August 22, 2011 11:15 am ET
This Sunday's talk shows echoed a quiet week in Washington, with newly-minted head of the Republican Governor's Association Bob McDonnell (R-VA) and Sen. John McCain (R-AZ) regurgitating standard lines on the President Obama's economic policies. McDonnell also faulted President Obama for the country's current debt and deficits, rejecting the notion that President George W. Bush bears any responsiblity. Long-shot presidential candidate Rick Santorum joined him in misplacing blame for deficits, claiming that safety net programs like Medicaid and food stamps are "the core problem with our deficit," before wrongly suggesting that repealing the health care reform law would create jobs and increase growth. Fellow presidential contender Jon Huntsman trotted out his flat tax plan, glossing over the truth about its disproportionate effect on the lower and middle classes. He also blamed the fact that corporations aren't hiring on "uncertainty and confusion," when business leaders themselves point to weak demand, not government policies.
NORAH O'DONNELL: What's the likelihood anything with any new spending could pass through Congress or is this thing dead on arrival?
SENATOR JOHN MCCAIN: I would look forward to seeing the president's plan. I'd love to see it now so we could have a chance to digest it and see where we agree and disagree. But I'll look forward to it. But spending has been really proven not to be an— a solution. Remember when we passed the stimulus the prediction was eight percent unemployment. [Face the Nation, 8/21/11]
CANDY CROWLEY (HOST): Gov. McDonnell, would you agree to some kind of short-term spending to try to pump up the economy? It seems to me that Gov. O'Malley is talking about research and development and some education, you know, to pump up jobs and some education funds and some infrastructure. Roads—road projects to put people back to work. Any of those unacceptable to you? [...]
GOV. BOB MCDONNELL: We've tried that. We've tried stimulus spending, we put very little into infrastructure. We put it into a lot of other spending that didn't create jobs and now we've gone from 7.8 to 9.1 percent unemployment. [State of the Union, 8/21/11]
The Economy Shed Almost 8 Million Jobs Under Republican Policies Before The Recovery Act Could Affect The Economy. According to economist Robert J. Shapiro:
From December 2007 to July 2009 - the last year of the Bush second term and the first six months of the Obama presidency, before his policies could affect the economy - private sector employment crashed from 115,574,000 jobs to 107,778,000 jobs. Employment continued to fall, however, for the next six months, reaching a low of 107,107,000 jobs in December of 2009. So, out of 8,467,000 private sector jobs lost in this dismal cycle, 7,796,000 of those jobs or 92 percent were lost on the Republicans' watch or under the sway of their policies. Some 671,000 additional jobs were lost as the stimulus and other moves by the administration kicked in, but 630,000 jobs then came back in the following six months.The tally, to date: Mr. Obama can be held accountable for the net loss of 41,000 jobs (671,000 - 630,000), while the Republicans should be held responsible for the net losses of 7,796,000 jobs. [Sonecon.com, 8/10/10, emphasis added]
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.com, 10/27/10, emphasis added]
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):
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]
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:
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]
GOV. BOB MCDONNELL: I absolutely disagree with the governor that he continues to blame Bush. You know, the president has been trying that for three years. He had two years with a Democratic Congress and a Democratic president, did not address the deficit or the debt or a jobs program. [State of the Union, 8/21/11]
SEN. RICK SANTORUM: But we continued to work on it and were able to end the federal entitlement, require work, and put time limits on welfare, something that we're going to have to do for Medicaid, something we're going to have to do for housing benefits, food stamps. All of these programs that are growing exponentially, that are the problem, the core problem with our deficit are things that I was able to accomplish when I was in the United States Senate. [Fox News Sunday, 8/21/11],
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]
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]
Before President Bush Took Office, There Was A Projected Surplus Of $128 Billion. As reported by CNN: "President Bush inherited a budget surplus of $128 billion when he took office in 2001 but has since posted a budget deficit every year." [CNN.com, 7/28/08]
CBPP: Present "Huge Deficits" Due To Bush Tax Cuts, Wars, And Recession. As the Center for Budget and Policy Priorities explains: "If not for the Bush tax cuts, the deficit-financed wars in Iraq and Afghanistan, and the effects of the worst recession since the Great Depression (including the cost of policymakers' actions to combat it), we would not be facing these huge deficits in the near term." [CBPP.org, 5/10/11]
