The historical myth that Reagan raised $1 in taxes for every $3 in spending cuts
(Courtesy Ronald Reagan Library, Michael Evans)
“In 1982, Ronald Reagan sat down with the Democrats and they had a deal — a $3 cut in spending for every dollar they raised in taxes. Guess what? They raised the taxes, and they never cut the spending.”
— oft-repeated story told in Washington during “fiscal cliff” negotiations
It had become an article of faith by conservatives that President Reagan reluctantly agreed to raise taxes in his first term in office — and that Congress then failed to follow though on promised spending cuts. The frequent recitation of this story during the current fiscal debate made us wonder: What actually happened three decades ago?
It’s not hard to find the source of this story — Reagan’s own memoir, “An American Life.” Here’s what he wrote: “I made a deal with the congressional Democrats in 1982, agreeing to support a limited loophole-closing tax increase to raise more than $98.3 billion over three years in return for their agreement to cut spending by $280 billion during the same period; later the Democrats reneged on their pledge and we never got those cuts.”
When Reagan made a nationally-televised speech in support of the tax hike — trying to refute charges that it was the biggest tax increase in U.S. history — he also cited a 3-to-1 agreement:
“Revenues would increase over a three-year period by about $99 billion, and outlays in that same period would be reduced by $280 billion. Now, as you can see, that figures out to about a 3-to-1 ratio — $3 less in spending outlays for each $1 of increased revenue. This compromise adds up to a total over three years of a $380 billion reduction in the budget deficits.”
The Washington Post did not have a Fact Checker column back then, and this speech certainly would have been ripe for fact checking. (We would have been suspicious of his use of the word “outlays.”) Let’s go back in time to show what really happened, using documents, news reports and memoirs of the period.
The Facts
Despite Reagan’s claim that he made a deal with the Democrats, the Senate at the time was controlled by Republicans. Sen. Bob Dole of Kansas — then chairman of the Finance Committee and later the majority leader and Republican nominee for president — was a driving force behind a big tax increase because he was concerned about soaring deficits after Reagan had boosted defense spending and slashed taxes.
Did Karl Rove earn any money from American Crossroads?
Chris Matthews: “Who got all this money? Nobody got it — not even him {Karl Rove]. It was just wasted.”
Rick Tyler: “So he said. Do you really believe Karl Rove got no money?”
Matthews: “Well, he said he volunteered.”
Tyler: “Well, fine. Show us your K-1s and your tax returns and we’ll see if you got any money. I don’t believe it.”
— exchange on MSNBC’s “Hardball,” Nov. 30, 2012
It is an axiom of Washington that when politicians spend money, lots of people are getting a piece of the action. So when the Super PAC American Crossroads spent some $300 million in 2012 on behalf of Republican candidates, with rather mixed results, some speculated that nevertheless Republican strategist Karl Rove, who co-founded the group, certainly earned a pretty penny.
Rove has denied he earned anything from his work with Crossroads, saying he was simply a volunteer. But that has not stopped the chatter.
After the election, US News ran an article titled “Why We May Never Know How Much Money Karl Rove Made Running Crossroads.” (The magazine later issued a long mea culpa, acknowledging “there is no credible basis to believe that Karl Rove earned any compensation, either directly or indirectly, from these outside groups.”)
Rick Tyler, a GOP consultant who is close to former House Speaker Newt Gingrich, also publicly expressed his deep skepticism on MSNBC’s “Hardball.” Tyler has also been a senior adviser to failed Senate candidate Todd Akin of Missouri, and during the campaign he publicly scolded Crossroads for not backing his candidate. “They would rather win television commissions than win the Senate,” he claimed.
But others have also assumed Rove ended up with a chunk of the millions of dollars raised by Crossroads. Bill Moyers in July said protesters “marched at the DC offices of American Crossroads and Crossroads GPS, which is the right wing money mills run by the mastermind of much of this massive fundraising, Karl Rove. He’s making a bundle himself, buying and selling free speech.”
Meanwhile, New York magazine columnist Frank Rich, on MSNBC’s Rachel Maddow Show, declared this week: “I'm sure he [Rove] gets a lovely salary from American Crossroads, too.”
In an exchange of e-mails, Tyler initially defended his comments, noting he was responding to Rove’s assertion of being merely a volunteer.
“I've not made a claim. He has. I simply don't believe his claim,” Tyler wrote. “I have no way of knowing if his assertion is true. Only Rove knows and given the responsibility he had with resources under his stewardship and that he was presented as an honest broker both on Fox News and The Wall Street Journal, he should provide some assurances that his assertion is true. We know that media buying precipitates commissions (kickbacks). Who got that money or where was it spent and why was it not disclosed?”
Rove is certainly a controversial figure, but we’re interested in the facts. Let’s look deeper at what the records show.
The Facts
American Crossroads was created after the 2008 elections, in an effort to create a conservative counterpoint to the alliance of labor and liberal interest groups that work on behalf of Democrats. As a tax-exempt organization subject to Section 527 of the tax code, the Super PAC is required to disclose its funding and its salaries, but a spin-off 501 (c)(4) nonprofit group known as Crossroads Grassroots Policy Strategies (Crossroads GPS) does not have to disclose donor information.
