Senate Republican Leader Mitch McConnell twisted some fiscal facts in his appearances on the Sunday talk show circuit:
- McConnell said the Obama administration has “driven spending as a percentage of our economy from 21 percent up to almost 25 percent.” But it was already projected to be almost 25 percent — actually 24.9 percent — in fiscal year 2009 even before Obama took office.
- He also said “99 percent of Americans will not see their taxes go up” as a result of the fiscal cliff deal. Actually, 77 percent of Americans will see their taxes go up in 2013. McConnell was referring only to income taxes, but payroll taxes will go up because Congress did not extend the payroll tax cut.
- McConnell also exaggerated when he said the U.S. debt “makes us look a lot like Greece.” U.S. debt is growing, but it’s less than half the public debt of Greece in relation to the size of each nation’s economy.
Spending as a Percentage of GDP
McConnell appeared on all three network Sunday shows to discuss the bipartisan fiscal cliff legislation and what’s next now that President Obama has signed the bill (by autopen).
On NBC’s “Meet the Press,” McConnell declared that he would not support any tax increases and stressed the need to reduce spending. In doing so, he blamed the Obama administration for increasing federal spending as a percentage of the nation’s gross domestic product.
McConnell, Jan. 6: This administration’s driven spending as a percentage of our economy from 21 percent up to almost 25 percent.
That’s not true. The nonpartisan Congressional Budget Office had already projected that spending would be almost 25 percent — actually 24.9 percent — of GDP in fiscal year 2009 before Obama even took the oath of office.
In a Jan. 7, 2009, report issued two weeks before Obama took office, CBO projected the federal government would spend about $3.5 trillion and the GDP would be nearly $14.3 trillion in the fiscal year, calculating the percentage at 24.9 percent (see Table 5). The fiscal year started Oct. 1, 2008 — nearly four months before Obama took office.
Fiscal 2009 ended with federal spending at 25.2 percent of GDP — up from 20.8 percent in 2008. Federal spending rose that year by nearly 18 percent. McConnell wants to assign Obama blame for the jump in federal spending from fiscal 2008 to fiscal 2009, but that’s misplaced — as we noted in “Obama’s Spending: ‘Inferno’ or Not?” As we said in that article, the spending that fiscal year “was mostly due to appropriations and policies that were already in place when Obama took office.”
It’s certainly true that spending has remained at a high level. Since fiscal 2009, federal spending as a percentage of GDP has remained at about 24 percent. But it is incorrect to claim that Obama and his administration drove it up to that level from 21 percent.
Taxes: Up or Down?
On ABC’s “This Week,” McConnell boasted that as a result of the fiscal cliff agreement “99 percent of Americans will not see their taxes go up.” On “Meet the Press,” McConnell claimed that he “prevented tax increases” on those 99 percent.
McConnell, “This Week,” Jan. 6: Fortunately, as a result of the agreement that was reached, 99 percent of Americans will not see their taxes go up, 500,000 small businesses will not see their taxes go up.
McConnell, “Meet the Press,” Jan. 6: What we did was prevent tax increases on 99 percent of the American public.
On this, McConnell and the president agree. But they are fudging the facts. Actually about 77 percent of Americans will pay more in taxes this year, regardless of the agreement, according to the nonpartisan Tax Policy Center.
McConnell is referring to a provision of the “American Taxpayer Relief Act of 2012” that extends the Bush-era tax cuts permanently for individuals making less than $400,000 and couples making less than $450,000 a year. In doing so, the president and Congress allowed the Bush tax cuts to expire for the 1 percent of taxpayers who earn above those levels.
However, the so-called fiscal cliff — as we previously wrote — included more than just the pending expiration of the Bush tax cuts. The president and Congress also had to decide if they wanted to extend the temporary cut in the Social Security payroll tax that had been in effect for two years. They didn’t. As a result, the payroll tax went back up to 6.2 percent from 4.2 percent on Jan. 1. That will result in an average tax hike for all Americans of $721 in 2013, the TPC estimates. For example, those earning between $75,000 and $100,000 will pay an additional $1,194 in taxes in 2013.
We wrote about this in more detail when Obama made a similar claim. Please see our Jan. 4 item, “Fudging on Fiscal Cliff Deal.”
U.S. Debt Not as Bad as Greece
McConnell also exaggerated when, on all three network shows, including CBS’ “Face the Nation,” he repeatedly compared the U.S. debt situation with that of Greece.
McConnell, “This Week,” Jan. 6: We now have a $16.4 trillion national debt, as big as our economy. That alone makes us look a lot like Greece.
McConnell, “Face the Nation,” Jan. 6: We now have a debt of $16.4 trillion. That’s as big as our economy. That alone makes us look a lot like Greece.
McConnell, “Meet the Press,” Jan. 6: We have a debt the size of our economy, which makes us look a lot like Greece.
While U.S. debt has been rising at a rate that CBO calls “unsustainable,” the public debt of Greece is double that of the U.S. in relation to the size of each nation’s economy.
But the comparison to Greece is a bit of a stretch. Greece’s debt was 170.6 percent of its GDP in 2011, according to the most recent figures from Eurostat, the official statistical office of the European Union.
Furthermore, as we have written before, McConnell is making an apples-to-oranges comparison. The $16.4 trillion figure refers to “total debt outstanding,” much of which is money that the government owes to the Social Security trust funds and other governmental entities, not money actually borrowed from the public. The U.S. debt held by the public is currently $11.6 trillion.
In its August update to the Budget and Economic Outlook, CBO estimated that federal debt held by the public would reach 73 percent of GDP by the end of the last fiscal year — “the highest level since 1950 and about twice the share that it measured at the end of 2007, before the financial crisis and recent recession.” Still, that’s less than half the public debt of Greece in relation to the size of each nation’s economy.
Don Stewart, a spokesman for McConnell, said the senator’s comment comparing the debts of the U.S. and Greece was “an analogy … not a statement of empirical precision.”
CBO has not yet estimated the long-term economic effects of the fiscal cliff deal reached by Congress, and approved by the president. But according to an “alternative fiscal scenario” that included many (but not all) of the tax scenarios in the fiscal cliff deal, CBO estimated that “debt held by the public would climb to 90 percent of GDP by 2022—higher than at any time since shortly after World War II.” Such a scenario, CBO wrote, “would lead to a level of federal debt that would be unsustainable from both a budgetary and an economic perspective.”
– Eugene Kiely and Robert Farley
- Politics & Government
- Budget, Tax & Economy