Political Correction

Fact Checking The Sunday Shows - August 14, 2011

August 15, 2011 10:18 am ET

Following Saturday's straw poll in Ames, Iowa, this week's Sunday political talk shows had a whole lot of straw poll winner Rep. Michele Bachmann (R-MN). Bachmann was on all five shows misrepresenting the rationale behind Standard & Poor's decision to lower the United States' credit rating and repeating the false claim that no Republicans had been "threatening default." She also pushed the debunked claim that the stimulus caused government to grow while the private sector lost jobs. With Bachmann dominating the bulk of time on all the shows, few others got time to speak, leaving Bachmann the sole focus of this week's fact check.

CLAIM: Rep. Bachmann Claimed Overspending Alone Caused The Downgrade

REP. MICHELE BACHMANN: And the real problem in all of this is the overspending. And the worry that S&P has, that we might not be able to pay our debt. Now, again, I have to remind you—

CANDY CROWLEY (HOST): But S&P says differently, that's all I—

BACHMANN: But— but—

CROWLEY: Their cause of the downgrade was this debate...

BACHMANN: A debate?

CROWLEY: Well, it's the— no, getting to the brink of default, and that we were even voices that thought, hey, what the heck? [State of the Union, 8/14/11]

REP. MICHELE BACHMANN: So then in April, we heard from Standard & Poor's, and they said, look, if you don't get your act together, we could potentially see a downgrading of the credit rating. The next day the treasury secretary went out and said there is no risk of us losing our AAA credit rating. So the president has known all along what could happen, and they essentially put their hands up in front of their eyes and said it would never happen. It did happen, because you can't spend money you don't have. People all across the country have been trying to get the attention of Washington. We can't spend money we don't have. We have to start paying our bills. That's what Standard & Poor's is telling us. Get your act together, like any homeowner would have to do, like any business would have to do, and that's what the federal government has to do. Stop playing with other people's money and get your act together, and they aren't doing that. [Fox News Sunday, 8/14/11]

FACT: S&P's Report Blames Political Dysfunction, Use Of "The Threat Of Default" As "Political Bargaining Chips" For Decision To Downgrade

S&P: "We Lowered Our Long-Term Rating" Because Of "The Prolonged Controversy Over Raising The Statutory Debt Ceiling." From Standard & Poor's: "We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. [...]The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy." [Standard & Poor's, 8/5/11, emphasis added]

National Journal: "It's Hard To Read The S&P Analysis As Anything Other Than A Blast At Republicans." From the National Journal: "To be sure, S&P didn't specifically single out Republicans. It criticized the overall $2.4 trillion deal as too limited, and it implicitly criticized both political parties for refusing to tackle their sacred cows - entitlements, in the case of Democrats; tax increases in the case of Republicans. But it's hard to read the S&P analysis as anything other than a blast at Republicans.  In denouncing the threat of default as a 'bargaining chip,' the agency was saying that the GOP strategy had shaken its confidence.  Though S&P didn't mention it, the agency must have been unnerved by the number of Republicans who insisted that it would be fine to blow through the debt ceiling and provoke a default." [National Journal, 8/6/11, emphasis added]

S&P's "Rationale" Section Cites Failure Of Long Public Debate To Produce Comprehensive Plan That Includes New Revenues. From the "Rationale" section of the Standard & Poor's report: "Despite this year's wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge, and, as we see it, the resulting agreement fell well short of the comprehensive fiscal consolidation program that some proponents had envisaged until quite recently. Republicans and Democrats have only been able to agree to relatively modest savings on discretionary spending while delegating to the Select Committee decisions on more comprehensive measures. It appears that for now, new revenues have dropped down on the menu of policy options. In addition, the plan envisions only minor policy changes on Medicare and little change in other entitlements, the containment of which we and most other independent observers regard as key to long-term fiscal sustainability." [Standard & Poor's, 8/5/11, emphasis added]

S&P: Republican Intransigence On Taxes Makes Permanent Extension Of Bush Tax Cuts More Likely, Which Would Be "Consistent With" Downgraded Rating. From S&P: "Under our revised base case fiscal scenario--which we consider to be consistent with a 'AA+' long-term rating and a negative outlook--we now project that net general government debt would rise from an estimated 74% of GDP by the end of 2011 to 79% in 2015 and 85% by 2021. Even the projected 2015 ratio of sovereign indebtedness is high in relation to those of peer credits and, as noted, would continue to rise under the act's revised policy settings. Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act." [Standard & Poor's, 8/5/11, emphasis added]

National Journal: Downgrade Based "On The Political Game Of Chicken...That Republicans Initiated And Pushed To The Limit." From the National Journal: "The big new element on Friday was an official outside recognition that U.S. creditworthiness is being undermined by a new factor: political insanity. S&P didn't base its downgrade on a change in the U.S. fiscal and economic outlook. It based it on the political game of chicken over the debt ceiling, a game that Republicans initiated and pushed to the limit, and on a growing gloom about the partisan deadlock.  Part of S&P's gloom, moreover, stemmed explicitly from what a new assessment of the GOP's ability to block any and all tax increases. S&P was remarkably blunt that its downgrade was mostly about heightened political risks:  'The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed,' it said." [National Journal, 8/6/11, emphasis added]

S&P Senior Director: Decision To Downgrade Partly Because "People In The Political Area Were Even Talking About Potential Default." According to an article in Politico citing S&P Senior Director Joydeep Mukherji:

A Standard & Poor's director said for the first time Thursday that one reason the United States lost its triple-A credit rating was that several lawmakers expressed skepticism about the serious consequences of a credit default - a position put forth by some Republicans.

