Research Briefing

Obama’s Carnegie Mellon Speech Not Concerned With Reality, Only Passing Blame

MALAISE AND BLAME AT MELLON

Obama Laments National Feeling That “American Dream Might Slowly Be Slipping Away.” “Over the last decade these families saw their incomes decline. They saw the cost of things like health care and college tuition reached record highs. They've lived through a so- called economic expansion that generated slower job growth than at any price year expansion since world war ii. Some people have called the last 10 years but lost decade. – ‘The lost decade.’ The recession has certainly made it worse, but that feeling of not being in control of your own economic future, the sense that the American dream might slowly be slipping away, that has been around for some time now.” (President Barack Obama, Excerpts From President Obama’s Remarks At Carnegie Mellon University, Pittsburgh, PA 6/2/10)

While Declaring That The Buck Stops Anywhere But Here. “As November approaches, leaders in the other party will campaign furiously on the same economic arguments they’ve been making for decades. Fortunately, we don’t have to look back too many years to see how their agenda turns out. For much of the last 10 years, we’ve tried it their way.”  (President Barack Obama, Excerpts From President Obama’s Remarks At Carnegie Mellon University, Pittsburgh, PA 6/2/10)

BUT OBAMA’S BLAME GAME DOESN’T MATCH THE FACTS

MYTH: Obama Claims GOP Did Not Have Solutions On Major Issues. “Now, some of you may have noticed that we have been building this foundation without much help from our friends in the other party.  From our efforts to rescue the economy to health insurance reform to financial reform, most have sat on the sidelines and shouted from the bleachers.” (President Barack Obama, Excerpts From President Obama’s Remarks At Carnegie Mellon University, Pittsburgh, PA 6/2/10)

REALITY:  House Voted Down GOP Alternative Stimulus Package Made Up Of Tax Cuts. “The House voted down several Republican proposals, including a substitute package made up entirely of tax cuts for individuals and businesses. Republicans did not say how much their package would cost, although Mr. Boehner said it would be far less than the Democratic plan.” (Jackie Calmes, “House Passes Stimulus Plan With No G.O.P. Votes,” The New York Times, 1/28/09)

• CBO Confirmed House Republican Alternative To Health Care Bill Would Have Lowered Premiums For Americans By Up To 10 Percent. “CBO estimates that the combination of provisions included in the amendment would reduce average private health insurance premiums per enrollee in the United States relative to what they would be under current law. The average reductions would be larger in the markets for small group and individually purchased policies, which are the focus of many of the legislation’s provisions. In the small group market, which represents about 15 percent of total private premiums, the amendment would lower average insurance premiums in 2016 by an estimated 7 percent to 10 percent compared with amounts under current law.” (Douglas W. Elmendorf, Congressional Budget Office, Letter To Honorable John A. Boehner, 11/4/09)
• And House GOP Has An “All Of The Above” Energy Plan. “House Republicans today revived their ‘all of the above’ pitch on energy policy, putting out an energy plan built around increased development of nuclear, fossil fuels and alternative energy… On the conservation and efficiency front, the legislation provides tax incentives for alternative fuel vehicles, prizes for development of innovative energy technologies, and a series of business and residential tax incentives for energy efficiency. Additionally, the proposal lays out steps to speed up licensing for nuclear power plants, setting a target of building 100 new nuclear power plants over the next 20 years.” (Alex Kaplun, “House GOP Brings Back 'All Of The Above' As Response To Dems' Energy Agenda,” E&E, 6/10/09)

MYTH: Obama Places Blame For His Binge Spending On Bush. “And despite all their current moralizing about the need to curb spending, this is the same crowd who took the record $237 billion surplus that President Clinton left them and turned it into a record $1.3 trillion deficit.”  (President Barack Obama, Excerpts From President Obama’s Remarks At Carnegie Mellon University, Pittsburgh, PA 6/2/10)

REALITY: “[T]he National Debt Has Ticked Up To $13 Trillion On Obama's Watch.” (Julie Pace, “Obama To Deliver Status-Check Speech On The Economy,” The Associated Press, 6/2/10)

