Summary
Our research has turned up some more dubious and misleading claims from the economic debate among Republican candidates in Hanover, N.H.
- Cain claims his 9-9-9 proposal to overhaul the tax code is “simple, transparent, efficient, fair, and neutral.” But his campaign has provided few details of how the plan would work, and a consultant hired by the campaign to analyze the plan could not provide evidence of how the plan would impact different income groups.
- Gingrich left out important facts on a government-backed panel’s recommendation that healthy men not get routine prostate screening tests. And he said that Sarah Palin’s bogus “death panel” claim had merit.
- Bachmann made the confusing and unsubstantiated claim that Obama secretly aims “for Medicare to collapse, and instead everyone will be pushed into Obamacare.”
- Perry claimed that a state program for small businesses offering health insurance has “driven down the cost of insurance by 30 percent.” But the cost is lower because Texas taxpayers subsidize the plans.
- Gingrich claimed that Federal Reserve Chairman Ben Bernanke had “spent hundreds of billions of dollars” on secret bailouts. But the Fed made loans, and actually reported billions in profits from interest income.
- Perry misquoted Romney’s economic adviser. Glenn Hubbard did not say that “Romneycare was Obamacare.” Hubbard said the two laws were similar and that the “main components” were the same.
Analysis
The debate was held Oct. 11 in Spaulding Auditorium on the campus of Dartmouth College in Hanover, N.H., and was sponsored by Bloomberg News and the Washington Post. It was devoted exclusively to economic issues and was televised live by Bloomberg. Eight Republican candidates participated, but much of the evening’s focus was on former Godfather’s Pizza CEO Herman Cain, who has surged in several polls and won an upset victory in a Sept. 24 Florida straw poll. Others debating were former Massachusetts Gov. Mitt Romney, Texas Gov. Rick Perry, Rep. Ron Paul of Texas, former Utah Gov. Jon Huntsman, Rep Michele Bachmann of Minnesota, former Sen. Rick Santorum of Pennsylvania and former House Speaker Newt Gingrich.
The candidates made a number of false or misleading claims that they’ve said before, which we covered in an earlier posting soon after the debate concluded. For example, Romney continued to claim that the health care law he signed affected only 8 percent of the population (not true) and that he didn’t raise taxes to pay for it (he left that for his successor). Bachmann claimed that a Medicare advisory board will make health care decisions for over 300 million Americans (it’s specifically prohibited from rationing) and repeated her claim that the U.S. is borrowing 40 cents of every dollar spent (the correct figure is 37 cents). Huntsman committed a real howler by claiming that the Internal Revenue Service is hiring 19,500 new employees to administer the “mandate” in the new health care law. The IRS has actually requested only 1,269 new employees, and much of their work will involve handing out tax credits.
We have continued to research other statements made during the debate. Here are some new ones we find worthy of note.
Cain’s ‘Transparent’ 9-9-9 Plan
Cain says his 9-9-9 economic plan is “simple, transparent, efficient, fair, and neutral.” On the contrary, it is far from transparent, and some preliminary estimates suggest it would fall far short of producing the same revenue as the existing tax system. It’s also a step toward a national sales tax that a bipartisan presidential advisory panel said would benefit the affluent and increase the tax burden on those in the middle. A consultant who analyzed the plan for Cain says he did not produce an income distribution table, so there is no evidence that the plan will indeed be “fair,” as Cain said.
As to long-term fairness, Cain’s website describes the plan as “Phase 1” in a progression to adopting the FairTax proposal, which a bipartisan presidential advisory panel rejected in 2005. The panel found such a national sales tax would have to be set at 34 percent to produce the same income as the current system, and would increase the tax burden on middle-income taxpayers while reducing it sharply on those making over $200,000 a year.
Cain’s 9-9-9 plan proposes to replace the tax code (including payroll taxes) with three flat taxes: a 9 percent business transaction tax, 9 percent income tax, and a new 9 percent national sales tax. But exactly how it would work is murky. His campaign devotes a web page to the plan, but it provides little more than a general description, with no analysis.
Cain’s plan has been evolving as the campaign goes on. Cain said in the debate that he plans to exempt “used goods” from the sales tax, a point not mentioned among the sketchy bullet points on his website. The FairTax would fall on all sorts of things including rent, purchase of a new home, doctor bills, legal fees and gasoline, for example.
