactCheck.org: Fair Tax Would 'Make The Tax Code Less Fair.' According to a FactCheck.org analysis of 2007 Fair Tax legislation: "It will collect more money from those earning between $15,000 and $200,000 per year and less from those earning more than $200,000 per year. It is possible that the FairTax would make most people better off, but much of that gain would be a direct result of making the tax code less fair." [FactCheck.org, 5/31/07]
CNN: Under Fair Tax Scenarios, "Burden Of Taxes In Any Given Year Likely Shifts To Lower Earners." According to CNN: "'Fair' is a value judgment, but a lot of people won't think this admittedly lurid scenario sounds fair at all: Let's say a hedge fund manager has a good year and earns $1 billion. If he can somehow manage to scrape by spending, say, $100 million, the other $900 million is tax free. He'll have paid about 2% of his income in taxes that year. If those who can afford to save a large chunk of their income pay less, the burden of taxes in any given year likely shifts to lower earners." [CNN, 2/21/08]
FactCheck.org: Despite Prebate, Tax Burden On Everyone Earning $15,000 - $200,000 Would Increase. According to FactCheck.org: "With the prebate program in effect, those earning less than $15,000 per year would see their share of the federal tax burden drop from -0.7 percent to -6.3 percent. Of course, if the poorest Americans are paying less under the FairTax plan, then someone else pays more. As it turns out, according to the Treasury Department, 'someone else' is everybody earning between $15,000 and $200,000 per year. ... Those in the highest and the lowest brackets will see their share decrease, while everyone else will see their share of taxes increase." [FactCheck.org, 5/31/07]
Prebate Would Cause "Administrative Nightmares" And Not Prevent Transfer Of Tax Burden Away From Wealthy. From the New York Times:
Like any tax on consumption, the biggest burden, comparatively, would fall on the poor. To help compensate for this, the plan would provide a monthly check from the government to every American household, rich and poor alike. The rebate amount would be set to equal what a household living at the poverty level would pay in taxes, leaving some of the poor better off and cushioning the proposal's impact on the middle class.
But, apart from the administrative nightmares associated with giving every household a rebate, it would still not prevent transferring a substantial part of the current tax burden from those with annual incomes above $200,000, who tend to save a large part of their income rather than spending it, to those earning less.
"Even with the rebate counted the way FairTax supporters want it calculated," said Bruce Bartlett, a conservative tax analyst and policy maker in the Reagan administration who has emerged as one of the proposal's most powerful critics, "there would be an enormous shift in the tax burden from the wealthy to those with lower and middle incomes." [New York Times, 1/6/08, emphasis added]
Bartlett: Fair Tax Prebate Program "Would Constitute A National Welfare Program With A Flat Payment For Every American Regardless Of Need" — And That's "Absurd." According to former President Reagan adviser Bruce Bartlett in an report for Tax Analysts: "There is no income or consumption test for the rebate. It would go equally to those with zero income and those who buy nothing in the course of a month, as well as to billionaires like Warren Buffett and Bill Gates. In effect, it would constitute a national welfare program with a flat payment for every American regardless of need. [...] In any case, there is essentially no relationship between the rebate and the cost of living or raising children. It's absurd to think that a single parent with three children needs to spend no more than a childless couple to achieve the same level of poverty - which is what the rebate is based on." [Tax Analysts, 12/24/07]
Click here to read much more about the problems with the Fair Tax.
REP. PAUL RYAN: First of all, if people are describing this accurately in polls, it's far more popular than the poll you've referenced.
Washington Post-ABC News Poll: 65 Percent Oppose Replacing Medicare With Direct Government Payments, And Over 80 Percent Oppose When Told Payments Are Projected To Grow More Slowly Than Costs. As reported by Ezra Klein of the Washington Post: "You know what's not popular? Reforming Medicare such that beneficiaries "receive a check or voucher from the government each year for a fixed amount they can use to shop for their own private health insurance policy." According to a new Washington Post-ABC News poll, 65 percent of Americans oppose the idea -- about the same number who dismissed it in 1995. And if they're told that the cost of private insurance for seniors is projected to outpace the cost of Medicare insurance for seniors -- which is exactly what CBO projects -- more than 80 percent of Americans oppose the plan." [Washington Post, 4/20/11, emphasis added]
When Those Who Support Replacing Medicare With Vouchers Are Told GOP Vouchers Won't Keep Up With Costs, More Than Half Jump Ship — Bringing Total Opposition To 84 Percent. Question 20 of the April Washington Post-ABC News poll (which was posed only to the 34 percent of total respondents who favored a generic voucher program in Question 19) asked, "What if the cost of private insurance rises faster than the value of the vouchers, so seniors have to pay more of their own money for health insurance? In that case, would you support or oppose replacing Medicare with a voucher system?" 60 percent of the sub-group who were asked that question said they would oppose replacing Medicare with vouchers that do not keep pace with increasing health care costs. Factoring in Question 20, opposition to the GOP Medicare plan jumps to 84 percent overall when the proposal is fully explained. Here is the relevant section from the poll's internals:
[Washington Post-ABC News poll, 4/14-17/11]
REP. PAUL RYAN: But let me be clear, we're the only ones who put out a plan to fix this problem. We have nothing, nothing from the president or from the Senate Democrats that come anywhere close to averting a debt crisis and fixing our problem.
