Obama’s mandate imposes his views on all Americans

By James D. Agresti
March 26, 2014

In a blatant inversion of reality, the New York Times editorial board is claiming that corporations want to “impose their religious views on their employees — by refusing to permit them contraceptive coverage as required under the Affordable Care Act.” In truth, the so-called contraception mandate imposes the views of President Obama (and the Times editors) on all Americans.

The Affordable Care Act (a.k.a Obamacare) gives the Executive Branch at least 40 regulatory powers that have the force of law. The Obama administration has exercised this authority to mandate that “most new and renewed health plans” cover “all FDA-approved forms of contraception” without any copayments.

This means that nearly all Americans who pay for health insurance—whether they are private citizens, business owners, or taxpayers—are required to pay for the products that Obama demands. This is not about the legality of these products but forcing everyone to pay for them, whether they want to or not. In short, the mandate denies everyone the freedom to purchase a healthcare policy that covers what they want, instead of what the President wants.

Proponents of the mandate often focus on employees who want these items paid for by health insurance provided by their employers, but they completely ignore the business owners and other employees who don’t want to pay for these items. This is a critical omission, because when government forces all health plans to pay for certain items, all of the insured are forced to pay for them through their insurance premiums.

Thus, regardless of whether the mandate is upheld by the Supreme Court or struck down in part or in whole, the only people who are in danger of having someone else’s views forced down their throats are those who don’t want to pay for these products. Everyone else would still be free to buy them as they wish.

Similarly, CNN recently stated that Rush Limbaugh “called Georgetown law student Sandra Fluke a ‘slut’ and ‘prostitute’ for her support of women’s access to birth control.” This is a gross mischaracterization of the facts. Everyone in the U.S. already had “access to birth control.” What Fluke demanded is that others be forced to pay for it.

Moreover, Fluke argued that others must buy her the precise type of birth control she prefers. She didn’t want to pay for it, and she didn’t want whoever she was having sex with to pay for it. Instead, she wanted others with no role in her sex life to pay for it. That is not about “access” but coercion.

Proponents of the mandate have also been actively spreading falsehoods about the devices and drugs that the mandate covers. The scientific facts are clear that some of these products destroy viable human embryos, which is abortion or tantamount to it.

Yet, NPR, the New York Times, and others are obscuring these facts by misrepresenting scientific studies and uncritically quoting scientists who are donors to Obama—without even identifying them as such. These realities are scrupulously documented in Just Facts’ article, “Does the Obama mandate force you to pay for abortions?

While people can argue endlessly about the pros and cons of this mandate, let’s make no mistake about who is seeking to impose their views on others: It is the people who support the mandate, not those who don’t want to be forced to pay for products that others demand.

How biofuel profiteers fleece average Americans

By James D. Agresti
March 12, 2014
Correction appended

By masking the costs of ethanol, certain wealthy biofuel investors advance ideas and polices that line their pockets at the expense of average Americans. An enlightening example of how this occurs is revealed by the way a green energy mogul lashed out at an organization named Intellectual Takeout (ITO) for publishing data from Just Facts about the cost of ethanol.

In December 2013, Just Facts commissioned a nationwide scientific poll to determine what voters understand about public policy issues. This poll contained 19 questions dealing with voters’ knowledge of nine major issues, one of them being energy. Among the energy-related questions was this: “Without government subsidies, which of these fuels is least expensive for powering automobiles? Gasoline, ethanol, or biodiesel?”

The correct answer is gasoline, which only 46% of voters answered correctly, even though the unsubsidized costs of ethanol and biodiesel substantially exceed that of gasoline. As calculated with data from the U.S. Department of Energy and U.S. Energy Information Administration, without federal subsidies, the average nationwide retail price for ethanol in 2013 was 22% more than gasoline, and biodiesel was 41% more than gasoline.

The results of the poll—along with the documentation of the correct answers—were published by various organizations and media outlets that syndicate articles from Just Facts. One of these is ITO, which soon received an email from Eric McAfee, the Founder, Chairman and CEO of Aemetis, a company that manufactures ethanol, biodiesel, and other products. McAfee, whose biography states that he “has founded and funded more than thirty companies,” wrote:

• “Are you being funded by the oil industry and merely a front for there [sic] $100+ million annual budget to protect the 90% gasoline monopoly in the US?”
• “In July 2013, E85 ethanol (97 octane) was sold for $2.99 per gallon retail in the high-cost California market, compared to $3.99 per gallon for premium gasoline (91 octane). Ethanol has traded wholesale at a $0.20 to $1.10 discount to gasoline for many years.”
• “There were no federal subsidies [for ethanol] in 2013.”
• “Please publish a retraction of the error in the same manner as the original article. If you fail to do so, please consider renaming your website ‘Intellectual Fast-Food’, focusing on quick bites of erroneous ‘facts’ that have enormous impacts on government and financial policy.”

In the exchange that followed, ITO president Devin Foley replied that his institute is not funded by oil companies and offered McAfee the opportunity to write a rebuttal, which Foley pledged to publish “so long as the tone and tenor is civil and within reason.” On January 15th, McAfee replied, “We would like to respond to the article, as you suggest.” However, after nearly eight weeks and multiple follow-ups by Foley, McAfee has yet to provide it.

Regardless, McAfee’s email to Foley employed a common ruse used by biofuel proponents to understate the costs of these fuels. This involves comparing the prices of a gallon of ethanol and a gallon of gasoline, even though a gallon of ethanol has 31% less energy than a gallon of gasoline. In practical terms, this means that a car fueled with E85 (a mixture of 70-85% ethanol and 15-30% gasoline) will get 25-30% fewer miles per gallon than the same car when it is fueled with gasoline.

That is why the poll question was worded to ask which fuel is “least expensive for powering automobiles,” not which fuel is “least expensive per gallon.” This question reflects the actual value of a fuel to consumers, not its price for a given volume. In fact, fuels with less energy content per gallon (like ethanol) are an inconvenience to consumers, because they reduce the range that a vehicle can travel between fill-ups.

McAfee is not the only person to use this distorted measure of ethanol costs. For example, a recent article published by both Bloomberg News and the Washington Post reported that “at $1.92 a gallon, ethanol costs refiners 28 percent less than petroleum products used to make gasoline.” The journalists then uncritically quoted Todd Becker, CEO of the multi-billion dollar Green Plains Renewable Energy Inc., who said, “We’re the cheapest molecule in the fuel tank.” What they all fail to mention is that a molecule of ethanol “gives off significantly less energy on combustion than petroleum,” as detailed by a Western Oregon University physics course.

This tangible results of such deceit are spelled out in the U.S. Department of Energy’s Clean Cities Alternative Fuel Price Report. This report explains that illusory savings based on price-per-gallon comparisons typically spur consumers to purchase biofuels, even if this “does not directly translate to savings on an energy-equivalent basis.”