It is not possible to do an economic analysis of Cain’s plan without many more details than the campaign has released so far. Bob Williams of the nonpartisan Tax Policy Center said his organization wants to do a thorough analysis and has requested more details. At least two news organizations have tried to analyze the plan. Bloomberg News attempted to do an analysis “following the broad contours” of Cain’s plan and found that it would have produced about $2 trillion — $200 billion less than federal revenues in 2010. The Washington Times came up with even less, about $1.8 trillion.
During the debate, Cain said Bloomberg’s analysis was wrong “because they start with the assumptions that we don’t make.” In an interview with ABC’s George Stephanopoulos the morning after the debate, Cain said: “We will be happy to share those assumptions but they won’t call and ask, ‘What are your assumptions?’ ”
Cain said an “independent firm” conducted an analysis of his plan and found that it is revenue neutral. Cain identified that firm in a CNBC interview as Fiscal Associates of Virginia, whose work has long been cited by FairTax proponents. Americans for Fair Taxation, a group that advocates for a FairTax, says in a 2007 white paper that a FairTax “would increase the GDP by 36.3 percent and increase private output by 48.4 percent over the long run,” citing the work of Gary and Aldona Robbins of Fiscal Associates.
In a phone interview, Gary Robbins confirmed that his firm did the analysis for Cain. He said he used 2008 economic data and determined that the three taxes combined would generate about $2.3 trillion — each producing about a third of the total revenue stream. That’s about $200 billion short of how much the federal government collected in revenues that year. But, he said, $200 billion would come from “other sources,” such as revenues from the Federal Reserve. So, he claims, it is revenue neutral. As for tax fairness, he said he did not determine the impact on different income groups. He said he was not asked to produce income distribution tables common for major tax proposals.
“I wasn’t asked to do that and I have not,” he said, when asked about the shift in tax burden. “My guess is that some people across the whole spectrum would be worse off and likewise better off.”
Robbins speculated that the low income “would be taken care of,” because the payroll tax would be eliminated and only income above a certain level would be taxed. However, low-income families spend a disproportionate amount of their incomes on food, housing and medicine — all things that Robbins said would be subject to the new national sales tax. Robbins insisted that the price of goods and services would be reduced by Cain’s plan, so the impact would be lessened on the poor. But the bottom line: Robbins doesn’t know for sure because he hasn’t done an analysis that shows how Cain’s plan will affect different income groups.
We spoke to Cain campaign spokesman J.D. Gordon and emailed him a list of questions at his request. We also called and emailed Rich Lowrie, whom Cain identified as “lead economist on helping to develop” his plan. But we have yet to receive an answer from Gordon or Lowrie. Lowrie doesn’t have a degree in economics; he has a bachelor’s in accountancy. He is a financial advisor with Wells Fargo Advisors in Cleveland, Ohio. Lowrie’s office referred us to Cain’s campaign spokesman, Gordon. An email sent to Lowrie triggered an automated response saying that inquiries should be directed to the campaign, and that “[i]n his efforts on behalf of Mr. Cain’s campaign, Mr. Lowrie represents only himself, and not Wells Fargo Advisors.”
Left unsaid at the debate is that the 9-9-9 plan is the first step toward instituting a “FairTax.” On his website, Cain says after enacting his 9-9-9 plan he will “begin the process of educating the American people on the benefits of continuing the next step to a Fair Tax” — which he called “Phase 2” of his tax plan. The FairTax proposal is a controversial idea. It was considered and rejected by President George W. Bush’s Advisory Panel on Federal Tax Reform. The panel said the tax would have to be set at 34 percent to be revenue neutral, and it would increase the tax burden on the middle class.
Cain is a smart businessman. His resume includes a bachelor’s degree in mathematics from Morehead College and a master’s degree in computer science from Purdue University. He was a board member of the Federal Reserve Bank of Kansas City from 1992 to 1996, and served as its chairman from 1995 to 1996. But his plan is not transparent, and we cannot judge if it is fair or revenue neutral. On this we have to agree with Michele Bachmann, who said, “the devil is in the details.”
Gingrich and ‘Death Panels’
Gingrich claimed that former Alaska Gov. Sarah Palin “got attacked unfairly for describing what would, in effect, be death panels” created by the Patient Protection and Affordable Care Act.
