Ryan, Biden Strain Truth Over Iran, Taxes: Reality Check

Oct. 12 (Bloomberg) -- Bloomberg's Matthew Dowd breaks down the vice presidential debate, what the campaigns can focus on and also weighs in on the EU winning the Nobel Peace Prize. He speaks on Bloomberg Television's "Bloomberg Surveillance."

Vice President Joe Biden and Republican challenger Paul Ryan, a Wisconsin representative, made competing assertions during their debate last night in Danville, Kentucky. How did they square with the facts?

Romney’s Defense Plan

The Claim: Biden said Republican presidential nominee Mitt Romney and Ryan were proposing an increase in U.S. defense spending of as much as $2 trillion, which Ryan denied. “We’re saying don’t cut the military by a trillion dollars,” Ryan said. “Not increase it by a trillion -- don’t cut it by a trillion dollars.”

The Background: Romney and Ryan have accused President Barack Obama of weakening the U.S. military by cutting defense budgets. They have vowed to reverse defense cuts and build more ships to enlarge the Navy.

The Facts: Biden was correct, and Ryan wasn’t.

Romney’s October 2011 white paper on national security says he will “reverse Obama-era defense cuts” and set a “floor of 4 percent of GDP” for defense spending. Romney’s defense- spending proposal would translate into $400 billion in added spending in his first term, compared with Obama’s current defense budget projection, according to Bloomberg Government analyst Robert Levinson. The Heritage Foundation, a Washington- based policy research organization, has said the additional spending would amount to $2 trillion over 10 years.

The Budget Control Act passed by Congress last year and signed by Obama calls for Pentagon spending to be reduced by $487 billion over a decade, compared with previously projected levels. The law also set the stage for an additional automatic $500 billion reduction over the same period if a debt deal can’t be reached. Ryan voted for the law. Adding both of those cuts would lead to a $1 trillion reduction over the next decade.

Medicare Advantage

The Claim: Biden said the Patient Protection and Affordable Care Act and the Obama administration “stopped overpaying insurance companies” that participate in Medicare Advantage, an alternative to the traditional Medicare program.

The Background: People who turn 65 have a choice. They can enroll in the traditional Medicare program, in which the government pays their medical bills, or in Medicare Advantage, in which they choose a private plan from a commercial insurer such as UnitedHealth Group Inc. (UNH) The government pays Advantage plans a set monthly fee for each beneficiary. Those payments have historically exceeded the cost of traditional Medicare.

The Facts: Biden was wrong. Overpayments to the plans were reduced by the health law, but they haven’t been stopped. In 2011, the year after the law was passed, the private plans were paid an average of 10 percent more than traditional Medicare cost, according to the Medicare Payment Advisory Commission, which monitors the program for Congress. In 2012, the plans will be paid an average of 7 percent more than traditional Medicare, MedPAC says. The plans remain overpaid, compared with regular Medicare, in part because of $8 billion in bonuses the administration is handing out, through 2013, to plans that perform well in government quality ratings. The Government Accountability Office, the investigatory arm of Congress, has said the administration’s bonus system isn’t authorized by law and should be canceled.

Deficit Spending

The Claim: Biden said Ryan and Republicans in Congress during the George W. Bush administration added to the national debt. “It came from this man voting to put two wars on a credit card, to at the same time put a prescription drug benefit on the credit card, a trillion-dollar tax cut for the very wealthy,” he said. “I was there. I voted against them. I said, ‘No, we can’t afford that.’”

The Background: The Republican-controlled Congress voted to cut taxes in 2001 and 2003, while authorizing the use of force against Iraq. Lawmakers also voted to provide funds for the war in Afghanistan in retaliation for the Sept. 11, 2001, terror attacks and to start a Medicare prescription-drug plan.

The Facts: Biden was mostly accurate in reciting what happened. He wasn’t entirely accurate about his own voting record. Biden voted against both tax-cut bills. Ryan voted for them. Both men voted for the Afghanistan spending bill in 2001 and to authorize the use of force in Iraq in October 2002. Biden opposed the prescription-drug program while Ryan voted for it. The federal budget, which ran a $128 billion surplus in the 12 months ending Sept. 30, 2001, had a deficit of $158 billion in fiscal 2002. The deficit doubled to $378 billion in fiscal 2003, according to the U.S. Office of Management and Budget.