Without specifically mentioning Republicans, S&P senior director Joydeep Mukherji said the stability and effectiveness of American political institutions were undermined by the fact that "people in the political arena were even talking about a potential default," Mukherji said.

"That a country even has such voices, albeit a minority, is something notable," he added. "This kind of rhetoric is not common amongst AAA sovereigns." [Politico.com, 8/11/11]

Bachmann's Claim That Standard & Poor's Downgrade Proved She Was Right Received A "False" Rating From PolitiFact. According to PolitiFact:

Another official with Standard & Poor's, director Joydeep Mukherji, told POLITICO that the stability of American political institutions were undermined by the fact that "people in the political arena were even talking about a potential default." He didn't mention who those people were. "That a country even has such voices, albeit a minority, is something notable," he added. "This kind of rhetoric is not common amongst AAA sovereigns."

As to which political party was in the right, the ratings agency did not explicitly tip its hand. The report said it took no position on whether taxes should be raised or spending should be cut. 

In the Fox News interview, Chambers was asked if the tea party movement was responsible for the downgrade as Democrats alleged. He declined to take the bait and assign blame. 

"I think that there's lots of blame to go around, and what we need to come to in the United States is a way of forging consensus, so that we can take the tough choices that lie ahead, because the fiscal situation in the United States is not sustainable," he said.

Bachmann said that when Standard & Poor's "dropped our credit rating, what they said is, we don't have an ability to repay our debt. That's what the final word was from them. I was proved right in my position. I was proved right in my position." 

In fact, because the debt ceiling was raised, the United States is paying its debts. What Standard & Poor's actually said was that politicians in Washington can't agree on long-term solutions for how to reduce the debt -- not that the country is or was unable to pay its debts. The notion that the report supported her position is wishful thinking. For that, we rate her statement False. [PolitiFact.com, 8/12/11]

CLAIM: Rep. Bachmann Claimed That Only Government Jobs Increased Due To The Stimulus

REP. BACHMANN: Government grew exponentially from the stimulus while private businesses were closing their doors and letting people off in real America. It's real America that needs to have their voice, not Washington. Let's listen to real America--that's what I'm trying to do--and bring their voice to the White House. [Meet The Press, 8/14/11]

REP. BACHMANN: Well, I think the one thing we have to do is reject the new normal level of spending under the Obama administration. Because President Obama amped up spending to never seen before levels. Should we accept that we should just continue that on? I mean, one example I'll give you is we had one employee at the Federal Department of Transportation that made $170,000 a year at the beginning of the recession. We had the trillion-dollar stimulus, and 18 months into the recession, we had 1,690 employees making over $170,000. Government has really been growing, a lot of largesse, but the people in the real world aren't. And that's what has to change. Government has no conformity at all with the real world. [Fox News Sunday, 8/14/11]

FACT: While The Private Sector Grows, The Public Sector Continues To Lay Off Thousands Every Month

Since Summer 2009, The Private Sector Has Added Jobs While The Public Sector Has Shrunk. Political Correction prepared a chart based on Bureau of Labor Statistics data showing cumulative job gains and losses in the public and private sectors since summer 2009 (click to enlarge):

click to enlarge

[BLS.gov, accessed 8/14/11; BLS.gov, accessed 8/14/11]

Since June 2009, The Private Sector Has Gained Over One Million Net Jobs. According to Bureau of Labor Statistics data, there were 107,936,000 private-sector jobs in June 2009. As of July 2011, the most recent report available, the data show that total is up to 109,156,000 — a net gain of 1,220,000 jobs in the private sector. [BLS.gov, accessed 8/14/11]

Since June 2009, The Public Sector Has Lost 523,000 Net Jobs. According to Bureau of Labor Statistics data, there were 22,557,000 jobs in the government sector in June 2009. As of July 2011, the most recent report available, the data show 22,034,000 government jobs — a net loss of 523,000. [BLS.gov, accessed 8/14/11]

BLS: The Private Sector Added 2.1 Million Jobs From February 2010 To April 2011. According to the Bureau of Labor Statistics: "Total nonfarm payroll employment increased by 244,000 in April, and the private sector added 268,000 jobs. Employment rose in a number of service-providing industries, manufacturing, and mining. Since a recent low in February 2010, total payroll employment has grown by 1.8 million. Private sector employment has increased by 2.1 million over the same period." [BLS.gov, 5/6/11]