Gingrich made the “death panel” claim when criticizing a recent recommendation by a government-backed panel that a routine blood test screening for prostate cancer isn’t necessary for healthy men and may cause more harm than good.
Gingrich: I was just swapping e-mails today with Andy von Eschenbach, who was the head of the National Cancer Institute, the head of the Food & Drug Administration. But before that, he was the provost M.D. Anderson, the largest cancer treatment center in the world. And he wrote me to point out that the most recent U.S. government intervention on whether or not to have prostate testing is basically going to kill people. …
And what Von Eschenbach will tell you if you call him is, the decision to suggest that we not test men with PSA will mean that a number of people who do not have — who are susceptible to a very rapid prostate cancer will die unnecessarily. And there was not a single urologist, not a single specialist on the board that looked at it. So, I am opposed to class intervention for these things.
Gingrich’s comments are in need of context. The board that made the prostate screening recommendation was the U.S. Preventive Services Task Force, which has been around since 1984, when Ronald Reagan was president. It’s a board of private-sector medical experts mainly in primary care, and it makes recommendation on preventive services. Its latest recommendation is a draft, and is now open to public comment. It said: “Prostate-specific antigen–based screening results in small or no reduction in prostate cancer–specific mortality and is associated with harms related to subsequent evaluation and treatments, some of which may be unnecessary.” The “harms” include incontinence and impotence due to the treatment, which could be used on tumors that won’t develop into serious illness. The board’s evaluation, published in the Annals of Internal Medicine this month, states that it is “intended to help clinicians, employers, policymakers, and others make informed decisions about the provision of health care services. This article is intended as a reference and not as a substitute for clinical judgment.”
The board is no stranger to controversy. This is the same entity that said in 2009 that women under age 50 didn’t need a mammogram every year — it should be an individual choice, the board said. That recommendation was rejected by groups such as the American Cancer Society, which continued to say women age 40 and older should have a mammogram every year.
Doctors, particularly urologists, have criticized the prostate cancer draft recommendation, as well. We have not been able to reach Dr. Andrew C. von Eschenbach, whom Gingrich quoted. The former FDA commissioner and head of the National Cancer Institute works for a health care organization Gingrich founded, however. Von Eschenbach is now the senior director for Strategic Initiatives at the Center for Health Transformation, a for-profit think tank founded by Gingrich in 2003.
But if he did indeed say that the recommendation “is basically going to kill people,” he wouldn’t be alone. The New York Times quoted Dr. Deepak Kapoor, the head of Integrated Medical Professionals and president-elect of the Large Urology Group Practice Association, as saying: “We will not allow patients to die, which is what will happen if this recommendation is accepted.”
We find Gingrich’s leap from the controversial PSA recommendation to “death panels” to be unsupported supposition. The recommendation was and is non-binding, and the panel that made it has been around since long before the health care law was passed. Furthermore, Palin’s pull-the-plug-on-grandma talk has been thoroughly debunked.
She first made the claim in a Facebook posting that made this far-fetched claim: “The America I know and love is not one in which my parents or my baby with Down Syndrome will have to stand in front of Obama’s ‘death panel’ so his bureaucrats can decide, based on a subjective judgment of their ‘level of productivity in society,’ whether they are worthy of health care.”
Palin’s claim primarily referred to a provision that would require Medicare to pay for voluntary end-of-life counseling sessions, where seniors could discuss issues such as living wills, hospice care, health care proxies and life-sustaining treatment. Seniors in no way would be obligated to have such a counseling session. But if they chose to talk to their doctor about end-of-life planning, Medicare would have paid for that appointment. What was once a bipartisan-backed proposal that many health care experts supported became the impetus for a political firestorm, and the entire provision was eventually dropped from the health care law. A reference to end-of-life planning was also dropped from subsequent Medicare regulations.
Palin later claimed that it was the health care law’s Independent Payments Advisory Board that would institute ” ‘death panel’-like rationing.” But as we said in our wire post on the debate last night, the IPAB, charged with finding ways to slow the growth of Medicare spending, can’t make “any recommendation to ration health care,” as stipulated on page 490 of the health care law. Recommendations from the board, made up of medical and health care professionals, could also be rejected by Congress.