Income Taxes

The Claim: “The middle class will pay less, and people making a million dollars or more will begin to contribute slightly more,” Biden said of Obama’s income tax plan.

The Background: The Obama administration wants to extend expiring income-tax cuts for most households and let them expire for top earners.

The Facts: Biden provides an incomplete description of the administration’s tax proposals. He said people making more than $1 million a year will pay more. That would be true under the administration’s proposed budget. What he left out was that many U.S. households making between $200,000 and $1 million a year would also pay more.

The $1 million threshold is higher than the one in the administration’s budget plan and the one that Obama has advocated since 2007. Obama wants to let tax cuts expire for income of individuals exceeding $200,000 a year and married couples above $250,000. He wants to limit deductions and other tax breaks for those earners.

In the administration’s budget, households making more than $1 million a year would pay an average of $179,117, according to the nonpartisan Tax Policy Center. Those households would see their after-tax income fall by 8.8 percent.

There are some cases in which middle-class families will pay more in taxes under the administration’s proposals. For example, the 2010 health-care law includes a requirement to purchase health insurance, enforced by a tax penalty for those who don’t comply.

Medicare Cuts

The Claim: Ryan said Medicare’s actuary “said one out of six nursing homes and hospitals are going to go out of business” as a result of the Patient Protection and Affordable Care Act, Obama’s health-care overhaul.

The Background: Medicare’s independent actuary, Richard Foster, produced estimates of the impact of the Affordable Care Act after it was passed. It was more pessimistic than the forecasts by the Congressional Budget Office, the official scorekeeper for legislation. Foster predicted that the law’s expansion of health-insurance coverage would cost the government $828 billion through 2019, $50 billion more than the CBO estimated.

The Facts: Ryan exaggerated one of Foster’s findings. To help pay for expanded coverage, the law would cut Medicare payments for health-care providers such as hospitals and nursing homes by about $233 billion over 10 years, by Foster’s calculations. He estimated those cuts would cause about 15 percent of providers, less than one out of six, to “become unprofitable” by 2019. He didn’t say they would “go out of business.” Foster also said the cuts “could be monitored over time to avoid such an outcome,” though that would reduce the amount of savings produced.

Libya Terrorism

The Claim: Ryan said the Obama administration was too slow to recognize that the Sept. 11 assault on the U.S. consulate in Benghazi, Libya, in which the U.S. ambassador and three other Americans were killed, was the result of terrorism. “It took the president two weeks to acknowledge that this was a terrorist attack,” Ryan said.

The Background: Republicans have faulted the Obama administration for initially saying the attack probably grew out of a spontaneous protest over an anti-Islamic video ridiculing the Prophet Muhammad.

The Facts: Ryan is correct that the administration advanced an argument that it has since said didn’t prove accurate. Biden was also correct in saying in response to Ryan: “That’s exactly what we were told by the intelligence community.”

Five days after the attack, U.S. Ambassador to the United Nations Susan Rice said on television news programs that intelligence showed the attack started as “a spontaneous, not premeditated response” to a “very offensive video.”

The administration gradually retreated from that description. On Sept. 19, Matthew Olsen, director of the National Counterterrorism Center, called the assault “a terrorist attack.”

On Sept. 28, the Office of the Director of National Intelligence issued a statement saying it was responsible for the initial assessment that the attack grew out of a spontaneous protest. “As we learned more about the attack, we revised our initial assessment,” according to the statement.

Embassy Protection

The Claim: Biden challenged Ryan’s assertion that U.S. officers in Libya had requested “extra” security. “We did not know they wanted more security,” Biden said.

The Background: Republicans have said the Obama administration failed to provide protection that had been requested for Benghazi by security officers in the country, which has been gripped by violence since the ouster of dictator Muammar Qaddafi.

The Facts: Biden’s statement is misleading because State Department officials in charge of diplomatic security did know. Eric Nordstrom, who was a regional security officer in Tripoli until July, told a congressional committee on Oct. 11 that he was turned down when he requested that a 16-member security support team that was scheduled to leave Libya in August be extended.

