Research Briefing

Tim Kaine’s Claims On The Economy Do Not Match Reality

KAINE CLAIMS THE ECONOMY HAS TURNED AROUND

CLAIM:  Kaine Claims There Has Been A “Turn-Around From Negative To Positive On The Economy.”  “It Is -- We Got Some Ways To Go. But Remember We Were Shrinking At 6% A Year When President Obama Took Office In GDP, So There Has Been A Turn-Around From Negative To Positive.” (Fox’s “Fox News Sunday,” 9/5/10)

• Even Though Dems Criticized Bush For Using The Phrase “Turning The Corner” Saying The President Was Out Of Touch. “That refrain was repeated on other campaign stops. But this week, the ‘turning the corner’ line has disappeared from Bush's speech, as Democrats seized on the words to charge that the president was out of touch. ‘The last time we had a president who talked about turning the corner and ran on the slogan of turning the corner was Herbert Hoover,’ Sen. John Kerry, the Democratic presidential nominee, said during a July 31 stop in Greensburg, Pennsylvania.”  (Dana Bash, “Bush Speech Drops ‘Turning The Corner,’” CNN.com, 8/13/04)

REALITY: Economists Worry About A "Weakening Labor Market" With One Economist Saying A “Revival In Payrolls Is Clearly Still Some Way [Off].” “Economists are concerned about a weakening labor market. 'Demand growth has slowed, largely triggered by the spring plunge in stock prices, and cautious companies are responding by holding fire on hiring,' wrote Ian Shepherdson, chief U.S. economist with High Frequency Economics, in a research note. "We do not expect a spiral down into sustained serious net job losses but a real revival in payrolls is clearly still some way [off].’” (Ruth Mantell, "ADP Says Private-Sector Employment Fell 10,000 In August," MarketWatch, 9/1/10)

In Their August Meeting, "Several Fed Officials Argued That Business Was Frozen By Uncertainty About Taxes, Regulations And Health-Care Costs." "Federal Reserve officials wrestled with a slew of questions about the disappointing recovery before deciding at a fractious Aug. 10 meeting to prevent their securities portfolio from shrinking, according to minutes released Tuesday. High unemployment was one issue. Several Fed officials argued that business was frozen by uncertainty about taxes, regulations and health- care costs." (John Hilsenrath, "Fed Wrestled With Questions, Doubts," The Wall Street Journal, 9/1/10)

• Fed Officials Concluded That The Economy Would Grow Slower Than Expected Through 2011. “Officials concluded the U.S. 'was operating farther below its potential than they had thought, that the pace of recovery had slowed in recent months and that growth would be more modest during the second half of 2010 than they had anticipated.' Fed staff lowered the projection for 2010 growth but largely stuck to its call for a 'moderate strengthening' in growth in 2011.” (John Hilsenrath, "Fed Wrestled With Questions, Doubts," The Wall Street Journal, 9/1/10)

Business Owners Have Been “Operating For The Last Year And A Half In Conditions Of Perfect Uncertainty.” "Economists and business owners say they've never seen anything like it: The Bush tax cuts are expiring, health care reform is confusing, deficits are exploding, cap-and-trade is looming - and political leaders are too busy fighting among themselves to offer any reliable vision of the future. Little wonder, then, that businesses are frozen, afraid to hire or make any other long-term plans. 'We've been operating for the last year and a half in conditions of perfect uncertainty,' said David J. Ward, president of Madison-based consulting firm NorthStar Economics Inc., adding that he has never before seen such economic doubt in his 45 years as an economist.” (Joe Taschler, "As Politicians Fight, Businesses Wait For A 'Go' Sign," Milwaukee Journal-Sentinal, 8/29/10)

KAINE CLAIMS OBAMA IS FOCUSED ON JOBS, CITES SMALL BUSINESS BILL

CLAIM: Kaine Claims Obama Is Focused On Jobs, Citing Small Business Bill.  “This president and this team are going to be focused on the issue of jobs, but as we're adding private sector jobs now every month we just have to focus on things that will continue that. There is a bill right now pending in the senate to extend lending and other tax credits to small businesses so they can keep hiring” (Fox, “Fox News Sunday,” 9/5/10)

REALITY:  Small Business & Entrepreneurship Council President And CEO Urges Dems To Stop Pushing Small Business Bill Saying It Does Not Address Real Reasons Small Businesses Are Hurting. “Small Business & Entrepreneurship Council President and CEO Karen Kerrigan on Tuesday urged Democratic leaders to stop pushing for passage of the small-business lending bill because it does not address the underlying reasons for why small-business expansion has stalled. ‘The concerns and needs of most business owners go much deeper, and this legislation does not address broader issues related to taxes, regulations and excessive spending which threaten to aggravate currently poor economic conditions,’ she said in prepared remarks. ‘At the end of the day, proposed tax hikes along with legislation and regulatory initiatives in the pipeline will drive business costs higher and drain more private capital from our economy.’” (Jay Heflin, “Small-Business Advocate Says Lending Bill Will Not Help Economy,” The Hill, 8/31/10)