Update, Oct. 20: We contacted the U.S. Preventive Services Task Force to ask about Gingrich’s claim that “there was not a single urologist, not a single specialist on the board that looked at it.” We were told in a statement sent via email that “[w]hile there is not currently a board-certified urologist” among the 16 experts on the task force, “many of the USPSTF members have specific expertise in cancer prevention. For example USPSTF member, Dr. Timothy Wilt, runs the international Cochrane Prostatic Diseases and Urologic Cancers Group and is a principal investigator on a large, multi-year NIH-fund prostate cancer screening trial.” Also, the task force noted that “the systematic evidence review upon which their draft recommendation was based was peer-reviewed by the National Cancer Institute, the Center for Disease Control and Prevention, and independent experts including urologists.”
The task force also reiterated that this is a “draft recommendation” and it was seeking input before issuing a final recommendation. “In advance of posting their draft recommendation they notified key stakeholders including the American Urological Association and the American Cancer Society and encouraged them to review and provide comment on the draft recommendation statement,” the task force said.
Bachmann’s Medicare Scare
Bachmann claimed that the president secretly plans “for Medicare to collapse, and instead everyone will be pushed into Obamacare.”
Bachmann: I was in the White House with President Obama this summer. We asked him not once, but three times, “President Obama, what is your plan to save Medicare?”
And the president mumbled and he didn’t give an answer the first time, the second time. And the third time the president said something very interesting, Karen. He said Obamacare.
I think that senior citizens across the country have no idea that President Obama plans for Medicare to collapse, and instead everyone will be pushed into Obamacare.
We’re going to follow the lead of our fact-checking colleague at the Washington Post and plead befuddlement on this one. The Post‘s Glenn Kessler checked this claim from Bachmann in June, after she said it a few times, though she did add the words “I’m speculating.” This time, she states it as if she has the inside scoop on a covert administration operation.
The fact is, Medicare is a government-run health care program — just the sort of thing that Republicans argued against in debating the federal health care law. The federal law, meanwhile, calls for state-based exchanges, where individuals would purchases private insurance, many with the help of subsidies. That description sounds awfully similar to Republican Rep. Paul Ryan’s Medicare plan, which would provide subsidies with which seniors would buy private plans on a new Medicare exchange. Bachmann supported Ryan’s overall budget plan but said in a blog post on RedState.com that she “expressed caution about how we approach the issue of Medicare.”
We’re not sure exactly what type of health care seniors would have if they were “pushed into Obamacare,” as Bachmann envisions. Private insurance seems to be the likely option. They’d be moving off of a government-run program.
Meanwhile, we find no evidence to support Bachmann’s claim that the president “plans for Medicare to collapse.” To the contrary, the president has consistently stated publicly that he intends to strengthen Medicare, and the new health care law improves coverage for prescription drug benefits. The day after the debate, in fact, the Department of Health and Human Services issued a release stating that “seniors have more benefits, better choices, lower costs” during the open enrollment period that starts Oct. 15.
Insurance Premiums Down in Texas?
Did you catch Perry’s boast that in Texas, “we have driven down the cost of insurance by 30 percent”? It’s not what you may think.
Here’s what Perry said:
Perry: But in the state of Texas, from the standpoint of what we have done to make access of health care better, we passed the most sweeping tort reform in the nation in 2003. We also passed Healthy Texas, which expands the private sector insurance. And we have driven down the cost of insurance by 30 percent.
Health insurance premiums in Texas have not gone down. In fact, private sector, employer-based health insurance premiums for families in Texas have gone up by about 58 percent — in inflation-adjusted dollars — between 2001 and 2010, according to the government’s Medical Expenditure Panel Survey.
But that’s not what he was referring to, a Perry campaign spokeswoman said. Rather, she said, Perry was talking only about the Healthy Texas program, which states on its website that its insurance plans cost an average of 30 percent less than other, comparable health insurance plans. Healthy Texas is a state program to offer an incentive for small businesses to purchase an affordable health care plan for their workers. But that hasn’t driven down the cost of health insurance. The premiums are lower because Texas taxpayers subsidize them. According to a 2009 story in the Austin American-Statesman, the program was expected to come at a two-year cost to the state of $35 million.
The way Perry worded his claim — “We have driven down the cost of insurance by 30 percent” — suggests overall health insurance premiums have gone down in Texas. And they have not. In fact, private sector, employer-based premiums for families in Texas have gone up at a slightly higher rate — 58 percent (inflation-adjusted) — than the average national rate (50 percent) between 2001 and 2010.
