Obama’s Export Target Isn’t ‘On Track’: Reality Check
President Barack Obama and Republican nominee Mitt Romney made competing assertions during their debate last night in Hempstead, New York. How did they square with the facts?
The Claim: Obama said he’s going to create jobs by increasing exports. “And we are on pace to double our exports, one of the commitments I made when I was president.”
The Background: On Jan. 27, 2010, in his first State of the Union address, Obama said, “We will double our exports over the next five years, an increase that will support 2 million jobs in America.” In practice, this means a doubling of exports by the end of 2014 from 2009 levels. Administration officials, including U.S. Trade Representative Ron Kirk on April 2, 2012, have previously said exports are “on pace” to double.
The Facts: The U.S. isn’t on pace to double exports and is highly unlikely to meet that target. In the 32 months from January 2010 through August 2012, exports grew at an average annual rate of 12.7 percent, falling behind the 14.9 percent required to double exports by the end of 2014.
“The U.S. was on track through the end of 2011,” says Muir Macpherson, a trade economist at Bloomberg Government. Economic slowdowns in two of the U.S.’s largest export markets - - Europe and China, have helped lower export growth in 2012. To meet the 2014 target, exports would have to grow by at an average annual rate of 17.4 percent in the remaining 28 months through the end of 2014. Since 1960, U.S. exports have doubled over five years only in the high inflation years of the mid- 1970s and early 1980s. Export growth won’t be helped by current inflation rates running just above 2 percent.
Fast and Furious
The Claim: Romney said guns from the U.S. law enforcement operation Fast and Furious “killed Americans.”
The Background: Congressional Republicans have criticized and investigated the Obama administration and its Justice Department over Fast and Furious, which was designed to track guns illegally flowing to Mexican drug cartels. The operation, conducted by the Bureau of Alcohol, Tobacco, Firearms and Explosives from late 2009 to early 2011, was meant to build a case against gun smugglers linked to cartels. The agency lost track of about 2,000 weapons, which later turned up at crime scenes in the U.S. and Mexico. A U.S. Justice Department inspector general’s report found management failures and flawed strategy were used in the operation.
The Facts: There isn’t evidence to support Romney’s claim that weapons from the operation killed Americans. Two of the guns were found at the scene of the 2010 killing in Arizona of U.S. Border Patrol Agent Brian Terry; it hasn’t been determined whether those guns were used to murder him. Romney also said the “American people would like to understand fully” what happened in the operation and that the Obama administration blocked the release of documents on the case. The Justice Department’s inspector general last month released a report that described the operation and its origins, and faulted more than a dozen officials. Romney is correct that the administration asserted executive privilege to block Republicans in Congress from certain documents. The inspector general, who was lauded by Republicans and Democrats for the thoroughness of his report, had access to all of those documents.
The Claim: Obama said he helped protect U.S. jobs by halting a flood of cheap tires from China. “We saved 1,000 jobs,” Obama said. “And that’s the kind of tough trade actions that are required.”
The Background: Obama in September 2009 announced punitive tariffs for three years on $1.8 billion in tire imports from China, after the United Steelworkers Union filed a complaint alleging that the Chinese goods cost U.S. jobs. The duties started at 35 percent and declined to 25 percent.
The Facts: Obama is correct on the tire jobs the tariffs saved, though he omitted the jobs lost in other industries, according to an April study by the nonpartisan Peterson Institute for International Economics in Washington. The study said higher prices triggered by the tariffs left less money for consumers to buy other goods, contributing to cuts in retail employment. The institute estimates the tariffs resulted in a net loss of 2,531 U.S. jobs and cost about $1.1 billion in 2011. Obama allowed the tariffs to expire last month.
Auto Industry Rescue
The Claim: Romney said Obama followed his advice and let General Motors Co. (GM) and Chrysler Group LLC go bankrupt, “a process that was necessary to get those companies back on their feet,” he said. “That was precisely what I recommended and ultimately what happened.”
The Background: During the 2008 financial crisis that included the failure of Lehman Brothers Holdings Inc., lending froze for businesses and consumers, and auto sales fell to levels unseen in years. GM lost $9.6 billion in the fourth quarter of 2008. Chrysler was closely held and didn’t report financial results. Ford Motor Co. (F) lost almost $6 billion, although it didn’t face bankruptcy.
The Facts: Romney is misstating his position. He opposed any use of taxpayer dollars to bail out the automakers, advice that President George W. Bush and Obama ignored. GM and Chrysler went through managed bankruptcies after Bush, at the end of his presidency, and later Obama provided federal funds. Steven Rattner, the Willett Advisers LLC chairman and leader of Obama’s auto task force, said no private sources of money were available at the time.
