June 27, 2011 10:39 am ET
The last Sunday of June saw GOP presidential candidate Rep. Michele Bachmann (R-MN) dominate the airwaves, making the rounds on Fox News Sunday and Face the Nation. On both, Bachmann repeated lies about health care reform's effect on jobs and Medicare, sentiments echoed by Sen. Mitch McConnell (R-KY) on This Week. Bachmann and Sen. Jim DeMint (R-SC) falsely stated that even if the debt ceiling weren't raised, the country would not go into default, something most economists disagree with. On Face The Nation Bachmann falsely called the stimulus a failure and continued to baselessly blame President Obama for high gas prices. Lastly, Sen. Jon Kyl (R-AZ), fresh off his departure from the debt ceiling talks, was on Fox News Sunday to falsely claim that tax increases would hurt the economy, a claim that the previous decade proves false.
CANDY CROWLEY (Host): And I'm convinced that what you have outlined here is not going to happen between now and August 2nd. So what you're saying is I don't care if the country defaults, unless we do this I'm not voting for this.
SEN. JIM DEMINT: I do care if it defaults. But the fact is Candy, we won't. If we never raise the debt ceiling again, we are going to pay our bills, we are going to pay social security.
CROWLEY: Why does everybody say differently? Why does the Treasury Secretary say 'this is going to be catastrophic?' Why do economists say it'll shake the markets? Why don't you believe that?
DEMINT: Default will do it, but we won't default. We'll be going back to budget levels of about 8 years ago. I mean we're not talking about draconian types of situations. [State of The Union, 6/26/11]
REP. MICHELE BACHMANN: Well, first of all, it isn't true that the government would default on its debts. Because, very simply, the Treasury secretary can pay the interest on the debt first, and then from there we have to just prioritize our spending. [Fox News Sunday, 6/26/11]
REP. MICHELE BACHMANN: Well, it is scare tactics. Because, Bob, the interest on the debt isn't any more than ten percent of what we're taking in. In fact, it's less than that. And so, the Treasury Secretary can very simply, pay the interest on the debt first, then we're not in default. What it means is we have to seriously prioritize. Now, it would be very tough love. [Face The Nation, 6/26/11]
Plans To Avoid Default Without Raising Debt Ceiling Sound Good But Would Undermine Economy. From the Washington Post's Ezra Klein: "In short, [Rep. Michele Bachmann's] plan is that we don't raise the debt ceiling, but we use the revenue still coming in to pay off creditors first and whatever we think most important second. That way, we 'don't violate our credit rating' and 'prioritize our spending.' Makes perfect sense. At least, it makes perfect sense unless you, like me, had spent the previous few days talking to economists, investors and economic policymakers about what could happen if we start playing games with the debt ceiling. Their answers were across-the-board apocalyptic. If the U.S. government is so incapable of solving its political problems that it can't come to an agreement on the debt ceiling, they said, that's basically the end of the United States as the world's reserve currency. We won't be considered safe enough to serve as the investment of last resort. We would lose the most important advantage our economy has in the global financial system - and we'd probably lose it forever. Skyrocketing interest rates would slow our economy and, in real terms, make it even harder to pay back our debt, which would in turn send interest rates going even higher. It's an economic death spiral we associate with third-world countries, not with the United States." [Washington Post, 4/20/11, emphasis added]
Zandi: High Investor Confidence In Long-Term Value Of U.S. Debt Is "Cornerstone" Of Global Economy. As reported by Ezra Klein of the Washington Post: "'The cornerstone of the global financial system is that the United States will make good on its debt payments,' says Mark Zandi, chief economist at Moody's Analytics. 'If we don't, we've just knocked out the cornerstone, and the system will collapse into turmoil.' 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." [Washington Post, 4/19/11, emphasis added]
Even Without Default, Delay In Debt Ceiling Hike Could Harm Economic Recovery. As reported by the Fiscal Times: "The government will bump up against the $14.3 trillion annual debt ceiling sometime around mid-May. The Treasury Department has a number of accounting and borrowing strategies that can postpone running out of cash for several additional months. And that has many of the business economists who monitor events in Washington fretting that the fragile economic recovery -estimates for economic growth in the just concluded first quarter are being ratcheted down to as low as 1.5 percent - could be aborted if Republican leaders in Congress and the White House engage in three months of brinkmanship before reaching an accord." [Fiscal Times, 4/19/11, emphasis added]
A sell-off of government bonds along the lines already pursued by PIMCO, whose founder, Bill Gross, said he exited the U.S. Treasury market earlier this year, would depress bond prices and raise rates, which go up when bond prices go down. "Bond traders are a spooky bunch," said Steve Bell, a budget analyst at the Bipartisan Policy Center who spent years on Capitol Hill as well as 10 years trading bonds for the now defunct Salomon Brothers.