Charlene Lamb, the deputy assistant secretary for international programs in the Bureau of Diplomatic Security who evaluated Nordstrom’s request, said she declined to support it. The special team was stationed in Tripoli, not Benghazi, and other diplomatic security agents were available to do the job along with Libyans who had been trained to take over, she said.

Security Budget

The Claim: Biden said Ryan’s budget proposal cut $300 million from the amount the Obama administration requested for U.S. embassy security.

The Background: Romney, Ryan and Republicans in Congress have accused the Obama administration of failing to provide adequate security for the U.S. diplomatic compound in Benghazi. Ryan is the chairman of the House Budget Committee.

The Facts: Biden’s claim is accurate and not complete. For fiscal year 2012, the House Appropriations Committee, where Republicans hold a majority, proposed $1.43 billion for embassy security, construction and maintenance purposes -- a reduction of $376 million from the Obama administration’s request. Yet the Senate Appropriations committee, where Democrats hold a majority, also proposed cutting the administration’s request by $231.5 million.

The bill that passed Congress reduced embassy security funds for 2012 by $263 million from what the administration sought.

Green Energy

The Claim: Ryan criticized what he described as wasteful and ineffective efforts by the Obama administration to boost the economy including “$90 billion in green pork to campaign contributors and special interest groups. There are, just in the Department of Energy, over 100 criminal investigations that have been launched.”

The Background: The 2009 economic stimulus funded clean energy initiatives, including a program that provided a $535 million loan guarantee to Solyndra LLC, a solar panel manufacturer that went bankrupt and became the subject of a congressional investigation.

The Facts: Ryan wrongly implied that all of the money went to failed companies like Solyndra. Only $16 billion of the $90 billion went into the loan program that backed Solyndra. Three of 28 companies that received loan guarantees eventually went bankrupt, a lower rate of failure than anticipated by Congress, according to an analysis released in February. Investors in companies that received backing included donors to both Democratic and Republican candidates.

Ryan is correct that the Energy Department initiated 100 investigations, yet most of the cases don’t involve large amounts of money. An 18-month investigation by House Republicans failed to show the White House intervened to benefit George Kaiser, a campaign fundraiser for Obama in 2008 whose foundation was the major investor in Solyndra.

Energy Department Inspector General Gregory Friedman told Congress in November 2011 the various investigations include allegations of “submission of false information, claims for unallowable or unauthorized expenses, and other improper uses of Recovery Act funds.” He said the investigations have resulted in more than $2.3 million in monetary recoveries and five criminal prosecutions.

Iran Sanctions

The Claim: Ryan said the Obama administration has been “trying to water down sanctions in Congress for over two years.” He also said, “They’ve given 20 waivers” to the sanctions aimed at Iran.

Counterclaim: Biden said the Obama administration has imposed “the most crippling sanctions in the history of sanctions” and that Iran has lost half its oil exports.

The Background: The U.S., Israel and European allies say Iran is covertly pursuing a nuclear weapons capability, while Iran says its program is for civilian energy and medical research. The international community has imposed rounds of economic sanctions in an effort to force Iran to abandon the disputed parts of its nuclear program, with dozens of new U.S. and EU penalties in the last year.

The Facts: Ryan’s suggestion that the Obama administration has been soft on enforcing Iran sanctions is incorrect. At a Dec. 1, 2011, Senate hearing, two administration officials were assailed by lawmakers for questioning whether proposed oil- related sanctions might rattle energy markets or divide the international coalition rallied against Iran. Once Congress passed legislation imposing the sanctions, Obama signed it and has enforced it.

The administration has pressured the 20 nations that were importing Iranian oil into making significant reductions in imports required by the law to avoid having their banks cut off from the U.S. financial system. The administration found all 20 nations complied, and they were exempted from U.S. sanctions.

Under pressure from the U.S. and European sanctions, Iran’s daily oil exports have dropped by more than half since a year ago, as Biden said, according to the Paris-based International Energy Agency, and the Iranian currency has tumbled as much as 40 percent since August. Iran’s leaders have said the sanctions have been crippling.

Campaign Ads

The Claim: “You have a president who ran for president four years ago promising hope and change, who has now turned his campaign into attack, blame and defame,” Ryan said when asked about negative advertising during the campaign.