Had Romney’s advice “been followed by either the Bush administration or the Obama administration, we would have today no auto industry,” Rattner said in February.
A former Bush aide agreed. “It wasn’t just that there wasn’t credit available; a lot of private equity had cash, they just weren’t giving it away,” said Tony Fratto, who worked in the administration when the initial bailout loans were extended in late-2008. “It was a very uncertain situation.”
The Claim: Romney said it took Obama 14 days before he called the Sept. 11 attack on the U.S. consulate in Benghazi, Libya, an “act of terror.”
Counter-Claim: Obama said that, in a statement in the White House Rose Garden the day after the killing of U.S. Ambassador Christopher Stevens, he “told the American people and the world that we are going to find out exactly what happened. That this was an act of terror.”
The Background: The Obama administration has come under criticism from Republicans for maintaining for days that the assault grew out of a demonstration against a video ridiculing the Prophet Muhammad. Five days after the attack, the U.S. ambassador to the United Nations, Susan Rice, presented that account on five Sunday television shows.
The Facts: Both are partially correct. Obama did mention “acts of terror” and Romney is right that days passed before the administration shifted its account of events in Benghazi.
On Sept. 12 at the White House, Obama made a broad reference to terrorism. “No acts of terror will ever shake the resolve of this great nation,” Obama said, in the aftermath of the death of Stevens and three other Americans. A day later, at a campaign event in Golden, Colorado, he was more specific. “I want people around the world to hear me: To all those who would do us harm, no act of terror will go unpunished.”
Still, the White House advanced a narrative that it didn’t unequivocally alter until Sept. 20, when press secretary Jay Carney said “it is self-evident that what happened in Benghazi was a terrorist attack.” He made the comment the day after Matthew Olsen, director of the National Counterterrorism Center, told a Senate committee that the four Americans died in a “terrorist attack.”
On Sept. 26, 15 days after the death of Stevens, Carney was still being asked by reporters where Obama stood: “The president -- our position is, as reflected by the NCTC director, that it was a terrorist attack.”
Arizona Immigration Law
The Claim: Obama said Romney called Arizona’s immigration law “a model for the nation.” The law allows law enforcement officers to “stop folks because they suspected maybe they looked like they might be undocumented workers and check their papers,” the president said. Obama also said Romney’s top immigration adviser “is the guy who designed the Arizona law.”
The Counter-Claim: “I did not say that the Arizona law was a model for the nation in that aspect,” Romney said. “I said that the E-Verify portion of the Arizona law, which is the portion of the law which says that employers could be able to determine whether someone is here illegally or not illegally, that that was a model for the nation.”
The Background: Romney has suggested that undocumented immigrants “self-deport” and called for actions to make them feel less comfortable in the U.S. He has said he opposes any effort to give legal status to undocumented immigrants without first requiring them to leave the country.
The Facts: Romney was right regarding his statement about the Arizona law. “I think you see a model in Arizona,” he said during a Feb. 20 Republican presidential debate in Mesa, Arizona. “They passed a law here that says that people who come here and try and find work, that the employer is required to look them up on E-Verify. This E-Verify system allows employers in Arizona to know who’s here legally and who’s not here legally.” Romney said requiring all employers to check an E- Verify system “can stop illegal immigration.”
Obama was correct when he said the author of the Arizona law was a Romney adviser. A Romney campaign press release in January quoted the Republican candidate as saying, “I look forward to working with” Kansas Secretary of State Kris Kobach “to take forceful steps to curtail illegal immigration.” Kobach’s biography on his official website says he “is well known nationally for his role as co-author” of the Arizona law.
The Claim: Obama said Romney “suggested that in fact employers should be able to make the decision as to whether or not a woman gets contraception through her insurance coverage.”
The Counter-claim: “I don’t believe employers should tell someone whether they could have contraceptive care or not,” Romney said. “Every woman in America should have access to contraceptives.”
Background: The Patient Protection and Affordable Care Act, Obama’s health-care overhaul, included a provision requiring health insurers to cover preventive services for women without co-payment. The Institute of Medicine, an independent nonprofit that advises Congress and the U.S. government, recommended in 2011 that women’s preventive services include contraception and Obama’s administration issued rules requiring insurers and employers who offer health benefits to cover all Food and Drug Administration-approved contraceptives, except churches and employers closely connected to them. About 85 percent of large firms cover contraception in their health plans now, according to the Kaiser Family Foundation, a nonprofit in Menlo Park, California that studies health issues.