• According To CBO, The Deficit In 2010 Is Projected To Be A Historically High $1.5 Trillion.  “If the President’s proposals were enacted, the federal government would record deficits of $1.5 trillion in 2010 and $1.3 trillion in 2011. Those deficits would amount to 10.3 percent and 8.9 percent of gross domestic product (GDP), respectively. By comparison, the deficit in 2009 totaled 9.9 percent of GDP.” (“An Analysis Of The President’s Budgetary Proposals For Fiscal Year 2011,” Congressional Budget Office, March 2010)
• Obama Rang Up Record-Setting $1.42 Trillion Deficit In 1^st Year In Office, Nearly Triple The Previous Record. (David Jackson, “Obama Team Makes It Official, Budget Deficit Hits Record. By A Lot,” USA Today’s “The Oval“ Blog, 10/16/09)
• Obama’s Deficit In 1^st Month Of 1^st Full Fiscal Year: $176 Billion; Deficit During Bush’s Entire 1^st Full Fiscal Year: $159 Billion. (Monthly Budget Review: Fiscal Year 2002: A Congressional Budget Office Analysis, Congressional Budget Office, 11/8/02; Jeanne Sahadi, “October Deficit $176 Billion,” CNNMoney.com, 12/10/09)

MYTH: Obama: “They Gave Tax Cuts That Weren’t Paid For To Millionaires Who Didn’t Need Them.” (President Barack Obama, Excerpts From President Obama’s Remarks At Carnegie Mellon University, Pittsburgh, PA 6/2/10)

REALITY: After 2000-2001 Recession, Tax Cuts On Capital Gains, Dividends And Payroll Increased Economic Growth. “Cutting the tax rates on dividends and capital gains was found to increase output in the long run by 0.4 percent, primarily by expanding the capital stock and enhancing labor productivity … Cutting the top four wage tax rates caused even a larger increase, 0.7 percent, primarily by increasing labor supply.” (Robert Carroll, “The 2001 And 2003 Tax Relief: The Benefit Of Lower Tax Rates,” Tax Foundation, 8/23/08)

• Tax Cuts Created Jobs Immediately. “The 2003 tax cuts lowered income, capital gains, and dividend tax rates. These policies were designed to increase market incentives to work, save, and invest, thus creating jobs and increas­ing economic growth. An analysis of the six quarters before and after the 2003 tax cuts (a short enough time frame to exclude the 2001 re­cession) shows that this is exactly what hap­pened… The economy lost 267,000 jobs in the six quar­ters before the 2003 tax cuts. In the next six quarters, it added 307,000 jobs, followed by 5 million jobs in the next seven quarters.” (Brian M. Riedl, “Ten Myths About The Bush Tax Cuts,” The Heritage Foundation, WebMemo #2001, 1/29/07)
• Lower Income Tax Rates “Boosted Incentives For Work, Savings And Investments.” “But the real story here is the success of the 2003 Bush tax cuts.  As expected, cutting taxes on dividends and capital gains and paring marginal income tax rates boosted incentives for work, savings and investments. Lower tax rates produced a dramatic increase in economic growth. … Just as predictably, cutting taxes eventually produced more, not less, tax revenues for the federal coffers. In 2005, federal tax revenues increased by $274 billion, a whopping 15 percent hike over the previous year. For the first nine months of the 2006 fiscal year, tax revenues are up another 12 percent-plus, or $206 billion.” (Robert J. Caldwell, Op-Ed, “Bush’s Strong Economy Performs,” The San Diego Union-Tribune, 6/16/06)

MYTH: Obama Forgets That Current Economic Conditions Under His Watch Are Not Robust. “Over the last decade these families saw their incomes decline. They saw the cost of things like health care and college tuition reach record highs. They've lived through a so- called economic expansion that generated slower job growth than at any prior year expansion since World War II. Some people have called the last 10 years but lost decade.” (President Barack Obama, Remarks At Carnegie Mellon University, Pittsburgh, PA 6/2/10)

REALITY: Almost Half Of The Unemployed Have Been Unemployed For Longer Than Six Months, A Historic High.  “Nearly half of the unemployed—45.9%—have been out of work longer than six months, more than at any time since the Labor Department began keeping track in 1948.  Even in the worst months of the early 1980s, when the jobless rate topped 10% for months on end, only about one in four of the unemployed was out of work for more than six months.  Overall, seven million Americans have been looking for work for 27 weeks or more, and most of them—4.7 million—have been out of work for a year or more.” (Sara Murray, “Chronic Joblessness Bites Deep,” The Washington Post, 6/2/10)