"If they start playing games with the debt ceiling like passing a number of short-term extensions, you'll see people exiting the market despite their desire for safety."
He estimated failure to increase the debt ceiling could raise long-term rates by 1 ½ to 2 percentage points over the next six months. "Housing is flat on its back now," Bell said. "Could you imagine what would happen if small and medium-sized businesses had to pay 2 to 3 percentage points more, or credit card debt or the rate you pay for your car went up. It seeps into every type of economic activity. It would cause a double dip." [Fiscal Times, 4/19/11, emphasis added]
"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]
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]
REP. MICHELE BACHMANN: It will hurt senior citizens because Obama took away $500 Billion, as you say, from Medicare and will transfer it to younger people in Obamacare. [Fox News Sunday, 6/26/11]
SEN. MITCH MCCONNELL: We know that the Democrats are willing to reduce Medicare. Obamacare cut Medicare by half a trillion dollars. [This Week, 6/26/11]
FactCheck.org: Cost Saving Provisions "Not A Slashing Of The Current Medicare Budget Or Benefits." According to FactCheck.org: "Whatever you want to call them, it's a $500 billion reduction in the growth of future spending over 10 years, not a slashing of the current Medicare budget or benefits. It's true that those who get their coverage through Medicare Advantage's private plans (about 22 percent of Medicare enrollees) would see fewer add-on benefits; the bill aims to reduce the heftier payments made by the government to Medicare Advantage plans, compared with regular fee-for-service Medicare. The Democrats' bill also boosts certain benefits: It makes preventive care free and closes the 'doughnut hole,' a current gap in prescription drug coverage for seniors." [FactCheck.org, 3/19/10]
New England Journal Of Medicine: The Affordable Care Act Phases Out "Substantial Overpayments" To Medicare Advantage Plans. From the New England Journal of Medicine:
A phased elimination of the substantial overpayments to Medicare Advantage plans, which now enroll nearly 25% of Medicare beneficiaries, will produce an estimated $132 billion in savings over 10 years. [...]
The ACA also produces nearly $200 billion in savings by assuming that providers can improve their productivity as firms in other industries have done. On the basis of this presumed improvement, the law reduces Medicare's annual "market basket" updates for most types of providers - a provision that has generated controversy. [New England Journal of Medicine, 7/8/10]
Health Care Reform "Will Keep Paying Medical Bills For Seniors." According to PolitiFact.com: "The government-run Medicare program will keep paying medical bills for seniors, but it will begin implementing cost controls on health care providers, mostly through penalties and incentives. The legislation would reduce payments for hospital-acquired infections or preventable hospital admissions. For Medicare Advantage, the federal government intends to reduce extra payments, taking away subsidies to private insurance companies. Insurers will likely cut benefits in order to not lose profits. The bill does not address the 'doctor's fix,' an expected proposal that Congress usually passes to prevent doctors' Medicare payments from severe cuts." [PolitiFact.com, 3/18/10, emphasis in original]
Medicare Trustees Report Shows Affordable Care Act Extends The Life Of Medicare. According to the Huffington Post:
The Medicare trust fund will last eight years longer than it would have without the passage of last year's health care law, the program's trustees announced Friday in a report.
The nonpartisan lead actuary for Medicare, Rick Foster, estimated that without the health care overhaul, the program's trust fund would have run dry by 2016. With the law in effect, Foster projected, the trust fund will last through 2024. [...]
Health and Human Services Secretary Kathleen Sebelius highlighted the boost reform gave to Medicare. "Over the next 75 years, Medicare's Hospital Insurance costs are projected to be about 25 percent lower due to the new law," she said in a statement. "And without the historic deficit reduction in the Affordable Care Act, Medicare would have gone bankrupt in 2016 -- only five years from now." [Huffington Post, 5/13/11]
Foster: Affordable Care Act Extends The Life Of Medicare By Eight Years. In an interview with Slate's David Weigel, Richard Foster, the chief actuary of the Centers for Medicare & Medicaid, said: "Under current law...including the Affordable Care Act, we're estimating that the trust fund would be exhausted in 2024. In the absence of the savings under the Affordable Care Act, a corresponding date of exhaustion would be 2016. So the Affordable Care Act, in the new projection, postpones the exhaustion by eight years. That's down from 12 years in last year's projection." [Slate, 5/16/11]
REP. MICHELE BACHMANN: This is the Obama deficit, Obama debt, due to Obama spending. And President Obama is overspending by 1.5 trillion this year and we can't do that. People know that the spending is what's causing the trouble in this country.
