One-Two Punch for GOP

Summary

Analysis

The debate was hosted by Chris Wallace of Fox News and took place Jan. 6 on the campus of Saint Anselm College in New Hampshire. Rep. Ron Paul of Texas and Rep. Duncan Hunter of California were not invited. Five Republican candidates took part: former Massachusetts Gov. Mitt Romney, Sen. John McCain of Arizona, former New York Mayor Rudy Giuliani, former Arkansas Gov. Mike Huckabee and former Sen. Fred Thompson of Tennessee.

We know that February is still weeks away, but we find ourselves feeling like we’re trapped in the political-hyperbole version of the Bill Murray movie already.

Mike Huckabee repeated some old boasts about his economic record.

Huckabee: I know that there had never been a broad-based tax cut in the 160-year history of my state, and I signed the first one. I know that I cut taxes 94 times and the taxes we cut helped families.

As we’ve said several times now, Huckabee’s 94 tax cuts include things like a reduction for manufacturing machinery that reduced state coffers by $500 per year. And, overall, his tax increases outweighed his tax cuts by more than $500 million. As for signing the first broad-based tax cut in 160 years, we’ve noted before that then-governor Bill Clinton signed an income-tax reduction in 1991 that was quite similar to the one that Huckabee signed a few years later. "Broad-based" is a matter of interpretation, but Huckabee's claim still sounds like unwarranted hyperbole to us.

In a new twist on an old theme, Romney downplayed the fee increases he enacted during his tenure as governor. After moderator Chris Wallace accused Romney of raising fees "on individuals and corporations by more than $500 million," Romney responded:

Romney: First of all, we raised fees by $240 million in our state because we had a whole series of fees that hadn’t been raised, in some cases, in decades, so we brought them up to the cost of providing services.

Romney’s numbers aren’t entirely accurate. For one thing, in 2006 his own administration estimated the figure to be higher – $260 million. Independent estimates were higher yet. The nonpartisan Massachusetts Taxpayers Foundation estimated that Romney’s fee increases resulted in "over $300 million" in additional revenue in 2004.The liberal Urban Institute – no opponent of higher taxes – estimated that Romney’s fee increases resulted in $400 million in additional revenue.

Moreover, Romney ignores the $174 million that his own administration figures he raised through "closing loopholes" in the corporate tax structure, which amounted to a tax increase for those who were using them.

Nor is it true that all of Romney’s fee increases were aimed at providing services. Michael J. Widmer of the Massachusetts Taxpayers Foundation says, "It’s been disingenuous to say there’s no new taxes, in the sense that there’s very little connection to the fee increases and the cost of services that the fees are supposed to represent."

Giuliani: Specifically – and you can go look – I lowered the income tax rate by 24 percent from the day I got in until the day I got out. The 24 percent lower income tax was yielding 42 percent more revenues. So I just talk about supply side, I actually made it work. I lowered the hotel occupancy tax by 34 percent, and we were making $200 million more on the lower tax than on the higher tax.

Giuliani was wrong in his calculations. New York City's personal income tax rate for the top bracket of resident taxpayers went from 4.457 percent to 3.592 percent from 1994 through 2001, which is a reduction of only 19.4 percent, not the 24 percent he claims. Net revenues (exclusive of refunds), measured from fiscal year 1994 through fiscal year 2002, increased only 28 percent, not 42 percent. That includes the economic impact of 9/11, however. Using fiscal 2001 as a measure, to avoid the 9/11 impact, the increase in net revenues was almost 62 percent, or even better than Giuliani claimed, according to the city's Independent Budget Office. But as he stated it, "from the day I got in until the day I got out," his claim is incorrect.

Correction, Jan. 8: We originally reported that Giuliani was correct to claim a 24 percent reduction in the income tax rate, but a helpful reader pointed out to us that our math, and that of Giuliani, was wrong. We and the mayor forgot the lesson our sixth-grade math teachers tried hard to impart, and we used the later tax rate as the divisor rather than the original tax rate. The rate fell from 4.457 percent to 3.592, which is a reduction of 0.865. And 0.865 is 19.4 percent of the original rate, 4.457.