The Center for Budget and Policy Priorities prepared the following graphic showing that the Bush tax cuts and wars in Iraq and Afghanistan will account for nearly half of public debt by 2019:
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:
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:
CBPP: Converting SNAP And Medicaid To Block Grants "Would Not Only Increase Hardship And Destitution In Recessions, But Also Would Further Weaken A Slumping Economy And Lead To The Loss Of Many More Jobs." According to the Center on Budget and Policy Priorities:
The plan justifies its large food stamp cuts by claiming that the trend in food stamp costs "is one of relentless and unsustainable growth." The claim is false. Food stamp costs have risen sharply in the past few years due mainly to the recession and a temporary food stamp benefit increase of the 2009 Recovery Act. As the economy recovers, food stamp costs will drop and, by the end of the decade, will return to about 2005 levels as a share of Gross Domestic Product (GDP), according to the Congressional Budget Office (CBO)
Finally, the impact of the Ryan plan would be harshest during recessions. Currently, Medicaid as well as SNAP (formerly known as food stamps) respond automatically to assist more people when, during recessions, more people lose their jobs, income, and health insurance. This automatic response both lessens hardship and keeps the economy from plunging deeper into recession, by adding more purchasing power to the economy that replaces part of the loss of demand from consumers and businesses. The Ryan plan would convert both Medicaid and SNAP to block grants, however, which means they would no longer respond automatically to increased need during recessions. That would not only increase hardship and destitution in recessions, but also would further weaken a slumping economy and lead to the loss of many more jobs. [CBPP.org, 4/6/11]
BRET BAIER (HOST): Let's talk the economy. Let's say it's President Santorum in office right now. What specific things would you do to create jobs, increase growth, calm the markets, but with the caveat that you could get it through this divided Congress right now?
RICK SANTORUM: You make the assumption that Rick Santorum wins the presidency, we are probably going to control the United States Senate. We're only three votes short right now, and I feel pretty good that with 23 of the 33 seats up being Democrat-held seats, we're going to pick up a few seats. Given that as a preference, we're going to repeal Obamacare. That's the first thing. Creating a certainty in the marketplace that we're not going to put this huge new entitlement, this huge amount of taxes and burden on the business community, I think we'll do a -- go first step No. 1 to solve the problem.
The Affordable Care Act "Could Increase The Number Of Jobs In The United States By About 250,000 To 400,000 Per Year." According to the Center for American Progress: "In the analysis that follows, we combine these two studies to show that health care reform could increase the number of jobs in the United States by about 250,000 to 400,000 per year over the coming decade." [Center for American Progress, 1/8/10]
Repealing The Affordable Care Act Could "Reduce Employment By 250,000 To 400,000 Jobs Annually." According to the Center for American Progress: "The House leadership has set as one of their first agenda items the repeal of health reform that would guarantee coverage and lower costs. They promise to 'repeal and replace' health care reform with an unspecified alternative. ... The implications of these plans for employment are profound. If successful, the effort to repeal health care reform would reduce employment by 250,000 to 400,000 jobs annually over the next decade and lower wage growth." [Center for American Progress, 1/7/11]
Repealing — Or Defunding — The Affordable Care Act Would Reduce Employment Across Industries. From the Center for American Progress:
Figure 4 shows the estimated employment change by industry in 2016 (omitting health care, which will have more employment). More than 200,000 jobs will be lost in manufacturing and nearly 900,000 jobs will be lost in nonhealth care services.
[Center for American Progress, 1/7/11]
CBO: Health Care Reform Repeal Would Increase The Deficit By $230 Billion. In a letter to Speaker John Boehner (R-OH), Congressional Budget Office Director Doug Elmendorf writes:
Because CBO and JCT estimated that the March 2010 health care legislation would reduce budget deficits over the 2010-2019 period and in subsequent years, we expect that repealing that legislation would increase budget deficits. The resulting increase in deficits projected for fiscal years 2012 through 2019 is likely to be similar in size to-but not exactly the same as-the reduction in deficits that was originally estimated to result from the enacted legislation. [...]