The Background: Obama’s re-election campaign and an aligned super-political action committee have run almost 132,000 ads from Sept. 9, shortly after the president was re-nominated at his party’s national convention, to Oct. 8, according to Kantar Media’s CMAG, which tracks TV advertising.

The Facts: Ryan is correct, though he isn’t telling the whole story. According to CMAG, 98 percent of the 131,944 general-election commercials Obama and the super-PAC that supports him, Priorities USA Action, ran from Sept. 9 to Oct. 8 were negative. They ran just 2,550 positive spots. Ryan neglected to say that the Republican ticket is running almost as high a percentage of attack ads. CMAG found that 89 percent of the ads by Romney and his aligned super-PACs, Restore Our Future and American Crossroads, plus its sister nonprofit Crossroads GPS, were negative. Of more than 85,000 Republican presidential spots, fewer than 10,000 were positive.

U.S. Naval Power

The Claim: Ryan said of planned defense budget cuts, “If these cuts go through, our Navy will be the smallest -- the smallest it has been since before World War I.”

The Background: Ryan was referring to cuts passed by Congress last year, with support from both parties and signed by Obama, in an effort to control the federal deficit. Reductions of $487 billion from projected defense spending over a decade are already reflected in Obama’s defense budget, while an additional $500 billion in reductions over the same period will take effect in January unless Congress and the president act to reverse them.

The Facts: Ryan’s comparison of the Navy to World War I levels is questionable because no calculation has been made of how the second round of cuts would affect the Navy’s size. The first round would leave the service with 284 ships, according to the Navy. In 1916, before the U.S. entered World War I, the Navy had 245 ships, according to the Navy’s History & Heritage Command.

Comparing ship numbers from 1916 with today is misleading in any case, according to Bloomberg Government analyst Levinson. Today’s modern Navy, centered on aircraft carriers and equipped with advanced weapons and radars, bears little resemblance to the Navy of 1916 built around battleships in the days before naval aviation, advanced electronics, and precision weapons. Back then, a battleship’s main guns had a range of about 20,000 yards, while jet fighters flying off today’s Nimitz-class, nuclear-powered aircraft carriers can reach targets thousands of miles inland with far greater accuracy.

Iran’s Bombs

The Claim: Ryan said that when Obama was elected, Iran had “enough fissile material -- nuclear material -- to make one bomb. Now they have enough for five. They’re racing toward a nuclear weapon. They’re four years closer toward a nuclear weapons capability.”

The counterclaim: Biden said, “When my friend talks about fissile material, they have to take this highly enriched uranium, get it from 20 percent up, then they have to be able to have something to put it in. There is no weapon that the Iranians have at this point.”

The Background: In a June 15 report, the Institute for Science and International Security, a Washington research group, said Iran’s current stockpiles of low- and medium-enriched uranium, if further enriched to bomb-grade levels, could be used for as many as five bombs, depending on the enrichment method.

The Facts: Ryan’s claim is misleading, while Biden’s description reflects the assessments of United Nations inspectors and U.S. intelligence agencies. International Atomic Energy Agency inspectors say Iran hasn’t diverted any declared nuclear material -- used for civilian power plants and a medical reactor -- to be further enriched to weapons grade, although they said they can’t be sure that Iran isn’t concealing nuclear activities. Israel has warned that if Iran abandoned the safeguards it could move within months to build a nuclear bomb. The IAEA has cited “credible” intelligence that Iran has worked on designs for a possible nuclear warhead in the past. Iran hasn’t developed a missile-delivery system for a nuclear bomb, according to U.S. intelligence reports.

Tax Cut Costs

The Claim: Biden said Republican plans to extend the George W. Bush-era tax cuts for top earners would result in “the continuation of a tax cut that will give an additional $500 billion in tax cuts to 120,000 families.”

The Background: The income tax cuts enacted in 2001 and 2003 expire ON Dec. 31. If Congress does nothing, tax rates will increase. The top income tax rate would reach 39.6 percent, up from 35 percent now, and rates on capital gains and dividends would rise.

