Thursday, August 9, 2012

Lies, Half-Truth, Truth ?

Three articles of interest and for evaluation:

"The Romney Hood Fairy Tale

The false, invented analysis behind Obama's tax claims.

As he escalates his class war re-election campaign, President Obama has taken to calling Mitt Romney's economic plan "Robin Hood in reverse" or "Romney Hood." The charge is that even though Mr. Romney is proposing to cut tax rates for everybody across the board, Mr. Romney will finance this by imposing a tax increase on the middle class. His evidence is a single study by the Tax Policy Center, a liberal think tank that has long opposed cutting income tax rates.
The political left always says Daddy Warbucks gets all the tax-cut money. So this is hardly news, except that the media are treating this joint Brookings Institution and Urban Institute analysis as if it's nonpartisan gospel. In fact, it's a highly ideological tract based on false assumptions, incomplete data and dishonest analysis. In other words, it is custom made for the Obama campaign.
By the way, even the Tax Policy Center admits that "we do not score Governor Romney's plan directly as certain components of his plan are not specified in sufficient detail." But no matter, the study plows ahead to analyze features of the Romney plan that aren't even in it.
The heart of Mr. Romney's actual proposal is a 20% rate cut for anyone who pays income taxes. This means, for example, that the 10% rate would fall to 8%, the 35% rate would fall to 28% and all the brackets in between would fall as well. The corporate tax would fall to 25% from 35%.

The plan says these cuts would be financed in a revenue-neutral way. First, by "broadening the tax base," which means reducing or eliminating tax deductions and loopholes as in the tax reform of 1986. The Romney campaign doesn't specify which deductions—no campaign ever does—but it has been explicit in saying that the burden would fall most on higher tax brackets. So in return for paying lower rates, the wealthy get fewer deductions.
Second, the Romney campaign says it expects to increase revenues by increasing the rate of economic growth to 4%, up from less than 2% this year and in 2011. (Separately from tax reform, but clearly relevant to budget deficits, Mr. Romney says he'd gradually reduce spending to 20% of the economy from the Obama heights of 24%-25%.)
The class warriors at the Tax Policy Center add all of this up and issue the headline-grabbing opinion that it is "mathematically impossible" to reduce tax rates and close loopholes in a way that raises the same amount of revenue. They do so in part by arbitrarily claiming that Mr. Romney would never eliminate certain loopholes (such as for municipal bond interest), though the candidate has said no such thing.
Based on this invention, they then postulate that Mr. Romney would have to do something he also doesn't propose—which is raise taxes on those earning less than $200,000. In the Obama campaign's political alchemy, this becomes "Romney Hood" and a $2,000 tax increase.

The Tax Policy Center also ignores the history of tax cutting. Every major marginal rate income tax cut of the last 50 years—1964, 1981, 1986 and 2003—was followed by an unexpectedly large increase in tax revenues, a surge in taxes paid by the rich, and a more progressive tax code—i.e., the share of taxes paid by the richest 1% rose.
For example, from 1980 to 2007, three tax rate cuts brought the highest marginal tax rate to 35% from 70%. Congressional Budget Office data show that when the tax rate was 70%, the richest 1% paid 18% of all federal income taxes. With the rate down to 35% in 2008, the share of taxes paid by the rich doubled to 40%.

The Tax Reform Act of 1986, which chopped the top income tax rate to 28% from 50%, was probably most similar to the Romney tax proposal because both were designed to lower rates and broaden the tax base. CBO and Martin Feldstein of the National Bureau of Economic Research found that the 1986 tax reform increased the share of taxes paid by the rich (to about 25% from 21% before the reform), in part because their reported taxable income rose as they lost tax shelters. Many businesses also changed their tax status from corporations to Subchapter S companies, thus paying taxes at the individual rate. This also increased the reported share of income declared, and tax paid, by the rich.
So on four separate occasions what TPC says is "mathematically impossible"—cutting tax rates and making the tax system more progressive—actually happened. Hats off to the scholars at TPC: Their study manages to claim that what happens in real life can't happen in theory.

The TPC analysis also fails to acknowledge how highly dependent the current tax system is on the very rich. As the Tax Foundation explains in a recent report based on CBO data: "The top 20 percent of households pay 94 percent of federal income taxes. The bottom 40 percent have a negative income tax rate, and the middle quintile pays close to zero."
This reality is treated as a state secret in Washington because it refutes Mr. Obama's campaign theme that the rich are undertaxed. The same crowd that has been howling that the rich don't pay their fair share of taxes now touts a study concluding that cutting taxes will only benefit the rich. Well, which is it?


Another reality is that more than one-third of Americans pay no income tax. Many in this group contribute payroll taxes, but for most their only connection to the income tax is to receive refundable tax credits (in the form of a check) that are effectively government payments. This is the basis for the Tax Policy Center's wild claim that the Romney plan raises taxes on those who earn less than $30,000—a group that now has a negative tax liability.

The claim is that reducing various refundable tax credits that are cash payments from the government are a "tax increase." By this logic, reducing unemployment benefits or food stamps would also be a tax increase. Even the CBO and Congress's Joint Committee on Taxation acknowledge that refundable tax credits are government outlays not tax cuts.