Then there is the matter of subsidies. McAfee wrote “there were no federal subsidies” for ethanol in 2013. While the federal ethanol blending tax credit did expire at the end of 2011, the federal Renewable Fuel Standard still requires refiners, blenders, and importers of transportation fuels to use specified amounts of ethanol and other biofuels. This subsidizes the production of these fuels, because it forces the market to use them, regardless of the costs.

As the U.S. Energy Information Administration has explained, such mandates “offset any cost disadvantage renewable fuels may have over comparable petroleum products in order to achieve the required levels of consumption.” This effectively requires that almost every gallon of gas sold in the U.S. contains about 10% ethanol by volume. Because ethanol is more costly than gasoline, this drives up the price of gas.

In the documentation for the poll and the original version of this article, Just Facts double-counted this subsidy, thus greatly overstating the cost differential between gasoline and biofuels. Just Facts originally reported that without federal subsidies, ethanol and biodiesel were respectively 42% and 64% more expensive than gasoline. In reality, as detailed above, these figures are 22% and 41%.

Consumers and taxpayers ultimately bear the financial burden of these cost premiums, which drain household budgets and harm the broader economy. As the EPA’s National Center for Environmental Economics explains, “Biofuels also tend to require subsidies and other market interventions to compete economically with fossil fuels, which creates deadweight losses in the economy.”

Likewise, as explained by the Institute for Plasma Physics in the Netherlands, the U.S. Department of Agriculture, the Congressional Budget Office, the Congressional Research Service, and the U.S. Government Accountability Office, higher energy costs drive up unemployment, drive down wages, and cause other harmful economic effects. Furthermore, these effects tend to be harsher on poorer nations and individuals, because they spend a greater portion of their incomes on energy than wealthier people.

Even President Obama, who is a staunch proponent of renewable energy, has admitted that higher gas prices negatively impact ordinary people and the economy:

I want gas prices lower because they hurt families. Because I meet folks every day who have to drive a long way to get to work, and them filling up this gas tank gets more and more painful, and it’s a tax out of their pocketbooks, out of their paychecks. And a lot of folks are already operating on the margins right now. And it’s not good for the overall economy, because when gas prices go up, consumer spending oftentimes pulls back.

Nonetheless, biofuel investors financially benefit from such outcomes, because high fossil fuel prices make biofuels more competitive. In the words of Yale Associate Professor Matthew Kotchen, who currently serves as the Deputy Assistant Secretary of Environment and Energy for the Obama administration Treasury Department: “History has shown repeatedly that nothing is worse for renewable energy — and the policies that support it — than cheap and abundant conventional energy.”

There are obviously environmental issues to consider, and some argue that the environmental benefits of biofuels outweigh their added costs. However, there can be no rational basis for such claims unless all of the relevant factors are honestly discussed and critically weighed. Without such clarity, citizens and policymakers will inevitably develop opinions and make decisions based upon half-truths and outright lies that can cause real harm to real people.

Correction (3/14/2014): An earlier version of this article incorrectly stated that without federal subsidies, ethanol and biodiesel were respectively 42% and 64% more expensive than gasoline. As stated in the corrected article above, these figures are actually 22% and 41%.

Audit reveals federal finances are far worse than publicized figures

By James D. Agresti
March 3, 2014

The U.S. Treasury has just released its annual “Financial Report of the United States Government,” which provides an account of the federal government’s finances using accounting standards like those that the government requires of large corporations. Because the federal budget is not bound by these standards, it does not have to account for all of its fiscal obligations.

For example, the Treasury report reveals that the federal government owes $6.5 trillion in retirement and health benefits to federal employees and veterans. This legal responsibility amounts to $53,000 for every household in the United States, but none of these liabilities are reflected in the 2013 budget deficit or national debt.

The report also accounts for fiscal obligations that are not legal liabilities but are still considered to be commitments of the federal government. These primarily consist of benefits due to current Social Security and Medicare participants that exceed the dedicated revenues they pay into these programs.

Likewise, the report accounts for federal government assets, such as cash, real estate, and stocks in certain corporations. It does not, however, include federal stewardship land and heritage assets, such as national parks and the original copy of the Declaration of Independence. While these items have tangible value, the report explains that the government “does not expect to use these assets to meet its obligations.”

By tallying this newly published data, Just Facts calculates that the federal government has accumulated $71.0 trillion in debts, liabilities, and unfinanced Social Security/Medicare obligations. Spread equally over all U.S. households, this shortfall amounts to an average of $580,000 per household.

During the federal government’s 2013 fiscal year, the official federal deficit was $680 billion, but this comprehensive accounting reveals that the federal government’s fiscal position deteriorated by $3.3 trillion or an average of $27,000 for every household in the U.S.

In reality, all of these figures may be higher, because some of the federal agency projections on which they are based are decidedly optimistic. Most notably, Medicare’s 2013 annual report states that the program’s financial projections “do not represent a reasonable expectation for actual program operations” because:

• “Current law would require a physician fee reduction of an estimated 24.7 percent on January 1, 2014—an implausible expectation.”
• The Affordable Care Act [Obamacare] eventually reduces “Medicare prices for hospital, skilled nursing facility, home health, hospice, ambulatory surgical center, diagnostic laboratory, and many other services” to “less than half of their level [under the prior law]. …. Well before that point, Congress would have to intervene to prevent the withdrawal of providers from the Medicare market and the severe problems with beneficiary access to care that would result. … [This] would lead to substantially higher costs for Medicare in the long range than those projected under current law.”

The implications of the facts above can be seen in the Congressional Budget Office’s (CBO) “current policy” projections of publicly held debt (a partial measure of the national debt). When CBO includes the economic effects of taxes, government spending, and debt, these projections show that the next generation of Americans is inheriting a fiscal situation like never before seen in the history of the nation:

Such levels of government debt portend far-reaching negative consequences, such as lower wages, weak economic growth, inflation, higher taxes, reduced government benefits, or combinations of such results. In the words of the U.S. Government Accountability Office, “the costs of federal borrowing will be borne by tomorrow’s workers and taxpayers” and “ultimately may reduce or slow the growth of the living standards of future generations.”

Further reading:
Do large national debts harm economies?

The term ‘carbon pollution’ is unscientific and misleading

By James D. Agresti
February 20, 2014

“Language is power,” and “with careful selection of and modification to language,” wrote Evie Loveband in the journal Idiom, any one person “has the power to control the debate and rewrite history.” This truism spurs endless debates over terminology in the political arena: Are we talking about an “unborn child” or a “fetus”? Is he “gay” or “homosexual”? Are we eating “lean finely textured beef” or “pink slime”? Should we “give amnesty to illegal immigrants” or “legalize undocumented workers”?