Democrats and Republicans disagree on what to do about the expiration of the tax cuts. Republicans support extending the tax cuts at all income levels for a year and then begin an overhaul of the U.S. tax code along parameters like the ones Romney and Ryan have outlined. Democrats want to let the tax cuts lapse for income of individuals exceeding $200,000 a year and married couples above $250,000.

The Facts: Biden’s numbers are correct. He focuses not on everyone who would pay more in taxes. Instead, he zeroes in on the top 0.1 percent, or about 120,000 households.

A 2010 study from the nonpartisan Tax Policy Center found that the average tax cut for that group would be about $310,000. Multiply by 120,000 households in that group and you get $37.2 billion. Over a 10-year budget period, a $500 billion estimate is reasonable after accounting for projected growth in incomes, said Patrick Driessen, a Bloomberg Government analyst.

Medicare Solvency

The Claim: “Medicare and Social Security are going bankrupt,” Ryan said. “These are indisputable facts.”

Background: Both programs face serious budget challenges. The pace of growth in the Medicare program for the elderly and disabled represents the most vexing problem in the federal budget because no one is sure how to tame rising health-care costs. Social Security has begun spending more annually than it receives in payroll tax revenues, and eventually won’t be able to cover all of its beneficiaries’ scheduled benefits.

The Facts: Ryan’s statement is an exaggeration. While it’s true Medicare’s main trust fund is projected to become insolvent in 2024, by which time Congress will have to intervene, the entire program isn’t going bankrupt. That’s because Medicare relies on multiple streams of money to cover its costs, including general tax revenue and the premiums that are paid by beneficiaries. Social Security has the resources to cover its bills until 2033, according to the latest report by the program’s trustees. After that, incoming payroll tax revenue will only be enough to cover 75 percent of scheduled benefits, which means assistance would have to be cut by one-quarter unless Congress takes action to shore up the program.

Health Insurance

The Claim: Ryan said 20 million people “are projected to lose their health insurance if Obamacare goes through.”

The Background: Ryan and Romney say they would quickly repeal the Affordable Care Act, which requires most Americans to purchase health insurance, and businesses with 50 or more workers to cover their employees. Employer groups have said the law will raise the cost of coverage over time by requiring more generous benefits, and that some businesses will drop their workers’ insurance in response.

The Facts: Ryan’s claim, which echoed a statement Romney made during his debate with Obama last week, is at best unlikely. It’s the worst-case scenario in a Congressional Budget Office report that examined how the law might affect employer- sponsored insurance. Depending on how employers respond to the law, CBO said the number of people with insurance through their jobs in 2019 would be anywhere from 20 million reduced to 3 million increased. In its most recent estimate of the law’s impact, published in July, CBO settled on a projection that 4 million people would lose their employer-sponsored insurance, either by choice or because their employers drop their plans. People earning less than four times the poverty level, or about $92,000 for a family of four this year, would have access to private insurance subsidized by the government or to Medicaid, the insurance program for the poor.

Debt Creation

The Claim: Biden said Republicans’ complaints about the rising federal debt are hypocritical because they engaged in reckless spending during George W. Bush’s administration. “Now, all of a sudden, these guys are so seized with the concern about the debt that they created,” he said.

The Background: Republicans have said the growth in the national debt under Obama will lead to a fiscal crisis. At the party’s convention in Tampa, Florida, a giant digital clock in the hall displayed a constantly updated total for the debt as it closed in on $16 trillion.

The Facts: While Biden is right that Republican policies, including funding two wars, cutting taxes and expanding Medicare benefits, added to the national debt, the total debt has increased more in Obama’s single term than it did during Bush’s two terms. During the Bush administration, the total public debt rose to $10.6 trillion from $5.7 trillion. That $4.9 trillion increase over the span of eight years was less than the $5.5 trillion that has been added under Obama in three years and nine months. A Bloomberg Government study found that 61 percent of the increase in the annual budget deficit in the Obama years was caused by the economic downturn, which reduced tax revenue and triggered automatic spending on programs such as Medicaid. An additional 24 percent was linked to the economic-stimulus program and the remainder was other spending, including on defense, veterans’ programs and Medicare.

Syria’s Assad

The Claim: Ryan said the Obama administration “should not have called Bashar Assad a reformer when he was turning his Russian-provided guns on his own people.”

