Punditfulls of Predictions!

My Election Prediction 2012 (270toWin)

During the primaries, I remember telling a friend of mine that if Romney was nominated, this election would look a lot like 2004.Turns out the similarities are striking. However, one of the most comical similarities is the denialism. In 2004, we had sites like the Donkey Rising Blog trying to explain away Bush's favorable numbers in the polls. Today we have sites like UnSkewed Polls doing the same thing to Obama's poll numbers, sometimes even projecting Romney will win in a near-landslide! However, the methods used to come up with these numbers are deeply flawed. But that hasn't stopped a number of pundits from giving similarly absurd projections:

• Michael Barone, The Examiner: Romney 315, Obama 223.  
• George Will, The Washington Post: Romney 321, Obama 217.
• James Pethokoukis: Romney 301, Obama 227.
• Dick Morris, FoxNews: Romney 325, Obama 213.
• Jim Cramer, CNBC: Obama 440, Romney 98.
• Dean Chambers, UnskewedPolls.com: Romney 311, Obama 227. 

Every one of these pundits is predicting a highly unlikely result. Other than Jim Cramer, each one predicts Romney picking up over 300 Electoral votes, meaning Obama would pick up at most 238 electoral votes. According to the RCP averages, this means the polls would have to be off by up to 4 points in some states! In the FiveThirtyEight model, such a thing would be historically unprecedented to an incredible degree! However, unlike Cramer's prediction, the FiveThirtyEight model at least holds this as a possibility, albeit an incredibly small one. One has to wonder why so many pundits are risking their credibility with such unbelievably unlikely predictions. Of course, one would also have to underestimate the level of cognitive dissonance some of these pundits have, as well as their fans.

I have to confess. Over the last couple of months, I have grown an unhealthy obsession with the polls. I have made trips to RealClearPolitics, Pollster, and FiveThirtyEight a regular habit. When I wake up in the morning to take the puppy out, I check the Rand Corporation's Daily Poll. Throughout the day, I check RCP for updates to the Rasmussen poll, the Gallup Poll, Investor's Business Daily, and ABC/Washington Post, as well as up to date averages of the state polls. I also make regular trips to Pollster to check on polls RCP doesn't factor in. I understand that you cannot cherry pick polls, that you have to account for house effects, and that you have to look at both the the national and state polls to get a clear picture of the race. As a result, I have mostly taken a break from blogging, preferring to post whatever thoughts I may have on Facebook rather than this blog, likely to the utter annoyance of all my friends. So before the election concludes tomorrow (hopefully), I thought I would put my own projection on the table (on the top of this page). Some explanations:

• Pennsylvania and Michigan: Despite Romney's recent play on Pennsylvania, the chances of him winning the state are extremely low: FiveThirtyEight gives Obama a 99% chance of taking the state. Other than the extremely right-leaning Susquehanna Poll, the most Romney-favorable polls still give Obama a comfortable 3 point lead. As Nate Silver has explained, this state is also incredibly inelastic, meaning there are rarely very many voters who will wait til the last minute to make a choice.  In Michigan, the only poll giving Romney any chance is the Baydoun/Foster poll. Although this poll is classified as a Democratic pollster, its numbers in Michigan have been extremely favorable to Romney, meaning it has a larger than normal house effect. Nate Silver gives Obama a 100% chance of winning the state and Romney has not seriously contested it.
• Nevada: Although RCP only gives Obama a 2.8 percent lead here, Nevada polls have consistently underrated Democrats for the elections in 2008 and 2010, by large margins. Given the issues among pollsters with the Latino vote, as well as Harry Reid's superior ground game in the state, I doubt 2012 will be any different. Nate Silver also has Obama at a 94% chance of winning Nevada.
• Wisconsin and Ohio: Both of these states show small but persistent Obama leads. And neither state show any poll with a  Romney lead. RCP has Obama up 2.9 points in Ohio and 4.2 points in Wisconsin. The distribution in Ohio has been very tight, despite the large number of polls conducted in the state. Wisconsin's distribution has been less so but it has also shown better numbers for Obama in its more Obama-favorable polls. However, both the polls showing strong Obama leads have been incredibly volatile over the course of this campaign. Nonetheless, Nate Silver gives Obama a 92% chance of carrying Ohio and a 97% chance of carrying Wisconsin. 
• Iowa and New Hampshire: Both of these states have had very sporadic polling. But Obama is still favored in both. RCP has Obama up 2.4 points in Iowa and 2.0 points in New Hampshire. In addition, only two polls give Romney a lead in Iowa and none give him a lead in New Hampshire. The two polls that give Romney a lead in Iowa tend to have very Romney-favorable results, and their leads are only a point. At least one Romney-favorable poll also gives Obama a 4 point lead in Iowa. In addition, Iowa's only local poll gives Obama one of his best leads. The situation is similar in New Hampshire. Nate silver gives Obama a 86% chance of winning Iowa and an 86% chance of winning New Hampshire.
• Virginia and Colorado: Both of these states appear to be toss-ups, although Nate Silver marked them both as "Likely Obama" today. According to RCP, Obama has a 0.3% lead in Virginia and a 1.5% lead in Colorado. However, there are still a few polls giving Romney slight leads in each state. Although early voting in Colorado seems to be favoring Mitt Romney, Democrats have been closing the gap (we should see the final results of early voting tomorrow morning). Some polls that have asked about early voting show that Obama is expected to do better on election day than he has in early voting. Others show he is expected to do worse but may get better results tomorrow morning. But this may not matter. In 2008, Obama barely edged out McCain in early voting, yet still won the state by 8.6 percentage points, meaning historically the early voting trend may not be unprecedented in Colorado given that Obama will likely not win by 8.6 percentage points anyway. For the purposes of my projection, I predict Obama will carry Colorado, mainly because of the polls. Virginia is very close nationally, and it is hard to come by good early voting statistics for the state. Their only local poll has also been extremely volatile. Given Nate Silver's projection, as well as the RCP average, I give Obama the slight edge in the state. Update 11/6/12: Wow, I cannot believe I didn't notice this until now. I fell for the fallacy of equating registration advantage with candidate advantage in Colorado. I took a look at whatever polls I could and noticed that Democrats do not have the identity advantage in Colorado that they do in other states. It appears as though, although Democrats and Republicans seem tied in terms of party identity, Republicans hold a 2-3 point registration advantage over Democrats in these polls, suggesting Obama is leading big with both registered and identified Independents. Indeed PPP's cross-tabs suggest as much. As a result, it is entirely possible, even likely, that Obama is still winning the early vote in Colorado, even though registered Republicans are ahead.
• Florida: On the surface, this state appears to be even more of a toss-up than other states. RCP has  Romney up 1.5 points, but FiveThirtyEight has Obama up 0.2 percentage points. In addition, this is a state where the inaccuracies in polling the Latino vote should make the final outcome more Obama-favorable than the polls suggest. However, the local polls are Romney's strongest polls, and local polls should be given more weight. As a result, I would buck the FiveThirtyEight model (just barely) and give Florida to Romney.
• North Carolina: RCP gives Romney a 3.0 point lead in this state and Nate Silver gives Romney a 72% chance of winning the state. Obama does have a significant lead in early voting, but the polls for North Carolina reflect the polls of Ohio, but in Romney's favor. Given the razor thin margin Obama won this state by in 2008, I seriously doubt Obama will win this state again in 2012.

Notice I rarely mentioned ground games. It is extremely hard to predict what kind of an effect a strong ground game will have on the election. Nevada is the obvious exception

So my final electoral vote prediction is Obama at 303 electoral votes and Romney at 235 electoral votes. I would expect the election to swing anywhere from Obama winning 281-257 to Obama winning 332-206. So let's see what happens!

Note: for early voting results, see here.

No Paul Ryan, Payroll Taxes Are NOT Going Towards ObamaCare

Paul Ryan has been LYING about Obamacare and payroll taxes.

