I saw on the interwebs a blog posting entitled “Eight False Things the Public ‘Knows’ Before Election Day”. It is hosted on a liberal leaning site and the bent can clearly be seen. I thought, for fun, I’d do a rebuttal of sorts. So here is my “Eight False Things the Liberals Think They ‘Know’ Before Election Day” responses:
1) President Obama tripled the deficit.
Reality: Bush’s last budget had a $1.416 trillion deficit. Obama’s first budget reduced that to $1.29 trillion.
First, one must understand the difference between “debt” and “deficit” as they pertain to the federal government. The deficit is the difference between the “revenue” that the federal government takes in for a particular fiscal year and the amount of outlays (payments) it makes in the same fiscal year. Second, one must understand some basic civics: the budget that gets passed is largely a construct of the Congress and not the President. Before the first Monday in February (later in administration changeover years), the President submits a budget request to Congress. From there, Congress takes over and the House & Senate Budget Committees draft budget resolutions. This is the real beginning of the annual budget that becomes reality after reconciliation and a vote (unless it’s Rep. Pelosi’s Congress then they try to abdicate this responsibility). Read more here.
So now that the problem is framed, let’s rephrase and expand upon the perceived falsehood:
Reality: The Democrat controlled Congress had a $1.416 trillion deficit (The FY07 deficit was roughly $200B, a reduction from the all-time largest dollar deficit of $413B in FY2004 and rolling forward starting in FY08 – when the Democrats controlled Congress, the deficit increased each year to FY09). Looking forward to a difficult mid-term elections and hearing from constituents over the past two years, Congress has focused on more fiscal responsibility and cut the deficit back. However, the CBO projections for Obama’s policies clearly show that he is playing a shell game where taxes and other incomes hit early and the spending impacts aren’t felt for later years. So the bottom line is that the Democrat controlled Congress tripled the deficit. We’ll touch on this again towards the end.
2) President Obama raised taxes, which hurt the economy.
Reality: Obama cut taxes. 40% of the “stimulus” was wasted on tax cuts which only create debt, which is why it was so much less effective than it could have been.
Reality: This is kind of mixed. Did President Obama raise taxes – sure, one can find individual tax items (i.e. Tanning Beds) that were taxed but that’s not the point here by the author. Instead, the author equates tax cuts with creating debt and that’s bad. For a very illuminating chart go to this site and set the date range (bottom left of main chart) to 2000-01 to 2010-09. Look at the inflection point for where the debt starts increasing faster. Then look at who controls Congress. Make no mistake, I’m not arguing that the GOP, both President Bush and those in Congress, were fiscally sound, but I think the resulting chart tells a lot. Back on the Stimulus: the $787B Stimulus had much more waste – consider the following:
- $5 million to create a geothermal energy system for a failing shopping mall in Tennessee.
- $1.57 million to Penn State University study fossils in Argentina
- $100,000 to a puppet theater in Minnesota
- $2 million to build a replica railroad in Carson City, Nev.
- A boat cruise company in Chicago got almost $1 million to “combat terrorism”
- $500,000 went to Arizona State University to study ant genetics
- Another $450,000 went to University of Arizona to study ants
- $5,000 a person tax rebate if you buy a new electric golf cart.
- Up to $1 million went to prisoners in $250 stimulus checks
- $54 mil to a New York Indian tribe to run its casino
- $15 million to back-road bridges that get little traffic in Wisconsin
- $3.4 million for an animal walk way under a road in Florida
- $1.15 million to install a guard rail for a lake that doesn’t even exist in Oklahoma
- $10 million to renovate a rail station that has stood unused for a decade
- $2 million to build a new fire house in a Nevada town that has no firemen
- North Carolina schools got $4.4 million for literacy and math coaches for their own teachers!
- $54 million for a railroad project in Napa Valley went to one company who then hired a local construction company for half the price, pocketing the rest
The author’s belief that short-term, government projects will stimulate the economy is flawed. True growth, as the President himself has said, comes from the private sector. Companies will be reluctant to hire (read: grow) for short-term projects when there isn’t a future in sight for that employee or the work. Tax cuts do not create debt. Debt is caused by the federal government borrowing money to pay for programs in the budget. Rather than point at failures, waste, and abuse in the federal budget and the programs it supports, the author wants to point at tax cuts reducing the level of “revenue” available to the government. The problem here is with growing unemployment, we have fewer contributors to that pot of money, which in itself appears as a “tax cut” to the federal government. So the natural reaction (as many states did with the “millionaire tax”) and that of President Obama (see all the taxes that come with the Healthcare Reform Act) is to raise taxes.
3) President Obama bailed out the banks.
Reality: While many people conflate the “stimulus” with the bank bailouts, the bank bailouts were requested by President Bush and his Treasury Secretary, former Goldman Sachs CEO Henry Paulson. (Paulson also wanted the bailouts to be “non-reviewable by any court or any agency.”) The bailouts passed and began before the 2008 election of President Obama.
Reality: This is true (TARP) and many, including some of us here, feel that it was a mistake.