On the hotel occupancy tax, there are two in New York, one local and one state-imposed. The local hotel tax, based on a $200-per-night room, went from 7 percent to 6 percent, a cut of 14.3 percent. This is the one Giuliani would be most responsible for, so his claim of a 34 percent cut is far too high. (The combined state and local tax went from 12 percent to 6 percent, a 50 percent cut.)

Hotel tax revenues didn't rise as much as he says, either. In fiscal 1994 they were $129 million. In fiscal 2001 (again, to avoid the effect of 9/11), they were up to $243.3 million – a respectable increase of 88.6 percent, but not a jump of $200 million as he claimed.

Correction, Jan. 8: In our original story we said revenues from the hotel tax in fiscal 1994 were $140.7 million, based on figures from the Independent Budget Office. However, our source at the IBO called us today to say the figure should actually be $129 million. That changes the increase from fiscal 1994 to fiscal 2001 to 88.6 percent, not 72.9 percent as we previously had it. Our point, that there was not a $200 million jump, as Giuliani claimed, remains correct.

Giuliani doesn't mention that there are more likely explanations than tax cuts for these increases in revenue, chiefly the booming economy of the 1990s. That was a national phenomenon, but may have had more impact in New York than anywhere else, as Wall Street profits soared to record levels. According to a 1997 IBO study, the city's 1 percentage point reduction in its hotel occupancy tax rate generated only enough increased activity "to offset as much as half of the direct cost of the tax cut."

Romney also bragged that he had cut state spending.

Romney: And this isn’t something I’ve just talked about. It’s something I’ve done. As governor, I cut spending. In my first year, our budget actually went down.

Romney is correct to say that he cut spending in his first year as governor. In real terms, Romney’s proposed 2004 budget (the first for which he was responsible) cut spending from $29.5 billion to $29.0 billion, a 1.7 percent decrease. But Romney fails to note that over his entire four-year term, he proposed spending increases of 7.5 percent.

Giuliani once again bragged about reducing welfare, even though New York City's record lagged behind the national trend while he was mayor. He inflated his previous claim in the process:

Giuliani: I took over a city that had 1.1 million people on welfare. I left behind a city with 670,000 fewer people on welfare.

Giuliani has been repeating this claim since at least early September, when we first called him on it. Interestingly, his record seems to have improved in the intervening months, since back then he took credit for reducing the welfare rolls by 640,000 people. The actual number, as we reported at the time (and as his own campaign confirms), is 650,000.

But what he leaves out is that New York’s reduction in welfare cases – a respectable-sounding 58.5 percent – actually trailed the national decline of 62.2 percent over the same period. And much of that nationwide reduction came after 1996, when President Bill Clinton signed a welfare reduction bill. So it is a matter of some debate just how much credit Giuliani deserves for the decline in New York.

Romney Rewrites History. Again.

Romney and Huckabee feuded over Romney’s position on President Bush’s tax cuts. Romney claims to have been a supporter of the cuts all along:

Huckabee: And facts are stubborn things, and you mentioned that. And did you support or oppose the 2002 Bush tax cuts?

Romney: I have never opposed the Bush 2002 tax cuts. I supported them. The first comment I made about the Bush tax cuts was that I supported the Bush tax cuts.

President Bush pushed through major tax cuts in 2001 and 2003. Huckabee is referring to the 2003 cuts, which occurred right at the beginning of Romney’s term as governor. Romney is correct to say that he never publicly opposed Bush’s tax cuts. But while he may have supported them, we find no record of his doing so in public. Indeed, Romney rather pointedly refused to endorse the Bush tax cuts in 2003. The Boston Globe quoted an unnamed observer as saying that Romney told the state's congressional delegation that he "won't be a cheerleader" for tax cuts that he doesn't agree with. According to this account, Romney added that he wouldn't oppose Bush's cuts either, because he "has to keep a solid relationship with the White House."