The Facts: Obama correctly described what Romney’s position has been. Romney has said he would repeal the health law. He also said in a radio interview in February that “of course I support the Blunt amendment,” legislation introduced by Senator Roy Blunt, Republican of Missouri, that would forbid the government from requiring health plans or employers to cover health services “contrary to the provider’s religious beliefs or moral convictions.”
In disputing Obama’s assertion, Romney’s statement that he believes women should have “access” to contraceptives is different than requiring insurers to cover them.
Obama’s Tax Math
The Claim: Limiting deductions for wealthy individuals will “pay for about 4 percent reduction in tax rates,” Obama said.
The Background: Romney has proposed cutting income-tax rates by 20 percent and curtailing deductions and other tax breaks to keep government revenue from falling. Obama has maintained that Romney’s math can’t add up. A report by the nonpartisan Joint Committee on Taxation that became public last week analyzed how much tax rates could be reduced if itemized deductions were eliminated.
The Facts: Obama takes the study’s results out of context. The study found that eliminating itemized deductions in the tax code -- for taxpayers at all income levels -- would generate enough money to pay for a 4 percent rate cut. By saying that 4 percent is for wealthy taxpayers’ deductions, he misstates the study’s findings.
The context and the caveats of the study are important, and Obama omitted them. Under what committee described as an “experiment,” much of the base broadening in the analysis covers costs that Romney assumes in his starting point.
For example, ending deductions generates about $2.5 trillion over the next decade. In the experiment, $851 billion is devoted to reducing rates by 4 percent and taxing capital gains as ordinary income. Another $986 billion is devoted to repealing the alternative minimum tax.
Within that AMT repeal estimate, however, is the cost of preventing the tax from its scheduled expansion. Neither party wants the AMT to spread and neither party wants to pay for preventing that expansion.
That means some of the money in the study that doesn’t go toward rate reduction is available to Romney for lower rates. The 4 percent figure cited by Obama understates how much rate reduction could be achieved by ending itemized deductions.
Romney’s Tax Math
The Claim: “The math doesn’t add up,” Obama said of Romney’s tax plans.
The Counterclaim: “Of course they add up,” Romney said.
The Background: Romney has proposed about $5 trillion in tax cuts: a 20 percent reduction in income-tax rates, eliminating the estate tax and alternative minimum tax, and cutting the corporate tax rate to 25 percent from 35 percent. He has said he would prevent the tax burden from falling on the middle class, continue tax breaks for savings and investments, and stop the deficit from growing.
The Facts: Romney hasn’t shown how his tax plan adds up, because he hasn’t provided a detailed proposal.
Coming up with a plan that would meet all of Romney’s tests may be mathematically possible. The nonpartisan Tax Policy Center found in August that there aren’t enough tax breaks among high earners to pay for their tax cuts. Romney allies said that the study kept several tax breaks off the table, including the exclusion for municipal bond interest and the earnings within life insurance policies. If you consider those items and assume that economic growth generated by the plan would pay for part of the cuts, it’s mathematically possible to design a plan that would meet Romney’s tests.
Regardless of whether it’s possible, Romney hasn’t proposed it. The Tax Policy Center study assumed that Romney would eliminate breaks such as the charitable deduction and mortgage interest deduction for everyone making more than $200,000 a year. It also assumed that Romney could make those breaks disappear as soon as a household’s income reached $200,000, with no phasing out. The closest Romney has come is a suggestion of a cap on deductions, which would fall short of generating the revenue needed.
Top Income Taxes
The Claim: Romney said that under his plan to overhaul the tax code, “the top 5 percent of taxpayers will continue to pay 60 percent of the income tax the nation collects.”
The Background: Who pays how much to fund the U.S. government and its programs has emerged as a central issue in the campaign. In September, a videotape was made public of Romney telling a private meeting of his financial backers in May that 47 percent of Americans paid no federal income tax, considered themselves “victims” and were dependent upon government for their livelihoods. The president has proposed raising taxes on higher-income Americans, including establishing a minimum tax liability for those making more than $1 million annually.
The Facts: Romney is essentially correct in his calculation of how much the wealthy pay in income taxes. The top 5 percent of taxpayers -- those with adjusted gross income of at least $154,643 -- earned 31.7 percent of the nation’s income in 2009 and paid 58.7 percent of federal individual income taxes, according to the Tax Foundation, a nonpartisan group that studied the most recent available Internal Revenue Service data. The facts are different when all taxes are taken into account. Including state and local levies, which fall more heavily on lower-income earners, the top 5 percent in 2011 earned 35.3 percent of the nation’s income and paid 37.1 percent of all taxes, according to a study by Citizens for Tax Justice.
