Thursday, January 28, 2010

Obama's State of the Union Address

As always, great job by for its analysis of President Obama's State of the Union speech last night. 


President Obama peppered his State of the Union address to Congress and the nation with facts, which were mostly right but sometimes cherry-picked, strained or otherwise misleading.

• He said “there are about 2 million Americans working right now” because of last year’s stimulus bill. But his own economic advisers say the total could be as little as 1.5 million, and independent estimates range down to as low as 800,000.

• He quoted the Congressional Budget Office as saying health care legislation could “bring down the deficit by as much as $1 trillion” over the next 20 years. But CBO has made clear that’s a soft and uncertain estimate.

• He said that when he took office, the deficit already was projected to total $8 trillion over the next 10 years. But the estimate is from his own Office of Management and Budget; the CBO put the figure at trillions less.

• He said he believes a Supreme Court decision will allow foreign corporations to spend in U.S. elections. Perhaps so, but it actually did not address a law still on the books forbidding any foreign-based corporation from spending on electioneering here.


This was the president’s first State of the Union address, but not his first speech to a joint session of Congress. We found a number of errors in his first one on Feb. 24, 2009, and also in his health care speech Sept. 9 (when a GOP House member shouted "you lie").

This time Republicans merely scoffed and grumbled at some of Obama’s statements. And while we found Obama strained the facts or cited uncertain statistics at times, we uncovered nothing we could show to be false.

How Many Jobs?

The president said the stimulus bill was responsible for "about 2 million" jobs, but that’s far from certain. Other estimates put the total as low as 800,000.

Obama: Because of the steps we took, there are about 2 million Americans working right now who would otherwise be unemployed.

The 2 million jobs estimate comes from the latest report of the White House Council of Economic Advisers. It said: "CEA estimates that as of the fourth quarter of 2009, the [stimulus bill] has raised employment relative to what it otherwise would have been by 1½ to 2 million." So his own economic advisers say the number could be as low as 1.5 million, but Obama took the higher number in their range. And the CEA report also cited fourth-quarter estimates from others, including the Congressional Budget Office and private economic forecasting firms, most of which are lower than the 2 million figure Obama used. The other estimates for job creation are:

• CBO: 800,000 to 2.4 million

• IHS/Global Insight: 1.25 million

• Macroeconomic Advisers: 1.1 million

• Moody’s 1.6 million

Furthermore, it’s difficult to say definitively what the employment situation would have been without the legislation, and the CEA report acknowledges that, saying: "As we have emphasized, measuring what a policy action has contributed to growth and employment is inherently difficult because we do not observe what would have occurred without the policy. Therefore, it must be understood that our estimates are subject to substantial margins of error."

Hopeful on Health Care

Obama touted an optimistic — and highly uncertain — estimate on how the Senate health care bill could affect the deficit:

Obama: And according to the Congressional Budget Office – the independent organization that both parties have cited as the official scorekeeper for Congress – our approach would bring down the deficit by as much as $1 trillion over the next two decades.

It’s true that the CBO’s admittedly rough estimate said the bill could reduce the deficit below its projected level by “as much as” about $1 trillion over 20 years — but it also said the reduction could be half of that amount. And it noted the estimate is subject to a great deal of uncertainty.

CBO normally gives estimates for 10-year periods, and the nonpartisan entity doesn’t like to go beyond that. It said the Senate bill could produce a net deficit reduction of $132 billion over 2010-2019. For the next decade, CBO said the reduction would be “in a broad range between one-quarter percent and one-half percent of GDP.” Senate Democrats estimated that would mean a reduction of $650 billion to $1.3 trillion.

But CBO emphasized how squishy that large range is: “The imprecision of that calculation reflects the even greater degree of uncertainty that attends to it.” Plus, the numbers count on a reduction in the growth of Medicare spending, of which CBO isn’t so confident. “It is unclear whether such a reduction in the growth rate could be achieved, and if so, whether it would be accomplished through greater efficiencies in the delivery of health care or would reduce access to care or diminish the quality of care,” CBO Director Douglas W. Elmendorf wrote.

Stretching Deficit Facts?

