Traverse City Record-Eagle

Archive: Saturday

February 16, 2013

Fact Check: State of the Union

President Obama put a rosy spin on several accomplishments of his administration in his 2013 State of the Union address.

The president claimed that "both parties have worked together to reduce the deficit by more than $2.5 trillion." But that's only an estimate of deficit reduction through fiscal year 2022, and it would be lower if the White House used a different starting point.

Obama touted the growth of 500,000 manufacturing jobs over the past three years, but there has been a net loss of 600,000 manufacturing jobs since he took office. The recent growth also has stalled since July 2012.

He claimed that "we have doubled the distance our cars will go on a gallon of gas." Actual mileage is improving, but Obama's "doubled" claim refers to a desired miles-per-gallon average for model year 2025.

Obama said the Affordable Care Act "is helping to slow the growth of health care costs." It may be helping, but the slower growth for health care spending began in 2009, before the law was enacted, and is due at least partly to the down economy.

The president also made an exaggerated claim of bipartisanship. He said that Republican presidential candidate Mitt Romney agreed with him that the minimum wage should be tied to the cost of living. But Romney backed off that view during the campaign.

Analysis

President Barack Obama gave his State of the Union address to Congress Feb. 12, but Obama puffed up his record.

Deficit reduction

Obama said the administration and Congress "have worked together to reduce the deficit by more than $2.5 trillion." A bipartisan group called the estimate "very reasonable." But it is only an estimate — and a debatable one at that — for deficit reduction from budgets through fiscal year 2022. Exactly how much will be cut will be up to future Congresses.

And, even if Congress meets those deficit-reduction goals, deficit spending will continue and the federal debt will grow larger — unless much more is done.

Obama: Over the last few years, both parties have worked together to reduce the deficit by more than $2.5 trillion — mostly through spending cuts, but also by raising tax rates on the wealthiest 1 percent of Americans. As a result, we are more than halfway towards the goal of $4 trillion in deficit reduction that economists say we need to stabilize our finances.

Obama has cited the $2.5 trillion figure on numerous occasions, including at a Jan. 14 news conference. It is based largely on two pieces of legislation: the Budget Control Act of 2011, which placed caps on discretionary spending beginning in 2012, and the American Taxpayer Relief Act of 2012, which prevented tax hikes on most Americans in 2013 but allowed rates to go up on the top 1 percent of taxpayers. There was some additional savings from reductions in discretionary spending in the fiscal 2011 appropriations bills.

Republicans challenge the $2.5 trillion figure with some justification, because the amount of savings depends heavily on the baseline — that is, the starting point of comparison. The White House told us it used the Office of Management and Budget's January 2011 baseline.

In a recent report, the bipartisan Committee for a Responsible Federal Budget estimated the deficit reduction at $2.7 trillion, using the nonpartisan Congressional Budget Office's August 2010 baseline. But it also acknowledged that "there is no simple answer to the question of how much deficit reduction has been enacted so far." The report says starting a year earlier or later would reduce the estimated savings.

CRFB, Feb. 11: Although $2.7 trillion is a very reasonable estimate of enacted savings, it is by no means the only way to measure past savings. It is worth noting that the discretionary savings in this number are in fact calculated from the high point of discretionary spending. Measuring either from a year later or from a year earlier would result in a smaller savings number because base discretionary spending (excluding the effects of the stimulus) actually increased between 2009 and 2010 due to larger-than-projected appropriations.

As we have written once before, the vast majority of the deficit reduction has yet to materialize. Congress is supposed to comply with the caps on discretionary spending imposed by the Budget Control Act in future appropriations bills. But whether that happens remains to be seen.

And, even if Congress complies, deficit spending will continue, and the federal debt will rise — just not as quickly as it otherwise would have. The latest CBO figures show the public debt — that is, the amount the federal government owes the public — will approach $20 trillion in 2023, an increase of more than $8 trillion from its current level of $11.6 trillion.

For that reason, most budget experts warn that the president understates the scope of the budget problem when he says, as he did in his speech, that "we are more than halfway towards the goal of $4 trillion in deficit reduction that economists say we need to stabilize our finances." The nonpartisan Concord Coalition says the president's goal of accomplishing $4 trillion in deficit reduction "would hardly mean the 'job is finished.' " The Committee for a Responsible Federal Budget struck the same cautionary note in its report, saying the progress so far is "notable" but enacting $4 trillion in deficit reduction will not stabilize the debt.

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