As a result of changes in direct spending and revenues, CBO expects that enacting H.R. 2 would probably increase federal budget deficits over the 2012-2019 period by a total of roughly $145 billion (on the basis of the original estimate), plus or minus the effects of technical and economic changes that CBO and JCT will include in the forthcoming estimate. Adding two more years (through 2021) brings the projected increase in deficits to something in the vicinity of $230 billion, plus or minus the effects of technical and economic changes. [Congressional Budget Office, 1/6/11, emphasis added]
CBO: Health Care Reform Package Would Reduce The Deficit By $138 Billion By 2019. According to the Congressional Budget Office: "The reconciliation proposal includes provisions related to health care and revenues, many of which would amend H.R. 3590. It also includes amendments to the Higher Education Act of 1965, which authorizes most federal programs involving postsecondary education. CBO and JCT estimate that enacting both pieces of legislation - H.R. 3590 and the reconciliation proposal - would produce a net reduction in federal deficits of $138 billion over the 2010-2019 period as result of changes in direct spending and revenue." [Congressional Budget Office, 3/18/10]
RICK SANTORUM: One big idea that I've proposed is to cut the corporate tax for all manufacturers from 35 percent to zero. You want to get jobs back in this country, you create a tax system that allows us not only to make things here and compete here and be profitable here, but one of the big impediments to manufacturing here is our tax -- our tax system doesn't match up with other tax systems around the world. As a result, it's harder to export here. You cut the tax rate to zero, you create a real launching pad for exports here in America.
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]
JON HUNTSMAN: Number two, we've got to get the regulatory monkey off our back. People aren't putting money into the marketplace, they're not hiring because there's so much uncertainty and confusion about where this economy is going.
WSJ: "The Main Reason" For Hiring Reluctance Is "Scant Demand, Rather Than Uncertainty Over Government Policies." According to the Wall Street Journal:
The main reason U.S. companies are reluctant to step up hiring is scant demand, rather than uncertainty over government policies, according to a majority of economists in a new Wall Street Journal survey.
"There is no demand," said Paul Ashworth of Capital Economics. "Businesses aren't confident enough, and the longer this goes on the harder it is to convince them that they should be."
In the survey, conducted July 8-13 and released Monday, 53 economists-not all of whom answer every question-were asked the main reason employers aren't hiring more readily. Of the 51 who responded to the question, 31 cited lack of demand (65%) and 14 (27%) cited uncertainty about government policy. The others said hiring overseas was more appealing. [Wall Street Journal, 7/18/11, emphasis added]
Washington Post: Executives Can't Draw Specific Link Between Government Actions And Hiring Decisions. According to the Washington Post: "Fundamentally, executives objected to Obama's policies on the grounds they would make the United States a less competitive place to operate in the long run. But when [manufacturing CEO Jason] Speer and other executives were pressed on the role that tax and regulatory policies play in hiring, they drew only vague connections. Speer said his decision whether to hire is driven primarily by demand for his products. Orders are coming in strong enough that he is running about 20 hours a week of overtime. So he is weighing whether to hire two or three additional manufacturing workers. None of the executives interviewed linked a specific new government initiative with a specific decision to refrain from hiring." [Washington Post,8/21/10, emphasis added]
Study By "The Most Right Wing Of The Major Business Groups" Shows Businesses Much More Afraid Of Weak Demand Than Taxes And Regulations. As Ezra Klein of the Washington Post reported:
The National Federation of Independent Businesses -- a small-business trade association that is considered the most right wing of the major business groups -- continually polls its members and releases the results. Here's what they say is their single most important problem:
As you can see, sales - that is to say, demand for their products - dominate the chart, while fear of taxes is lower than in the '90s. The concern over sales is understandable. Not only is the economy bad. But as the next chart shows, it keeps underperforming what the businesses assume will happen.
So, if anything, businesses have been too optimistic over the past few years. [Washington Post, 7/22/10]
JAKE TAPPER (HOST): You instituted a flatter tax system in Utah as governor, bringing rates to five percent. But your critics say that the flat tax system in Utah raised taxes on the middle class while essentially cutting them for wealthier individuals in Utah, such as yourself. How could you institute a flat tax across the country without raising taxes on the middle class?
JON HUNTSMAN: You simply phase out the deductions and the loopholes and the biases in the system and you use that to pay down the rate, you do it in a revenue-neutral fashion.
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]
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