Summary
Two new TV ads from a pro-Rick Santorum super PAC attack Mitt Romney and President Obama on Republican hot button issues: debt, taxes and oil. But the ads mislead on several fronts.
- One ad states that Romney supported the Wall Street bailout — he did support TARP — but then adds, “putting America trillions in debt.” Only $250 billion was loaned to Wall Street bankers through TARP, and those loans have actually turned a profit for the American taxpayer.
- The ad also inaccurately states that as governor, Romney left Massachusetts “over $1 billion in debt.” That’s the high end of a projected budget shortfall for the following fiscal year. It was not an actual debt, and because of higher than expected revenues, it never materialized anyway.
- Another ad attacks Obama for “spending $314 billion a year on foreign oil, funding radicals with bad intentions, causing pump prices to rise drastically.” But the dollar amount is off by more than $50 billion and, the fact is, half of U.S. oil imports come from the Western Hemisphere, led by Canada.
Analysis
The pro-Santorum super PAC Red White and Blue Fund was formed in October 2011. It has been badly outspent by super PACs backing Republican rivals Mitt Romney and Newt Gingrich, but with Santorum gaining momentum, it has also gained donors. Aside from its repeated calls for Gingrich to quit the race, the group has upped its attacks on front-runner Romney and has sought to position Santorum as the best alternative to President Barack Obama with new TV ads in states with upcoming primaries.
The Real Mitt Romney?
Red, White and Blue Fund launched its 30-second ad “Meet the Real Mitt Romney” in Illinois a week ahead of the Prairie State’s March 20 Republican primary.
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Red White and Blue Fund TV Ad: “Meet the Real Mitt Romney”
Announcer: Meet the real Mitt Romney. Supported the Wall Street bailout, putting America trillions in debt. Raised job-killing taxes and fees by $700 million, leaving Massachusetts over $1 billion in debt. His health care takeover, the blueprint for ObamaCare. Mitt Romney, more debt and taxes, less jobs. More of the same. Rick Santorum, a bold plan for the middle class. Create dynamic jobs and cut wasteful spending. Rick Santorum for President. Red White and Blue Fund is responsible for the content of this ad.
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According to the ad, Romney “supported the Wall Street bailout, putting America trillions in debt.” It’s true that Romney supported the Troubled Asset Relief Program (TARP), at least its original intent to prop up failing banks. He did not support President Obama’s later expansion of the program, including loans to the auto industry.
So it is accurate to say that Romney supported the “Wall Street” part of the bailout. But what about the claim that Romney’s support for the Wall Street bailout put “America trillions in debt”?
Trillions? TARP only authorized $700 billion worth of Treasury disbursements, and just $470 billion of that actually went out the door. And most of the money has been repaid. According to the latest estimates from the Congressional Budget Office, TARP is expected to ultimately cost taxpayers $34 billion.
Furthermore, the Wall Street portion of TARP has actually been a net gain to taxpayers. The government paid out $250.5 billion to “bank programs” that included buying stock in the banks, often at low prices. And to date, the government has received back $258.8 billion.
So how did the Red White and Blue Fund arrive at the conclusion that Romney’s support for the Wall Street bailout put Americans trillions in debt?
The group says Romney’s support of Wall Street bailouts extended well beyond TARP. It points to reports by Bloomberg News and the Center for Media and Deomcracy about federal assistance to banks beyond TARP. Bloomberg detailed more than $1.2 trillion in emergency loans by the Federal Reserve to banks and other financial institutions between August 2007 and April 2010. Add in loan guarantees and spending limits (potential, but not actual lending) and the figure rose to $7.7 trillion, Bloomberg reported. The Center for Media and Democracy also concluded federal assistance — including TARP and other Treasury and Fed loans — to financial institutions ran in the trillions.
Did Romney support those loans as well? Red White and Blue Fund pointed to Romney’s comments at a Republican debate on Oct. 11, 2011. In that debate, Romney defended the Wall Street bailouts, saying in his experience the entire financial system was on the precipice of “a complete meltdown” and that “action had to be taken.”
His comments clearly show Romney’s support for TARP. But nothing in his answer suggests he was taking a position on Fed loans. You can read the full transcript here.
As Bloomberg noted, outside the Fed, few knew the details of the specific recipients and terms of those loans — not even members of Congress — until Bloomberg won a lawsuit against the Fed in March 2011, forcing it to disclose 29,000 pages of documents related to the loans.
