Romney’s Auto Industry Advice Wasn’t Taken: Reality Check
By Bloomberg News - Oct 17, 2012 12:15 AM ET
President Barack Obama and Republican nominee Mitt Romney made competing assertions during their debate last night in Hempstead, New York. How did they square with the facts?
Auto Industry Rescue
Mitt Romney, Republican presidential candidate, speaks during the second presidential debate at Hofstra University in Hempstead, New York, on Tuesday, Oct. 16, 2012. Photographer: Scott Eells/Bloomberg
The Claim: Romney said Obama followed his advice and letGeneral Motors Co. (GM) and Chrysler Group LLC go bankrupt, “a process that was necessary to get those companies back on their feet,” he said. “That was precisely what I recommended and ultimately what happened.”
The Background: During the 2008 financial crisis that included the failure of Lehman Brothers Holdings Inc., lending froze for businesses and consumers, and auto sales fell to levels unseen in years. GM lost $9.6 billion in the fourth quarter of 2008. Chrysler was closely held and didn’t report financial results. Ford Motor Co. (F) lost almost $6 billion although it didn’t face bankruptcy.
The Facts: Romney is misstating his position. He opposed any use of taxpayer dollars to bail out the automakers, advice that President George W. Bush and Obama ignored. GM and Chrysler went through managed bankruptcies after Bush, at the end of his presidency, and later Obama provided federal funds. Steven Rattner, the Willett Advisers LLC chairman and leader of Obama’s auto task force, said no private sources of money were available at the time.
Had Romney’s advice “been followed by either the Bush administration or the Obama administration, we would have today no auto industry,” Rattner said in February.
A former Bush aide agreed. “It wasn’t just that there wasn’t credit available; a lot of private equity had cash, they just weren’t giving it away,” said Tony Fratto, who worked in the administration when the initial bailout loans were extended in late 2008. “It was a very uncertain situation.”
Mike Jackson, chief executive officer of AutoNation Inc. (AN), the largest U.S. auto-dealer group, said the idea that private financing was available was a “fantasy.”
Contraception Coverage
The Claim: Obama said that Romney “suggested that in fact employers should be able to make the decision as to whether or not a woman gets contraception through her insurance coverage.”
The Counter-claim: “I don’t believe employers should tell someone whether they could have contraceptive care or not,” Romney said. “Every woman in America should have access to contraceptives.”
Background: The Patient Protection and Affordable Care Act, Obama’s health-care overhaul, included a provision requiring health insurers to cover preventive services for women without co-payment. The Institute of Medicine, an independent nonprofit that advises Congress and the U.S. government, recommended in 2011 that women’s preventive services include contraception and Obama’s administration issued rules requiring insurers and employers who offer health benefits to cover all Food and Drug Administration-approved contraceptives, except churches and employers closely connected to them. About 85 percent of large firms cover contraception in their health plans now, according to the Kaiser Family Foundation, a nonprofit inMenlo Park, California that studies health issues.
The Facts: Obama correctly described what Romney’s position has been. Romney has said he would repeal the health law. He also said in a radio interview in February that “of course I support the Blunt amendment,” legislation introduced by Senator Roy Blunt, Republican of Missouri, that would forbid the government from requiring health plans or employers to cover health services “contrary to the provider’s religious beliefs or moral convictions.”
In disputing Obama’s assertion, Romney’s statement that he believes women should have “access” to contraceptives is different than requiring insurers to cover them.
Romney’s Tax Math
The Claim: “The math doesn’t add up,” Obama said of Romney’s tax plans.
The Counterclaim: “Of course they add up,” Romney said.
The Background: Romney has proposed about $5 trillion in tax cuts: a 20 percent reduction in income-tax rates, eliminating the estate tax and alternative minimum tax, and cutting the corporate tax rate to 25 percent from 35 percent. He has said he would prevent the tax burden from falling on the middle class, continue tax breaks for savings and investments, and stop the deficit from growing.
The Facts: Romney hasn’t shown how his tax plan adds up, because he hasn’t provided a detailed proposal.
Coming up with a plan that would meet all of Romney’s tests may be mathematically possible. The nonpartisan Tax Policy Center found in August that there aren’t enough tax breaks among high earners to pay for their tax cuts. Romney allies said that the study kept several tax breaks off the table, including the exclusion for municipal bond interest and the earnings within life insurance policies. If you consider those items and assume that economic growth generated by the plan would pay for part of the cuts, it’s mathematically possible to design a plan that would meet Romney’s tests.
Regardless of whether it’s possible, Romney hasn’t proposed it. The Tax Policy Center study assumed that Romney would eliminate breaks such as the charitable deduction and mortgage interest deduction for everyone making more than $200,000 a year. It also assumed that Romney could make those breaks disappear as soon as a household’s income reached $200,000, with no phasing out. The closest Romney has come is a suggestion of a cap on deductions, which would fall short of generating the revenue needed.
Top Income Taxes
The Claim: Romney said that under his plan to overhaul the tax code, “the top 5 percent of taxpayers will continue to pay 60 percent of the income tax the nation collects.”
The Background: Who pays how much to fund the U.S. government and its programs has emerged as a central issue in the campaign. In September, a videotape was made public of Romney telling a private meeting of his financial backers in May that 47 percent of Americans paid no federal income tax, considered themselves “victims” and were dependent upon government for their livelihoods. The president has proposed raising taxes on higher-income Americans, including establishing a minimum tax liability for those making more than $1 million annually.
