New Group, Old Habits

Summary

A liberal, labor-funded group calling itself Americans United for Change (previously Americans United to Protect Social Security) is running a $1-million national advertising campaign that makes some dubious claims and tries to imply more than it can prove.

The one-minute ad attempts to link Bush’s recently signed energy legislation with high gasoline prices, and implies that former FEMA director Michael Brown was somehow linked to the Abramoff and DeLay scandals. It also assails Republicans for “cutting healthcare for our seniors,” ignoring the fact that Medicare is undergoing its largest expansion since it was enacted.

In fact, the new prescription drug benefit will provide an average, net benefit this year of $465 per person, according to an independent estimate by the Kaiser Family Foundation. The cuts the ad refers to will amount to less than a penny of every $3 over the next five years, according to projections by the Congressional Budget Office.

Analysis

Americans United for Change announced a new 60-second television ad called “Time,” set to premier Jan. 26 on CNN and FOX News Channel nationwide. The entire campaign is slated to cost $1 million. It attacks President Bush and the Republicans, calls for enactment of reform measures and a change in “the state of our leadership.”

According to a Jan. 24 Associated Press story, the group has received $500,000 from the American Federation of State, County and Municipal Employees, a large labor union representing government workers. The AP also quote unnamed officials of Americans United as saying “Senate Democratic leader Harry Reid of Nevada and House Democratic leader Nancy Pelosi of California met with potential donors in Los Angeles earlier this month, underscoring their personal interest in the group’s efforts .” The group’s executive director Karen Olick had been chief of staff to Democratic Sen. Barbara Boxer of California. For the record, Americans United spokesman Brad Woodhouse told FactCheck.org: “We are not advocating for or promoting the Democratic party agenda – we are promoting progressive issues.” The group does not formally disclose its donors.

We make no comment on the ad’s call for “commonsense reforms” or a change in “the state of our leadership.” These are clear statements of opinion, not fact. However, the ad makes misleading statements about President Bush’s record on Medicare, invites viewers to blame the President for high gasoline prices without offering any relevant evidence, and suggests that Bush’s appointment of Michael D. Brown to head the Federal Emergency Management Agency had something to do with the crimes of convicted lobbyist Jack Abramoff, which isn’t true.

Gasoline Prices

The ad begins by stating that “oil company lobbyists sit at the White House helping write their own tax breaks…while you stand at the gas pump paying forty dollars to fill your tank.” This implies a connection that isn’t supported by evidence.

It’s true enough that the Bush administration consulted oil-company lobbyists when drafting its proposed energy legislation in 2001, and also true that the legislation that Bush finally signed into law four years later – on Aug 8, 2005 – contained tax breaks for oil companies (and also for buyers of high-mileage “hybrid” vehicles and builders of energy-efficient homes.) But these tax breaks have nothing to do with current gasoline prices. In fact, one of the incentives would allow an immediate write-off of 50 percent of the cost to increase the capacity of an existing refinery by at least five percent, or to increase the output of qualified fuels by at least 25 percent. That is aimed at increasing the supply of refined gasoline, diesel fuel and home heating oil, which would tend to hold down their prices, not increase them.

What is keeping gasoline prices higher than they were a year or two ago, economists generally agree, is a rising worldwide demand for all petroleum products. As the nonpartisan Energy Information Administration puts it: “Crude oil prices rose throughout 2004 and 2005, as global oil demand increased dramatically, stretching capacity along the entire oil market system, from crude oil production to transportation (tankers and pipelines) to refinery capacity, nearly to its limits.”

Another factor is the continuing effect of Hurricane Katrina, which damaged drilling platforms, refineries and pipelines along the Gulf Coast. The national average for gasoline prices hit a high of $3.07 per gallon on Sept. 5, 2005, and most recently was $2.34 per gallon as of Jan. 23, 2006, nearly 49 cents higher than a year earlier. The EIA said “retail prices are likely to remain elevated as long as some refineries remain shut down and the U.S. gasoline market continues to stretch supplies to their limit.”

Abramoff & FEMA?

The ad also invites a false inference by visually suggesting that the appointment of Michael Brown to head the Federal Emergency Management Agency (FEMA) had something to do with convicted lobbyist Jack Abramoff. It shows photos of Abramoff, former House Republican Leader Tom DeLay and former vice presidential chief of staff I. Lewis “Scooter” Libby, and then a photo of Brown. Meanwhile the narrator says: “Republican leaders are indicted for money laundering, bribery and obstruction of justice…while political friends get appointed to run life-or-death agencies.”

It is of course true that DeLay and Libby have been indicted. They say they are innocent and face trial on multiple charges. It is also true that Abramoff pleaded guilty to fraud and other charges and is said to be cooperating with prosecutors in a wider probe.

It is also true that Brown qualified as a “political friend” of the Bush administration, and left his job after widespread complaints that he was unqualified and had mishandled federal relief efforts during the Katrina disaster.