During a campaign stop at Miami University in Ohio, Paul Ryan made the claim that payroll taxes will now be used to fund the Affordable Care Act:

"Ryan slightly reframed the attack by arguing that Obamacare is effectively taking hundreds of billions from payroll taxes. “Take a look at your paycheck next time. Look at that line on your paycheck that [reads] payroll taxes," Ryan said. "You see our payroll taxes from our paychecks are supposed to go to two programs--Social Security and Medicare period. Now because of Obamacare they’re also going to pay for Obamacare." The crowd booed." (emphasis mine)

One problem with this: It is completely false. And the Romney campaign knows it.

Earlier this week, FactCheck.org released probably the best article on Mediscare claims since they began resurfacing after the Ryan VP pick. This article is an absolute must read for anyone wanting to understand how Medicare works, as well as what Romney, Ryan, and Obama each plan to do about Medicare's fiscal problems. The article begins with explaining the troubles Medicare faces down the road, mainly focusing on insolvency (which is different from bankruptcy). The article then summarizes the history of Medicare, as well as the different "Parts" of Medicare (A,B,C, and D). Understanding this is crucial for understanding the Ryan, Romney, and Obama Medicare plans (Obama has already passed his plan as part of the ACA). Here is a basic summary of what each Part of Medicare covers:

• Medicare Part A: Hospital insurance
• Medicare Part B: Insurance for doctor visits
• Medicare Part C (Medicare Advnatage): Combines both Part A and B but uses a private insurer.
• Medicare Part D: Prescription Drugs

The article also debunks the claims from both the Obama and Romney campaigns about how each candidate plans to cut benefits and push the cost of healthcare further onto seniors. I will not spend any time in this post talking about whether or not either campaign's arguments hold water (See my previous post and Roundup from last week for that). This post will be dedicated to understanding why Paul Ryan is lying about payroll taxes going to fund the Affordable Care Act (Obamacare, PPACA, ACA).

One area where FactCheck's article falls a bit short is on explaining why Paul Ryan's claim mentioned above is wrong. The article is a bit vague and inconclusive. However, a campaign speech by Paul Ryan finally motivated FactCheck to get more detailed and help explain specifically why Paul Ryan's claim is wrong (the article also debunks Medicare bankruptcy claims). This article is another absolute must read. I will summarize and expand here:

Medicare payroll taxes go to pay for Medicare Part A. What revenue is left over goes into the Medicare Hospital Insurance trust fund. And that fund goes to finance shortfalls in Medicare Part A. As of late, there is not enough revenue coming from payroll taxes to cover hospital insurance for medicare beneficiaries. As a result, the trust fund is being drained and will eventually be empty, meaning Medicare Part A will become insolvent. To help mitigate the problem, the Affordable Coverage Act slows the amount of money coming out of the trust fund via reduced payments to hospitals. Obama can get away with those reduced payments to hospitals largely without causing them to drop out of the program because of a deal he stuck with hospitals, promising new patients through the ACA, more than making up for the lost revenue. This saved money stays in the trust fund (although it can be loaned out, more on that later).³ It does not go to cover the uninsured not currently in Medicare. In addition, Obama increases the revenue coming into the trust fund via a 0.9 percent tax "on earnings above $200,000 for single taxpayers or $250,000 for married couples."

The savings from Medicare that actually go into Obamacare come from Medicare Parts B, C, and D, and only from funds that come from congress (income taxes, corporate taxes, etc...) to cover outlays. This accounts for approximately 2/3 of $716 Billion in slowed medicare growth. Obama decreases the growth of money congress spends on Medicare from general revenue using the Independent Payment Advisory Board, which is incredibly limited¹ in what it can target.

So it should be pretty clear Paul Ryan's claim is false. But remember I accused Ryan of more than just telling him a falsehood. I accused him of lying, meaning he knew what he was saying was false. What is my evidence? Besides Ryan's work on the medicare program (meaning he should know this Medicare 101 knowledge) and acceptance of Obama's ACA Medicare savings (he should know what he is accepting), when FactCheck asked Romney's campaign about their claims, the campaign responded this way:

"When we asked the campaign how it could argue that Obama’s spending reductions didn’t extend the life of the trust fund, a spokesman replied that it didn’t extend the fund “unless the administration is ready to admit their law blows a huge hole in our deficit.”"