Ultimately, many language choices are subjective, but some cross the line from preference to deceitfulness. In his essay “Politics and the English Language,” George Orwell wrote about people who use words “in a consciously dishonest way. That is, the person who uses them has his own private definition, but allows his hearer to think he means something quite different.”

Such is the case with purveyors of the term “carbon pollution,” a phrase that conflates carbon dioxide with noxious chemicals like carbon monoxide and black carbon. Carbon dioxide or CO2 is the primary man-made greenhouse gas, but it is also a natural substance that is essential for life. Additionally, it is colorless, odorless, and nontoxic at many times the concentration in earth’s atmosphere. In fact, nature produces considerably more CO2 than man.

Thus, for reasons detailed below, referring to CO2 as “carbon pollution” is highly misleading.

First, the phrase “carbon pollution” is scientifically inaccurate because there are more than ten million different carbon compounds, and the word “carbon” could refer to any of them. Some of the more notorious of these compounds are highly poisonous, such as carbon monoxide (a deadly gas) and black carbon (the primary ingredient of cancerous and mutagenic soot). Using a phrase that does not distinguish between such drastically different substances is a sure way to misinform people.

Second, the term “pollution” conjures up images of smoke pouring from smokestacks and sewage flowing into rivers, which are markedly different from CO2 emissions. Those who use the word “pollution” for CO2 draw no distinction between these scenarios, which again encourages a false impression.

Some of the more prominent users of this verbiage go even further to foster the idea of CO2 as a toxic contaminant. For example, while referring to CO2 as “carbon pollution,” President Obama criticizes “polluters” who “emit the dangerous carbon emissions that contaminate the water we drink and pollute the air that we breathe.” In stark contrast, the academic book Carbon Dioxide Capture for Storage in Deep Geologic Formations explains that:

Carbon dioxide is generally regarded as a safe and non-toxic, inert gas. It is an essential part of the fundamental biological processes of all living things. It does not cause cancer, affect development or suppress the immune system in humans.

Fueling the deceitful impression advanced by Obama and others, major media outlets, such as Politico, NBC News, and the New York Times, publish articles and commentaries that refer to CO2 as “carbon pollution” with pictures of billowing smokestacks, such as these:

The fact is that none of the smoke in these pictures is CO2, because CO2 is invisible except under extreme pressures and temperatures that cause it to transition from a gas to a liquid or solid. Such conditions are far outside the range of anything found in smokestacks.

Some argue that it is acceptable to call CO2 a pollutant because of the Supreme Court’s 5-4 ruling that allowed the EPA to regulate CO2 under the Clean Air Act’s expansive definition of pollution. Such rationale, however, is not a license to use these words in ways that create misleading impressions.

Furthermore, why would anyone who honestly wants to inform people employ an ambiguous and unscientific phrase like “carbon pollution” in favor of a clear and scientifically accurate term like “greenhouse gas”? Only those who simply echo what they hear or those wantonly pushing global warming-related taxes, regulations or similar polices would use such verbiage.

In sum, those who refer to carbon dioxide as “pollution” blur a critical distinction between noxious pollutants and greenhouse gases. Moreover, media outlets that consciously engage in this practice blur a critical distinction between journalism and activism.

Additional reading:
FactCheck.org misrepresents the dangers of carbon dioxide

Obamacare’s Effects on Wages

By James D. Agresti
February 13, 2014

Contrary to claims by certain prominent individuals, the Congressional Budget Office (CBO) is projecting that Obamacare will drive down workers’ wages.

A recent CBO analysis found that the equivalent of two million full-time workers will drop out of the workforce by 2017 as a result of Obamacare. This represents 1.5% of all hours Americans will work that year, and CBO projects that this will increase to 2.0% by 2024.

Based on those estimates, the following individuals are claiming that Obamacare will increase workers’ wages:

Glenn Kessler, the Washington Post‘s “Fact Checker”: “Fewer workers initially would lead to higher wages as employers competed to hire people.”

Paul Krugman, Nobel Prize-winning economist, Princeton University professor, and New York Times columnist: “Oh, and because labor supply will be reduced, wages will go up, not down.”

Dean Baker, Ph.D. economist and co-director of the Center for Economic and Policy Research:

[L]et’s go back to the CBO report … “According to CBO’s more detailed analysis, the 1 percent reduction in aggregate compensation that will occur as a result of the ACA [Affordable Care Act] corresponds to a reduction of about 1.5 percent to 2.0 percent in hours worked. (p 127)”

We checked with Mr. Arithmetic and he pointed out that if hours fall by 1.5 to 2.0 percent, but compensation only falls by 1.0 percent, then compensation per hour rises by 0.5-1.0 percent due to the ACA. In other words, CBO is telling us that for each hour worked, people will be seeing higher, not lower wages. That is the opposite of a pay cut.

All of these claims contradict what the CBO report explicitly states, which is that Obamacare will cause “reductions in wages or other compensation.” In more detail:

Under the ACA, employers with 50 or more full-time-equivalent employees will face a penalty if they do not offer insurance (or if the insurance they offer does not meet certain criteria) and if at least one of their full-time workers receives a subsidy through an exchange. … In CBO’s judgment, the costs of the penalty eventually will be borne primarily by workers in the form of reductions in wages or other compensation—just as the costs of a payroll tax levied on employers will generally be passed along to employees. Because the supply of labor is responsive to changes in compensation, the employer penalty will ultimately induce some workers to supply less labor.

In plain words, one of the reasons people will work less under Obamacare is that the law drives down their wages through regulations and fines, which reduces their incentive to work.

Kessler’s and Krugman’s (KK’s) points are grounded in basic laws of supply and demand. Less workers means more competition for labor, and thus, higher wages. However, KK neglect to mention that one of the reasons there will be less workers is because wages will be lower. By failing to report this, KK mislead their readers about the findings of the CBO report.

Baker’s arithmetic is fatally flawed, because it wrongly assumes that Obamacare will drive workers with different incomes out of the labor force at the same rate. CBO explains this is not the case:

Because the largest declines in labor supply will probably occur among lower-wage workers, the reduction in aggregate compensation (wages, salaries, and fringe benefits) and the impact on the overall economy will be proportionally smaller than the reduction in hours worked.

To simplify this, consider a hypothetical example of 10 workers, five who earn $40,000 per year and five who earn $20,000. If Obamacare drives down all of their wages and causes the lower-wage workers to quit working, the average wage for all workers will rise because the lower-wage workers are no longer a part of that average. However, nobody earns higher wages. In fact, everyone earns less.