Also, the Fed says those loans have been repaid (with interest), or are on track to be paid back, so the ad’s claim that it has left Americans trillions in debt is simply inaccurate. In fact, profits from those loans have subsidized the federal budget. According to the latest figures from the Office of Management and Budget, the Treasury received $82.5 billion from the Fed in the fiscal year that ended Sept. 30, and it’s projected to get $81.3 billion during the current fiscal year.
Did Romney Leave Massachusetts in Debt?
The ad also claims Romney “raised job-killing taxes and fees by $700 million, leaving Massachusetts over $1 billion in debt.”
We’ve written many times about Romney’s dubious claim never to have raised taxes as governor. Technically, Romney never raised personal income taxes, but he did increase fees by hundreds of thousands of dollars, and he also closed loopholes on some corporate taxes.
But there is some disagreement over the $700 million figure cited in the ad. The Massachusetts Department of Administration and Finance put the fee total at $260 million a year and the corporate tax change at $174 million a year, and the independent Massachusetts Taxpayers Foundation said both fees and taxes totaled $740 million to $750 million a year.
Whatever the figure, however, it did not leave Massachusetts “over $1 billion in debt.”
The Red White and Blue Fund is referring to a projected budget shortfall predicted by Romney aides in the waning days of Romney’s term. It was a projected deficit for the fiscal year beginning six months after Romney left office.
Based on assumptions about tax revenues and the growing cost of pensions, Medicaid and other state programs, the aides projected incoming Democratic Gov. Deval Patrick would need to come up with a budget plan to close a gap of between $400,000 and $1.1 billion in the state’s $26 billion budget the following year in order to comply with the state’s balanced budget requirement, according to a Dec. 30, 2006, story in the Boston Globe. The ad chose the high end of that projected deficit.
Moreover, it was not an actual debt. It was a budget projection. And, as it turns out, tax revenues came in much higher than expected due to an improving economy, largely erasing the projected deficit, said Michael Widmer, president of the Massachusetts Taxpayers Foundation. It’s true that Romney’s successor signed a $1-a-pack tax on cigarettes to help pay for the cost of Romney’s health care law, but that tax didn’t go into effect until a year after Romney left office.
To characterize that as Romney leaving Massachusetts with a $1 billion debt is “largely inaccurate,” Widmer said. “It’s an analytical exercise” he said, to help with budget planning. And again, the state ultimately passed a balanced budget, as required by state law.
One other note: Neither Romney nor any governor of Massachusetts has absolute control of the budgets. Massachusetts has a powerful state Legislature, and during Romney’s term as governor, it was overwhelmingly Democratic.
Widmer said Romney’s proposed budgets were largely ignored by the state Legislature. Instead, the Legislature passed its own budget. The governor can’t add anything to the Legislature’s budget but can exercise a line-item veto. But as we have previously reported, more than 700 of the roughly 800 vetoes issued by Romney were overridden by the Massachusetts Legislature.
‘Funding Radicals’ … in Canada and Mexico?
In “America’s Future,” the Red White and Blue Fund attacks Obama for U.S. reliance on foreign oil and the high price of gasoline. But the ad’s lack of context and false association serve to mislead viewers.
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Red White and Blue Fund TV Ad: “America’s Future”
Announcer: Under Barack Obama, America is spending $314 billion a year on foreign oil, funding radicals with bad intentions, causing pump prices to rise drastically. Rick Santorum is the principled leader with an energy plan. Develop domestic resources. Utilize natural gas, and power generation and transportation. Open drilling and build pipelines to lower costs. Create jobs. Secure America. Rick Santorum for president.
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The ad, which began airing in Louisiana on March 13, starts with this opening sentence: “Under Barack Obama, America is spending $314 billion a year on foreign oil, funding radicals with bad intentions, causing pump prices to rise drastically.” The ad shows images of demonstrators burning a U.S. flag.
But there are several things that viewers might want to know:
- Oil imports have declined under Obama (although not necessarily because of his policies).
- The $314 billion figure — which is slightly exaggerated — is driven by the high cost of oil, which is set on the world market, and not by Obama’s policies. Crude oil prices last year averaged a record $99.78 per barrel.
- The U.S. imports most of its oil from friendly nations, not “radicals with bad intentions.” Canada provides the U.S. with 25 percent of its oil imports — more than any other country by far. Mexico provides another 9 percent.
Let’s first look at how much the U.S. spends on foreign oil and what’s driving that cost.
In the fine print, the ad claims the U.S. has spent an average of $314 billion a year on foreign oil in Obama’s first three years in office, from 2009 through 2011. It’s certainly true that the U.S. spends a lot on foreign oil, but not quite that much.