So essentially they are accusing Obama of double counting the savings from hospital insurance. If that money has to be put into the trust fund, it can't also cover the non-Medicare related Obamacare expenses. Fact Check explains (from their original article):

"The fact is that CBO and the guardians of the hospital trust fund say Obama’s health care law does both extend the life of the trust fund and reduce the deficit, but can’t be also counted as paying for the law’s added spending."

This may sound a bit confusing. It essentially comes from the fact that a bill can both reduce the deficit and not be "paid for." This is because some of the revenue that comes in goes "into savings" instead of being used to pay the bills. And just like a bank uses savings accounts to make loans, so too can this Medicare money "in savings" be loaned out to pay for other programs.² FactCheck explains:

"What happens in government accounting is that after Treasury issues a bond that it will have to pay later, it can spend the money it received on other things. And it often does, whether that’s coverage expansion, as called for in the health care law, or any number of things. The Romney spokesman said it was “a shell game.”"

But that doesn’t mean that the Medicare trust fund will be slashed or its “piggy bank” “robbed” or “raided,” or any other claim we’d put firmly in the category of “senior scare.” (emphasis mine)

Romney does have a point in essentially calling this an accounting trick. And he could spend time making that claim instead of a demonstrably false one. You can argue over whether or not the CBO was therefore wrong to say the ACA cuts the deficit (see Update 8/28/12). But you cannot say payroll taxes are going toward the ACA anymore than you can say your personal savings in the bank are going toward someone else's loan. Just like those savings are still legally yours, so are the trust funds still legally Medicare's. Any money that is borrowed from the fund has to be paid back. The Romney campaign knows this and it is reasonable to assume Ryan does as well. So he knows payroll taxes will not fund the ACA, yet he still makes that claim. It is a lie.

¹ Most of what the IPAB targets is the extra money paid into Medicare Advantage (Part C,except for hospital insurance), making costs from the expensive program fall into line with traditional Medicare. You can argue this will indirectly affect benefits, but the program is forbidden from directly cutting benefits. Romney and Ryan, on the other hand, give congress practically unlimited power to save money however they desire, including through benefits (and we all trust congress, don't we). As Ezra Klein and others have repeatedly noted, ObamaCare and Ryan's plan call for approximately the same-sized reductions in future medicare growth. The difference is in how it is implemented. Without a doubt though, Romney's plan to avoid the $716 in slowed growth is the worst. It will actually hasten insolvency.


Update 8/28/12:

For the last few weeks, the Washington Post Fact Checker has been on vacation. So he as not been posting fact checks on this issue since the Ryan VP pick. Today he finally posted a response to readers' questions on Medicare Cuts, bankruptcy, and cost shifting. Overall, the post was not all that impressive compared to FactCheck's posts. However, he did link to an old article talking about the "double counting" issue mentioned above. This article is another absolute must read for anyone interested in this issue. It turns out double counting has been an acceptable practice for both parties for the last few decades. That's right, Republicans use this as well:

"When President Bill Clinton signed the Balanced Budget Act of 1997, then House Speaker Newt Gingrich (R-Ga.) was one of the speakers. “On Medicare, we came together and we saved the system for at least a decade,” he declared. How could he make this claim? Through the same double-counting that Republican now decry. The

Fact Checker especially frowns on hypocrisy, and Republicans should acknowledge that they have gladly played this game before, including under President George W. Bush." (emphasis mine)

However, playing the "you did it too" game is not a good excuse for doing something potentially harmful. But it does turn out this practice isn't really that bad, since it increases gross debt without increasing public debt. The Fact Checker explains:

"Some argue that the increase in the gross debt is evidence of double-counting but the CBO has said that focusing on the health care law’s impact on the gross debt is not very illuminating: “That measure of debt conveys little information about the federal government’s future financial burdens and has little economic meaning.” (emphasis mine)

This may explain why the Romney campaign has avoided this line of argument and instead chosen a demonstrably false line of argument. He would be open to criticisms that both parties do this and could put the reputation Reputation of congressional Republicans in 1997 in jeopardy. It is much easier to tell a simple lie.