In sum, contrary to KK and Dean, CBO is projecting that Obamacare will drive down wages. However, as is the case with all such analyses, CBO explains that these projections are “subject to substantial uncertainty.”

Poll reveals voters misinformed about key issues

By James D. Agresti
December 20, 2013
Correction appended

What do voters truly understand about public policy issues? To scientifically measure this, Just Facts, a non-profit research and educational institute, commissioned a nationwide poll of people who say that they vote “every time there is an opportunity” or in “most elections.” The poll consisted of 20 questions, one concerning voters’ political leanings and 19 dealing with their knowledge of public policy issues.

The questions were designed to identify disconnects between perception and reality across the political spectrum. Covering a wide range of issues, the poll consisted of questions about government spending, the national debt, taxes, healthcare, hunger, global warming, pollution, energy, and Social Security. Each question focused on a central aspect of each issue. For example, voters were asked:

Do you think the federal government spends more money on social programs, such as Medicare, education, and food stamps – or does the federal government spend more money on national defense, such as the Army, Navy, and missile defense?

The poll found deep partisan divides, with both Democrats and Republicans being relatively more or less knowledgeable depending upon the questions. Overall, a majority of voters gave the correct answer to only four of the questions, such as these:

Over the past 5 years, which has grown at a faster rate, the U.S. economy or the national debt? (Correct answer given by 87% of all voters.)

In 1960, governments paid for 24% of all healthcare costs in the U.S. Do you think government now pays a greater portion or a lesser portion of all healthcare costs in the U.S.? (Correct answer given by 57% of all voters.)

Conversely, two examples of questions that voters seldom answered correctly are:

On average, who would you say pays a greater portion of their income in federal taxes: The middle-class or the upper 1% of income earners? (Correct answer given by 18% of all voters.)

On an average day, what portion of U.S. households with children have at least one child who experiences hunger? Less than 1%, 1% to less than 10%, 10% to less than 20%, or more than 20%? (Correct answer given by 9% of all voters.)

On average, all voters answered 39% of the questions correctly. Separating voters into subgroups, those who said they would probably vote for a Democrat if the U.S. presidential election were held today got an average of 30% correct, probable Republican voters got 45% correct, probable third-party voters got 41% correct, and undecided voters got 39% correct. All of the questions, results, and correct answers are provided below.

Although journalists, commentators, politicians, educators, and advocacy groups regularly inundate Americans with information about public policy issues, this poll provides evidence that voters are often ill-informed and may be casting their ballots based upon misconceptions. Just Facts works to improve this situation by empowering voters with verifiable facts that help them to make truly informed decisions.
______
This is the second annual poll of voter knowledge commissioned by Just Facts. The poll was conducted by Conquest Communications Group, a professional polling firm. The results were obtained through live telephone surveys of 500 likely voters across the continental United States on December 16, 2013.

The margin of sampling error for all voters is +/- 4.5% with a 95% level of confidence. The margin of error for Republican voters is +/- 7.3%, for Democratic voters is +/- 8.3%, for undecided voters is 9.8%, and for third-party voters is 13.0%.

Question 1: The average U.S. household spends about $25,000 per year on food, housing, and clothing combined. If we broke down all combined federal, state, and local taxes to a per household cost, do you think this would amount to more or less than an average of $25,000 per household per year?

Correct Answer: Taxes are more than $25,000 per household per year. In 2012, federal, state and local governments collected a combined total of $3.997 trillion in taxes or an average of $33,006 for every household in the U.S. Correct answer given by 39% of all voters, 35% of Democratic voters, 38% of Republican voters, 51% of third-party voters, and 40% of undecided voters.

Question 2: On average, who would you say pays a greater portion of their income in federal taxes: The middle-class or the upper 1% of income earners?

Correct Answer: The upper 1% of income earners. Per the Congressional Budget Office’s latest estimates of federal tax burdens, households in the middle 20% of the U.S. income distribution paid an average federal tax rate of 11.5%, as compared to 29.4% for the top 1% of income earners. Correct answer given by 18% of all voters, 4% of Democratic voters, 31% of Republican voters, 8% of third-party voters, and 20% of undecided voters.

Question 3: Now, changing the subject from taxes to spending, suppose we broke down all government spending to a per household cost – do you think the combined spending of federal, state and local governments amounts to more or less than $40,000 per household per year?

Correct Answer: Government spending is more than $40,000 per household per year. In 2012, federal, state and local governments spent a combined total of $5.788 trillion or an average of $47,802 for every household in the U.S. Correct answer given by 46% of all voters, 37% of Democratic voters, 48% of Republican voters, 54% of third-party voters, and 52% of undecided voters.

Question 4: Do you think the federal government spends more money on social programs, such as Medicare, education, and food stamps – or does the federal government spend more money on national defense, such as the Army, Navy, and missile defense?

Correct Answer: Social programs. In 2010 (later data not available), 61% of federal spending was on social programs, versus 22% for national defense. Half a century ago, the opposite was true, and 53% of federal spending was for national defense, versus 23% on social programs. Correct answer given by 41% of all voters, 18% of Democratic voters, 58% of Republican voters, 49% of third-party voters, and 36% of undecided voters.

Question 5: What about federal government debt? The average U.S. household owes about $107,000 in consumer debt, such as mortgages and credit cards. Thinking about all federal government debt broken down on a per household basis, do you think federal debt amounts to more or less than $107,000 per U.S. household?

Correct Answer: Federal debt is more than $107,000 per household. As of December 2, 2013, the federal debt was $17.2 trillion or $140,741 for every household in the U.S. Correct answer given by 65% of all voters, 48% of Democratic voters, 75% of Republican voters, 78% of third-party voters, and 62% of undecided voters.

Question 6: Over the past five years, which has grown at a faster rate, the U.S. economy or the national debt?

Correct Answer: The national debt. Over the past five years, the national debt grew by 62%, while the U.S. economy grew by 14%. Correct answer given by 87% of all voters, 70% of Democratic voters, 97% of Republican voters, 92% of third-party voters, and 89% of undecided voters.

Question 7: Would you say the earth is generally warmer than it was 30 years ago, cooler than it was 30 years ago, or about the same?

Correct Answer: Warmer. According to satellite measurements and ground-level thermometers, the earth’s average temperature has increased over the past 30 years by about 0.6 to 0.9 degrees Fahrenheit. For context regarding the magnitude of this change, a temperature analysis of a glacier in Greenland found that the location was about 22ºF colder during the last ice age than it is now. Correct answer given by 45% of all voters, 74% of Democratic voters, 23% of Republican voters, 46% of third-party voters, and 46% of undecided voters.

Question 8: Again, thinking about the whole planet, do you think the number and intensity of  hurricanes and tropical storms have increased over the past 30 years, decreased over the past 30 years, or stayed about the same?