The study's claims also rest on the assumption that tax cutting doesn't increase economic growth. The study's authors expose their own bias on this point by asserting that "the effects of tax rate reductions are likely to be small or even negative" over 10 years.

It's certainly true that not all tax cuts have the same economic impact. But nearly all economists save for the most partisan liberals agree that cutting tax rates at the margin has the most bang for the buck. So how can the Tax Policy Center claim that cutting tax rates to increase incentives to work and invest has a "negative" impact? Not even the Keynesian economists who gave us the failed stimulus plan argue that the effect of tax cuts is negative.
Harvard economist Dale Jorgenson recently testified before the Senate Finance Committee that "a tax reform similar to the Reagan effort of 1986" would raise economic output over the long term "by $7 trillion in 2011 dollars."

The Tax Policy Center's claim that it's impossible to make the numbers add up is also refuted by President Obama's own Simpson-Bowles deficit commission report. The Romney plan of cutting the top tax rate to 28% and closing loopholes to pay for it is conceptually very close to what Simpson-Bowles recommended.
You can argue that Mr. Romney's expectation of 4% GDP growth is too rosy, but the recent White House mid-session budget review predicts 4% growth in both 2014 and 2015 despite a huge tax increase next year. The Romney plan is far more realistic than that wish in the dark.
And here's the kicker: Simpson-Bowles assumed that the top rate could be cut to 28%, loopholes could be closed, revenues as a share of GDP would rise to 20% and the deficit could be cut by close to $1.5 trillion. The difference is that the Romney plan caps tax revenues at about 18% of GDP so that taxes don't have to rise on the middle class. If Mr. Romney's numbers don't add up, then neither do those in the bipartisan Simpson-Bowles plan that the media treat as the Holy Grail of deficit reduction.


What the Obama campaign and its acolytes at the Tax Policy Center are really saying is that tax reform that reduces rates and makes all income groups better off is impossible. This is a far cry from what Democrats used to believe, going back to Jack Kennedy in 1964 and in the 1980s when prominent Democrats Bill Bradley, Dick Gephardt and Don Rostenkowski helped to write the 1986 tax reform.
The Obama Democrats, by contrast, favor income redistribution and raising rates on the wealthy for their own partisan political sake, no matter the damage to growth, the cost in lost revenue, or a less progressive tax code as the rich exploit loopholes.
The great irony is that the candidate most likely to raise taxes on the middle class is Mr. Obama. He could raise every tax on the rich he proposes and still not come up with enough revenue to finance the increases in spending he wants in a second term. Where do you think he'll turn then?
A version of this article appeared August 8, 2012, on page A14 in the U.S. edition of The Wall Street Journal, with the headline: The Romney Hood Fairy Tale."

A Harsh Anti-Romney Ad Sparks Criticism


A new TV ad that suggests Mitt Romney's business dealings contributed to 
a woman's death from cancer 
by depriving her of health insurance enraged Republicans and left even 
some supporters of President Barack Obama troubled by its tone.

Meanwhile, the woman's husband, featured in the one-minute ad from a 
pro-Obama super PAC, said Wednesday that he doesn't blame 
Mr. Romney for her death.

The ad by Priorities USA Action drew protests from Republicans for suggesting that Mr. Romney's leadership of Bain Capital, the 
private-equity firm he once ran, played a role in the death of 
Ilyona Soptic at age 55.

The ad features Joe Soptic, 62, of Missouri, who lost his job when GST 
of Kansas City—owned by Bain 
and other investors for eight years—was closed. As melancholy music 
plays, Mr. Soptic says that when the plant closed, he and his family 
lost their health-care coverage and "a short time after that, my wife 
became ill." Her illness was diagnosed five years later. "I don't think Mitt Romney understands what he's done to people's lives by closing the plant," 
Mr. Soptic says in the ad.

The steel plant was purchased in 1993 and closed in 2001. Mr. Romney departed Bain in 1999 and had no role in the decision to close the plant, 
his campaign said.

In an interview, Mr. Soptic said he thought the ad was fair. But he also 
said of Mr. Romney: "I'm not blaming him for her death. I wouldn't 
do that."

Mr. Soptic said that his wife was receiving health insurance through 
her employer at the time he lost his job at GST Steel, though she later 
suffered an injury, left her job and lost her insurance coverage. He 
could not say precisely when this occurred.

Mr. Soptic said that after he lost his job, he found work as a school 
custodian about six months later and had the option to put her on 
his insurance plan. 
But he opted not to, he said, because he could not afford the more than 
$350 monthly premium on the $25,000 salary he was making, on top of paying his mortgage and a daughter's college tuition. Ilyona Soptic was diagnosed with cancer in 2006 and died that year.

Bill Burton, a former Obama White House aide who co-founded Priorities USA Action, said the ad was running in five battleground states, including Ohio and Florida. He said the ad was part of a $20 million project but would not say 
how much of that money was devoted to putting the ad on the air. When ads are provocative, even a small investment in airtime can lead to outsize attention from the media and viewers who watch the ad online.