Read about Rep. Bachmann's repeated attempts to blame President Bush's FY 2009 deficit on President Obama here and here. The Republican logic on debt ignores the bottom line: the policies that are driving our debt today came from the Bush White House.
Before Obama Took Office, The FY 2009 Deficit Was Projected At $1.2 Trillion. As reported by the Washington Times: "The Congressional Budget Office announced a projected fiscal 2009 deficit of $1.2 trillion even if Congress doesn't enact any new programs. [...] About the only person who was silent on the deficit projection was Mr. Bush, who took office facing a surplus but who saw spending balloon and the country notch the highest deficits on record." [Washington Times, 1/8/09, emphasis added]
When President Bush Took Office, The National Debt Was $5.727 TRILLION. As reported by CBS News: "But what Mr. Bush didn't mention, and what he almost never mentions, is the National Debt. With good reason. On the day he took office, the National Debt stood at this unfathomable number: $5,727.776.738,304.64 In fiscal shorthand, that's $5.7 trillion dollars. Trillion with a 'T.'" [CBSNews.com, 6/16/07]
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:
Conservative Cato Institute: Assertion That Obama Exploded Deficits "Is Largely Untrue" Because Most 2009 Spending Was Done By Bush Administration. From the Cato Institute's Cato-At-Liberty blog: "In addition to being theoretically misguided, critics sometimes blame Obama for things that are not his fault. Listening to a talk radio program yesterday, the host asserted that Obama tripled the budget deficit in his first year. This assertion is understandable, since the deficit jumped from about $450 billion in 2008 to $1.4 trillion in 2009. [...] But there is one rather important detail that makes a big difference. The chart is based on the assumption that the current administration should be blamed for the 2009 fiscal year. While this makes sense to a casual observer, it is largely untrue. The 2009 fiscal year began October 1, 2008, nearly four months before Obama took office. The budget for the entire fiscal year was largely set in place while Bush was in the White House. So is [sic] we update the chart to show the Bush fiscal years in green, we can see that Obama is partly right in claiming that he inherited a mess (though Obama actually deserves a small share of the blame for Bush's last deficit since earlier this year he pushed through both an "omnibus" spending bill and the so-called stimulus bill that increased FY2009 spending)." [Cato-At-Liberty.org, 11/19/09, emphasis added]
REP. MICHELE BACHMANN: President Obama, again, he put—he spent a trillion-dollar stimulus program that's been an abject failure.
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]
There Have Been 15 Consecutive Months Of Private-Sector Job Growth. Below is a graph prepared by the Office of the Democratic Leader showing monthly private-sector job gains and losses:
[Office of the Democratic Leader, 6/3/11, via Flickr]
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]
March 2011: Private Sector Added 230,000 Jobs. According to the Bureau of Labor Statistics, the economy added 230,000 private sector jobs in March. [BLS.gov, accessed 4/4/11]
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]
CBO: The Recovery Act Created Jobs, Lowered Unemployment, And Boosted GDP. According to the nonpartisan Congressional Budget Office:
CBO estimates that ARRA's policies had the following effects in the third quarter of calendar year 2010:
- They raised real (inflation-adjusted) gross domestic product by between 1.4 percent and 4.1 percent,
- Lowered the unemployment rate by between 0.8 percentage points and 2.0 percentage points,
- Increased the number of people employed by between 1.4 million and 3.6 million, and
- Increased the number of full-time-equivalent (FTE) jobs by 2.0 million to 5.2 million compared with what would have occurred otherwise. (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, November 2010]
Princeton, Moody's Economists Say "Highly Effective" Government Response To Crisis Saved 8.5 Million Jobs. According to the New York Times: "Like a mantra, officials from both the Bush and Obama administrations have trumpeted how the government's sweeping interventions to prop up the economy since 2008 helped avert a second Depression. Now, two leading economists wielding complex quantitative models say that assertion can be empirically proved. In a new paper, the economists argue that without the Wall Street bailout, the bank stress tests, the emergency lending and asset purchases by the Federal Reserve, and the Obama administration's fiscal stimulus program, the nation's gross domestic product would be about 6.5 percent lower this year. In addition, there would be about 8.5 million fewer jobs, on top of the more than 8 million already lost; and the economy would be experiencing deflation, instead of low inflation. The paper, by Alan S. Blinder, a Princeton professor and former vice chairman of the Fed, and Mark Zandi, chief economist at Moody's Analytics, represents a first stab at comprehensively estimating the effects of the economic policy responses of the last few years. 'While the effectiveness of any individual element certainly can be debated, there is little doubt that in total, the policy response was highly effective,' they write." [New York Times, 7/27/10, emphasis added]