Correct Answer: About the same. Data published in the journal Geophysical Research Letters shows that the number and intensity of hurricanes and tropical storms is about the same as it was 30 years ago. Likewise, Christopher Landsea, a Ph.D. atmospheric scientist and hurricane specialist for NOAA, wrote in 2005, “All previous and current research in the area of hurricane variability has shown no reliable, long-term trend up in the frequency or intensity of tropical cyclones, either in the Atlantic or any other basin.” Additionally, the Intergovernmental Panel on Climate Change reported in 2012: “There is low confidence in any observed long-term (i.e., 40 years or more) increases in tropical cyclone activity (i.e., intensity, frequency, duration), after accounting for past changes in observing capabilities.” Correct answer given by 41% of all voters, 23% of Democratic voters, 54% of Republican voters, 42% of third-party voters, and 42% of undecided voters.

Question 9: Now, just thinking about the United States, in your opinion, is the air generally more polluted than it was 30 years ago, less polluted, or about the same?

Correct Answer: Less polluted. Per EPA data, levels of criteria air pollutants have declined significantly over the past 30 years. The same is true for emissions of hazardous air pollutants. Correct answer given by 33% of all voters, 28% of Democratic voters, 41% of Republican voters, 32% of third-party voters, and 27% of undecided voters.

Question 10: If the U.S. stopped recycling and buried all of its trash for the next 100 years in a single landfill that was 30 feet high, how much of the nation’s land area would this cover? Less than 1%, 1% to less than 5%, or more than 5%?

Correct Answer: Less than 1%. At the current U.S. population growth rate and the current per-person trash production rate, the landfill would cover 0.05% of the nation’s land area. More realistically, the actual area in use will be an order of magnitude smaller, because (1) the U.S. recycles 26% of its trash, burns 12% of it for energy, and composts 8% of it; (2) landfills can be more than 200 feet high; and (3) landfills have an average lifecycle of about 30-50 years, after which they are covered and used for purposes such as parks, golf courses, ski slopes, and airfields. Correct answer given by 7% of all voters, 4% of Democratic voters, 11% of Republican voters, 3% of third-party voters, and 4% of undecided voters.

Question 11: Without government subsidies, which of these technologies is least expensive for generating electricity? Wind turbines, solar panels, or natural gas power plants?

Correct Answer: Natural gas power plants. Determining the costs of electricity-generating technologies is complex, but data from the U.S. Energy Information Administration shows that natural gas is considerably less expensive than wind, and wind is considerably less expensive than solar. Correct answer given by 43% of all voters, 34% of Democratic voters, 54% of Republican voters, 34% of third-party voters, and 42% of undecided voters.

Question 12: Without government subsidies, which of these fuels is least expensive for powering automobiles? Gasoline, ethanol, or biodiesel?

Correct Answer: Gasoline. As calculated with data from the U.S. Department of Energy and U.S. Energy Information Administration, without federal subsidies, the average nationwide retail price for ethanol in 2013 was 22% more than gasoline, and biodiesel was 41% more than gasoline. Correct answer given by 46% of all voters, 35% of Democratic voters, 57% of Republican voters, 44% of third-party voters, and 44% of undecided voters.

Question 13: Worldwide, which of these technologies generates the most electricity? Solar panels, natural gas power plants, coal power plants, or nuclear power plants?

Correct Answer: Coal power plants. Due to the low cost and widespread availability of coal, coal power plants produced 40% of the world’s electricity in 2010. Correct answer given by 43% of all voters, 35% of Democratic voters, 49% of Republican voters, 39% of third-party voters, and 45% of undecided voters.

Question 14: On an average day, what portion of U.S. households with children have at least one child who experiences hunger? Less than 1%, 1% to less than 10%, 10% to less than 20%, or more than 20%?

Correct Answer: Less than 1%. Per U.S. Census Bureau data, on an average day, less than one fifth of one percent (0.18%) of households with children have a child who experiences hunger. Correct answer given by 9% of all voters, 6% of Democratic voters, 13% of Republican voters, 8% of third-party voters, and 5% of undecided voters.

Question 15: Some people say that Social Security faces financial problems because politicians have looted the program and spent the money on other programs.  Do you believe that statement is true or false?

Correct Answer: False. By law, all Social Security income can be used only for the Social Security program. Since the outset of Social Security, the law has required that all of the program’s surpluses be loaned to the federal government, but the law also requires that the federal government pay back this money with interest, and the federal government has never failed to do this. Social Security faces financial problems not because it has been looted but because of other factors such as (1) increases in life expectancy without a comparable increase in the retirement age; (2) the higher birth rate of the baby boom generation compared to other generations, and (3) the increasing number of people receiving disability benefits. Correct answer given by 19% of all voters, 37% of Democratic voters, 10% of Republican voters, 14% of third-party voters, and 15% of undecided voters.

Question 16: Some policymakers are proposing that individuals be allowed to save and invest some of their Social Security taxes in personal accounts instead of paying these taxes to the Social Security program. In your view, do you think such proposals generally improve or harm the finances of the Social Security program?

Correct Answer: Improve. As evidenced by analyses conducted by the chief actuary of the Social Security Administration and a bipartisan presidential commission, proposals to give Social Security an element of personal ownership are generally structured to strengthen the program’s finances. Although some tax revenues that would have gone to the program instead go to people’s personal retirement accounts, these tax revenues are more than offset by the savings of not paying these individuals full benefits. Correct answer given by 25% of all voters, 11% of Democratic voters, 35% of Republican voters, 30% of third-party voters, and 23% of undecided voters.

Question 17: In 1960, governments paid for 24% of all healthcare costs in the U.S. Do you think government now pays a greater portion or a lesser portion of all healthcare costs in the U.S.?

Correct Answer: A greater portion. Between 1960 and 2009, the portion of U.S. healthcare expenses paid by government increased from 24% to 48%. Correct answer given by 57% of all voters, 45% of Democratic voters, 64% of Republican voters, 59% of third-party voters, and 59% of undecided voters.

Question 18: When health insurance copayments are high, people tend to spend less on healthcare. Does this reduced spending typically have a negative impact on people’s health?

Correct Answer: No. Multiple studies have shown that when copayments are high, people generally spend less money on their healthcare without negatively impacting their health. This is because when people directly pay for more of their healthcare bills, they are more likely to be responsible consumers and use only those services that actually benefit their health. An exception to this rule is the poorest 6% of the population, who do experience negative effects when copayments are increased. Correct answer given by 16% of all voters, 10% of Democratic voters, 20% of Republican voters, 19% of third-party voters, and 15% of undecided voters.

