Fred’s Facts Check Out; Rudy’s Don’t

Summary

Former Sen. Fred Thompson got the facts straight for his GOP debate debut Oct. 9. But former Mayor Rudy Giuliani added to a lengthening string of exaggerations and misstatements:

• Giuliani claimed Sen. Hillary Clinton once called the free-market economy “the most destructive force in modern America.” She didn’t say that. She quoted another author who said free markets were “disruptive.” She also said free markets bring prosperity.
• The mayor falsely claimed Clinton proposes to give $1,000 to “everybody.” Her proposed subsidies to workers’ retirement accounts would be for couples making up to $60,000 a year and would be $500 for those making up to $100,000.
• Giuliani falsely claimed that more than 2 percent of the nation’s gross domestic product is spent on “frivolous” lawsuits. The figure is from a study about the cost of all lawsuits.

Analysis

The Oct. 9 debate in Dearborn, Michigan, was the first in which former Sen. Fred Thompson appeared with the full array of Republican rivals. That led Massachusetts Gov. Mitt Romney to quip that the long string of GOP debates had become like the NBC television program “Law & Order”: “It has a huge cast, the series seems to go on forever, and Fred Thompson shows up at the end.”

But Thompson made it through his first debate without making any false or misleading factual claims that we could detect, while former New York Mayor Rudy Giuliani committed multiple factual gaffes, adding to a growing list of misstatements.

Giuliani: Multiple Missteps

Misquoting Hillary: Giuliani wrongly attributed a quote to Democratic hopeful Hillary Clinton, and he got the quote wrong as well:

Giuliani: And the leading Democratic candidate once said that the unfettered free market is the most destructive force in modern America.

Sen. Clinton, the “leading” candidate in public opinion polls, never said that. The quote is by Alan Ehrenhalt, author and executive editor of Governing magazine. Furthermore, Ehrenhalt didn’t call the free market “destructive” but used the somewhat softer term “radically disruptive.” As Clinton quoted him in her book, “It Takes a Village”:

Ehrenhalt: The unfettered free market has been the most radically disruptive force in American life in the last generation, busting up neighborhoods….

To be sure, Sen. Clinton agreed with that sentiment. But she also said in the same book, on the next page, that “the economy is also creating millions of new jobs, with small businesses starting at a record pace.” And later she said the free market is “the driving force behind our prosperity.” She was asked about the Ehrenhalt quote in a C-SPAN interview in 1996, and gave this response:

Clinton: I believe that. That’s why I put it in the book…. I just believe that there’s got to be a healthy tension among all of our institutions in society, and that the market is the driving force behind our prosperity, our freedom in so many respects to make our lives our own but that it cannot be permitted just to run roughshod over people’s lives as well.

Giuliani misleads when he says Clinton called the free market “destructive,” when what she has really said is that it is both disruptive to neighborhoods and people’s lives, and a driving force behind prosperity.

Mischaracterizing her proposals: Giuliani also incorrectly described a proposal by Clinton to boost Americans’ 401(k) plans.

Giuliani: I’ll give you an example. Hillary, the other day – remember the Hillary bond program? She’s going to give out – she’s going to give $5,000 to every child born in America, with her picture on it. (LAUGHTER) I think, right, right? OK, OK, OK. (LAUGHTER) I challenged her on it. I challenged her. She has backed off that. She has a new one today. This one is, she’s going to give out $1,000 to everybody, to set up a 401(k). The problem is, this one costs $5 billion more than the last one.

It’s simply not true that Clinton proposes to give out $1,000 to “everybody.” That sum would only go to those making $60,000 a year or less, and only if they also contribute $1,000 of their own to their 401(k) plans. Specifically, she proposed providing “a matching refundable tax credit … for the first $1,000 of savings [in a 401(k)] done by every married couple making up to $60,000,” according to the details of the plan on her Web site. “The plan will provide a 50% match on the first $1000 of savings for every couple making between $60,000 and $100,000, which will be phased out after that.” Money could be placed in an existing 401(k) or a new “American Retirement Account,” which Clinton would make available for those who either don’t have a 401(k) through their employers or like the government-offered plan better.