New York Times: April Jobs Numbers Show "The Largest Gain In Four Years." According to the New York Times: "The Labor Department's monthly snapshot of the job market, released on Friday, showed that employers added 290,000 jobs in April - the largest gain in four years - and that they did so across a broad swath of industries. The United States has now added jobs for four consecutive months." [New York Times, 5/7/10]
AP: "The Nation's Economy Posted Its Largest Job Gain In Three Years In March." According to the Associated Press: "The nation's economy posted its largest job gain in three years in March, while the unemployment rate remained at 9.7 percent for the third straight month. The increase is the latest sign that the economic recovery is sustainable and healing in the job market is beginning." [Associated Press, 4/2/10, via ABC]
CBO: The American Recovery And Reinvestment Act Has Created Up To 2.4 Million American Jobs. According to CNNMoney: "The Congressional Budget Office attributes between 800,000 to 2.4 million jobs and 1.2 to 3.1 percentage points of economic growth to stimulus." [CNNMoney, 1/13/10]
REP. MICHELE BACHMANN: When you told the American people that if we borrow a trillion dollars from other countries and spend it on a stimulus that we won't have unemployment go above eight percent and today when it's 9.1 percent and the economy is tanking, that is what's serious. That's a very serious statement that the president made. Did he mislead the American people? Not only did he mislead the American people, he's caused our economy to go down to depths that we haven't seen.
"Not An Official Government Assessment, Nor Even An Analysis Of An Actual Plan That Had Passed Congress." From a Washington Post fact check of a similar claim by Tim Pawlenty:
Pawlenty is referring to a projection issued on Jan. 9, 2009 - before Obama even took the oath of office - by two aides: Christina Romer, the nominee to head the Council of Economic Advisers, and Jared Bernstein, an incoming economic adviser to Vice President-elect Biden.
The 14-page report thus was not an official government assessment, nor even an analysis of an actual plan that had passed Congress. Instead, it was an attempt to assess the impact of a possible $775 billion stimulus package and what difference it would make compared to doing nothing. The president-elect had articulated a goal of passing a plan that would "save or create 3 million jobs by the end of 2010."
Page 5 of the report included a chart that showed that unemployment would peak at 8 percent in 2009, compared to 9 percent in 2010 if nothing was done. But the report also contained numerous caveats and warnings because, after all, it was merely a projection. At the time, other economists had similar forecasts - Romer and Bernstein were in the mid-range - but the economy turned out to be in deeper trouble than most people thought. [Washington Post, 5/26/11]
Economists: Slowed Job Growth Is A Temporary "Soft Patch." From the Huffington Post: "Economists still believe the lull in activity will be temporary. They cite high gasoline prices, bad weather and disruptions to motor vehicle production because of a shortage of parts from Japan as factors weighing on growth. 'It is clear we have temporarily entered a soft patch,' said Christopher Probyn, chief economist at State Street Global Advisors in Boston, before the report. 'Nobody knows how soft and how long, but the best case view is that the fundamentals of the recovery remain intact and the economy will re-accelerate in the second half of the year.'" [Huffington Post, 6/3/11]
Economist: "Soft Spot" Is "Not Necessarily An Indication That This Economy Is Not Going To Be Able To Create A Whole Lot Of Jobs Going Forward." During a PBS interview, economist Joel Naroff of Naroff Economic Advisors stated:
We had been moving along at a pretty solid pace. Indeed, businesses were adding jobs at a rate that was much more than any of us had expected coming into the year. But the speed bump that the higher gasoline prices has created has caused businesses to ask the question, is this recovery going to pick up the kind of speed that they were hoping it would, and if not, do they really needs the jobs right now?
So, I think what they're starting to do is basically say: I'm going to hold off a little while, see if the gasoline prices come back, see if people start spending again, and, if we do have that pickup that would come with the lower gas prices, then we can start hiring once again.
I think this is a soft spot, but necessarily -- not necessarily an indication that this economy is not going to be able to create a whole lot of jobs going forward. [PBS, 6/3/11, emphasis added]
REP. MICHELE BACHMANN: I will tell you, we have one of the highest corporate tax rates in the world. We need to drop that significantly so that we have a pro-business, pro-job creation environment. So if we cut back the corporate tax rate, if we would zero out the capital gains rights and offer 100 percent expensing when a job creator buys equipment for their business, that would go a long way toward job creators realizing that this is a pro-business environment. But right now, businesses are looking at the uncertainty.