• Kerrigan Argues That The Threat Of The Dems’ Proposed Tax Hike And New Healthcare, Energy, And Financial Services Regulations Have Hurt Small Businesses. “Kerrigan, however, argues that new regulations from the Department of Labor, the Environmental Protection Agency and the IRS, along with the expiration of Bush-era tax cuts and new proposals affecting telecommunications, energy, healthcare and financial services have helped small-business owners feel as if they are under siege from Washington. These issues have also stopped them from hiring until they have a clearer picture of what the regulatory landscape will look like in the near future.”  (Jay Heflin, “Small-Business Advocate Says Lending Bill Will Not Help Economy,” The Hill, 8/31/10)

NFIB: “The Primary Problem Facing Small Business Owners Right Now In Terms Of Job Creation Is Not Access To Credit, It’s A Lack Of Sales, Customers And Confidence.” (NFIB, “NFIB Statement on Senate Small Business Jobs Act of 2010,” Press Release, 7/22/10)

• The Bill Ignores The Fact That Small Business Lending Is Down Because There Is No Demand For It From Small Businesses Who Are Afraid Of What’s Coming Out Of Washington. “The false assumption here is that banks are reluctant to lend because they lack the capital. This ignores that small business lending is also down because the business demand for loans is weak. Businesses don't typically expand when Washington is raising dividend, capital gains and personal income tax rates while piling on the new costs of ObamaCare and other regulations.”  (Editorial, “Son of TARP” The Wall Street Journal, 7/30/10)

KAINE CLAIMS DEMS’ TAX HIKE WON’T HURT THE ECONOMY

CLAIM: Kaine Claims Increasing Taxes Will Not Hurt The Economy. “You know the economic argument on this, is tax cuts in the middle class and small businesses are the dollars most likely to be spent and create economic activity. Tax cuts to the wealthiest might add to savings which is good in some ways but they’re not going to be spent in a way that will address a recovery.” (Fox, “Fox News Sunday,” 9/5/10)

REALITY: Dems’ Tax Hike Will Hit More Small Businesses Than They Suggest. “House Speaker Nancy Pelosi flipped the number around, saying that the planned tax increases would exempt '98% of American families and about 97% of small businesses.' The impact is far more severe than Mrs. Pelosi and Mr. Biden suggest. In fact, the sound bite about 3% of small businesses, which has been picked up by numerous pundits, is one of the more misleading statements in the long history of economic propaganda.” (Kevin A. Hassert and Allan D. Viard, Op-Ed, “The Small Business Tax Hike And The 97% Fallacy,” The Wall Street Journal, 9/3/10)

• Nearly Half Of The Business Income That Is Reported On Personal Tax Filings Goes To Families And Business That Would Have Their Taxes Raised By Dems. “The numbers are clear. According to IRS data, fully 48% of the net income of sole proprietorships, partnerships, and S corporations reported on tax returns went to households with incomes above $200,000 in 2007. That's the number to look at, not the 3%.” (Kevin A. Hassert and Allan D. Viard, Op-Ed, “The Small Business Tax Hike And The 97% Fallacy,” The Wall Street Journal, 9/3/10)

“It's Clear That Business Income For Large And Small Firms Will Be Hit By The Higher Tax Rates. And In Point Of Fact, Firms Of All Sizes Contribute To The Nation's Prosperity.” (Kevin A. Hassert and Allan D. Viard, Op-Ed, “The Small Business Tax Hike And The 97% Fallacy,” The Wall Street Journal, 9/3/10)

Small Businessman Says He Hasn’t Hired This Year Because His Taxes Have Increased And He Expects Them To Increase Again With The Dems’ Tax Hike.  “Last year, even as he struggled through the worst of the recession, Chris Upham said revenue at his District-based real estate and construction businesses doubled -- allowing him to hire two agents. But Upham said he hasn't increased his staff thus far in 2010 and he doesn't expect to for the remainder of the year. That's because his taxes rose sevenfold. And he said he anticipates they'll increase again if the Bush tax cuts for people earning $250,000 and above expire at the end of the year.” (V. Dione Haynes, “Small Businesses Feel Squeeze By Obama’s Policies,” The Washington Post, 9/4/10)

Dems’ 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)