But the ad implies a connection that isn’t evident. We find no evidence of Brown owing his appointment to Abramoff, DeLay or Libby. It is true that a one-time Abramoff associate, David Safavian, was the top administrator at the federal procurement office in the White House Office of Management and Budget until he was arrested Sept. 19, 2005 and charged with obstructing the Abramoff investigation. But Safavian isn’t mentioned in the ad and Safavian is not Brown. And while it is true that Safavian also worked on Katrina relief efforts, he worked on procurement policy, not “life or death” decisions.

Cutting Healthcare for Seniors?

Another distortion in the ad is a statement that “the President gives away billions to the drug companies… while cutting healthcare for our seniors.” In fact, Bush signed the biggest expansion of Medicare since its enactment, adding a prescription drug benefit that took effect this month.

Far from “cutting healthcare,” the new drug benefit is estimated to reduce out-of-pocket spending for prescription drugs by an average of 37 percent – or $465 – for the 29 million seniors expected to enroll. That estimate comes from a study by the nonpartisan Actuarial Research Corp. and the nonpartisan Kaiser Family Foundation, and is the most recent and authoritative estimate available.

To be sure, not all seniors will benefit. The Kaiser study estimates that one in four seniors will pay more for drugs, including retirees who may be dropped from more generous plans sponsored by the companies that once employed them.  It is also true that Democrats had proposed a more generous and more expensive prescription drug benefit for Medicare, but could not get it through the Republican-controlled House. And as widely publicized, the transition to the very complicated new benefit program is causing widespread confusion in its first weeks. Nevertheless, the large majority of seniors are predicted to benefit substantially from the Bush drug benefit.

The cuts the ad refers to – according to a fact sheet provided by Americans United – are in the Deficit Reduction Act passed Dec. 19, 2005. That does indeed set targets for trimming nearly $11.2 billion from projected Medicare and Medicaid spending over the next five years. To put that into perspective, the reduction amounts to just under one-third of one percent of the nearly $3.5 trillion that the Congressional Budget Office projects that those two federal programs will cost over the five-year period (fiscal years 2006 through 2010). That’s less than one penny of every $3.

Billions to Drug Companies?

The ad’s claim that Bush “gives away billions to the drug companies” is also contentious. In fact, no taxpayer money goes to drug companies under the new Medicaid benefit. The ad fails to make clear that it is referring to what Democrats like to call a “windfall” for pharmaceutical companies from a provision in the new law that prevents the federal government from requiring the companies to discount their prices. That is based on a disputed study, often cited by Democrats, authored by two Bush critics who once wrote that Bush’s prescription drug bill is “breathtaking in its recklessness.” The study was published in 2003 by Boston University researchers Alan Sager and Deborah Socolar, who concluded that $139 billion would go as “windfall profits” to drug companies. Their findings are contradicted by a study in March 2004 commissioned by the Pacific Research Institute, which describes itself as a “free-market think tank.” They hired the accounting firm PricewaterhouseCoopers, which estimated that drug company profits would be much lower – from an increase of only 3.2% to a possible decline of 1%. The two studies make starkly different assumptions about whether the new drug benefit will cause seniors to buy a lot more medication thereby increasing sales, and also about the extent to which competition among different drug plans will force drug companies to offer rebates and discounts to get the business. We can’t say which of these contradictory studies might eventually be proven correct, or if either of them will be.

In summary, this ad is a partisan attack that attempts to insinuate more than it can support with facts.

 

Media

Watch Americans United for Change Ad: “Time”

 

Sources

United States Senate Committee on Finance, “Summary of the conference agreement of H.R. 6, Title XIII, the Energy Tax IncentivesAct of 2005,” 27 July 2005

Energy Information Administration, “A Primer on Gasoline Prices,” undated.

Karen Tumulty; Mark Thompson; Mike Allen, “How Many More Mike Browns Are Out There?” Time Magazine 3 Oct 2005: 49.

Jim Mays, Monica Brenner, Tricia Neuman, Juliette Cubanski, and Gary Claxton, “Estimates  of Medicare Beneficiaries’ Out-of-pocket Drug Spending in 2006: Modeling the Impact of the MMA” Actuarial Research Corporation & The Henry J. Kaiser Family Foundation, November 2004.

R. Jeffrey Smith and Susan Schmidt, ” Bush Official Arrested  in Corruption Probe,” Washington Post 20 Sept 2005: A1.

House Committee on the Budget, “Summary, the Deficit Reduction Act of 2005,” 19 Dec 2005.

Congressional Budget Office, “The Budget and Economic Outlook,” 26 Jan 2006, pp 11,52.

Alan Sager and Deborah Socolar, Boston University School of Public Health, “61 Percent Of Medicare’s New Prescription Drug Subsidy Is Windfall Profit To Drug Makers,” 31 Oct. 2003.