Summary
President Obama peppered his State of the Union address to Congress and the nation with facts, which were mostly right but sometimes cherry-picked, strained or otherwise misleading.
- He said “there are about 2 million Americans working right now” because of last year’s stimulus bill. But his own economic advisers say the total could be as little as 1.5 million, and independent estimates range down to as low as 800,000.
- He quoted the Congressional Budget Office as saying health care legislation could “bring down the deficit by as much as $1 trillion” over the next 20 years. But CBO has made clear that’s a soft and uncertain estimate.
- He said that when he took office, the deficit already was projected to total $8 trillion over the next 10 years. But the estimate is from his own Office of Management and Budget; the CBO put the figure at trillions less.
- He said he believes a Supreme Court decision will allow foreign corporations to spend in U.S. elections. Perhaps so, but it actually did not address a law still on the books forbidding any foreign-based corporation from spending on electioneering here.
We also scoured the Republican response delivered by Virginia Gov. Bob McDonnell. He doctored a Thomas Jefferson quote — omitting Jefferson’s endorsement of government action to protect people from injury. McDonnell also overstated the speed with which the national debt is growing.
Analysis
This was the president’s first State of the Union address, but not his first speech to a joint session of Congress. We found a number of errors in his first one on Feb. 24, 2009, and also in his health care speech Sept. 9 (when a GOP House member shouted "you lie").
This time Republicans merely scoffed and grumbled at some of Obama’s statements. And while we found Obama strained the facts or cited uncertain statistics at times, we uncovered nothing we could show to be false.
How Many Jobs?
The president said the stimulus bill was responsible for "about 2 million" jobs, but that’s far from certain. Other estimates put the total as low as 800,000.
Obama: Because of the steps we took, there are about 2 million Americans working right now who would otherwise be unemployed.
The 2 million jobs estimate comes from the latest report of the White House Council of Economic Advisers. It said: "CEA estimates that as of the fourth quarter of 2009, the [stimulus bill] has raised employment relative to what it otherwise would have been by 1½ to 2 million." So his own economic advisers say the number could be as low as 1.5 million, but Obama took the higher number in their range. And the CEA report also cited fourth-quarter estimates from others, including the Congressional Budget Office and private economic forecasting firms, most of which are lower than the 2 million figure Obama used. The other estimates for job creation are:
- CBO: 800,000 to 2.4 million
- IHS/Global Insight: 1.25 million
- Macroeconomic Advisers: 1.1 million
- Moody’s Economy.com: 1.6 million
Furthermore, it’s difficult to say definitively what the employment situtation would have been without the legislation, and the CEA report acknowledges that, saying: "As we have emphasized, measuring what a policy action has contributed to growth and employment is inherently difficult because we do not observe what would have occurred without the policy. Therefore, it must be understood that our estimates are subject to substantial margins of error."
Hopeful on Health Care
Obama touted an optimistic — and highly uncertain — estimate on how the Senate health care bill could affect the deficit:
Obama: And according to the Congressional Budget Office – the independent organization that both parties have cited as the official scorekeeper for Congress – our approach would bring down the deficit by as much as $1 trillion over the next two decades.
It’s true that the CBO’s admittedly rough estimate said the bill could reduce the deficit below its projected level by “as much as” about $1 trillion over 20 years — but it also said the reduction could be half of that amount. And it noted the estimate is subject to a great deal of uncertainty.
CBO normally gives estimates for 10-year periods, and the nonpartisan entity doesn’t like to go beyond that. It said the Senate bill could produce a net deficit reduction of $132 billion over 2010-2019. For the next decade, CBO said the reduction would be “in a broad range between one-quarter percent and one-half percent of GDP.” Senate Democrats estimated that would mean a reduction of $650 billion to $1.3 trillion.
But CBO emphasized how squishy that large range is: “The imprecision of that calculation reflects the even greater degree of uncertainty that attends to it.” Plus, the numbers count on a reduction in the growth of Medicare spending, of which CBO isn’t so confident. “It is unclear whether such a reduction in the growth rate could be achieved, and if so, whether it would be accomplished through greater efficiencies in the delivery of health care or would reduce access to care or diminish the quality of care,” CBO Director Douglas W. Elmendorf wrote.
Stretching Deficit Facts?
Republicans laughed when Obama described the huge deficits he had inherited when he took office.
Obama: At the beginning of the last decade, the year 2000, America had a budget surplus of over $200 billion. (Applause.) By the time I took office, we had a one-year deficit of over $1 trillion and projected deficits of $8 trillion over the next decade. Most of this was the result of not paying for two wars, two tax cuts, and an expensive prescription drug program. On top of that, the effects of the recession put a $3 trillion hole in our budget. All this was before I walked in the door. (Laughter and applause.)
Now — just stating the facts.
