First Presidential Debate Fact Check: Obama and McCain’s Economic Claims

The first 2008 Presidential Debate saw both Senators Obama and McCain defend their economic proposals and attack the other's plan. Facts, figures and statistics were flying back in forth during the exchange so fast it was difficult to keep up. So after the debate I watched the replay and read the transcript to pick out the economic claims made by both Presidential candidates. In this article, we'll look at their claims to determine whether they are rock solid true (earning a score of 1), true but with a lot of spin (earning a score 2) or flat out, nose-growing false (earning a score of 3).

Individual Tax Cuts

Senator Obama: "What I've called for is a tax cut for 95 percent of working families, 95 percent."

Score: 3 (Nose is growing)

Details: Senator Obama has proposed a tax cut of $500 for workers and $1,000 for working couples. Notice that this tax cut is for "workers" and "working couples," not 95% of the population. Senator Obama gets a score of 3 for two reasons. First, according to factcheck.org, Senator Obama's tax plan would benefit only 81% of workers and working households, not 95%. Second, he neglected to point out that the plan generates less than $42 per month for workers and $84 per month for working couples. As regular readers know, I believe every dollar counts. That said, it's a bit difficult to get excited over $42 to $84 per month. In fact, I suspect Senator Obama would have looked foolish had he said, "Washington has neglected the middle class over the last eight years. I'll change all that by giving workers $42 a month." Tax cuts for "95% of working families" sounds a lot better, but it does not tell the whole story.

Senator Obama has proposed other tax cuts, including a mortgage credit for those that do not itemize their deductions and a college credit, both of which would lower taxes for some, but not 95% of workers.

Source:

• Tax Policy Center's 2008 Presidential Candidates' Tax Proposals
• Barack Obama's Comprehensive Tax Plan (pdf file)
• FactChecking Debate No. 1

Senator McCain: "So the point is, I want people to have tax cuts. I want every family to have a $5,000 refundable tax credit so they can go out and purchase their own health care. I want to double the dividend from $3,500 to $7,000 for every dependent child in America.

Score: 2 (yes, but. . .)

Details: Senator McCain does propose a $5,000 refundable tax credit, and he does propose to increase the dependent child exemption from $3,500 to $7,000. But he leaves out a few details. First, Senator McCain proposes to tax individuals for the value of health care benefits paid by their employers (Senator Obama incorrectly stated that Senator McCain proposed taxing the employer), so the value of the $5,000 credit would be reduced, if not eliminated for some. Also, the doubling of the dependent exmeption is misleading because, under current law, it is estimated that the exemption would reach $4,200 by the time Senator McCain's $7,000 exemption took effect for most taxpayers. A small point, perhaps, but we do watch every dime here at the Dough Roller.

Source:

• FactChecking Debate No. 1
• An Updated Analysis of the 2008 Presidential Candidates' Tax Plans: Executive Summary - Revised September 15, 2008

Senator Obama: "And if you make less than $250,000, less than a quarter-million dollars a year, then you will not see one dime's worth of tax increase."

Score: 3 (Nose is growing)

Details: Senator Obama has proposed increasing the capital gains tax rate (which is currently 15%) for families making more than $250,000 and individuals making more than $200,000. While at times he has stated his intention to raise the tax to as high as 28%, he currently plans to raise it to 20%. In past speaches and printed materials, he has stated that no families making less than $250,000 will pay a dime more in taxes. During the debate, he failed to make this distinction.

He also plans to increase social security tax by 2 to 4% on individuals making $200,000 or more.

Source:

• The Tax Facts: The Truth About the Obama Plan (pdf file)
• Tax Policy Center's 2008 Presidential Candidates' Tax Proposals

Senator Obama: "And in [McCain's] tax plan, you would have CEOs of Fortune 500 companies getting an average of $700,000 in reduced taxes, while leaving 100 million Americans out."

Score: 2 (yes, but. . .)