4) The stimulus didn’t work.
Reality: The stimulus worked, but was not enough. In fact, according to the Congressional Budget Office, the stimulus raised employment by between 1.4 million and 3.3 million jobs.
Reality: The stimulus didn’t work. We’ve covered it a number of times (search the site using the Stimulus Package tag or the Pork Filled Stimulus Bill tag). But maybe the best rebuttal is the video below deconstructing Mr. Goolsbee’s propaganda piece. In the end, one cannot prove that the stimulus created or saved any jobs. And in many cases, based on the data available at this administration’s Recovery.gov site, the government paid an incredible amount per job created or saved.
5) Businesses will hire if they get tax cuts.
Reality: A business hires the right number of employees to meet demand. Having extra cash does not cause a business to hire, but a business that has a demand for what it does will find the money to hire. Businesses want customers, not tax cuts.
Reality: true, tax cuts don’t cause businesses to hire. But the underlying falsehood here is that businesses pay taxes or get “tax cuts”. They don’t. Tax implications to businesses are passed along to the customer. Fewer taxes on businesses could mean greater ability or benefits to their employees (a good thing) or lower cost of doing business and therefore the ability to cut the price of their goods or services resulting in a savings to the consumer (a good thing). So tax cuts frees up money to the individual to invest (through investment or purchasing goods and services) in private sector companies.
6) Health care reform costs $1 trillion.
Reality: The health care reform reduces government deficits by $138 billion.
The author has fallen for a number of liberal falsehoods again. First, the Healthcare Reform Act was packaged together with some student loan reforms which account for $19B over the ten years. Then one should account for the CLASS Act trickery which really reduces any savings by the Healthcare Reform Act to around $49B. But in reality, the reform act is increasing spending and, as we learned above, that drives up the deficit – but is offset by a series of…wait for it….wait for it…yes, new taxes. A simple search on the internet will show that the debate is still raging over whether the country will realize any deficit reductions as a result (doubtful) and whether citizens will see a net benefit as a result (doubtful).
7) Social Security is a Ponzi scheme, is “going broke,” people live longer, fewer workers per retiree, etc.
Reality: Social Security has run a surplus since it began, has a trust fund in the trillions,is completely sound for at least 25 more years and cannot legally borrow so cannot contribute to the deficit (compare that to the military budget!) Life expectancy is only longer because fewer babies die; people who reach 65 live about the same number of years as they used to. Everyone knows the deficit was caused by tax cuts for the rich and the huge increases in military spending.
Wow. Ok, after a few deep breaths, let me dissect this one. According to a report by the Social Security Trustees, the Social Security fund “will continue to take in more money than it pays out until the year 2018; however, after this date, benefit payments will be larger than the revenue”. As the large contingent of Baby Boomers hit retirement age, the payouts will increase beyond its intakes. After the year 2018, the federal government will need to use reserves to supplement Social Security. This is the “trust fund” the author refers to above. However, and this fact is quite alarming, all of the money which has been put aside following the 1983 tax increase during the Reagan administration “has been embezzled and used for other purposes; thus, there is not a single dollar of cash in these reserves” (Baker, Dean. Social Security: The Phony Crisis. University of Chicago Press, 1999). Maybe the author should listen to the Treasury Secretary or read CNN’s report based on Fortune’s analysis.
8) Government spending takes money out of the economy.
Reality: Government is We, the People and the money it spends is on We, the People. Many people do not know that it is government that builds the roads, airports, ports, courts, schools and other things that are the soil in which business thrives. Many people think that all government spending is on “welfare” and “foreign aid” when that is only a small part of the government’s budget.
Reality: Listen, Geither gets it: “The government can help but we need to make this transition now to a recovery led by private investment.” And President Obama in the past has echoed similar statements (whether he puts his effort behind it may be another question). Yes, the government “builds” roads, schools, etc. by spending money contractually to do so. The problem is that once built the job is done. The road is built. The school is open. Growing the economy and adding to the GDP is done through investment and innovation by private sector companies. Government spending will not move the needle over the long term. And as far as welfare being a “small part of the government’s budget” – how about these numbers for 2010 (Obama’s budget):
- Government Pensions $770B
- Healthcare $830B
- Defense $890B
- Welfare $560B
Welfare is no small part and when one considers that $120B of the Defense budget goes to Veterans programs and $50B go to Foreign Aid, the Defense budget (as targeted by the likes of this author) is closer to $720B.
This stuff really matters.
If the public votes in a new Congress because a majority of voters think this one tripled the deficit, and as a result the new people follow the policies that actually tripled the deficit, the country could go broke.
So now the author equates all the good things Obama has done (look back and try to find him pointing to the Democrat-led Congress) with voting in a “new Congress” (read: a GOP led Congress). With a week left before the midterm elections, people really need to consider their civics lessons and what this Congress that it’s leader self-proclaimed as the “most honest, open and ethical” Congress has done for the past 4 years since they’ve controlled it – to the point of being able to override the filibuster and other minority party maneuvers.