It is also an exaggeration to say Clinton was going to “give $5,000 to every child.” She never formally proposed such a plan, though she did flirt with the idea for a few days. According to several news reports, Clinton told the Congressional Black Caucus on Sept. 28, “I like the idea of giving every baby born in America a $5,000 account that will grow over time, so that when that young person turns 18 if they have finished high school they will be able to access it to go to college or maybe they will be able to make that down payment on their first home.” A campaign spokesman told The Associated Press that Clinton’s comment was not a policy proposal “but an idea under consideration.” She told the Wall Street Journal this month that she wouldn’t propose the idea.

Giuliani also exaggerated when he said Clinton’s new proposal would cost $5 billion more than the $5,000-per-baby idea. She estimates that the new retirement plan proposal would cost about $20 billion to $25 billion each year, an amount she would finance by freezing the estate tax at its 2009 level. According to the Centers for Disease Control and Prevention, there were 4,289,000 live births in the U.S. during the 12 months ending in February, the most recent year on record. The cost of giving each of those kids a $5,000 bond is $21.4 billion, which is actually more than the low end of Clinton’s estimate for her new plan.

“Frivolous” lawsuits: Giuliani misstated a statistic when he said that “2.2 percent of our GDP now, is spent on all these frivolous lawsuits. It’s double any other industrialized nation.” That figure comes from a 2005 study of the costs of civil claims of negligence (called tort claims) that gives the total cost associated with all such legal disputes – but in no way attempts to distinguish between “frivolous” ones and lawsuits of merit. The study, published by Tillinghast, a division of the management consulting firm Towers Perrin, makes this clear in its introduction: “No attempt has been made to measure or quantify the benefits of the tort system. This study makes no conclusion that the costs of the U.S. tort system outweigh the benefits or vice versa.” The lead author of the study, Russ Sutter, told us earlier this year when we looked into how the U.S. Chamber of Commerce also misrepresented his numbers that the study “looked at all torts; we don’t segregate between legitimate and illegitimate.”

Also, Giuliani is slightly off when he compares the U.S. to other nations. Tillinghast did find that the total costs in 2003 and 2004 amounted to 2.2 percent of the United States’ gross domestic product, a figure that is double Germany’s 2003 costs (1.1 percent of GDP) but not quite twice as large as Italy’s (1.7 percent). Tillinghast’s 2006 update of the study, however, found that costs as a percentage of GDP had slipped to 2.09 percent in the U.S. No international figures were included in that report.

Thompson: Just the Facts

Thompson stuck to the facts in his rookie outing. A number of his statements attracted our interest, but they all checked out.

Corporate Taxes 2nd Highest in the World: Thompson was correct when he said of the U.S., “We have the second highest corporate tax penalty in the world.” According to a study produced by the global consulting firm KPMG, the U.S. top corporate tax rate of 40 percent is just slightly below Japan’s 40.6 percent. The United States is resisting a worldwide trend that has seen most nations reduce corporate taxes during the last decade. As of Jan. 1, 2007, the German rate was 38.36 percent; the Italian rate was 37.25 percent; and the Canadian rate was 36.1 percent. The average for the 30 major industrial democracies was 27.8 percent.

WMDs in Iraq: Thompson corrected moderator Chris Matthews, who wrongly implied that the former senator had said Saddam Hussein had weapons of mass destruction “right before” the U.S.-led invasion of Iraq:

Matthews: You made a statement a couple of days ago, I believe, that alluded to the fact you believed that there were such weapons [WMDs] in Iraq. Do you believe they were there right before we got in – they were moved out somewhere? …
Thompson: No, I didn’t say that. I was just stating what was obvious and that is that Saddam had had them prior. They used them against his own people – against the Kurds.

Thompson was correct. Matthews referred to remarks the senator made to about 60 persons in Newton, Iowa, last week. Both MSNBC and the Des Moines Register quoted him as saying, “We can’t forget the fact that although at a particular point in time we never found any WMD down there, he clearly had had WMD. He clearly had had the beginnings of a nuclear program.” Thompson didn’t say in the speech when Saddam “had had WMD.” The Register updated its article with a follow-up interview in which he made clear he was referring to a period long before the war:

Thompson (Des Moines Register): He [Hussein] acknowledged, I think, in filings made by the United Nations that prior to the invasion – sometime prior to the invasion – that he had chemical and biological weapons. I mean he used chemical weapons on the Kurds.

We can see how Thompson might have given the crowd in Newton the impression that he thought Iraq possessed WMD immediately before the 2003 invasion. Unless he saw the Register‘s update, Matthews could well have been left with that impression, too.