Despite the Republican scoffing, Obama’s claims are backed up by the historical record — mostly.
- Budget surplus in 2000: The Congressional Budget Office reported on Nov. 14, 2000, in its Monthly Budget Review: "Fiscal year 2000 ended with a total budget surplus of $237 billion."
- Deficit when Obama took office: By the time Obama took office, that black ink had turned to gushers of red. "CBO projects that the deficit this year will total $1.2 trillion," CBO said in its "Budget and Economic Outlook." That was released Jan. 8, 2009, days before Obama’s inauguration. Update Feb 5: The $1.2 trillion projection would have been $966 billion had CBO been accounting for mortgage losses then the way they were eventually treated in the official deficit figures. See clarification below.
So the president actually understated matters regarding annual surpluses and deficits for years past, but he may have strained the facts when he spoke of what was being predicted for future years at the time he assumed office. He said he inherited a projected 10-year deficit of $8 trillion. But at the time, CBO projected only a $3.1 trillion deficit over 10 years (Table 4, page 15).
In fairness, that CBO figure assumed that all of President Bush’s tax cuts would be allowed to expire on schedule. And in reality, Obama and congressional Democrats supported extending many of the cuts, while Republicans supported extending all of them. Extending all of the Bush tax cuts would add another $2.9 trillion to that (Table 7, page 22), for a total of $6 trillion — still short of Obama’s claim.
His figure is based on a "baseline" projection issued Feb. 20 by his own Office of Management and Budget (Table S-2, page 115). The OMB projected a 10-year deficit of $8.9 trillion, including the $787 billion stimulus package that Obama had just signed.
So it’s fair to say that Obama was facing an ocean of red ink when he took office, but it could have been anywhere between $3.1 trillion (CBO’s unrealistically low estimate) to a bit over $8 trillion (OMB’s estimate minus Obama’s stimulus bill).
Clarification, Feb. 5: Obama was correct to say the deficit already was being projected at "over $1 trillion" when he took office. But CBO would have projected it at somewhat under $1 trillion had it used the same accounting method for Fannie Mae and Freddie Mac that was used by both the Bush and Obama administrations. CBO said its $1.2 trillion deficit projection for fiscal year 1999 included $240 billion in losses on mortgages held by those two government-sponsored but privately owned entities, which had been placed in a federal conservatorship in September 2008. "If it [the administration] chose to continue to treat them as nongovernmental entities, CBO would estimate the 2009 deficit to total $966 billion," CBO said in its Jan. 9, 2009 review. And that’s what happened. The official year-end deficit figures, based on monthly statements from the Treasury Department, reflect only the cash that the government has pumped into the two entities and do not include their mortgage losses, as CBO explained in a background paper released January 2010.
Foreign Corporations Donating?
The president claimed that "foreign corporations" could begin spending big money to influence U.S. elections under a recent Supreme Court decision.
Obama: Last week the Supreme Court reversed a century of law that I believe will open the floodgates for special interests –- including foreign corporations –- to spend without limit in our elections.
Justice Samuel Alito, who with the other justices sat at the very front of the chamber last night, was seen shaking his head and mouthing what appeared to be the words "not true" as Obama said this. Alito joined the majority in the 5-4 Citizens United v. Federal Election Commission decision issued by the Court last week, which knocked down restrictions on corporate spending on elections.
But it’s unclear whether the court’s opinion will lead to allowing foreign-based corporations to buy campaign ads and engage in other electioneering activities. There is still a law barring foreign corporations from spending money in connection with U.S. elections (see 2 U.S.C. 441e(a)(1) and (b)(1), with definition of "foreign principal" in 22 U.S.C. 611(b)(3)), and that’s a matter likely to be litigated further. The court’s most recent decision explicitly didn’t deal with that question. But strictly speaking, Obama couched his claim as something "I believe," making it a statement of opinion and not of fact. So whether his view turns out to be right remains to be seen.
Taxes
The president correctly pointed out that he signed a number of tax cuts for individuals and businesses as part of the stimulus package, and also said this:
Obama: And we haven’t raised income taxes by a single dime on a single person. Not a single dime.
That’s true, according to Bob Williams of the Tax Policy Center. But it’s not the whole story. As Obama himself later said, tax increases are coming, at least for some:
Obama: To help working families, we’ll extend our middle-class tax cuts. But at a time of record deficits, we will not continue tax cuts for oil companies, for investment fund managers, and for those making over $250,000 a year. We just can’t afford it.
K St. to the White House: Road Almost Closed
Obama touted his efforts to change Washington’s ways.
Obama: [W]e’ve excluded lobbyists from policymaking jobs or seats on federal boards and commissions.
Obama, by executive order last January, did put in place the federal government’s first-ever reverse-revolving door policy, which says that anyone who has lobbied within the previous two years can’t join a part of the administration that he or she lobbied.