The House Voted On Five Budget Resolutions, Three From Democrats, In April. As reported by the Christian Science Monitor:
On Friday, the House voted on five budget plans for fiscal year 2012, each with dramatically different strategies to resolve the nation's fiscal woes. Here are details of those five plans:
- The GOP leadership plan, developed by House Budget Committee chair Paul Ryan (R) of Wisconsin, lowered both individual and corporate tax rates and capped government spending as a percentage of gross domestic product. It also significantly overhauled Medicare and Medicaid, shifting costs to individuals and the states. It passed with no Democrat votes, 235 to 193.
- Democrats on the House budget panel, led by Rep. Chris Van Hollen of Maryland, aimed to bring the budget back toward "primary balance" by fiscal year 2018 by freezing nondefense spending for five years, ending tax breaks to oil and gas industries, and not renewing the Bush-era tax cuts. It failed 166 to 259, with no Republican votes.
- GOP conservatives proposed even deeper cuts in entitlement programs: They'd increase the retirement age for Social Security to 70 and raise the eligibility age for Medicare to 67. It failed 119 to 120, with no Democratic votes. (In a last-minute maneuver, all but 16 Democrats voted "present" - a move that could have allowed the measure to defeat the more moderate Ryan proposal.)
- The Congressional Black Caucus aimed to cut deficits by nearly $3.96 trillion over 10 years, mainly by increasing revenue - ending, specifically, the Bush-era tax cuts on the wealthy. It failed 103 to 303. Seventy-five Democrats voted with all Republicans in opposition.
- The Congressional Progressive Caucus outlined the reduction of deficits by $5.7 trillion over the next 10 years, mostly by increasing taxes by some $4 trillion and cutting defense spending by $2.3 trillion. The measure failed 77 to 347, with 108 Democrats joining all Republicans in opposition. [Christian Science Monitor, 4/18/11, emphasis added]
EPI: Congressional Progressive Caucus's "People's Budget" Ends Federal Deficits By 2021. According to the Economic Policy Institute: "[T]he People's Budget would reduce primary spending by $868.9 billion, increase general revenue by $2.8 trillion, and increase payroll tax receipts by $1.2 trillion over a decade relative to the adjusted CBO baseline. [...] In total, the People's Budget would reduce deficits by $5.6 trillion over 2012-21 relative to the adjusted CBO baseline. The People's Budget is projected to turn from budget deficit to budget surplus in 2021, with a surplus of $30.7 billion ... in that year." [EPI.org, 4/13/11, emphasis added]
Well, here's a test case. Mr Miller's column notes that "the Congressional Progressive Caucus plan wins the fiscal responsibility derby thus far; it reaches balance by 2021 largely through assorted tax hikes and defense cuts." Which is pretty interesting. Have you ever heard of the Congressional Progressive Caucus budget plan? Neither had I. The caucus's co-chairs, Raul Grijalva of Arizona and Keith Ellison of Minnesota, released it on April 6th. The budget savings come from defence cuts, including immediately withdrawing from Afghanistan and Iraq, which saves $1.6 trillion over the CBO baseline from 2012-2021. The tax hikes include restoring the estate tax, ending the Bush tax cuts, and adding new tax brackets for the extremely rich, running from 45% on income over a million a year to 49% on income over a billion a year.
Mr Ryan's plan adds (by its own claims) $6 trillion to the national debt over the next decade, but promises to balance the budget by sometime in the 2030s by cutting programmes for the poor and the elderly. The Progressive Caucus's plan would (by its own claims) balance the budget by 2021 by cutting defence spending and raising taxes, mainly on rich people. Mr Ryan has been fulsomely praised for his courage. The Progressive Caucus has not. [The Economist, 4/22/11, emphasis added, parentheses original]
President Obama Announced Plan To Reduce Debt By $4 Trillion Over 12 Years Compared To Current Forecasts. As reported by the Washington Post: "President Obama entered the debate about the national debt on Wednesday after months on the sidelines, offering a plan to trim borrowing by $4 trillion over the next 12 years by combining deep cuts in military and domestic spending with higher taxes on the wealthy. In a stinging rebuke to Republican budget-cutters, Obama acknowledged that the debt must be tackled faster than he has previously proposed, but he rejected GOP calls to make fundamental changes to Medicare and Medicaid and to scale back his initiative to expand health-care coverage to the uninsured." [Washington Post, 4/13/11]
Click here for much more on Democratic proposals for reducing the debt.