Details: The current tax rates as enacted in 2001 and 2003 are set to expire in 2010. These tax cuts benefit virtually all workers. Senator McCain proposes to make the current marginal rates permanent. When Senator Obama refers to "reduced taxes," he is comparing taxes under McCain's plan with pre-Bush tax rates. Senator McCain is not proposing to lower income tax rates as they exist today.

In addition, Senator McCain has made several tax proposals that would benefit the middle class, calling into question Senator Obama's claim that McCain is "leaving 100 million Americans out." For example, here is how the Tax Policy Center describes Senator McCain's increase in the dependent exemption:

Dependent exemption increase. Taxpayers may claim exemptions for themselves, their spouses (on joint returns), and each dependent (usually children, but also certain other relatives and household members supported by the taxpayer). The exemption is $3,500 in 2008 and is indexed for inflation going forward. Senator McCain has proposed increasing the dependent exemption— but not the personal exemption for taxpayers themselves—by $500 each year beginning in 2010 until it reaches $7,000 in 2016, after which it would again be indexed for inflation.7 Although billed as a doubling of the exemption, the $7,000 exemption would be only two-thirds higher than the level we project under current law in 2016 ($4,200).

Married couples filing a joint return reporting adjusted gross income of $50,000 or less would be eligible for the $7,000 exemption immediately (in 2009). The higher exemption is not indexed for inflation until 2017 and would phase down at a rate of $100 for each $1,000 (or fraction thereof) in excess of 50,000, but not below the level set for all taxpayers. Thus, even for lower- income married filers, the doubled exemption only applies (approximately) in the first year.

Source:

• An Updated Analysis of the 2008 Presidential Candidates' Tax Plans: Revised August 15, 2008
• Taxes: Simple, Fair, Pro-Growth and Competitive

Senator McCain: "And so, again, look at the record, particularly the energy bill. But, again, Senator Obama has shifted on a number of occasions. He has voted in the United States Senate to increase taxes on people who make as low as $42,000 a year."

Senator Obama: "That's not true, John. That's not true."

Score: McCain--1 (rock solid); Obama-3 (nose is growing)

Details: According to factcheck.org, "Yes, as we’ve said before, Obama did in fact vote for a budget resolution that called for higher federal income tax rates on a single, non-homeowner who earned as little as $42,000 per year. A couple filing jointly, however, would have had to earn at least $83,000 per year to be affected. A family of four with income up to $90,000 would not have been affected." Senator Obama's current tax proposal would not include such an increase, but he did vote in favor of increasing taxes on individuals making as little as $42,000.

Source:

• FactChecking Debate No. 1

Corporate Tax Rates

Senator Obama: "Look, it's just not true. And if we want to talk about oil company profits, under your tax plan, John -- this is undeniable -- oil companies would get an additional $4 billion in tax breaks."

Score: 2 (yes, but. . .)

Details: Senator McCain has proposed a gradual decrease of the current 35% corporate tax rate. Under his plan, after 2014 the corporate tax rate will reach 25%. While it is true that this reduced tax rate will benefit big oil, it is just as true that it will benefit manufacturers of baby food, safety equipment, life-saving drugs, and alternative energy sources. To single out big oil as a benefactor of McCain's tax proposal is misleading, at best.

Source:

• An Updated Analysis of the 2008 Presidential Candidates' Tax Plans: Revised August 15, 2008

Senator Obama:"Senator McCain is proposing -- and this is a fundamental difference between us -- $300 billion in tax cuts to some of the wealthiest corporations and individuals in the country, $300 billion."

Score: 2 (yes, but. . .)

Details: Senator McCain has proposed cutting the corporate tax rate from 35% to 25%. The tax cut would be phased in, with the 25% rate taking effect in 2015. According to the Tax Policy Center, the reduction would reduce tax revenues by $231 billion over four years (2009-2013). We'll give Senator Obama the benefit of the doubt on the numbers. After all, given the financial crisis we are facing, what's $69 billion? But the tax cut is not for the "wealthiest corporations"; it's for all corporations, wealthy or not.