The order allows for waivers, however, and several have been granted. For instance, Jocelyn Frye, who used to lobby on employment and gender discrimination, became director of policy and projects for Michelle Obama; Cecilia Muñoz, who formerly lobbied for the National Council of La Raza, was appointed White House director of intergovernmental affairs and former Raytheon lobbyist William Lynn became deputy secretary of defense.
Obama might have been trying to leave himself some wiggle room when he specified "policymaking jobs." But Lynn’s job sounds to us like it involves policymaking. And it’s hard to claim that Ron Kirk, the United States trade representative, doesn’t have a policymaking role. Kirk didn’t need a waiver because he was a lobbyist — for Merrill Lynch and others — in Texas, not Washington, but Obama made no such distinction in his statement Wednesday night.
The Republican Response – Doctoring Jefferson
Delivering the Republican response from the Virginia Statehouse, Gov. Bob McDonnell used a slightly doctored quote that he attributed to an early predecessor, Thomas Jefferson, the second governor of the Commonwealth of Virginia:
McDonnell: It was Thomas Jefferson who called for "a wise and frugal Government which shall leave men free to regulate their own pursuits of industry … and shall not take from the mouth of labor the bread it has earned." He was right.
That’s a selective paraphrase of what Jefferson actually said in his first inaugural address, when he was sworn in as the nation’s third president. What Jefferson really said was:
Jefferson, March 4, 1801: Still one thing more, fellow-citizens — a wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government, and this is necessary to close the circle of our felicities.
So Jefferson first said a wise government "shall restrain men from injuring one another," something that could today be taken as an endorsement of government regulation. By leaving that part out, McDonnell made Jefferson — founder of what has become the modern Democratic Party — sound a good bit more like an anti-tax, anti-regulation Republican than he was in reality.
Wrong on the Debt
McDonnell also made incorrect claims about the expected growth of the national debt.
McDonnell: The amount of this debt is on pace to double in five years, and triple in 10.
That’s an outdated Republican talking point that failed to account for the most recent Congressional Budget Office report, issued several hours before McDonnell spoke and discussed in Senate testimony earlier in the day. CBO’s latest figures show the public debt increasing from $7.5 trillion at the end of fiscal year 2009 (which ended Sept. 30) to $11.6 trillion in 2014 and $14.3 trillion in 2019. That’s an increase of about 55 percent in five years and 91 percent in 10 years, far less than the doubling and tripling of which McDonnell spoke.
McDonnell is even further off the mark if counting what’s called the "gross" debt, which includes money the government owes to itself, chiefly in IOUs held by the Social Security trust funds. CBO’s latest report includes a table (Table D-2) showing the gross debt at $11.9 trillion at the end of fiscal 2009, and expected to rise to $16.7 trillion in five years and $20.6 trillion in 10 years. That figures out to be increases of 40 percent and 73 percent.
McDonnell also claimed:
McDonnell: The federal debt is already over $100,000 per household.
That’s only true if one looks at gross debt. The Census Bureau estimates there are 117 million U.S. households. Dividing that figure into the gross debt — also known as "total public debt outstanding" — does indeed yield a figure of $105,143. But using the figure that economists generally find more relevant — "debt held by the public" — the debt works out to be a less dramatic number — $66,531 per household.
— by Brooks Jackson, Viveca Novak, D’Angelo Gore, Lori Robertson, Justin Bank and Jess Henig
Update, Jan. 29: A section of our story was missing when we originally posted it. We have added the section, headed "K St. to the White House: Road Almost Closed," just before our analysis of the Republican response.
Correction, Feb. 3: In the original version of this story, we conflated the citations for two related statutes having to do with prohibiting foreign corporations from spending money in U.S. elections. We have fixed the error.
Sources
Council of Economic Advisers. "The Economic Impact of the American Recovery And Reinvestment Act Of 2009; Second Quarterly Report." 13 Jan 2010.
Congressional Budget Office. “Monthly Budget Review.” 14 Nov 2000.
Office of Management and Budget. “Budget of the United States Government; Summary Tables, Table S–2.” 20 Feb 2009.
U.S. Senate. Floor Statement by Senate Budget Committee Chairman Kent Conrad (D-ND) on Senate Health Plan. 22 Dec 2009.
Congressional Budget Office. Letter to Sen. Harry Reid. 20 Dec 2009.
Federal Election Commission. Federal Campaign Laws, p. 86. April 2008.
Barnes, Robert. "Alito’s State of the Union Moment." The Washington Post. 27 Jan 2010.
U.S. Office of Government Ethics. Executive Agency Ethics Pledge Waivers. Accessed 28 Jan 2010.
The White House. Ethics Pledge Waivers Released by the White House. Accessed 28 Jan 2010.