REP. PAUL RYAN: House Republicans put out a plan that cut $6.2 trillion over the next 10 years to get this economy growing, to save our safety net, to guarantee health and retirement security, and to pay off our debt. [...] We've laid out $6.2 trillion in spending cuts.
CBPP: The GOP Budget Only Cuts $4.3 Trillion Compared To Current Policy, Factoring Out The Savings From President Obama's Planned Troop Withdrawals In Afghanistan And Iraq. From the Center on Budget and Policy Priorities:
The chairman claims that his plan generates $5.8 trillion in spending cuts over ten years, relative to the Congressional Budget Office (CBO) baseline. But that number falls by $1.5 trillion - to $4.3 trillion - once one corrects for two things:
§ $1.3 trillion in "savings" from the official CBO baseline that comes merely from the fact that the Ryan plan reflects the costs of current policy in Iraq and Afghanistan. The CBO baseline contains a large anomaly related to the costs of the Iraq and Afghanistan wars. Following the rules governing budget baselines, CBO's baseline mechanically assumes that current levels of U.S. operations - and costs - in Iraq and Afghanistan will continue forever rather than phasing down in accordance with current policy. The CBO baseline figures are thus much higher than the costs of current policy. Ryan himself said earlier this year on National Public Radio - in attacking President Obama's 2012 budget proposal for not doing enough to reduce deficits - that simply showing the costs of current policy in Iraq and Afghanistan produces "phantom savings" from an anomalous baseline, not real deficit reduction.
§ $200 billion in lower interest savings due to an error by Chairman Ryan's staff in calculating interest savings. [CBPP.org, 4/8/11]
$4.3 Trillion In Real Spending Cuts From GOP Budget Offset By $4.2 Trillion In Tax Cuts, Leaving $155 Billion In Real Debt Reduction. From the Center on Budget and Policy Priorities:
Even some critics of House Budget Committee Chairman Paul Ryan's budget plan have praised his 'courage' and his willingness to make 'hard choices' to address looming deficits. But, upon closer inspection, Chairman Ryan's widely reported claim that his plan produces $1.6 trillion in deficit reduction proves illusory. In fact, the numbers in his plan show that his budget produces just $155 billion in real deficit reduction over ten years (see graph).
That means that, despite proposing $4.3 trillion in what would be the most severe and wrenching budget cuts in U.S. history - two-thirds of which would come from programs for people of low or moderate incomes - the plan barely reduces deficits at all over the next decade. That's because his budget cuts are offset by $4.2 trillion in tax cuts that would go disproportionately to those at the top. In essence, at least for the next decade, this plan is far less a blueprint for addressing deficits and far more a proposal to redistribute large amounts of resources from those at the bottom to those at the top.
CBO Says That Republican Budget Would Increase Debt Over 10-Year Window. As reported by Talking Points Memo: "In addition to acknowledging that seniors, disabled and elderly people would be hit with much higher out-of-pocket health care costs, the CBO finds that by the end of the 10-year budget window, public debt will actually be higher than it would be if the GOP just did nothing. Under the so-called 'extended baseline scenario' -- a.k.a. projections based on current law -- debt held by the public will grow to 67 percent of GDP by 2022. Under the GOP plan, public debt would reach 70 percent of GDP in the same window. In other words, the spending cuts Republicans would realize in the first 10 years would be outpaced by deficit increasing tax-cuts, which Ryan also proposes. After that, debt projections under the plan improve decade-by-decade relative to current law. That's because 2022 would mark the beginning of the Medicare privatization plan. That's when, CBO finds, 'most elderly people would pay more for their health care than they would pay under the current Medicare system.'" [Talking Points Memo, 4/5/11, emphasis added]
NEWT GINGRICH: When I entered, we had 5 percent unemployment. When I left, it was drifting down below 4 percent.
PolitiFact: Gingrich Unemployment Claim "False"; Unemployment Was Above Four Percent When He Resigned The Speakership. From PolitiFact:
In January 1995, the month Gingrich took the gavel as speaker, the nation's unemployment rate was indeed 5.6 percent. The unemployment rate fell to 4.4 percent by December 1998, the month Gingrich announced he was going to resign as speaker. The rate dropped one-tenth of a percentage point by January 1999, when Gingrich resigned. Each tenth of percentage point at that time equaled about 50,000 unemployed Americans.
The unemployment rate didn't fall below 4 percent until September 2000, which was 21 months later. The lowest the unemployment rate fell during Gingrich's time as speaker was in April 1998, when it was 4.3 percent.
An e-mail to a Gingrich spokesman late Wednesday was not immediately returned.
Gingrich was correct about the unemployment rate when he became House Speaker and correct that it did go down, but he was wrong in saying it went down to 4 percent during his term as speaker. The lowest rate it hit during his tenure as speaker was 4.3 percent. He could have easily looked it up and gotten it right. We rate his claim as False. [PolitiFact.com, 5/11/11]
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