The Facts: Romney is essentially correct in his calculation of how much the wealthy pay in income taxes. The top 5 percent of taxpayers -- those with adjusted gross income of at least $154,643 -- earned 31.7 percent of the nation’s income in 2009 and paid 58.7 percent of federal individual income taxes, according to the Tax Foundation, a nonpartisan group that studied the most recent available Internal Revenue Service data. The facts are different when all taxes are taken into account. Including state and local levies, which fall more heavily on lower-income earners, the top 5 percent in 2011 earned 35.3 percent of the nation’s income and paid 37.1 percent of all taxes, according to a study by Citizens for Tax Justice.
Energy Production
The Claim: Romney said, “Oil production is down 14 percent this year on federal land, and gas production is down 9 percent. Why? Because the president cut in half the number of licenses and permits for drilling on federal lands and in federal waters.”
The Counter-Claim: “We’re actually drilling more on public lands than in the previous administration, and the previous president was an oil man,” Obama said.
The Background: Romney and Obama agree that oil and natural gas production is up under the Obama administration. Romney says the increase has come on private lands and not as a result of the administration’s policies.
The Facts: Romney is correct that oil and gas production on public lands and offshore fell by 14 percent and natural gas by 9 percent from 2010 to 2011, though he exaggerates the decline in permits and ignores the fact that overall oil production on federal lands and offshore has increased 12 percent during Obama’s term. While gas production has fallen 17 percent on public lands over the course of his term, overall production is the highest ever as companies use hydraulic fracturing to access reserves in places like the Marcellus shale formation on private lands in the northeastern U.S.
$2 Trillion for Defense
The Claim: Obama said Romney “wants to spend $2 trillion on additional military programs, even though the military’s not asking for them.”
The Background: Romney, since at least 2009, has endorsed keeping basic defense spending, not counting wars, at 4 percent of gross domestic product. Today’s rate is about that, counting war spending, and 3.4 percent if only non-war annual spending is included. The Congressional Budget Office estimates the total defense budget will decline to 3 percent of GDP by 2017 as war spending decreases.
The Facts: Obama was partially correct. Washington study groups ranging from the Heritage Foundation to the Center for New American Security said sustaining the basic non-war defense budget at 4 percent of GDP annually over 10 years may cost as much as $2 trillion. Romney surrogates have repeatedly said he has not endorsed a specific spending figure.
Romney’s 4 percent defense proposal would translate into $400 billion in added spending in his first term, compared with Obama’s current defense budget projection, according to Bloomberg Government analyst Robert Levinson.
Military officials have not weighed in on the issue. The then-Chairman of the Joint Chiefs of Staff, Admiral Mike Mullen, in March 2008 said a “4 percent floor” for defense is “important.” Later, in June 2010, Mullen said “our national debt is our biggest national security threat.”
Arizona Immigration Law
The Claim: Obama said Romney called Arizona’s immigration law “a model for the nation.” The law allows law enforcement officers to “stop folks because they suspected maybe they looked like they might be undocumented workers and check their papers,” the president said. Obama also said Romney’s top immigration adviser “is the guy who designed the Arizona law.”
The Counter-Claim: “I did not say that the Arizona law was a model for the nation in that aspect,” Romney said. “I said that the E-Verify portion of the Arizona law, which is the portion of the law which says that employers could be able to determine whether someone is here illegally or not illegally, that that was a model for the nation.”
The Background: Romney has suggested that undocumented immigrants “self-deport” and called for actions to make them feel less comfortable in the U.S. He has said he opposes any effort to give legal status to undocumented immigrants without first requiring them to leave the country.
The Facts: Romney was right regarding his statement about the Arizona law. “I think you see a model in Arizona,” he said during the Feb. 20 Republican presidential debate in Mesa, Arizona. “They passed a law here that says that people who come here and try and find work, that the employer is required to look them up on E-Verify. This E-Verify system allows employers in Arizona to know who’s here legally and who’s not here legally.” Romney said requiring all employers to check an E- Verify system “can stop illegal immigration.”
Obama was correct when he said the author of the Arizona law was a Romney adviser. A Romney campaign press release in January quoted the Republican candidate as saying, “I look forward to working with” Kansas Secretary of State Kris Kobach “to take forceful steps to curtail illegal immigration.” Kobach’s biography on his official website says he “is well known nationally for his role as co-author” of the Arizona law.
Coal Jobs
The Claim: Obama said: “We’ve seen increases in coal production and coal employment.”
The Counterclaim: Romney said: “Coal production is not up. Coal jobs are not up.”
The Background: Romney has said Obama administration environmental regulations, including requirements to reduce greenhouse-gas emissions, are hurting the coal industry in hotly-contested states such as Ohio, Pennsylvania and Virginia.
The Facts: Obama and Romney are both half-right. Coal employment has increased during Obama’s term, from about 81,200 workers in 2008 to 86,200 workers in 2011. Obama is wrong that coal production has also risen. It dropped from 1.17 billion tons in 2008 to 1.09 billion in 2009. The biggest dip came in 2009 during the height of the economic crisis when demand for electricity dropped. Coal production has increased since then without reaching the levels of the last year of Bush’s term.
To contact the reporters on this story: Richard Rubin in Washington atrrubin12@bloomberg.net; Jonathan D. Salant in Washington at jsalant@bloomberg.net
To contact the editors responsible for this story: Steven Komarow atskomarow1@bloomberg.net; Clark Hoyt at choyt2@bloomberg.net
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