Gingrich on the Fed
Gingrich was wrong when he said that Federal Reserve Chairman Ben Bernanke had “spent hundreds of billions of dollars” on secret bailouts during the economic crisis. Under Bernanke, the Federal Reserve Bank has made trillions of dollars in loans, but these loans are not a net loss for the bank. In 2010, in fact, the Fed reported nearly $79.3 billion in profits, nearly all from interest income.
Gingrich: Bernanke has in secret spent hundreds of billions of dollars bailing out one group and not bailing out another group. I don’t see anybody in the news media demanding the kind of transparency at the Fed that you would demand of every other aspect of the federal government.
Gingrich’s statement implies that the Fed has funneled billions of taxpayer dollars to big banks without any oversight. But that is not true. There was an audit of the bank by the Government Accountability Office in July of this year. As a part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress required a “one-time audit of emergency loans and other assistance provided by the Federal Reserve System from December 1, 2007, through July 21, 2010,” the GAO explains in its report. That report found that the Fed took numerous steps to guarantee repayment of the large loans.
GAO Audit: Reserve Banks required borrowers under several programs to post collateral in excess of the loan amount. For programs that did not have this requirement, Reserve Banks required borrowers to pledge assets with high credit ratings as collateral.
The protections appear to have worked. “The emergency programs that have closed have not incurred losses and FRBNY does not project any losses on its outstanding loans,” the GAO said.
In part because of these loans, the Fed was able to earn an income of $79.3 billion in 2010. That money was transferred to the U.S. Treasury and counted as revenue. Fed earnings accounted for 3.5 percent of all government revenues in fiscal year 2010.
The GAO audit did recommend some measures for increased transparency in the Fed’s loan process, but the existence of the audit itself debunks the myth of a conspiratorial Fed. And it is wrong to suggest that the Fed “spent” billions of dollars, when exactly the opposite is true.
Perry’s ‘Romneycare’ Misquote
Perry claimed that an adviser to Romney, R. Glenn Hubbard, “said that Romneycare was Obamacare.” Not exactly. Perry referred to a study coauthored by Hubbard, but the governor’s claims are exaggerated.
Perry: Glenn Hubbard, who you know well, he said that Romneycare was Obamacare. And Romneycare has driven the cost of small-business insurance premiums up by 14 percent over the national average in Massachusetts.
Perry exaggerated in citing the Hubbard study in the last debate on Sept. 22, saying wrongly that Hubbard had called the Massachusetts law “an absolute bust.” Perry did slightly better this time, but he’s still off.
First, the study, published in the Forum for Health Economics & Policy, didn’t say that “Romneycare was Obamacare.” It did say that the two laws were similar. “Because the [Massachusetts plan’s] main components are the same as those of the new health reform law, the effects of the Plan provide a window onto the country’s future,” the study said.
Second, the study tried to determine what impact the Massachusetts law had had on employer-sponsored insurance premiums. It determined that premiums had gone up because of the law by simply comparing the rate of growth in the state to the national growth rate for 2004-2006 and 2006-2008, before and after the law was passed. Since the difference between the national average and Massachusetts’ was greater after the law, the authors attribute the differential growth to the law. But they also acknowledged that the method had limitations, saying that “the data do not permit firm conclusions about the effect of the Massachusetts Plan on premiums.” The study also said: “Although our research design has important limitations, it does suggest that policy makers should be concerned about the consequences of health reform for the cost of private insurance.”
The study shows some mixed results. While it found a 14.4 percent differential growth in Massachusetts premiums for family coverage at firms with fewer than 50 employees — the statistic Perry mentioned — it found a much smaller increase for single coverage plans at those businesses, 6.8 percent. While it found a 5.9 percent increase in premiums for single coverage for all firms, it found just a 1.5 percent increase for family coverage.
The study also has its critics. MIT economist Jonathan Gruber, who advised Romney on the state law, points out that while Massachusetts premiums increased at a greater rate than the nation, 19 other states had even higher rates of growth. “Statistically, there is no evidence that MA is particularly different than the other states,” Gruber told us.
— by Eugene Kiely, Lori Robertson, Robert Farley, Scott Blackburn, D’Angelo Gore and Brooks Jackson
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