Note: Just to head off a potential criticism, Ryan cannot say that he was talking about Medicare funds being loaned Obamacare when he said payroll taxes were being used to fund Obamacare. If he had meant it in this way, he would have to admit payroll taxes also fund national defense, congressional pay, the war on drugs, and most any program funded by congress through general revenue. However, his statement started by claiming that payroll taxes only fund Medicare and Social Security. So either way, he was lying.

² I reworded this to make it clearer. It used to say "However, as with any "savings account", that money is available for other uses when it's not being spent"

³ I added the qualifier in parenthesis to make it clear that this money can still be loaned out, even if it still belongs to the trust fund. It has to be paid back.

The Roundup

Best Thing to Happen to The Internet Since Al Gore! ... Here is a cat singing the theme from Game of Thrones (Thanks to The Washington Post):

Yet another reason to subscribe to Ezra Klein's RSS...

Steven Novella: Nocebo Nonsense

"Chopra’s article was inspired by a New York Times article by researchers into nocebo effects. The researchers, however, make very different points from Chopra. They review the scientific evidence, which is pretty clear. People will report negative side effects even when taking placebos. If they are warned about a particular side effect, they are more likely to report that one. Again – there is no reason to think this is anything other than subjective reporting. Stress is the one factor that can cause real physiological consequences, and therefore illnesses that significantly respond to stress (like heart disease) can be affected by anxiety or hopefulness. This is not true, however, of most diseases." (emhpasis mine)

The Solyndra Standard
A MUST READ on the GOP's hypocrisy in the Solyndra case. Stephen Lacey puts the case in context:

"And here’s the really astonishing disconnect: While supporting tens of thousands of jobs, the loan guarantee program is expected to cost $2 billion less than Congress budgeted for, according to an analysis from Herb Allison, John McCain’s former National Finance Chairman.

Meanwhile, amidst the Solyndra saga, we casually accept a $300 million aircraft failure without batting an eye. No outrage. No sustained political campaign. It’s just another day testing our military toys.

Why? Because we don’t often see programs like this as a “failure” in the political arena. We would never use one failure as an excuse to abandon investment in new technologies. Most politicians accept losses in military R&D expenditures because the long-term gains are potentially so important for national defense and for eventually developing technologies for civilian use.

We should always strive to make programs as efficient and cost-effective as possible. But a few bankrupt clean energy companies representing a fraction of the program’s budgeted cost is no excuse for abandoning federal investments in clean energy — a strategically important sector that is becoming one of the largest drivers of business this century." (emphasis mine)

Will the Fed’s efforts to boost the economy only benefit the wealthiest?
Thanks to the inaction of congress, quantitative easing may be one of the last options to help stimulate the economy. It effectively lowers the value of debt using inflation, which could help tackle the crippling deleveraging that is keeping consumer demand down and slowing the recovery (particularly in the housing market). But there is a price. That price is increased income inequality.

Great hyperinflation episodes in history — and what they tell us about the Fed
A MUST READ:
A look at historical cases of hyperinflation point to why it is absurd to suggest it will happen in the US any time soon:

"none of the most severe instances of hyperinflation appear to be triggered by a central bank simply trying to inject money into a basically intact economy in order to reduce the unemployment rate." (emphasis mine)

Conservative Group Plans to Push Republicans Toward Action on Climate, Cleaner Energy

"Leading members of the Christian Coalition and the Young Republicans on Monday will launch nationwide the Young Conservatives for Energy Reform, a grassroots group aimed at engaging Republicans on the goals of cutting oil use, backing alternative energy and clean-air regulations, and fighting climate change."

Can these groups pull the GOP away from the propaganda of the fossil fuel industry?

The politics and philosophy of racism
Two points:

1. Turns out racists aren't necessarily more likely to be republican than democrat. 
2.  Libertarianism will not sure racism for essentially the same reason free markets work: individual cases of racism are "spontaneous orders—of phenomena that are the product of human action, but not of human design" 

2013 may be the year of Austerity. Isn't that what the GOP wanted so badly back in 2010?

Poll: Republicans Really Aren't Big Fans of Arabs or Muslims

Brutal Attack On Palestinian Met With Near-Universal Rebuke among Israelis

On the Progressive Consumption Tax and What it means for people like Romney.