Question 19: In 2010, Congress passed and President Obama signed the Affordable Care Act, also known as “Obamacare.” This law uses price controls to save money in the Medicare program. Do you think these price controls will affect Medicare patients’ access to care?

Correct Answer: Yes. As explained by Medicare’s actuaries, the price controls in the Affordable Care Act will cut Medicare prices for many medical services over the next three generations to “less than half of their level under the prior law.” The program’s actuaries have been clear that this will likely cause “withdrawal of providers from the Medicare market” and “severe problems with beneficiary access to care.” Correct answer given by 64% of all voters, 32% of Democratic voters, 83% of Republican voters, 73% of third-party voters, and 71% of undecided voters.

The poll results for all voters are available here, and the results broken down by political preferences, age, and gender are available here.

Correction (3/14/2014): This article originally stated that without federal subsidies, ethanol and biodiesel were respectively 42% and 64% more expensive than gasoline. As shown in the corrected article above, these figures are actually 22% and 41%.

Advocates for social welfare benefits turn the truth about federal spending on its head

By James D. Agresti
December 4, 2013

Since the outset of the Great Recession, left-leaning public figures have insisted that temporary increases in government spending—especially on social welfare programs—would rapidly stimulate the economy. Yet, as detailed below, even though such spending quickly rose to record levels, the economy has been burdened with high unemployment for more than four years since the recession ended.

Now that a portion of this increased spending has been scaled back, the left is blaming high unemployment and other economic ills on federal spending cuts, even though inflation-adjusted federal spending is currently 15% higher than it was before the recession, and social benefits comprise a greater portion of federal spending than ever recorded in the nation’s history.

To wit, the Huffington Post’s chief financial writer, Mark Gongloff, recently wrote that “the federal government has cut spending at the fastest pace since the end of the Vietnam War,” and these cuts in combination with other “harsh austerity measures” “instigated by Republicans,” are “ruining the economy.” In making that case, Gongloff cites sources that are specious and then drags them even further from the truth by misrepresenting what they say.

To support his claim that “the federal government has cut spending at the fastest pace since the end of the Vietnam War,” Gongloff links to a February 26th New York Times article entitled, “Austerity Kills Government Jobs as Cuts to Budgets Loom.” Notwithstanding the title, the fifth paragraph reveals that “total government spending continues to increase,” a point that Gongloff never mentions.

Like other left-leaning publications, the Times article focuses on a category of federal spending called “purchases and investments,” which excludes all social welfare programs. The Times reporter, Binyamin Appelbaum, justifies this narrow focus by asserting that “government purchases and investments expand the nation’s economy, just as private sector transactions do, while benefit programs move money from one group of people to another without directly expanding economic activity.”

Unlike Gongloff, who fails to state that he is citing only a subset of federal spending, Appelbaum directly reveals this caveat. However, Appelbaum neglects to provide other key context, such as the fact that this category of spending only accounts for one third of federal spending, and more than 60% of it is defense spending, which has fallen to less than 20% of the federal budget.

Even more importantly, the statement that “benefit programs move money from one group of people to another without directly expanding economic activity” is at odds with frequent, strident claims from the left that social welfare benefits are highly beneficial to weak economies, and government should stimulate the economy by enlarging these programs.

For a prime example in the vast array of such claims, in August 2011 White House Press Secretary Jay Carney scolded Laura Meckler from the Wall Street Journal for asking how unemployment benefits improve the economy. After telling Meckler that she should “know this as part of the entrance exam just to get on the paper,” Carney stated that unemployment benefits are

one of the most direct ways to infuse money into the economy because people who are unemployed and obviously aren’t earning a paycheck are going to spend the money that they get . . . and that creates growth and income for businesses that then lead them to making decisions about jobs—more hiring.

For another instructive example, while testifying before Congress in April 2010, Mark Zandi, the chief economist of Moody’s Analytics, stated:

No form of the fiscal stimulus has proved more effective during the past two years than emergency UI [unemployment insurance] benefits, providing a bang for the buck of 1.61—that is, for every $1 in UI benefits, GDP [gross domestic product] one year later is increased by an estimated $1.61.

Zandi also claimed that other social welfare programs, such as food stamps, stimulate economic growth. Advocates for increased social spending have repeatedly cited such assertions from Zandi and other economists as proof that government social benefits help the economy, but Gongloff and others are now excluding these and other programs from their measures of government spending.

Looking at the big picture, from the outset of the Great Recession in December 2007 through the third quarter of 2013, inflation-adjusted federal spending has grown by 15%, peaking at 22% above the 2007 level in 2010 (see graph below). Likewise, measured as a portion of the nation’s economy or gross domestic product, federal spending is now 11% above the 2007 level, peaking at 26% higher in 2010, when it consumed a larger portion of the U.S. economy than at any time since World War II.

This spending growth has been the result of multiple factors, one of them being safety net programs that are structured to automatically expand during economic downturns and thereby drive increases in government spending that allegedly “reduce the depth of recessions….” More significantly, in the wake of the recession, several laws were passed that increased federal spending for the expressed purpose of stimulating the economy, with assurances that the spending would be “timely, targeted and temporary.”

The first of those “stimulus” laws was passed in February 2008 and provided refundable tax credits, which take the form of both tax cuts and spending. The most notable of these laws—the American Recovery and Reinvestment Act—was passed in February 2009 with claims that it would generate positive effects “very, very quickly,” “have its greatest impact on growth in the second and third quarters of 2009,” and “create between three and four million jobs by the end of 2010….”

Nevertheless, it has been nearly six years since the first stimulus was passed, almost five years since the 2009 stimulus became law, and more than four years since the recession ended, but the latest published unemployment rate is still 7.3% (versus 4.4% before the recession), and the underemployment rate is 13.8% (versus 8.1% before the recession).

As unemployment figures and other disappointing economic data have poured in, prominent journalists and commentators have blamed the results on decreased government spending, while neglecting to inform their audiences that such spending has been at or near record highs. Even in 2010, as federal spending reached its post-World War II record, and combined expenditures for federal, state and local governments were higher than at any time in the nation’s history, New York Times columnist and Nobel Prize-winning economist Paul Krugman was blaming the feeble economy on “drastic spending cuts” by state and local governments.

Such deceptive claims by Gongloff, Krugman, and others have been built upon patently false assertions, definitions of government spending that exclude large portions of it, and cherry-picked comparisons to record-high spending levels. In sum, there is a chorus of individuals who are attempting to link bad economic news to short-term falls in subsets of government spending, while at the same time concealing the broader realities of this issue from their readers and listeners.

The national debt is rising—not declining

By James D. Agresti
October 31, 2013

In a recent Los Angeles Times article entitled “Four facts about the national debt you may not know,” assistant managing editor David Lauter claimed that “the U.S. debt burden is starting to decline. That’s right – it’s going down, not up.”