Republicans laughed when Obama described the huge deficits he had inherited when he took office.

Obama: At the beginning of the last decade, the year 2000, America had a budget surplus of over $200 billion. (Applause.) By the time I took office, we had a one-year deficit of over $1 trillion and projected deficits of $8 trillion over the next decade. Most of this was the result of not paying for two wars, two tax cuts, and an expensive prescription drug program. On top of that, the effects of the recession put a $3 trillion hole in our budget. All this was before I walked in the door. (Laughter and applause.)

Now — just stating the facts.

Despite the Republican scoffing, Obama’s claims are backed up by the historical record — mostly.

• Budget surplus in 2000: The Congressional Budget Office reported on Nov. 14, 2000, in its Monthly Budget Review: "Fiscal year 2000 ended with a total budget surplus of $237 billion."

• Deficit when Obama took office: By the time Obama took office, that black ink had turned to gushers of red. "CBO projects that the deficit this year will total $1.2 trillion," CBO said in its "Budget and Economic Outlook." That was released Jan. 8, 2009, days before Obama’s inauguration.

So the president actually understated matters regarding annual surpluses and deficits for years past, but he may have strained the facts when he spoke of what was being predicted for future years at the time he assumed office. He said he inherited a projected 10-year deficit of $8 trillion. But at the time, CBO projected only a $3.1 trillion deficit over 10 years (Table 4, page 15).

In fairness, that CBO figure assumed that all of President Bush’s tax cuts would be allowed to expire on schedule. And in reality, Obama and congressional Democrats supported extending many of the cuts, while Republicans supported extending all of them. Extending all of the Bush tax cuts would add another $2.9 trillion to that (Table 7, page 22), for a total of $6 trillion — still short of Obama’s claim.

His figure is based on a "baseline" projection issued Feb. 20 by his own Office of Management and Budget (Table S-2, page 115). The OMB projected a 10-year deficit of $8.9 trillion, including the $787 billion stimulus package that Obama had just signed.

So it’s fair to say that Obama was facing an ocean of red ink when he took office, but it could have been anywhere between $3.1 trillion (CBO’s unrealistically low estimate) to a bit over $8 trillion (OMB’s estimate minus Obama’s stimulus bill).

Foreign Corporations Donating?

The president claimed that "foreign corporations" could begin spending big money to influence U.S. elections under a recent Supreme Court decision.

Obama: Last week the Supreme Court reversed a century of law that I believe will open the floodgates for special interests –- including foreign corporations –- to spend without limit in our elections.

Justice Samuel Alito, who with the other justices sat at the very front of the chamber last night, was seen shaking his head and mouthing what appeared to be the words "not true" as Obama said this. Alito joined the majority in the 5-4 Citizens United v. Federal Election Commission decision issued by the Court last week, which knocked down restrictions on corporate spending on elections.

But it’s unclear whether the court’s opinion will lead to allowing foreign-based corporations to buy campaign ads and engage in other electioneering activities. There is still a law barring foreign corporations from spending money in connection with U.S. elections (see 2 U.S.C. 441e(b)(3)), and that’s a matter likely to be litigated further. The court’s most recent decision explicitly didn’t deal with that question. But strictly speaking, Obama couched his claim as something "I believe," making it a statement of opinion and not of fact. So whether his view turns out to be right remains to be seen.


The president correctly pointed out that he signed a number of tax cuts for individuals and businesses as part of the stimulus package, and also said this:

Obama: And we haven’t raised income taxes by a single dime on a single person. Not a single dime.

That’s true, according to Bob Williams of the Tax Policy Center. But it’s not the whole story. As Obama himself later said, tax increases are coming, at least for some:

Obama: To help working families, we’ll extend our middle-class tax cuts. But at a time of record deficits, we will not continue tax cuts for oil companies, for investment fund managers, and for those making over $250,000 a year. We just can’t afford it. is an independent site and is not affiliated with any official web sites, associations, or organizations associated with President Reagan. Any views expressed or content included on this site do not necessarily reflect the views, positions, or opinions of any of the organizations or individuals named, linked, or advertised.

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