Effective Tax Rates Are Lower Than Statutory Rates. In its 2009 report on global taxation, the World Bank wrote: "The key point to recognise is that it is not simply the statutory rate of corporate income tax that is important here, but also the effective tax rate for current corporate income tax, taking into account all the additions and deductions to profit before tax that tax rules may require." ["Paying Taxes 2009: The Global Picture," World Bank, 11/10/08]
American Companies Pay Lower Effective Tax Rate Than German, Canadian, Chinese, Italian, And Other Companies. In its 2009 report on global taxation, the World Bank wrote:
As noted in Chapter 1, reducing the statutory rate of corporate income tax has been the most popular government tax reform in the period. However in most of the economies, the case study company does not pay corporate income tax at the statutory rate on its profit before tax, since the tax rules require adjustments to be made to this in order to calculate taxable profits. A common example is to substitute tax depreciation for commercial amortisation of assets.
The effective rate of current corporate income tax can be defined as the actual rate of corporate income tax paid as a percentage of profit before tax. Figure 2.7 compares this effective rate with the statutory rate of corporate income tax for the G8 and BRIC (Brazil, Russia, India and China) economies, and shows that the two are often not the same...
["Paying Taxes 2009: The Global Picture," World Bank, 11/10/08; in-text citation removed for clarity]
CBPP: U.S. Corporations Pay Lower Taxes Than Average For Developed Economies. According to the Center for Budget and Policy Priorities: "The U.S. corporate tax burden is smaller than average for developed countries. Corporations in 19 of the member states of the Organization for Economic Co-operation and Development paid 16.1 percent of their profits in taxes between 2000 and 2005, on average, while corporations in the United States paid 13.4 percent." [CBPP.org, 10/27/08; in-text citation removed for clarity]
2009: General Electric Earned A $1.1 Billion Tax CREDIT Despite $10.3 BILLION In Pre-Tax Income. According to Forbes: "As you work on your taxes this month, here's something to raise your hackles: Some of the world's biggest, most profitable corporations enjoy a far lower tax rate than you do--that is, if they pay taxes at all. The most egregious example is General Electric. Last year the conglomerate generated $10.3 billion in pretax income, but ended up owing nothing to Uncle Sam. In fact, it recorded a tax benefit of $1.1 billion. Avoiding taxes is nothing new for General Electric. In 2008 its effective tax rate was 5.3%; in 2007 it was 15%. The marginal U.S. corporate rate is 35%." [Forbes, 4/1/10; emphasis added]
REP. MICHELE BACHMANN: We need to open those up so we can bring down the price of gasoline at the pump. The President has it exactly wrong when it comes to energy.
Due To "Globally Integrated Nature Of The World Oil Market" Drilling In America Would "Not Have A Large Impact On Prices" Long Term. According to Richard Newell, Administrator of the Energy Information Administration in the U.S. Department of Energy: "Long term, we do not project additional volumes of oil that could flow from greater access to oil resources on Federal lands to have a large impact on prices given the globally integrated nature of the world oil market and the more significant long-term compared to short-term responsiveness of oil demand and supply to price movements. Given the increasing importance of OPEC supply in the global oil supply-demand balance, another key issue is how OPEC production would respond to any increase in non-OPEC supply, potentially offsetting any direct price effect." [EIA.DOE.gov, 3/17/11]
Drilling In ANWR Would See Peak Oil Production Around 2030 But Would Only Lower Prices By "Perhaps About One Percent." According to Richard Newell, Administrator of the Energy Information Administration in the U.S. Department of Energy: "Based on this timetable and the assumption that the largest ANWR fields would be the first to go into production, peak ANWR oil production could occur around 2030 at about 700,000 to 800,000 barrels per day. In this scenario, the greatest impact on crude oil prices could occur 9 around peak ANWR production with oil prices projected to be perhaps about one percent lower as a result." [EIA.DOE.gov, 3/17/11]
EIA Study Concludes That "Gas Prices Might Drop A Whopping 3 Cents A Gallon" If Areas Currently Closed To Drilling Were Opened. According to CNN:
According to a 2009 study from the government's Energy Information Administration, opening up waters that are currently closed to drilling off the East Coast, West Coast and the west coast of Florida would yield an extra 500,000 barrels a day by 2030.
The world currently consumes 89 million barrels a day, and by then would likely be using over 100 million barrels.