Likewise, Michael Hiltzik, a Pulitzer Prize-winning business columnist of the Los Angeles Times, soon thereafter wrote that the national debt has “been falling recently as a percentage of gross domestic product and is expected to keep doing so for the next few years at least.”

These statements are demonstrably false, and they are accompanied by other misleading claims that mirror partisan talking points.

First, for clarification, note that Lauter and Hiltzik don’t refer to the full national debt but only to the debt that is “publicly held.” This is a partial measure of the national debt that excludes money owed to federal programs with independent budgets, like Social Security. Lauter and Hiltzik also measure debt as a portion of the nation’s annual economic output (gross domestic product or GDP), which is a common practice among federal agencies and economists. For the sake of consistency, all of the data below on the national debt uses these same measures used by the LA Times.

Both Lauter and Hiltzik linked to reports from the Congressional Budget Office (CBO) as alleged proof for their claims that debt is falling, but as shown in the graph below of CBO data from September 2013, federal debt is currently at the highest levels of the past 50 years and is still growing:

Ironically, the cover page of the CBO report cited by Lauter features a chart that clearly shows the debt is rising, and the same is true of the CBO report cited by Hiltzik.

Looking into the future, Hiltzik declared that the debt will keep declining “for the next few years at least,” according to CBO projections. Similarly, Lauter stated that CBO projects the debt will stay level for the next year and then decline by four percentage points by 2018.

Both of those assertions are misleading, and they echo rhetoric used by President Obama and Paul Krugman. The problem with these claims is that they are based on CBO’s “baseline” projections, which employ certain assumptions that require significant changes in current policy.

For example, CBO’s baseline projections assume that Medicare will implement a 25% cut in payment rates to physicians starting on January 1, 2014. This cut is required under a 1997 federal law, but as the 2013 Medicare Trustees Report explains, “it is a virtual certainty that lawmakers … will override this reduction as they have every year since 2003.” This is because Medicare already pays doctors 20% below private insurance rates, and another 25% reduction would cause many doctors to stop accepting Medicare patients, as has occurred with Medicaid.

CBO also produces projections based upon “current policy,” which don’t include the unrealistic assumptions inherent in the claims of Lauter, Hiltzik, Krugman, and Obama. When CBO accounts for the economic effects of taxes, government spending and debt, these projections show the debt growing in 2014, staying level in 2015, declining in 2016 and 2017, and then climbing to unprecedented levels:

In total, CBO’s more realistic projections show that the federal government’s current policies will leave the next generation of Americans with an escalating debt that permanently dwarfs the previously unprecedented debt spike from World War II.

Because of “unanticipated changes in economic conditions” and “a host of other factors that affect federal spending and revenues,” CBO has emphasized that actual budget outcomes could be different from projections. Nevertheless, CBO has also explained that “under a wide range of possible assumptions about some key factors that influence federal spending and revenues, the budget is on an unsustainable path.”

Another patent falsehood in Lauter’s article is his claim that “the debt grew rapidly during most of President George W. Bush’s tenure and President Obama’s first term as the government borrowed money to fight two wars and the deepest recession in more than half a century. But the rapid growth ended more than a year ago.”

In reality, as the CBO data shown above reveals, the debt grew more rapidly over the recently-ended fiscal year (Oct 1. 2012 – Sept. 30, 2013) than it did in seven of the nine fiscal years that overlapped Bush’s presidency. Also, during one of those two years, Barack Obama was president for more than two thirds of the year. Nevertheless, linking the national debt to any particular president fails to account for the actions of Congress, the impacts of preexisting laws, and numerous other variables.

Finally, Lauter repeats a talking point of Krugman and other left-leaning professors who claim that there is little need for concern over the debt, because rapid economic growth in the wake of World War II indicates that “a large debt doesn’t necessarily strangle an economy.”

What Lauter and the others neglect to mention is that the debt from World War II (1941-1945) was fleeting because it was quickly addressed through drastically reduced government spending. For example, by 1951, federal debt was already 11% lower than our current debt, and federal spending was consuming 27% less of our economy than in 2012.

In contrast, the federal government has currently accumulated more than $67 trillion in debts, liabilities, and unfinanced obligations. This amounts to $215,311 for every person living in the U.S. and is greater than the combined net worth of all U.S. households and nonprofit organizations, including all assets in savings, real estate, corporate stocks, private businesses, and consumer durable goods such as automobiles. As CBO projections show, if the federal government continues its current polices, these liabilities and unfinanced obligations will become concrete debt.

Moreover, politicians and others who have supported increased government borrowing can easily deflect the blame for their actions because the consequences of government debt can manifest in ways that are not obvious to many voters, such as lower wages, weak economic growth, inflation, higher taxes, reduced government benefits, or combinations of such results. In the words of the U.S. Government Accountability Office, “the costs of federal borrowing will be borne by tomorrow’s workers and taxpayers” and “ultimately may reduce or slow the growth of the living standards of future generations.”

Has government turned us into a nation of makers and takers?

By James D. Agresti
September 16, 2013

In a recent article and accompanying video produced by the Tax Policy Center, tax analyst Roberton Williams reports that 43% of Americans won’t pay federal income taxes this year. Williams, a former deputy assistant director for the Congressional Budget Office, also states that “many commentators” have twisted such statistics to suggest “that nearly half of all households paid no tax at all when, in fact, nearly everyone pays something.”

He emphasizes that regardless of whether someone pays federal income taxes, almost all Americans pay “Social Security and Medicare payroll taxes, state and local sales taxes, excise taxes, or some other levy.” In the video, he adds that “pundits and politicians” have misused data about those who don’t pay federal income taxes “to portray a world of makers and takers,” where roughly half of Americans pay for benefits that go to the other half.

The article and video have been widely cited by organizations such as CNBC, Fox News, the Drudge Report, the Committee for a Responsible Federal Budget, and the Illinois Policy Institute.

Williams is correct that the federal income tax is just one of many taxes, and hence, it is misleading to ignore other taxes when discussing makers and takers. However, he ignores another crucial aspect of this issue, which is that the person who pays $1,000 in taxes and receives $10,000 in government benefits is a taker on net. Even though this person pays “something,” as Williams notes, he receives far more from government than he pays in taxes.

A 2012 report from the Congressional Budget Office (CBO) provides data that speaks to this issue. These are estimates of the household distribution of federal taxes, market income, and government transfers from 1979-2009. To define these terms, market income comes from work and investments, while government transfers include “cash payments and in-kind benefits from social insurance and other government assistance programs.”