Wallace vs. Thompson on Social Security

In an exchange that may have left viewers baffled, it was moderator Wallace who misstated matters while questioning Thompson about his proposal to reduce the growth of future Social Security benefits:

Thompson: In the first place, I never said that I was cutting Social Security. What I suggested with regard to Social Security…

Wallace: You’re going to reduce the cost of living…

Thompson: I’ve suggested that it’s going bankrupt. I mean, the alternative with regard to Social Security is losing Social Security as we know it. So it’s a plan to save Social Security.

Wallace: But this would reduce — forgive me, sir. This would reduce the cost of living increase from what they currently are, if you change the index.

Actually, Thompson's proposal would not affect the annual cost of living increases for Social Security beneficiaries. Those would continue to be calculated as they are now, both for current and future beneficiaries. What Thompson's proposal would do is slow the growth of benefits for future retirees, changing the way that the initial benefit is calculated. These benefits would grow at the rate of inflation. Currently initial benefits are pegged to the growth in wage levels, which rise faster. The result is that somebody retiring in the future would get less to start than the current formula promises. However, after that, the checks would get annual cost of living increases under the same formula that now applies.

Thompson overstated matters somewhat when he said Social Security is "going bankrupt." It's true that the system is headed for trouble. Under current projections Social Security benefits will exceed income from payroll taxes by 2017, at which point money from general tax revenues will be needed to make good on IOUs from the trust fund. And by 2041 the trust fund will be exhausted. At that point benefits would have to be cut by 25 percent unless new revenue sources are found, with additional cuts in each year following. But the system would not stop paying benefits entirely, as the term "bankrupt" might seem to imply.

McCain and 'Pork'

McCain denied ever asking for a single "pork-barrel project" or Arizona, a claim disputed by rivals:

McCain: And I’m proud to tell you, Chris, in 24 years as a member of Congress, I have never asked for nor received a single earmark or pork barrel project for my state and I guarantee you I’ll veto those bills. I’ll ask for the line item veto and I’ll veto them and I’ll make the authors of them famous.

McCain has certainly made a crusade out of attacking the special projects of other members of Congress, and especially the hundreds of secretive "earmark" appropriations that increasingly have been slipped into spending bills at the request of House and Senate members, without public hearings or debate. And nobody is accusing him of using such tactics. In fact, the president of Citizens Against Government Waste, says the anti-pork watchdog group doesn't know of any instance in which McCain has asked the appropriations committee for an earmark.

However, rivals immediately pointed to a recent Washington Post report of what it called "an old earmark of McCain’s." The newspaper obtained a 1992 letter the senator wrote to the head of the Environmental Protection Agency, asking that the EPA provide $5 million for a wastewater treatment project either out of existing funds or "earmark the amount from an appropriate account." The $5 million for the treatment plant in Nogales, Ariz., was originally requested by President George H.W. Bush as part of the 1993 budget, but Congress didn’t approve it. Neither did EPA head Bill Reilly give the green light to McCain’s request. But McCain's letter was a request, not a legislative earmark carrying the force of law. The McCain camp says the senator asked if the EPA could "meet this need out of existing funds."

There are two other gray areas in McCain's past. A Nov. 2003 Roll Call article questioned the senator's actions in securing $14.3 million for an Arizona Air Force base, funding that was part of a military appropriations bill but was not requested by the president. The Roll Call report included critical quotes from the House Appropriations Committee spokesman, who said the funding violated McCain's own rules on pork-barrel spending. McCain told the newspaper that he first sought approval for the project in the 2004 defense authorization bill. Later that month, Roll Call ran a correction, saying that McCain hadn't violated his own rules and that Sen. Kay Bailey Hutchison, chair of the appropriations committee, said McCain didn't ask her to put the project in the appropriations legislation.