Economic Growth: Thompson erred – but on the safe side – when he said, “We’re enjoying 22 quarters of successive economic growth.” Actually, the U.S. economy has grown for 23 successive quarters, according to the most recent figures from the Bureau of Economic Analysis. And when preliminary figures on gross domestic product for July, August and September are released later this month, the official total is expected to reach 24.

Restraining Future Social Security Benefits: Thompson also was correct about the effect of restraining growth of Social Security benefits for future retirees:

Thompson: And then, lastly, one of the other things that could be done would be to index benefits to inflation. Index benefit to inflation for future retirees. It would not affect current or near retirement people. [It] would be indexed to inflation instead of wages, as it is today. And it would solve the problem for several years; it wouldn’t solve it indefinitely, but it would give us a window of opportunity to get our arms around the problem. It would be a major step in the right direction.

The Social Security actuaries calculate that it would require a tax increase of 1.95 percent of taxable payroll to pay benefits promised under current benefit formulas for the next 75 years. But most of that “actuarial imbalance” would disappear under various proposals to peg benefits of future retirees to inflation rather than to wage growth. One form of so-called “progressive” indexing would allow future retirement benefits for the lowest 40 percent of wage earners to keep growing under the current formula, which is pegged to wage growth, but slow down the growth of benefits for higher-income workers retiring after 2012 according to a sliding scale. Benefits for those at the very top would rise only enough to keep pace with inflation. Actuaries calculated that this would remove 1.21 percentage points from the 1.95 percent actuarial imbalance.

Opinions differ on whether any reduction in future benefit growth is a step “in the right direction,” and we take no position on that. Thompson was correct to say that proposals for inflation indexing would “solve the problem for years,” however.

To Be Continued . . .

Sources

Clinton, Hillary Rodham. “It Takes a Village: And Other Lessons Children Teach Us.” Simon & Schuster: New York, 1996.

Clinton, Hillary Rodham. “Interview with Brian Lamm.” C-SPAN Booknotes, 3 Mar. 1996.

Barrett, Devlin. “Hillary Clinton: $5,000 savings bond for every U.S. baby.” The Associated press, 29 Sept. 2007.

Sisk, Richard. “Hil Gives Birth to a $20B Baby. The 4 Million Tots Born in America Each Year Would Get $5G Bonds. Daily news (New York) 29 Sept. 2007.

“Hillary Clinton’s American Retirement Accounts Plan: A 401(k) Plan For All Americans.” HillaryClinton.com. 9 Oct. 2007.

“2006 Update on Tort Costs Trends.” Towers Perrin Tillinghast, 2006.

“U.S. Tort Costs and Cross-Border Perspectives: 2005 Update.” Towers Perrin Tillinghast, 2005.

Pickler, Nedra. “Hillary Rodham Clinton proposes 401(k)s with federal matching funds.” The Associated Press. 10 Oct. 2007.

Calmes, Jackie. “Politics & Economics: Clinton Turns to Economic Issues.” The Wall Street Journal, 9 Oct. 2007.

“Births, Marriages, Divorces, and Deaths: Provisional Data for February 2007.” National Vital Statistics Report, Volume 56, Number 2. Centers for Disease Control and Prevention, 9 Oct. 2007.

Chaplain, Chris and Alice H. Wade. “Memorandum. Subject: Estimated OASDI Long-Range Financial Effects of Several Provisions Requested by the Social Security Advisory Board,” 10 Aug. 2005.

U.S. Bureau of Economic Analysis, National Economic Accounts. “Gross Domestic Product, Percent Change from Preceding Period,” 27 Sept. 2007. accessed 10 Oct. 2007.

Applebaum, Lauren and Adam Aigner-Treworgy. “Fred: Saddam Had WMD.” 1 Oct. 2007.

Beaumont, Thomas. “Thompson: Iraq Had WMDs Before U.S. Invaded.” Des Moines Register, 1 Oct. 2007.

Beaumont, Thomas. “Thompson: Iraq had WMDs before U.S. invaded
UPDATE: He points to Saddam’s 1980s attacks on Kurds.” Des Moines Register, 1 Oct. 2007.

“KPMG’s Corporate and Indirect Tax Rate Survey 2007,” KPMG International, 2007; 8.