The report is not fully inclusive because it does not account for state and local taxes due to “the difficulty of estimating them for individual households.” Also, the analysis excludes about 5% of federal taxes (estate and gift taxes, customs duties, and other miscellaneous receipts). Nonetheless, the report accounts for virtually all government transfers and two thirds of all taxes paid in the U.S. from 1979-2009. Notably, three quarters of government transfers over this period came from the federal government. Thus, the report accounts for the vast majority of taxes that fund government transfers.

The CBO data, which is analyzed below, shows that in 2009 roughly half of U.S. households received more in government transfers than they paid in federal taxes. For example, the lowest-earning 20% (or quintile) of households earned an average of $7,600 in market income, received $22,900 in government transfers, and paid $0 in federal taxes. Similar data for all the quintiles are graphed here:

It is important to note that the figures above are averages, and not every household in these income groups receives or pays what is shown. It is also important to note that there are substantial changes among individual households over time. People tend to pay more taxes during their working years and receive more transfers as they become eligible for Social Security and Medicare.

Nonetheless, over the past three decades, there has been a clear trend of increasing government dependency. In 1979, only the lowest-earning 20% of households paid less in federal taxes than they received in government benefits. Since then, both the second and middle quintiles have moved into this territory:

In an email to Just Facts, CBO stated that it currently does not have a “specified release date” for such data in more recent years. However, when the data is released, it will likely show that the 2011/2012 payroll tax holiday created markedly larger proportions of government transfers to taxes for the lower income groups.

Conversely, in 2013, the expiration of the payroll tax holiday and other tax breaks, along with the waning of the Great Recession, may move the middle quintile back into the category of those who pay more in federal taxes than they receive in government benefits.

The modern increase in government dependency is even more vivid when comparing changes in market income with changes in government transfers. Between 1979 and 2009, all quintiles saw larger percentage increases in government transfers than market income. For example, over this period (while accounting for inflation):

• the lowest-earning quintile of households increased their market income by 13%, but their gross income rose by 60% due to a 135% increase in government transfers.
• the middle quintile increased their market income by 7%, but their gross income rose by 21% due to a 235% increase in government transfers.
• the highest quintile increased their market income by 63%, but their gross income rose by 64% due to a 173% increase in government transfers.

These increasing government transfers have been caused by many factors, such as general economic malaise from the Great Recession, escalating healthcare expenditures, more people receiving Medicaid and disability benefits, and increases in life expectancy that have raised spending on Social Security and Medicare. Accordingly, during the past half century, social programs have consumed a rising share of the federal budget, and CBO projects that this trend will continue for the foreseeable future.

In summary, when addressing the issue of makers and takers, statements about how many Americans don’t pay federal income taxes can be misleading if further context is not provided. Likewise, declaring that “nearly everyone pays something” can be just as misleading if one does not also consider how much they pay and how much they take.

Additional reading:
High-income earners pay a much higher federal tax rate than the middle class
What portion of the federal budget is spent on the military?

Can we prevent a debt-driven economic collapse without reforming entitlements?

Debt versus deficit: Obama’s bait and switch

By James D. Agresti
August 26, 2013

In a recent speech at Binghamton University in which he lobbied for spending on various welfare programs, President Obama claimed that “we don’t have an urgent deficit crisis. The only crisis we have is one that’s manufactured in Washington, and it’s ideological.”

Continuing, he declared that his political opponents fabricated this crisis so they can argue “that we shouldn’t be helping people get health care, and we shouldn’t be helping kids who can’t help themselves and whose parents are under-resourced — we shouldn’t be helping them get a leg up.”

To support his point, Obama compared the current annual deficit to those of recent years. “The deficit has been cut in half since 2009 and is on a downward trajectory,” said Obama to his audience’s applause. However, a broad factual perspective shows the situation is not as rosy as the president paints it out to be.

The deficits of recent years have been the largest in modern history, peaking at 10.1% of the entire nation’s economy (GDP) in 2009. For context, the 2009 deficit was 68% larger than any other deficit since the World War II era, and it was 6.1 times larger than the average deficit from 1947-2008 (see graph below).

So although the White House’s projected deficit for 2013 (4.7% of GDP) is less than half of the 2009 deficit, it is still 3.6 times higher than the average of the past 20 years, 3.2 times higher than the average of the past 40 years, and 4.2 times higher than the average of the past 60 years.

More importantly, Obama dodged the crux of this issue by avoiding any mention of the national debt. This is crucial because the financial condition of the federal government is not just a function of how much it borrows in any given year, but more significantly, how much it has borrowed in total.

In the same Binghamton University speech in which Obama claimed that federal finances are healthy, he repeatedly addressed the issue of student loan debt. Concerning this subject, it would have been ridiculous if he had told his audience, “There is no need to worry about this debt because once you get out of college, your annual student loan deficit will quickly decline.” Such reasoning is transparently illogical, but it is implicit in the President’s portrayal of the federal government’s finances.

In striking contrast, on March 16, 2006, then-Senator Obama gave a speech on the floor of the U.S. Senate in which he denounced “reckless fiscal policies” that had driven federal deficits to “historically high levels.” Among other things, he stated that:

• “America’s debt weakens us domestically and internationally.”
• “America has a debt problem and a failure of leadership.”
• “Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren.”

On the day Obama gave that speech, the national debt was $8.3 trillion or 61% of the nation’s economy. The national debt now stands at $16.7 trillion or 101% of GDP. Thus, even after adjusting for economic growth (which accounts for population increases and inflation), the current debt is 66% larger than the debt Obama condemned in 2006.

Regarding the implications of this debt, in March 2013, the Congressional Budget Office (CBO) reported that the current national debt is “very high by historical standards” and threatens “serious negative consequences” for the following reasons:

If the amount of debt held by the public remains so large, federal spending on interest payments will increase substantially when interest rates rise to more normal levels. Because federal borrowing generally reduces national saving, the stock of capital assets, such as equipment and structures, will be smaller and aggregate wages will be less than if the debt were lower. In addition, lawmakers will have less flexibility than they ordinarily might to use tax and spending policies to respond to unanticipated challenges. Moreover, such a large debt poses an increased risk of precipitating a fiscal crisis, during which investors would lose so much confidence in the government’s ability to manage its budget that the government would be unable to borrow at affordable rates.

In sum, CBO cautioned that the national debt—if left unaddressed—is going to suppress workers’ wages, degrade the government’s capacity to weather challenges, and may trigger a financial crisis. Furthermore, the same report projected that under current polices, publicly-held federal debt is going to rise by 20% of GDP over the next 10 years. Nevertheless, the President characterized CBO’s projections by stating, “We don’t have an immediate crisis in terms of debt. In fact, for the next 10 years, it’s gonna be in a sustainable place.”

Additional reading:
Blame for the national debt
Do large national debts harm economies?

Federal government finances deteriorated by $6.5 trillion in 2012