Thomas A. Schatz, president of CAGW, says for the funding to qualify as a pork request, McCain would have had to ask the appropriations committee to add it to the bill. (CAGW's 2003 Pig Book, however, does include a $13 million land acquisition cost for the Air Force base, but McCain's name isn't in the book.) The McCain campaign says the senator requested the amount "as part of the annual defense authorization process. He did not seek any special appropriations earmark or consideration, but the appropriations committee respected the authorization process and providing funding accordingly."

Also, in 2006, he proposed legislation that would give $10 million to the University of Arizona to create a center honoring former Chief Justice William Rehnquist. But was that pork-barrel spending? Answer: It depends. An Arizona Republic editorial said this wasn’t pork because it wasn’t slipped into some bill in the dead-of-the-night, but was a separate piece of legislation. A Chicago Tribune editorial, meanwhile, criticized McCain, saying the request was “not much better” than a hidden earmark, and a New York Times article included this assessment by Pete Sepp of the National Taxpayers Union: "If it doesn't meet the technical term of earmark, it would probably meet the public idea of one." As a separate authorizing bill (that died in committee), it doesn't meet CAGW's definition of pork.

– by Joe Miller, Viveca Novak, Lori Robertson and Brooks Jackson

Sources

Massachusetts Fiscal Affairs Division. “Governor’s Annual Budget Recommendations.” 2003-2007.

Massachusetts Dept. of Administration & Finance, "GAA 2004 Overview," Oct 2006, document supplied by Romney campaign 7 Jan 2008.

Bureau of Labor Statistics. “Consumer Price Index – All Urban Consumers.” 19 September 2007. Bureau of Labor Statistics. 7 January 2008.

Bovbjerg, Randall R. State Responses to Budget Crises in 2004: Massachusetts. 1 Feb. 2004. The Urban Institute. 16 May 2007.

Cardozo, Carol L., et al. State Budget '04: The Long Road Back. 1 Jan. 2004. The Massachusetts Taxpayer Foundation. 16 May 2007.

Rick Klein, "Mass. Is Called No. 1 in Fee Hikes," Boston Globe. July 24, 2003.

Wayne Washington and Glen Johnson, “Romney Weighs In – Carefully – on Bush Tax-Cut Plan,” Boston Globe. April 11, 2003.

Tax Cut Returns: Hotel Occupancy Tax Reductions: Returns to the City Treasury and Applicabililty to Sales Tax Cuts, Independent Budget Office of the City of New York, 28 July 1997.

Reductions in the City's Hotel Occupancy Tax Rate: The Impact on Revenues, Independent Budget Office of the City of New York, 28 July 1997.

Status of the Social Security and Medicare Programs. "A SUMMARY OF THE 2007 ANNUAL REPORTS." Social Security and Medicare Boards of Trustees, accessed 7 Jan. 2008.

Friends of Fred Thompson. "Saving and Protecting Social Security, A Plan to Ensure Retirement Security for All Americans." Web page, accessed 7 Jan. 2008.

Solomon, John. "An Old Earmark of McCain’s Surfaces." The Washington Post. 31 Dec. 2007.

Pierce, Emily. "McCain Breaks Own Pork Rule." Roll Call, 6 Nov. 2003. Correction, 17 Nov. 2003.

"Perfuming the barnyard." Editorial, Chicago Tribune, 4 Mar. 2006.

"2003 Congressional Pig Book." Citizens Against Government Waste, 2003.

Hulse, Carl. "Foe of Earmarks Has a Pet Cause of His Own." The New York Times, 18 Feb. 2006.

"The Issue: Honoring a Chief Justice; Rehnquist Center Is No Pork Project." Editorial, Arizona Republic, 26 Mar. 2006.

Interview with Michael Jacobs, Senior Economist, Independent Budget Office of the City of New York, 7 Jan. 2008.

"City Spending and Revenue since 1980," Table 4: Tax Revenue, Independent Budget Office of the City of New York.