Obama’s missing context on manufacturing jobs
“American manufacturing is growing at the fastest pace since the 1990s.”
— President Obama, remarks at the Daimler Detroit Diesel Plant, Dec. 10. 2012
The presidential campaign may be over, but President Obama has kept up a pace of campaign-style speeches to build support for his push to raise taxes on the wealthy.
On Monday, he reached back to the campaign to cite one of his favorite statistics. Sounds great, but it is missing some context. Let’s explain.
The Facts
In January, the White House issued a report touting the private-sector jobs record since the depths reached in early 2010. The report noted: “Over the past two years, the economy has added 334,000 manufacturing jobs — the strongest two-year period of manufacturing job growth since the late 1990s.”
Lindsey Graham’s ‘bankruptcy’ trifecta
(JASON REED/REUTERS)
“I think we’re going over the cliff. It’s pretty clear to me they made a political calculation. This offer doesn’t remotely deal with entitlement reform in a way to save Medicare, Medicaid and Social Security from imminent bankruptcy. It raises $1.6 trillion on job creators that will destroy the economy and there are no spending controls.”
— Sen. Lindsey O. Graham (R-S.C.), on CBS’s “Face the Nation,” Dec. 2, 2012
In dismissing the administration’s offer to resolve the so-called “fiscal cliff,” Sen. Graham referred to the “imminent bankruptcy” of Medicare, Medicaid and Social Security.
We have warned before that politicians in both parties are guilty of misusing such phrases as “bankruptcy” or “broke” when talking about Medicare. But Graham hits the trifecta here — Medicare, Social Security and Medicaid. We take no position on whether the White House’s proposals are adequate, but what’s he talking about?
The Facts
Medicare is an old-age health-care program, while Medicaid delivers health care for the poor. Social Security is designed to provide workers with a basic level of income in retirement, as well as disability pay and life insurance while they work.
Did Obama pull a bait-and-switch on tax increases?
(OLIVIER DOULIERY/POOL/EPA)
“The proposal calls for $1.6 trillion in new tax revenue, twice the amount you supported during the campaign.”
— Dec. 3, 2012 letter signed by House Speaker John A. Boehner (R-Ohio) and other House leaders to President Obama
During the negotiations over the “fiscal cliff,” President Obama has proposed $1.6 trillion in higher taxes over 10 years. House Republicans have countered with $800 billion in new revenue, which in a letter to Obama they said was his proposal in the just-concluded presidential campaign.
From the White House perspective, all Obama did was dust off his tax plans contained in the 2013 budget, submitted earlier this year. That plan contained about $1.9 trillion in tax increases, with about $300 billion in tax cuts, for a net tax increase of nearly $1.6 trillion. The net figure is actually the administration’s goal in these talks.
Republicans argue they hit the target set by Obama during the campaign, while the administration says Republicans are only halfway there. Both sides have good evidence for their case, and we’ve spent several days reviewing campaign speeches, ads and the presidential debates in an effort to come to a conclusion on this matter.
The Facts
Obama’s 2013 budget plan, with its $1.6 trillion in tax increases, was dead on arrival. The core of the tax provisions was restoring the pre-Bush margin tax rates on the top 2 percent of tax filers, but that would raise just $442 billion over 10 years. But the proposal also would have eliminated other Bush-era tax cuts for the wealthy, totaling $165 billion, and revamped estate and gift taxes to add $143 billion. It also boosted capital gains and dividend taxes on the wealthy — that added another $243 billion.
Obama’s claim of the ‘largest’ discretionary cuts ‘in history’
(KEVIN DIETSCH/POOL/EPA)
“Working with Democrats and Republicans last year, we were able to cut over a trillion dollars of spending — the largest cut, by the way, in discretionary spending in history.”
— President Obama, remarks to the Business Roundtable, Dec. 5, 2012
To some extent, it is a bit silly for politicians to claim they have achieved the “biggest” or “largest” event in history because it simply invites more scrutiny.
Our ears perked up when President Obama made this claim on Wednesday to a group of corporate chieftains. It was reminiscent of a claim he had previously made concerning a $38.5 billion cut in the fiscal 2011 budget, which he had called “the largest annual spending cut in our history.”
Republicans at the time also made similar claims and The Washington Post even had a front-page headline that declared “Biggest Cuts in U.S. History.” None of that turned out to be correct, especially when inflation-adjusted dollars were considered. We awarded Two Pinocchios to the media for failing to provide the right context for the comments of politicians.
But in April 2011, Obama was referring to a year-over-year reduction in actual dollars. In this case, Obama is referring to the subsequent Budget Control Act, which ended the impasse over raising the debt ceiling by seeking to reduce the deficit over a 10-year period. In other words, that $1 trillion that the president mentioned is a reduction from previous budget targets — what is known as the budget baseline.
Let’s take a closer look.
The Facts
As we noted before, when making comparisons over many years, inflation must always be considered. The price of retail gasoline was about 25 cents in 1918, which sounds much better than the average of $3.64 this year. But, inflation-adjusted, the price of gasoline in 1918 was actually higher — $3.83
Allen West’s comparison to one-term congressman Abraham Lincoln
(Harry Hamburg/AP)
“Always remember, Abraham Lincoln only served one term in Congress, too.”