The Private Sector Has Added Jobs For 17 Straight Months. Minority Leader Pelosi's office prepared a graph based on BLS data for monthly private sector job gains and losses:

[DemocraticLeader.gov, 8/5/11]

FACT: The Economy Shed Millions Of Jobs During The Bush Recession Until President Obama's Policies Began To Turn Things Around

The Economy Shed Almost 8 Million Jobs Under Republican Policies Before The Recovery Act Could Affect The Economy. According to economist Robert J. Shapiro:

From December 2007 to July 2009 - the last year of the Bush second term and the first six months of the Obama presidency, before his policies could affect the economy - private sector employment crashed from 115,574,000 jobs to 107,778,000 jobs. Employment continued to fall, however, for the next six months, reaching a low of 107,107,000 jobs in December of 2009. So, out of 8,467,000 private sector jobs lost in this dismal cycle, 7,796,000 of those jobs or 92 percent were lost on the Republicans' watch or under the sway of their policies. Some 671,000 additional jobs were lost as the stimulus and other moves by the administration kicked in, but 630,000 jobs then came back in the following six months. The tally, to date: Mr. Obama can be held accountable for the net loss of 41,000 jobs (671,000 - 630,000), while the Republicans should be held responsible for the net losses of 7,796,000 jobs. [Sonecon.com, 8/10/10, emphasis added]

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 Post8/12/10]

PolitiFact: "True" That "Most Job Losses" Happened Before Obama Policies Took Effect. According to PolitiFact'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, 10/27/10, emphasis added]

Meet the Press

CLAIM: Rep. Bachmann Claimed No Republicans Were "Threatening Default"

REP. MICHELE BACHMANN: He's the one who threatened default. Not me. Not Republicans. I didn't see Republicans threatening default. I saw the president threatening default.

FACT: Several Republicans Said They Would Let The Country Default

Sen. Pat Toomey Endorsed Stanley Druckenmiller's Point That "Technical Default" Would Be "Disruptive" But Won't Leave A Lasting Impact. According to Talking Points Memo:

At an event at the conservative American Enterprise Institute Wednesday morning, Sen. Pat Toomey (R-PA) laid out the case. "This problem is so urgent that there is -- an alternative school of thought has emerged recently," Toomey said. "The most high-profile advocate for this was Stanley Druckenmiller ... one of the world's most successful hedge-fund managers, extraordinarily wealthy from his knowledge of the markets, a big money manager now, and a big holder of Treasury securities -- and he has said that he would actually accept even a delay in interest payments on the Treasuries that he holds. And he would prefer that if it meant that the Congress would right this ship." [...]

"It [default] is very disruptive, I don't think it's going to have an adverse impact on the economy for the days or weeks or perhaps even months that this would continue," he said. "I doubt it would be that long. I doubt that it would be disruptive to the economy per se. But it would be disruptive, certainly, to the people who are accustomed to and relying on the programs that would necessarily be cut."

The Obama administration has rejected Toomey's plan as unworkable. But for Republicans, that's where option "B" comes into play: miss a few payments, force huge entitlement cuts, and all will be forgiven.

"It's a powerful testimony to how urgently the market wants us to address these things that somebody like Stanley Druckenmiller would make an argument that even a technical default, provided there's a solution, is better than kicking the can down the road," Toomey said. [Talking Points Memo, 5/18/11]

Rep. Paul Ryan Stated Investors Could Handle Default For "A Day Or Two Or Three Or Four." According to CBNC.com:

Holders of US government debt would be willing to miss payments "for a day or two or three or four" if it put the US in a stronger position to pay them later on, Rep. Paul Ryan told CNBC Tuesday.

"That's what I'm hearing from most people," said the Wisconsin Republican, chairman of the House Budget Committee. "What is more important is that you're putting the government in a materially better position to be able to pay their bonds later on." [CNBC.com, 5/17/11]

Rep. Devin Nunes Claimed Defaulting On The Debt "Could Benefit Us." According to Politico:

Nunes says the debt cap must be raised at some point but not necessarily before the point of default.

"By defaulting on the debt, in the short and long term, it could benefit us to go through a period of crisis that forces politicians to make decisions" on major policies that affect the budget, he told POLITICO. [Politico, 5/19/11]

Rep. Bass Suggested A Short-Term Default Wouldn't Be A Big Deal Because "The Global Economy Will Understand." On CNN's State of the Union, Rep. Charlie Bass (R-NH) stated: "There's a difference between strategic or technical default, and default where you really don't have the economy to support the spending. We are not at that point yet. We could be. We could be like some European nations. But I think the global economy will understand that the United States has the ability to meet its obligations, but it's not going to be able to do it over the long term if we can't control the growth of government." [CNN's State of the Union, 6/12/11, via Political Correction]

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