Very good story about the debate over the minimum wage.

Quote of the Day: Early Voting a Bad Idea Because it Makes it Easier for Blacks to Vote

NPR debunks the myth of the "independent voter".

The Roundup: Election Edition

Greg Sargent: The Morning Plum: No, Romney and Ryan don’t really want a `great debate’

"Romney wants to repeal the unpopular Obamacare, and promises he’d do something for some people with preexisting conditions — because replacing it with nothing would be even more unpopular. Romney says he’d get rid of Wall Street reform, and vows to replace it with unspecified “common sense” regulations — because replacing reform with nothing is also a political nonstarter. Romney says he’d cut whole agencies to make government more efficient and cost-effective, but won’t say which ones; and Ryan won’t explain in meaningful detail how he’d achieve the draconian spending cuts necessary to make his numbers work — because when the talk turns to specifics, suddenly cutting government is politically very difficult indeed, and gutting social programs would be very unpopular. Romney and Ryan won’t say how they’d pay for their tax cuts — because they must be paid for by hiking the middle class’s tax burden or exploding the deficit, neither of which is politically palatable." (emphasis mine)

When asked about cutting the size of government, most people are conservatives. When you get into asking about the specifics, the leftward shift is incredible!


Ezra Klein: Obama’s money gap: Incompetence, incumbency or meaningless?
Romney is currently outspending Obama 2 to 1, partly because of Obama's negative attitude toward wall street. However, there seems to be little if any effect on the polls. The country already largely feels like they know Obama. So negative a advertising will only do so much to hurt him. Romney would theoretically be better off running on his own strengths rather than attack Obama. But those strengths in the most important areas (jobs, budget) are quite suspect to say the least.

Ezra Klein: The real Romney-Ryan budgets cuts aren’t to Medicare. They’re to programs for the poor.

"And so, if you look at Ryan’s specific cuts, most of them are programs for poor people. In fact, the Center for Budget and Policy Priorities estimates that more than six of every 10 dollars Ryan cuts from the federal budget is coming from programs for the poor" (emphasis mine)

And Romney's is MUCH worse!

No, Republicans Have Not Suddenly Developed a Love of Policy Wonkery

"Conservatives are excited about Ryan because he's a true believer, not because they've developed a sudden love of budget wonkery. They would have been equally ecstatic about Bobby Jindal or Marco Rubio, and they're breathing a sigh of rel ief that Romney didn't pick Rob Portman or Tim Pawlenty, both of whom are plenty serious policy wonks but don't have quite the right-wing fire in their eyes that the other guys do."

Desperate Measures: Paul Ryan Tries To Revive the “Death Panel” Canard
Spreading malicious lies about ObamaCare in 2010 helped bolster Republicans to take over the house in 2011. Only problem, Obama is campaigning now and, even though he is behind in spending (for the last month or so), he has money in the cof fers to help keep him from falling too far behind. And he has the incmbant advantage, meaning attacks against him are much less effective. So he has the means to dispel this misinformation campaign (and the sad truth: start some of his own)

"But even if seniors like the first Gen Xer on a presidential ticket personally, the Pew poll shows that they dislike Ryan’s plan even more than their younger counterparts.

This points to an information vacuum, which is why death panels are back, and why this campaign is only going to get uglier from here."

Republicans Wanted a Culture War, Now They're Getting It

"If conservatives do indeed want a "truce" on issues like abortion, that's fine with me: let them start observing one. Leave Planned Parenthood the hell alone. Stop pushing for laws that challenge Roe v. Wade. Shut down all your ultrasounds . Tell Bob Vander Plaats to stop trying to run pro-marriage-equality judges off the Iowa Supreme Court. Take all those dog whistles about "respect for life" and "constitutional originalism" out of your platforms and speeches. Promise us you won't put unholy pressure on a President Romney to ensure the next new member of the Supreme Court will vote to turn abortion policy back to the states or even protect zygotes under the 14th Amendment."

Paul Krugman: Nobody Cares About the Deficit

"If the right was at all consistent, it would be denouncing the CBO report for failing to take into account the impact of a lower deficit in deterring the invisible bond vigilantes and encouraging the confidence fairy."