— Rep. Allen West (R-Fla.) on NPR talking about his prospects after an election defeat, Nov. 30, 2012
Rep. Allen West (R-Fla.) is an outspoken conservative, one of only two African American Republicans in Congress and a former Army officer who served in both Iraq wars. He lost his bid for re-election this year after just one term in office, ending — at least temporarily — the rise of a one-time tea party star.
In an interview for NPR’s “Tell Me More,” West spoke about his election defeat and his prospects for the future. He ended the discussion by reminding listeners that President Abraham Lincoln served only one term in Congress, hinting that his political career may not be over and that a loss this year does not dim his hopes for the future.
We have no interest in rubbing salt in West’s wounds. But we wondered whether his comments about Lincoln’s political career warranted some clarification.
Let’s examine Lincoln’s biography to determine how much the former president’s single term in Congress serves as a lesson for West.
The Facts
West’s statement suggests Lincoln might have mounted a political comeback after suffering a defeat in a House race — at least that’s what any uninformed listener might assume. But no such thing ever happened.
Geithner’s fuzzy math on entitlement ‘spending cuts’
(Chris Usher/AP)
“We've laid out a detailed plan of spending cuts. $600 billion in spending in mandatory programs over 10 years. They phase in gradually, they build over time. They are good policy. They make a lot of sense.”
— Treasury Secretary Timothy F. Geithner, on NBC’s “Meet the Press,” Dec. 2, 2012
“We've laid out a very comprehensive detailed framework of how we do it and in what stages with $600 billion of spending cuts spread over 10 years in entitlement programs.”
— Geithner, on CNN’s “State of the Union,” Dec. 2
The debate over the “fiscal cliff’ is largely about numbers — and clearly, $600 billion was the Treasury secretary’s talking point of the day on the Sunday talk shows.
Eager to rebut Republican claims that the administration was not serious about reining in entitlement programs such as Medicare and Medicaid, Geithner insisted the administration did have “a detailed plan of spending cuts,” totaling $600 billion, in what he described as “mandatory programs” or “entitlement programs.”
But his language is a bit slippery. Let’s explore what’s going on.
The Facts
President Obama’s opening bid in the battle of wills with Republicans is essentially his fiscal year 2013 budget, so it’s fairly easy to get the details by looking at Table S-9 of the White House budget. Every policy change is detailed there across 20 pages of numbers, though a few items have already been enacted.
Boehner’s misfire on the impact of tax hikes on small-business owners
(J. Scott Applewhite — AP)
“Raising taxes on the so-called top 2 percent — half of those taxpayers are small business owners who pay their taxes through their personal income tax filing every year.”
— House Speaker John A. Boehner (R-Ohio), Nov. 28, 2012
The speaker misspoke — again.
A reader asked us about this statement, and we noticed that it was similar to a claim he made last year. His spokesman at the time explained that Boehner had meant to say “half of small business income,” but he misspoke. We don’t try to play gotcha here, so we gave Boehner a pass.
But in the midst of the “fiscal cliff” debate, he said it again. Once again, his spokesman said it was a mistake. “He meant to say half of small business income would be hit by the president’s plan for higher tax rates,” said spokesman Brendan Buck.
We think it’s time for a refresher course, especially since we previously looked askance at the claim that the tax hike would hit half of all small-business income. Such assertions about small businesses keep coming up time and again in this debate, and it is a complex issue.
The Facts
Higher taxes on individuals would hit just over 50 percent of business income. But they aren’t necessarily “small” businesses.
Updating a ruling: Social Security and its role in the nation’s debt
(Andrew Harrer/Bloomberg)
“Social Security has not added one penny to the deficit.”
— Sen. Richard Durbin (D-Ill.), Nov. 27, 2012
In 2011, we evaluated a similar statement about Social Security and gave it a relatively rare rating — “true but false” — which seemed to please no one. Yet as the “fiscal cliff” negotiations have heated up, Democrats have once again been using this talking point to shield Social Security from the chopping block.
Durbin, to his credit, in a speech to the Center for American Progress this week, acknowledged that Social Security’s long-term financing is an important issue that cannot be deferred. He advocates creating a commission that would separately address how to ensure 75 years of solvency to the program. So we don’t mean to pick on Durbin since plenty of Democrats in recent days have made similar comments.
But we remain troubled by the reemergence of this talking point, especially given the further decline in Social Security’s finances in the past year. We do not think this line is a slamdunk falsehood, as some believe, but it is certainly worth revisiting.
The Facts
Social Security is a pay-as-you-go system, which means that payments collected today are immediately used to pay benefits. Until recently, more payments were collected than were needed for benefits. So Social Security loaned the money to the U.S. government, which used it for other things, which in effect masked the overall size of the federal budget deficit. In exchange, Social Security received interest-bearing Treasury securities, which now total more than $2.7 trillion.
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@SeanGHiggins @DonovanSlack actually, more interesting he said in the mid-80s he would be considered a moderate Republican. how test that?
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