Source:

• An Updated Analysis of the 2008 Presidential Candidates' Tax Plans: Updated September 12, 2008. Note, this is an excellent and extremely detailed analysis of both McCain's and Obama's tax plans.

Senator McCain: "Right now, the United States of American business pays the second-highest business taxes in the world, 35 percent. Ireland pays 11 percent."

Senator Obama: "Now, John mentioned the fact that business taxes on paper are high in this country, and he's absolutely right. Here's the problem: There are so many loopholes that have been written into the tax code, oftentimes with support of Senator McCain, that we actually see our businesses pay effectively one of the lowest tax rates in the world."

Score: McCain-3 (nose is growing); Obama-2 (yes, but. . .)

Details: Senator McCain is correct that at 35%, our corporate tax rate is one of the highest in the world. But corporations, like individuals, benefit from a number of deductions and exemptions, reducing their taxes to one of the lowest in the world. Senator McCain gets a 3 for suggesting that U.S. corporations pay one of the highest tax rates in the world and for using Ireland as a comparison (why Ireland?). Senator Obama gets a 2 because the "loopholes" he talks about are called deductions, exemptions, credits, and the like, and aren't as pernicious as Senator Obama suggests. Besides, if he plans to eliminate them, than Senator McCain's claim that U.S. corporations pay one of the highest tax rates in the world would be true.

Source:

• An Updated Analysis of the 2008 Presidential Candidates' Tax Plans: Updated September 12, 2008

Senator Obama's Spending Proposals

Senator McCain: "Now, Senator Obama didn't mention that, along with his tax cuts, he is also proposing some $800 billion in new spending on new programs."

Senator Obama: "I -- I don't know where John is getting his figures. Let's just be clear."

Score: McCain--2 (yes, but. . .); Obama--3 (nose is growing)

Details: According to an AARP article, Senator Obama estimates the cost of his spending plan at $130 billion, or $520 billion during a first term in the White House. According to the Taxpayers Union, the cost of Senator Obama's spending plans would be just under $300 billion a year, or $1.2 trillion during his first term. According to a U.S. News & World Report, Senator Obama's campaign acknowledged that his spending plans would cost a quarter of a trillion per year, or over $1 trillion during his first term.

I gave Senator McCain a 2 not because the $800 billion number is wrong, but because it is unclear where it comes from. Senator Obama gets a 3 because he should know full well that the $800 billion number is in the right ballpark, give or take a few hundred billion. In the final analysis, I'd like to hear Senator Obama describe what his proposals will cost.

Source:

• Adding up the cost of Obama's agenda
• Democratic Presidential Candidate Spending Analysis – Barack Obama
• Obama's Trillion-Dollar Spending Plan - Capital Commerce (usnews.com)

Earmarks

Senator McCain: "Earmarks account for $18 billion in last year's budget."

"Senator Obama suspended those requests for pork-barrel projects after he was running for president of the United States. He didn't happen to see that light during the first three years as a member of the United States Senate, $932 million in requests."

"But the point is that – you see, I hear this all the time. "It's only $18 billion." Do you know that it's tripled in the last five years?"

Senator Obama: "Well, Senator McCain is absolutely right that the earmarks process has been abused, which is why I suspended any requests for my home state, whether it was for senior centers or what have you, until we cleaned it up."

Score: McCain and Obama-2 (yes, but. . .)

Details: Earmarks have been a source of attack for Senator McCain for years. To the contrary, Senator Obama has obtained nearly $1 trillion in earmarks for his constituents, including $1 million for the hospital where his wife works. Senator McCain blew it, however, when he said earmarks had tripled in the last year; they have actually gone down by 24%. Finally, Senantor Obama has suspended his requests for earmarks, but Senantor McCain is probably right that it was a purely political move.

Source:

• FactChecking Debate No. 1