The Background: Republicans have sought to portray the Obama administration as too timid in calling for Assad’s ouster and supporting rebel forces. Ryan was referring to remarks made by Secretary of State Hillary Clinton, who once used the term “reformer,” according to Romney campaign spokesman Darrel Ng.

The Facts: Ryan’s comment was misleading. Clinton used the word “reformer” in reference to Assad on March 27, 2011, in an interview on CBS’s “Face the Nation” program, as protests against his rule were getting under way in Syria. “There’s a different leader in Syria now,” she said. “Many of the members of Congress of both parties who have gone to Syria in recent months have said they believe he’s a reformer.”

Two days later, at a press conference, Clinton said she didn’t share the assessment of those lawmakers. “I referenced opinions of others,” Clinton said. “That was not speaking either for myself or for the administration. We deplore the crackdown that is occurring in Syria, and we call on Syria, as we have throughout the last months, to respect the rights of its citizens, to allow people to protest peacefully, to work toward political and economic reform that would be to the benefit of the Syrian people.”

Small Business Taxes

The Claim: Ryan said the administration’s proposed tax increases on top earners would tax “about 53 percent of small business income.”

The Counter-Claim: Biden said 97 percent of small businesses would be unaffected by the administration’s proposed tax increases.

The Background: Most U.S. businesses don’t pay the corporate income tax. Their business income shows up on the tax returns of the business owners, where it is taxed under the individual income tax code.

The businesses that pay taxes this way include small businesses as well as larger ones organized as partnerships, such as global law and accounting firms.

The Facts: Both candidates are correct and both are misleading.

Biden is correct that most small businesses don’t report income of more than $250,000 a year and wouldn’t be subject to higher tax rates set to take effect in 2013.

Ryan is correct, though, that business income subject to individual tax rates is concentrated among the few businesses that would be affected.

Many of those businesses aren’t small, and they include hedge funds and pipeline companies. Ryan also includes profits from side businesses received by people who have other primary sources of income.

A 2011 Treasury Department analysis tried to determine how much small-business income would be subject to higher taxes and found that between 29 percent and 32 percent of small-business income would be affected.

Mathematically Possible

The Claim: Ryan said Romney’s tax plan is “mathematically possible.”

The Counterclaim: Biden said it’s not, and that the “only way you can find $5 trillion in loopholes” to offset the cost of Romney’s proposed rate cuts is to curtail deductions for middle-income families.

The Background: Romney wants to cut individual income tax rates by 20 percent, eliminate the estate tax and alternative minimum tax and reduce the corporate tax rate to 25 percent from 35 percent.

Those changes would cost about $5 trillion over the next decade in forgone revenue. Romney and Ryan say they can make up that difference without imposing higher taxes on the middle class and while protecting breaks for savings and investment. They haven’t provided details about how they would broaden the tax base to fill the $5 trillion hole.

The Facts: Ryan is correct about what’s possible, without acknowledging the politically difficult choices inherent in his arithmetic.

In August, the nonpartisan Tax Policy Center analyzed whether Romney’s plan could meet all of its goals and found that there weren’t enough tax breaks for high-income taxpayers to offset their rate cuts, meaning that Romney would have to shift the tax burden to everyone else to avoid increasing the deficit.

That analysis assumed policies that would be hard to move through Congress, such as ending deductions for charitable contributions for top earners and eliminating tax breaks when people earn more than $200,000.

Since then, Romney allies have challenged the study. They say some tax breaks the center didn’t include should be on the table, such as the exclusion of interest from municipal bonds. Counting those items makes Romney’s plan more mathematically possible.

Romney and Ryan also assume that economic growth caused by their plan will increase tax revenue, making their arithmetic easier. Official congressional scorekeepers don’t count that revenue because the growth effects of tax policies are hard to predict. If they were presented with a tax-cut plan relying on revenue from economic growth, they would say that it increases the deficit.

To contact the reporters on this story: Richard Rubin in Washington at rrubin12@bloomberg.net; Jonathan D. Salant in Washington at jsalant@bloomberg.net; Gopal Ratnam in Washington at gratnam1@bloomberg.net

To contact the editor responsible for this story: Clark Hoyt at choyt2@bloomberg.net

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