Mark Zandi, Chief Economists At Moody’s, Says Unemployment Will Go Above 10 Percent And Remain There For A Few Months, Signaling A Weak Job Market. “Economist Mark Zandi expects the unemployment rate to float above 10 percent during the next few months as workers look to take advantage of improving opportunities.  The increase in unemployment is a sign of a stronger job market, but it is also a sign of how weak the job market still is and vulnerable the recovery is to anything that might go wrong,” Zandi wrote in an e-mail to The Hill.”  (Ian Swanson, “Higher Unemployment On Horizon, Posing Big Challenge For Dems,” The Hill, 5/13/10)

MYTH: Obama Forgets His Policies Are Hurting Business Owners And Causing Uncertainty.  “As November approaches, leaders in the other party will campaign furiously on the same economic arguments they’ve been making for decades. Fortunately, we don’t have to look back too many years to see how their agenda turns out. For much of the last 10 years, we’ve tried it their way.” (President Barack Obama, Remarks At Carnegie Mellon University, Pittsburgh, PA 6/2/10)

REALITY: Obama Pays For His Government Takeover Of Health Care With Nearly $570 Billion In Job-Killing Taxes On Small Businesses, Investments And Innovation. (Douglas W. Elmendorf, Letter to Speaker Nancy Pelosi, 3/18/10)

• Which Could Cause 690,000 Net Job Losses. "The dynamic analysis shows that this bill would result in 690,000 net job losses, many of which would be in the health services industry. These losses represent both cutbacks in jobs and jobs that are simply never created as talented individuals choose to specialize in other industries that are not subject to the government's payment squeezes.'" (Karen A. Campbell, et. al., "Mandates And Taxes Re-Burden Health Insurance Markets," Heritage Foundation Web Memo, 3/16/10)

Obama’s FY2011 Budget Includes Nearly $1 Trillion Of Income Tax Increases By Letting Much Of 2001, 2003 Tax Cuts Expire. “President Barack Obama's $3.8 trillion budget for fiscal 2011 raises $2 trillion in taxes, cuts spending on programs with considerable political support and still leaves the nation with $8.5 trillion in additional debt over the next decade.”; “Taxes on high-income earners would rise by nearly $1 trillion over the next 10 years, under the budget plan put forward by President Barack Obama on Monday. The bulk of that increase comes as tax cuts enacted under President George W. Bush expire at the end of 2010.” (Jonathan Weisman, “White House Proposes $3.8 Trillion Budget,” The Wall Street Journal, 2/1/10; Martin Vaughn, “Tax Cuts To Expire For Top Earners,” The Wall Street Journal, 2/2/10)

Obama’s Income Tax Rate Increase Will Hit Small Businesses That Create 60 To 80 Percent Of New Jobs, “Discouraging” Their “Growth Or Expansion.” “They want to restore the higher, Clinton-era tax rates on the top two individual income brackets, increasing the 33 and 35 percent rates to 36 and 39.6 percent. But these higher rates won’t just hit high wages; they’ll hit business income … Depending on how we define ‘small business,’ these higher tax rates would raise taxes on 45 to 55 percent of small business income … So why should we pay attention to the way our tax code treats small businesses? They are an important source of innovation and risk-taking, creating between 60 and 80 percent of net new jobs, employing over half the labor force ... Higher income tax rates reduce the investment spending of entrepreneurs and the likelihood that they invest at all, discouraging the growth or expansion of small businesses.” (Robert Carroll, “Small Business And The Personal Income Tax Rates,” Tax Foundation, 10/28/08)

Obama’s Higher Income Tax Rates Will Stifle Entrepreneurship And Hurt “An Important Source Of innovation.” “The impact of the higher tax rates on the entrepreneurial sector is also particularly troubling. An often underappreciated feature of our tax system is that roughly one-third of all business taxes are paid by owners of flow-through businesses … when they file their individual tax returns. These businesses are an important source of innovation and risk taking.” (Robert Carroll, “The Economic Cost Of High Tax Rates,” Tax Foundation, 7/29/09)