After OPEC got done adjusting its production to reflect the increased American output, gas prices might drop a whopping 3 cents a gallon, the study said. [CNN.com, 4/25/11]
Increased Drilling Will Benefit Highest Earners But "Will Have Hardly Any Impact On Gas And Oil Prices." According to CNN:
The problem is this: While increased oil and gas drilling in the United States may create good-paying jobs, reduce reliance on foreign oil and lower the trade deficit, it will have hardly any impact on gas and oil prices.
That's because the amount of extra oil that could be produced from more drilling in this country is tiny compared to what the world consumes.
Plus, any extra oil the country did produce would likely be quickly offset by a cut in OPEC production. [CNN.com, 4/25/11, internal citations removed]
Conservative AEI Scholar: At 100 Percent Production, "We Probably Couldn't Produce Enough To Affect The World Price Of Oil." Ken Green, resident scholar with the conservative American Enterprise Institute, told the New York Times: "'The world price is the world price,' Green said. 'Even if we were producing 100 percent of our oil,' he said, if prices increase because of a shortage in China or India, 'our price would go up to the same thing. We probably couldn't produce enough to affect the world price of oil,' Green added. 'People don't understand that.'" [NYTimes.com, 1/4/11]
"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 6/27/11]
Gas Prices 2000-March 2011
[Data from EIA.DOE.gov, accessed 3/13/11]
SEN. JIM DEMINT: We need to do something that significantly lowers spending in the short term. The second point—cap spending— is to put some controls on spending in the long term and guide it towards a balanced budget; which is the ultimate goal, is to pass a balanced budget amendment, allow states to ratify it, and then 5 years after its ratified it takes effect. And then like 49 states, every year we have to make those hard decisions and balance the budget.
Politifact: Impossible To Say How Many States Have Absolutely Binding Budget Requirements. According to Politifact Texas:
The report also shows a tabulation of states' balanced-budget provisions kept by the National Association of State Budget Officers that takes a narrower view of which states require a balanced budget.
According to the NCSL report, the association surveyed balanced-budget requirements in 2008, tallying which states require the governor to submit a balanced budget (43 total) and which require the legislature to pass a balanced budget (40). Thirty-eight states prohibit carrying deficits from one year to the next. We found 41 states have constitutional provisions requiring the governor to submit a balanced budget or the legislature to pass one, and five states that have a statutory requirement.
So that's 46 states, by the National Association of State Budget Officers' count, that have balanced budget requirements as a matter of law. However, as Snell said, "it's almost impossible to say" for how many states the balanced budget mandate is "an absolutely binding requirement."
Where does that leave us?
Only two states — not 49, as Cornyn says — have amended their constitutions to require balanced budgets. Counting amendments plus provisions tucked into original constitutions, however, 45 states have balanced-budget stipulations, according to NCSL's count. NASBO considers 46 states to have constitutional or statutory balanced-budget requirements.
Also, despite the letters of those statutory and constitutional strictures, they aren't universally viewed as mandatory. [Politifact.com, 12/25/10]
REP. MICHELE BACHMANN: Even worse, the Congressional Budget Office is saying we will lose 800,000 jobs with Obamacare.
AP Fact Check: Job Loss Number Cited By GOP "A Story Of How Statistics Get Used And Abused." From the Associated Press:
[The GOP] cites the 650,000 lost jobs as Exhibit A, and the nonpartisan Congressional Budget Office as the source of the original analysis behind that estimate. But the budget office, which referees the costs and consequences of legislation, never produced the number.
What follows is a story of how statistics get used and abused in Washington.
What CBO actually said is that the impact of the health care law on supply and demand for labor would be small. Most of it would come from people who no longer have to work, or can downshift to less demanding employment, because insurance will be available outside the job.
"The legislation, on net, will reduce the amount of labor used in the economy by a small amount -roughly half a percent- primarily by reducing the amount of labor that workers choose to supply," budget office number crunchers said in a report from last year.
That's not how it got translated in the new report from Speaker John Boehner, R-Ohio, and other top Republicans.
CBO "has determined that the law will reduce the 'amount of labor used in the economy by roughly half a percent,' an estimate that adds up to roughly 650,000 jobs lost," the GOP version said.
Gone was the caveat that the impact would be small, mainly due to people working less.
[Associated Press, 1/18/11, emphasis added]
CBO Director Elmendorf Previously Testified That Health Care Reform Reduces The Supply Of Labor, Not Jobs. From the video linked by Rep. Ryan of CBO Director Douglas Elmendorf testifying before the House Budget Committee:
REP. JOHN CAMPBELL (R-CA): ...First on health care before I get to broader issues. You just mentioned that you believe or that in your estimates, that the health care law would reduce the labor used in the economy by about one half of one percent. Given that I believe you say there's 160 million full-time people working in 2021 that means that in your estimation, the health care law reduce employment by 800,000 in 2021. Is that correct?
