Bloomberg News

Obama Is Wrong on Romney Tax Plan Impact: Reality Check

September 05, 2012

Obama Is Off on Effects of Romney’s Tax Plan

A delegate holds up a sign with a photograph of U.S. President Barack Obama before the start of day one at the 2012 Democratic National Convention in Charlotte, North Carolina. Photographer: Daniel Acker/Bloomberg

In the heat of the presidential campaign, both sides have made statements that don’t square with reality. Here’s a look at some claims compared with the facts.

Tax Cuts for Millionaires

The Claim: President Barack Obama says his Republican opponents want “another budget-busting $250,000 tax cut for folks making $3 million a year or more.”

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The Background: Republican presidential candidate Mitt Romney has proposed a 20 percent across-the-board tax rate cut for individuals. He also has said that he would curtail tax breaks to prevent the government from losing revenue and make sure the tax burden won’t be shifted from top earners to others.

The Facts: Obama’s statement is wrong on two counts. The proposed tax cut is less than $250,000, and it wouldn’t “bust” the budget, according to a study the president and Democrats use as the authority for their criticism of Romney’s plan. The $250,000 figure -- actually $246,652 -- was first calculated by the non-partisan Tax Policy Center.

The group later updated its report and said the cut for top earners could be smaller if additional tax breaks were eliminated, without specifying a new number for those earning $3 million and more a year.

The center denies that it changed its core analysis and said the new estimates were part of an effort to give Romney every benefit of the doubt as their analysts tried to fill in the gaps in his plan. The group has said the new estimates don’t change their central findings about Romney’s plan.

The Romney plan is predicated on being revenue neutral, and the Tax Policy Center study was based on that premise, meaning that something would have to give -- fewer cuts for millionaires or higher taxes for the middle class -- to achieve the goal. Romney hasn’t said what breaks would end, and independent analyses have shown that it would be almost impossible to meet all the goals of his program simultaneously. He says his first priority is avoiding a middle-class tax increase, signaling that he might have to compromise on tax rates or revenue.

The Carter Years: “The Good Old Days?”

The Claim: Paul Ryan, the Republican vice presidential candidate, said economic conditions are so bad, “The Jimmy Carter years look like the good old days compared to where we are right now.”

The Background: Ryan’s comment reminds voters of today’s economic disappointments and ties Obama to President Jimmy Carter, who was defeated in his 1980 re-election bid.

The Facts: Ryan is mostly wrong. Few people who lived through the late 1970s recall them as the good old days. True, unemployment was lower in the Carter years, averaging 6.6 percent compared with 8.9 percent for Obama. By other measures, today’s economy is outperforming the 1970s. As of its Aug. 31 close, the Standard & Poor’s 500 Index (SPX) has risen 74 percent since Inauguration Day 2009, almost four times the 19 percent gain during the comparable period in Carter’s presidency.

The biggest difference is inflation, which peaked at 14.8 percent in March 1980, while the consumer price index today is rising at an annual 1.4 percent rate. Republicans used the “misery index” -- combining the unemployment and inflation rates -- to savage Carter. Obama’s score, using July figures, is 9.7 compared with Carter’s 20.9 in July 1980. Most importantly, Obama is presiding over an economy that is expanding, albeit modestly, while Carter ran for re-election with a shrinking economy.

The Democrats’ Record on Mortgage Relief

The Claim: The Democratic platform says, “President Obama took swift action to stabilize a housing market in crisis, helping five million families restructure their loans to help them stay in their homes.”

The Background: The collapse of home prices starting in 2006 and the resulting financial crisis in September 2008 have led to almost 3.7 million foreclosures, with millions more in the pipeline. The Obama administration rolled out loan- modification and refinancing programs to help troubled borrowers keep their properties.

The Facts: The platform exaggerates the Obama record. The U.S. Treasury Department’s Home Affordable Modification Program (HAMP) and the Federal Housing Administration, which insures mortgages, together aided about 2.4 million borrowers through the end of June, according to Treasury Department data. Lenders were slow to embrace the voluntary programs, which offer payments to banks for loan restructurings.

In making the claim that Obama has helped 5 million families, the Democratic Party is counting 2.9 million mortgage modifications that banks handled on their own without government incentives. The administration maintains that the president deserves credit for these, too, because the banks have adopted some government standards for loan workouts.

To contact Bloomberg News staff for this story: David J. Lynch in Charlotte, North Carolina at dlynch27@bloomberg.net; Clea Benson in Washington at cbenson20@bloomberg.net; Richard Rubin in Charlotte, North Carolina at rrubin12@bloomberg.net

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


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