Some say the Priorities USA spot ups the ante in an already negative political ad culture. Even some Democrats are recoiling at the negative tone. "I thought the ad was wrong in terms of trying to tie 
a presidential candidate to a personal tragedy of a family," said former U.S. Rep. Joe Sestak, a 
Democrat from Pennsylvania. "This ad goes over the edge."

Kirsten Kukowski, a spokeswoman for the Republican National Committee, accused the super PAC of "exploiting the tragic death of a woman with cancer 
to further their political agenda. Tactics like 
these show the lengths President Obama and his 
allies will go to distract voters from Obama's 
failure to turn the economy around."

Mr. Burton said the ad was fair, noting that Mr. 
Soptic couldn't afford insurance for his wife after 
GST Steel closed. "Anyone who suggests the impact of 
a factory shutting down isn't felt for years later 
is wrong,'' he said.

Peter Buttenwieser, a longtime Obama supporter and fundraiser, said the ad 
is just one of many that he considers unduly negative and arguably unfair. He 
says super PACs on both sides are largely responsible for the glut of 
misleading commercials this season. 
And while he did not defend the Priorities USA spot, 
he said that pro-Romney groups have ample resources 
to defend the Republican candidate and level their 
own charges. "I don't think it's a terrific ad, but then I haven't seen many terrific ads," he said. "I don't see any particular reason to be exorcised 
about one particular ad."

The ad comes as the campaign rhetoric is coarsening, with Messrs. Obama 
and Romney taking to name-calling. This week, President Obama trotted 
out a new phrase 
to impugn Mr. Romney's tax plan: "reverse Romney 
Hood." The Republican challenger retorted that Mr. Obama is full of "Obamaloney."

Mr. Soptic also appeared in a spot put out by the 
Obama campaign in May. In it, he said that watching what happened to the steel company after Bain and others took over "was like watching an old 
friend bleed to death."

Asked what Mr. Romney's responsibility was in the family's misfortunes, 
Mr. Soptic said: "He was one 
of the investors [in the plant]. When they bought 
the company, they guaranteed us that we would receive 
a full pension and health care. And when [the company] filed for 
bankruptcy, I lost some of my pension and 
all my health care. And if I've had that health care, her quality of life 
would probably have been a little better."

And here is the third article weblink:

The Strangeness of Obama Supporters Playing the Innocents-Killed Card

The advertisement above is the work of PrioritiesUSA, a SuperPac that supports President Obama. It assigns partial blame to Mitt Romney for the death of a terminal cancer patient. What does the former Massachusetts governor have to do with her sad story? As the ad tells it, the company that Romney led, Bain Capital, closed a plant that employed the man in the ad. Due to his subsequent unemployment, his family lacked health insurance. When his wife got sick, she delayed going to the doctor, perhaps because she knew that she and her husband couldn't afford the bills. And when she finally went to the doctor, her cancer had progressed passed the point where she could be saved by treatment. "I don't think Mitt Romney realizes what he's done to anyone," the widower states, "and furthermore, I don't think Mitt Romney is concerned."

The blogger Doug Mataconis has a good roundup of the numerous factual problems with the advertisement, and I join him in declaring it despicable, emotionally manipulative, and beyond the pale. All the scorn I heaped on the folks responsible for this Mitt Romney advertisement earlier this week is as appropriately applied to the unethical people who produced this pro-Obama ad.   

What I found most absurd about the advertisement, however, is the notion of enthusiastic supporters of President Obama attacking Mitt Romney for being complicit in the death of innocent people. Are they totally oblivious to Obama's record? It's true that the president has never led a company that closed a plant that employed someone whose wife later died of cancer.

(Has Obama ever fired anyone? I'd be curious to know.)

On the other hand, Obama personally approved a drone program that has killed hundreds of innocents since taking office. (Admittedly, few of them have TV-ready relatives living in a swing state.)

It would be nice if Obama defenders could respond that he's done everything in his power to minimize civilian casualties, but that isn't true. Drones that fire missiles, then sometimes fire again when rescuers rush to the scene, or when funerals are held, does not minimize civilian casualties. When a drone program defines "all military-age males in a strike zone as combatants, according to several administration officials, unless there is explicit intelligence posthumously proving them innocent," the effect is not to minimize civilian casualties, but to maximize the cover the United States has to kill people without raising alarm from outside observers.

Do Obama supporters who cheered this anti-Romney ad understand the sort of commercial that grieving family members of this 16-year-old American boy killed in a CIA drone strike could make?

Should Mitt Romney be elected, I presume that he'll continue Obama's drone program; he's given no indication that he's bothered by the dead innocents it has produced, or that he'd introduce new safeguards and checks on executive branch power that, as presently constituted, guarantees abuses. But the inconvenient fact for Obama supporters is that so far, only Obama is responsible for the deaths of these innocents, for only he has served four years as president, during which he has established himself as international arbiter of which individuals live and die. 

Even under a drone program that had better oversight, that captured accused terrorists when possible, and that defined "militant" more narrowly, so that there was more pressure to kill only bad guys, there would still be innocents killed. In that alternative scenario, Obama supporters would be less vulnerable to persuasive attack. In our reality, they have no credibility on this subject.