The Claim: Romney said, “Oil production is down 14 percent this year on federal land, and gas production is down 9 percent. Why? Because the president cut in half the number of licenses and permits for drilling on federal lands and in federal waters.”
The Counter-Claim: “We’re actually drilling more on public lands than in the previous administration, and the previous president was an oil man,” Obama said.
The Background: Romney and Obama agree that oil and natural gas production is up under the Obama administration. Romney says the increase has come on private lands and not as a result of the administration’s policies.
The Facts: Romney is correct that oil and gas production on public lands and offshore fell by 14 percent and natural gas by 9 percent from 2010 to 2011, though he exaggerates the decline in permits and ignores the fact that total oil production on federal lands and offshore has increased 12 percent during Obama’s term. While gas production has fallen 17 percent on public lands over the course of his term, total production is the highest ever as companies use hydraulic fracturing to access reserves in places like the Marcellus shale formation on private lands in the northeastern U.S.
$2 Trillion for Defense
The Claim: Obama said Romney “wants to spend $2 trillion on additional military programs, even though the military’s not asking for them.”
The Background: Romney, since at least 2009, has endorsed keeping basic defense spending, not counting wars, at 4 percent of gross domestic product. Today’s rate is about that, counting war spending, and 3.4 percent if only non-war annual spending is included. The Congressional Budget Office estimates the total defense budget will decline to 3 percent of GDP by 2017 as war spending decreases.
The Facts: Obama was partially correct. Washington study groups ranging from the Heritage Foundation to the Center for New American Security said sustaining the basic non-war defense budget at 4 percent of GDP annually over 10 years may cost as much as $2 trillion. Romney surrogates have repeatedly said he hasn’t endorsed a specific spending figure.
Romney’s 4 percent defense 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.
Military officials haven’t weighed in on the issue. The then-Chairman of the Joint Chiefs of Staff, Admiral Mike Mullen, in March 2008 said a “4 percent floor” for defense is “important.” Later, in June 2010, Mullen said “our national debt is our biggest national security threat.”
The Claim: “We have to make sure that we make it easier for kids to afford college,” Romney said. “I want to make sure we keep our Pell grant program growing.”
The Background: Pell grants are the main way the U.S. government helps low-income families send their children to college. The program provided $36.5 billion in aid to almost 9 million undergraduates in 2010, most from households earning less than $30,000 a year. It has grown in recent years because Congress made the benefits more generous and also because more young people, unable to find jobs, have gone to college instead.
The Facts: Romney’s running mate, House Budget Committee Chairman Paul Ryan has proposed cutting the maximum Pell grant awarded to students and making it harder to qualify for the aid.
Romney has endorsed Ryan’s budget. The Romney campaign said in a paper outlining its education policies that it would “refocus” Pell grants on those who “need them most.” It said recent increases in the program are “a result of the expanding entitlement mentality.”
Ryan has suggested that recent increases in Pell grants may have spurred colleges to increase costs to students.
The Claim: “I’m going to get us to a balanced budget,” Romney said.
The Background: With the U.S. running a deficit topping $1 trillion for four consecutive years, the federal budget has become a major issue in this year’s campaign. Balancing the budget is considered by many voters to be the standard of fiscal rectitude.
The Facts: Romney hasn’t spelled out how he would balance the federal budget and there is little evidence lawmakers would support the massive spending cuts that would be required.
Ryan’s budget, which was adopted by the Republican-led U.S. House, wouldn’t reach balance until 2040. That’s in part because Ryan and House Republicans refuse to raise taxes or cut Medicare benefits for those at or near retirement age. A proposal from a deficit-reduction committee led by former Senator Alan Simpson and Bill Clinton’s one-time chief of staff, Erskine Bowles, wouldn’t balance for 25 years.
A proposal last year by Kentucky Republican Senator Rand Paul that would balance the budget within five years was rejected by Democrats and Republicans, receiving seven votes in the Senate.
The Claim: Obama said: “We’ve seen increases in coal production and coal employment.”
The Counterclaim: Romney said: “Coal production is not up. Coal jobs are not up.”
The Background: Romney has said Obama administration environmental regulations, including requirements to reduce greenhouse-gas emissions, are hurting the coal industry in hotly-contested states such as Ohio, Pennsylvania and Virginia.