ELMENDORF: Yes, the way I would put it, is we do estimate, as you said, that the household employment will be about 160 million by the end of the decade. Half a percent of that is 800,000. That means that if the reduction in the labor used was workers working the average number of hours in the economy, and earning the average wage, that there will be a reduction of 800,000 workers. In fact, as we mentioned in our analysis last summer, the legislation also creates some incentives that might affect the number of hours people worked, it might affect the propensity to work of lower and higher income people. We haven't tried to quantify those things, but the impact is that the 800,000 might not be exactly the number, but it is equivalent of withdrawing 800,000.
[House Budget Committee hearing via YouTube.com, 2/10/11]
CBO Report Says Health Care Law Will "Reduce The Amount Of Labor That Workers Choose To Supply." From a CBO report discussing the health care law:
The Congressional Budget Office (CBO) estimates that the legislation, on net, will reduce the amount of labor used in the economy by a small amount — roughly half a percent — primarily by reducing the amount of labor that workers choose to supply.
[CBO, The Budget and Economic Outlook: An Update, August 2010, emphasis added]
PolitiFact Rated Claim That Health Care Reform Kills Jobs "False." From PolitiFact.com's fact check of House Majority Leader Eric Cantor's claim that the health care law is "job killing":
Republicans have used the "job-killing" claim hundreds of times -- so often that they used the phrase in the name of the bill. It implies that job losses will be one of the most significant effects of the law. But they have flimsy evidence to back it up.
The phrase suggests a massive decline in employment, but the data doesn't support that. The Republican evidence is extrapolated from a report that was talking about a reduction in the labor supply rather than the loss of jobs, or based on measures that weren't included in the final health care law. We rate the statement False. [PolitiFact.com, 1/19/11]
McClatchy: "Saying That The Law Is A Job Killer Doesn't Necessarily Make It One." According to McClatchy:
Republicans have titled their effort to overturn the law the "Repealing the Job-Killing Health Care Law Act," and that's their favorite talking point against it. The House of Representatives will start debate on repeal Tuesday and probably vote Wednesday.
Saying that the law is a job killer doesn't necessarily make it one, however, and independent experts say that such a conclusion is at least premature, if not unfounded.
"The claim has no justification," said Micah Weinberg, a senior research fellow at the centrist New America Foundation's Health Policy Program. [McClatchy, 1/17/11]
REP. MICHELE BACHMANN: Well let's be clear. The Ryan budget is really the 55 and under plan. People need to recognize no one over 55 will be touched.
"Path To Prosperity" Reopens Medicare "Doughnut Hole," Forcing Millions Of Seniors To Pay Higher Drug Costs "Immediately." From the National Journal: "[T]he GOP is doubling down on the idea that today's seniors won't be affected. That's partly true. Ryan's plan to convert Medicare into a limited insurance subsidy, the most controversial aspect of the budget, wouldn't take effect until 2022. But the proposal would also repeal last year's health care law, which means reopening a coverage gap in Medicare's prescription-drug benefit that the statute closed. The gap, commonly called the "doughnut hole," requires seniors to pay 100 percent of any prescription costs after the annual total reaches $2,840 and until it hits $4,550. Those who spend more or less have at least three-quarters of the costs covered. Under the 2010 health law, Medicare will pay 7 percent of the cost of generic drugs and 50 percent on name-brand pharmaceuticals; by 2020, the doughnut hole will be closed. If Congress were to pass Ryan's plan and repeal the law, as House Republicans want, the 3 million to 4 million seniors left in the doughnut hole each year would immediately face significant out-of-pocket costs." [National Journal, 6/3/11, emphasis added]
Once Republican Voucher Program Begins In 2022, Healthy Seniors Still On "Traditional" Medicare Would Have Incentive To Leave Which Would Endanger The Program For Less-Healthy Beneficiaries. From the National Journal: "The policies in the House GOP budget, if enacted, would begin affecting millions of seniors almost immediately by increasing their costs for prescription drugs and probably long-term care. Further, Medicare costs could rise over time if healthier seniors choose to abandon the traditional benefit program. [...] The plan to grandfather traditional Medicare for those older than 55 could also have negative consequences for current seniors: In 2022, when the limited-subsidy program would be introduced, seniors who qualified for traditional Medicare would be allowed to switch to the new program. If healthier or younger beneficiaries make the change to lower their out-of-pocket costs, those still participating in Medicare would be part of an insurance pool that is less healthy and more expensive. To cover those higher per-person costs, Medicare might well be forced to either raise premiums or limit reimbursements to health care providers-which could prompt many to stop taking Medicare patients." [National Journal, 6/3/11]
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]
9 Million Seniors Receive Medicaid As Well As Medicare. From the National Journal: "Some 9 million seniors qualify for both Medicare and Medicaid benefits, and about two-thirds of all nursing-home residents are covered by Medicaid." [National Journal, 6/3/11]
GOP Budget Cuts $744 Billion From Medicaid Over The Next Decade. From the National Journal: "Perhaps more jolting, the Republican budget would cut spending on Medicaid-health care for the poor-much of which goes to long-term care for the elderly. [...] The GOP budget proposes cutting some $744 billion from Medicaid over 10 years by turning the system into block grants that limit federal contributions and give states more choice in structuring benefits. No one knows exactly which Medicaid services states would choose to cut back, but senior citizens account for a disproportionate share of Medicaid outlays and would almost certainly bear some of the burden." [National Journal, 6/3/11, emphasis added]
CHRIS WALLACE (Host): It would take away, that's for the voucher plan.