Five things to know about Mitt Romney’s energy plan 
Five points on Romney's energy plan:

1. North American energy independence is already expected to largely happen by 2020, regardless of who is in the white house 
2. Romney's refusal to accept Obama's fuel-efficiency standards will make his plan more difficult. 
3. Energy independence will not significantly lower prices since oil is still traded in world markets (exhibit A: Canada) 
4. Although energy independence may have gross job gains (likely much smaller than what Romney has predicted), the net effect will likely be insignificant. 
5. Romney does not tackle environmental concerns (global warming, fracking, oil spills), which may mean "public concern over fracking could stymie gas development."

Why the Weak Economy Doesn't Doom Obama

"So think of it this way. In 1980, Jimmy Carter didn't have an argument for re-election that appealed very far beyond the Democratic base. Similarly, in 1984, Walter Mondale simply didn't have much of an argument for getting rid of Ronald Reagan. The Republicans didn't have a good argument for holding on to power in 2006, nor did the Democrats in 2010. The elections reflect that.

This year, Barack Obama has an argument -- he didn't inherit the mess, and the economy is slowly expanding. That's an argument that is probably good enough to get him to 46 or 47 percent of the vote. Similarly, Mitt Romney has a pretty good argument for electing a new president, one that will shore up his base and Republican-leaning independents. Thus, we should probably expect what we're presently seeing in the polls: a close race, to be decided by a relatively small slice of the electorate." (emphasis mine)

Ezra Klein: The GOP has picked the wrong time to rediscover gold
When people think of returning to the gold standard, they think of it as a way of controlling inflation. However, it actually does precisely the opposite. Gold prices are tied to demand across global markets, meaning inflation would be tied to the whims of gold buyers and the fed would lose its ability to control it.

"Unlike 1981, in other words, when the gold standard made a kind of superficial sense as a response to our problems, 2012 is a moment when a gold standard would clearly have worsened our problems. Dramatically. As Eichengreen concludes, the idea’s “proponents paint the gold standard as a guarantee of financial stability; in practice, it would be precisely the opposite.”

Not reimbursing towns for expenses dealing with presidential incumbent campaigns is common for BOTH PARTIES.

Debunking Romney (Part 3): Medicare Claims

This post is part three of a three part series debunking a few central claims that have been made by the Romney campaign this year. The first part deals with Romnay's tax policies, the recent Tax Policy Center study, and Romney's response to that study. The second part deals with the white paper Romney's advisers wrote to attempt to justify his plan. Finally, the third part deals with Romney's recent Medicare claims, as well as his impossible promises on the subject. 


From Ezra Klein of The Washington Post:

I’ve got a modest proposal: You’re not allowed to demand a “serious conversation” over Medicare unless you can answer these three questions:

1) Mitt Romney says that “unlike the current president who has cut Medicare funding by $700 billion. We will preserve and protect Medicare.” What happens to those cuts in the Ryan budget?

2) What is the growth rate of Medicare under the Ryan budget?

3) What is the growth rate of Medicare under the Obama budget?

The answers to these questions are, in order, “it keeps them,” “GDP+0.5%,” and “GDP+0.5%.”

Let’s be very clear on what that means: Ryan’s budget — which Romney has endorsed — keeps Obama’s cuts to Medicare, and both Ryan and Obama envision the same long-term spending path for Medicare. The difference between the two campaigns is not in how much they cut Medicare, but in how they cut Medicare.

...

These plans get at the basic disagreement between Democrats and Republicans on Medicare. Democrats believe the best way to reform Medicare is to leave the program intact but vastly strengthen its ability to pay for quality. Republicans believe the best way to reform Medicare is to fracture the system between private plans and traditional Medicare and let competition do its work.

...

But it’s simply a conservative myth that the White House hasn’t put forward a Medicare reform plan. What that line really means is that White House hasn’t put forward some variant of Ryan’s plan, which in many Republican circles, has come to be seen as the only policy change that counts as “entitlement reform.”