The Facts: Obama and Romney are both half-right. Coal employment has increased during Obama’s term, from about 81,200 workers in 2008 to 86,200 workers in 2011. Obama is wrong that coal production has also risen. It dropped from 1.17 billion tons in 2008 to 1.09 billion in 2009. The biggest dip came in 2009 during the height of the economic crisis when demand for electricity dropped. Coal production has increased since then without reaching the levels of the last year of Bush’s term.
Payroll Tax Cut
The Claim: Obama said he has cut taxes for middle-class families by $3,600 and that he wants “to continue those tax cuts for middle-class families.”
The Background: In 2009 and 2010, the Making Work Pay tax credit provided $800 each year to a married couple making $50,000. In 2011 and 2012, that was replaced by a 2-percentage- point reduction in the payroll tax, which provided $1,000 each year to that same family, for a total of $3,600. The payroll tax cut is scheduled to expire at the end of 2012, and lawmakers in both parties have expressed lukewarm support for an extension.
The Facts: Obama sounded like he was taking a position that he hasn’t. By referencing the $3,600 in middle-class tax cuts and saying he wants to “continue those tax cuts,” Obama made it seem as though he wants to extend the payroll tax cut. The administration hasn’t said whether it supports an extension, as White House spokeswoman Amy Brundage confirmed after the debate.
“There are a number of tax issues that Congress will have to deal with at the end of the year, this being one of them,” Brundage said in an e-mailed statement when asked about the payroll tax cut. “And we will continue to evaluate all of the options available to us at that time.” Obama does want to extend the Bush-era income tax cuts for individuals’ income below $200,000 and income below $250,000 for married couples.
The Claim: According to Romney, President Ronald Reagan, during the rebound from the early 1980s’ recession, created “twice as many jobs as this president’s recovery.” Speaking of Obama, Romney said, “He keeps saying, ‘Look, I’ve created 5 million jobs.’ That’s after losing 5 million jobs.”
The Background: At issue is whether the current economic situation is akin to earlier recoveries from recessions or whether the 2008 financial crisis renders it distinctive. The economists Kenneth Rogoff and Carmen Reinhart concluded that recoveries from recessions caused by financial panics are slower and more protracted than those following most downturns. The recession in the early 1980s, for example, was triggered by the Federal Reserve’s decision to increase interest rates to curb inflation. And unlike the period after the Lehman Brothers bankruptcy of 2008, the nation’s banks then were healthy.
The Facts: The first half of Romney’s claim is true; the second half is misleading. In the 39 months from the end of the Reagan recession in November 1982, the U.S. added 10 million jobs. That’s more than twice as many as the economy has added since its February 2010 low point. Few independent analysts attribute the job losses in the first few months of 2009 to Obama’s policies, since the labor market had gone into a nosedive months before he took office. The economy began shedding jobs in February 2008 and didn’t stop until March 2010. In January 2009, 818,000 jobs vanished, yet Obama wasn’t inaugurated until the 20th of the month. In February, 724,000 more disappeared. The president’s signature economic initiative, the American Recovery and Reinvestment Act, wasn’t signed into law until Feb. 17. That measure had its largest effect on unemployment in the second and third quarters of 2010, according to a Congressional Budget Office study.
The Claim: Romney’s plan for international taxation of U.S. companies “will create 800,000 new jobs,” Obama said. “Problem is, they’ll be in China or India or Germany. That’s not the way we’re going to create jobs here.”
The Background: Romney wants to change the principles of international taxation of U.S. companies. Under current law, companies owe U.S. taxes on profits they earn around the world. They receive tax credits for payments to foreign governments and don’t pay the U.S. until they bring home the money. Romney wants the U.S. to adopt a so-called territorial tax system, under which companies would owe little or no taxes on their overseas income.
The Facts: Obama overstated the findings of a study that analyzes an extreme version of Romney’s idea. The 800,000 jobs figure is based on a study conducted by Kimberly Clausing, an economics professor at Reed College in Portland, Oregon. Her analysis examined a “pure” territorial system in which U.S. companies would have no U.S. tax liability on their foreign income.
Romney hasn’t provided details of his territorial tax plan. The clearest Republican proposal has come from Representative Dave Camp of Michigan, chairman of the House Ways and Means Committee. It includes provisions opposed by companies that prevent them from shifting profits outside the U.S. That’s not the pure proposal Clausing analyzed.
U.S. companies say a territorial tax system would make them more competitive in foreign markets, while creating headquarters jobs in the U.S. Clausing’s study doesn’t address whether a territorial tax system would create U.S. jobs.