REP. MICHELE BACHMANN: It's not a voucher plan.
WALLACE: We can talk about that, it's a premium support; a lot of people say that's the same thing.
BACHMANN: But it's not.
CBO: GOP's "Path To Prosperity" Budget Would Provide "A Typical 65-Year-Old ... $8,000 In 2022" To Buy Health Insurance. According to the Congressional Budget Office's analysis of the GOP "Path to Prosperity": "After assessing the total costs that would be incurred for a typical 65-year-old, CBO estimated the government's share and the beneficiary's share of those costs under the proposal and under CBO's long-term scenarios. The proposal would set the premium support payment for a typical 65-year-old at $8,000 in 2022, approximately equal to government spending on the average 65-year-old beneficiary in Medicare under the extended-baseline scenario in that year." [CBO.gov, 4/5/11]
Cato Institute Senior Fellow: Republican Medicare Plan Is 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]
SEN. JON KYL: Most economists agree that in times of economic downturn like this, the last thing you want to do is to add more taxes onto the economy.
Bloomberg News: "Give The Wealthiest Americans A Tax Cut And History Suggests They Will Save The Money Rather Than Spend It." According to Bloomberg News: "Give the wealthiest Americans a tax cut and history suggests they will save the money rather than spend it. Tax cuts in 2001 and 2003 under President George W. Bush were followed by increases in the saving rate among the rich, according to data from Moody's Analytics Inc. When taxes were raised under Bill Clinton, the saving rate fell. The findings may weaken arguments by Republicans and some Democrats in Congress who say allowing the Bush-era tax cuts for the wealthiest Americans to lapse will prompt them to reduce their spending, harming the economy. President Barack Obama wants to extend the cuts for individuals earning less than $200,000 and couples earning less than $250,000 while ending them for those who earn more." [Bloomberg News, 9/14/10]
Lower Taxes Have Not Resulted In Economic Growth. As the Center for American Progress's Michael Linden explains:
>The top marginal income tax rate has ranged all the way from 92 percent down to 28 percent over the last 60 years. With such a large range, it should be easy to see the enormous impact of lower rates on overall economic growth, as conservatives routinely claim. Years with lower marginal rates should boast higher growth, right?
That's definitely not what happened. In fact, growth was actually fastest in years with relatively high top marginal tax rates. Back in the 1950s, when the top marginal tax rate was more than 90 percent, real annual growth averaged more than 4 percent. During the last eight years, when the top marginal rate was just 35 percent, real growth was less than half that.
[Center for American Progress, 6/20/11]
New York Times: "Research Suggests That Tax Cuts... Have Limited Ability To Bolster The Flagging Economy." According to the New York Times: "The concept of lower taxes is so appealing to voters that many embrace them as an economic cure-all. But economic research suggests that tax cuts, though difficult for politicians to resist in election season, have limited ability to bolster the flagging economy because they are essentially a supply-side remedy for a problem caused by lack of demand. The nonpartisan Congressional Budget Office this year analyzed the short-term effects of 11 policy options and found that extending the tax cuts would be the least effective way to spur the economy and reduce unemployment. The report added that tax cuts for high earners would have the smallest 'bang for the buck,' because wealthy Americans were more likely to save their money than spend it." [New York Times, 9/11/10]
CBO: Among Eleven Proposals To Spur Economic Growth, Cutting Income Taxes Ranks Last. Below is a chart created by the Congressional Budget Office to show the "cumulative effects of policy options on employment in 2010 and 2011":
[Congressional Budget Office, 2/23/10]
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