We asked how RWB Fund arrived at the $314 billion figure, but the group sent us an undated and unattributed chart that we could not verify. Government data, however, show the U.S. spent $188.7 billion on foreign crude oil in 2009, $252.1 billion in 2010 and nearly $332 billion in 2011, for an annual average of $257.5 billion over three years — or $56.5 billion less than the ad claims. That does not, however, include other petroleum products, such as jet fuel, kerosene and fuel oil.
And the staggering $332 billion spent on crude oil last year is not even a record high. That was set in 2008, President Bush’s last year in office, when the U.S. spent a record $342 billion.
What’s driving that cost, and why has it increased each year under Obama? The price of oil is set on the world markets and influenced by world events. For example, the U.S. buys no oil from Iran but world markets have pushed prices up in response to Iran’s threat “to close the Strait of Hormuz, through which passes some 35% of the world’s oil exports,” as Daniel Yergin, chairman of IHS Cambridge Energy Research Associates, wrote in a March 15 op-ed in the Wall Street Journal. Similarly, the U.S. buys very little oil from Libya (just one-half of 1 percent of all U.S. imports in 2010), yet gasoline prices here spiked when fighting broke out between government and opposition forces.
So, the U.S. is spending more on foreign oil because the price of a barrel of oil is going up — not because the U.S. relies more on foreign oil. In fact, the percentage of oil the U.S. imports — both total imports and net imports (after exports are subtracted) — have fallen each year under Obama. Total imports have dropped from 66.2 percent in 2008 to 60.3 percent in 2011, while net imports have declined from 57 percent in 2008 to 45.1 percent in 2011 — the lowest since 1995. That’s not to say that Obama deserves credit for a declining reliance on foreign oil. It’s due to a combination of factors, including improved technology that has increased oil production in areas such as the Bakken Formation in North Dakota.
The ad also claims that U.S. money being spent on foreign oil is “funding radicals with bad intentions.” That is accompanied by photos of demonstrators burning a U.S. flag. We asked the campaign where the photo was taken and what radicals are getting U.S. money. We didn’t get a specific answer to either question.
“The funding radicals is related to countries that we buy oil from where the wealth from oil trickles into people who wish us harm,” said Stuart Roy, a spokesman for the pro-Santorum PAC.
Roy didn’t identify which countries he’s talking about. But the U.S. imports about half of its net oil and petroleum products from the Western Hemisphere — mostly from Canada, which provides the U.S. with about one-quarter of its net imports. That’s more than the U.S. imports from all of the Persian Gulf states, which account for about 18 percent — mostly from Saudi Arabia, which alone is responsible for 12 percent.
In fact, five countries — Canada, Saudi Arabia, Mexico, Venezuela and Nigeria, in that order — accounted for 69 percent of U.S. imports in September 2011. Only Venezuela, which is responsible for about 10 percent of U.S. imported oil, is not considered a close friend and ally of the United States. U.S.- Venezuelan relations are described by the State Department as “tense,” to say the least, although obviously it remains a key trading partner.
So, the relationship between buying foreign oil and “funding radicals” is exaggerated and made worse by images of the burning of a U.S. flag in an unidentified country.
Bottom line: The Red White and Blue Fund ad plays to its audience’s base fears and uses facts and images out of context to inflame rather than inform.
— by Robert Farley and Eugene Kiely
Sources
Vogel, Kenneth P. and Bravender, Robin. “Pro-Rick Santorum PAC picks up another mega-donor.” Politico. 20 Feb 2012.
Burns, Alexander. “Santorum super PAC renews call for Gingrich to exit the race.” Politico. 13 Mar 2012.
Congressional Budget Office. “CBO’s Estimate of the Cost of the TARP: $34 Billion.” 16 Dec 2011.
U.S. Treasury. Daily TARP Update. 09 Mar 1012.
PBS. “The true cost of the bank bailout.” 03 Sep 2010.
Center for Media and Democracy. Total Wall Street Bailout Cost.
Bloomberg. Chart: The Fed’s Secret Liquidity Lifelines.
Time. Complete Transcript of Republican Debate. 11 Oct 2011.
Ivry, Bob, Keoun, Bradley Keoun and Kuntz, Phil. “Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress.” Bloomberg. 27 Nov 2011.
Friedman, Robert and Voskuhl, John. “Bloomberg News Responds to Bernanke Criticism of U.S. Bank-Rescue Coverage.” 07 Dec 2011.
Estes, Andrea and Levenson, Michael. “State could face $1b deficit in ’07 New governor may have to revise agenda.” Boston Globe. 30 Dec 2006.
National Conference of State Legislatures. “NCSL Fiscal Brief: State Balanced Budget Provisions.” Oct 2010.