But Obama’s plan is, without doubt, far more detailed than anything Romney has put forward, and Republicans are well aware of its existence." (emphasis mine)

Ironically, Romney has attacked Obama for these cuts to Medicare growth. It should be noted that, of all the ways Medicare growth can be cut under Obama's plan, there is one area that is protected: benefits:

"It’s worth noting that there’s one area these cuts don’t touch: Medicare benefits. The Affordable Care Act rolls back payment rates for hospitals and insurers. It does not, however, change the basket of benefits that patients have access to." (emphasis mine)

In the time since this article appeared, Romney has declared he will not keep Obama's cuts to future Medicare growth, despite the fact that these cuts would keep the Medicare trust fund solvent through 2024 (without them, they could lose solvency as soon as 2016). However, this will also make his budget promises practically impossible. Ezra Klein explains:

"Consider what Romney has promised. By 2016, he says federal spending will be below 20 percent of GDP, and at least 4 percent of that will be defense spending. At that point, he will cap federal spending at 20 percent of GDP, meaning it can never rise above that level.

All that’s hard enough. Romney will have to cut federal spending by between $6 and $7 trillion over the next decade to hit those targets. As my colleague Suzy Khimm has detailed, those budget promises already require cuts far in excess of what even Paul Ryan’s budget proposes.

But Ryan’s budget includes more than $700 billion in Medicare cuts over the next decade, Romney’s budget won’t. And Romney promises that there will be no other changes to Social Security or Medicare for those over 55, which means neither program can be cut for the next 10 years. But once you add up Medicare, Social Security and defense and you’ve got more than half of the federal budget. So Romney is going to make the largest spending cuts in history while protecting or increasing spending on more than half of the budget."

...

"Consider what the Romney campaign, then, is saying: If Romney is elected, then by his third year in office, every single federal program that is not Medicare, Social Security, or defense, will be cut, on average, by 40 percent. That means Medicaid, infrastructure, education, food safety, road safety, the postal service, basic research, foreign aid, housing subsidies, food stamps, the Census, Pell grants, the Patent and Trademark Office, the FDA — all of it has to be cut by, on average, 40 percent. If Romney tried to protect any particular priority, it would mean all the others have to be cut by more than 40 percent.

That’s not even remotely plausible. The consequences would be catastrophic. The outcry would be deafening. And Romney has shown no stomach for selling such severe cuts.

...

And yet Romney, who has never released the specific cuts that would make his numbers add up, repeatedly touts it on the campaign trail, and the media dutifully reports his promises to cut federal spending by more than $500 billion in 2016, and in fact to balance the budget by the end of his second term, which would require far larger cuts than what I’ve outlined here, despite the fact that everyone basically knows these cuts aren’t credible and will never happen.

I’m not sure what alternative there is, exactly, except to say, as clearly as possible, Romney’s budget plan is a fantasy, and it will never happen." (emphasis mine)

But what about Ryan's plan. Isn't it supposed to be a bipartisan option? To answer this question, Ezra Klein interviewed Sen. Wyden (D-OR), then man for whom the "bipartisan" label is referring to:

"Ron Wyden: My view is that the policies that were adopted by the Republican House majority and the Romney campaign do not preserve the Medicare guarantee. And that’s what the [Ryan/Wyden] white paper was all about. It was a set of options for improving on the existing Medicare system with public and private choices, beefing up consumer protection, adopting a new way to control costs and put Medicare on a budget so you can protect the guarantee.

Probably the two most significant specific differences between what Governor Romney is talking about and the white paper is, first, that the Romney campaign and the governor would repeal the Affordable Care Act. To lay a foundation for putting together a program to protect the guarantee and protect the budget, you need the changes the Affordable Care Act makes to Medicare, like bundled payments and moving the system towards pay-for-quality. Without it, you can’t move to premium support.

The second difference is that the Romney approach completely pulls the rug out from under the poorest and most vulnerable seniors. In the white paper, protections for so-called dual eligibles, the people in both Medicare and Medicaid, are bulletproof. There’s no way to throw them under the bus. Gov. Romney says he’d block grant the Medicaid program and push those cuts onto the people, which would do enormous harm to those people whose protection was at the center of the white paper." (emphasis mine)

Indeed there has been little attention to Ryan's proposals for cutting government healthcare spending outside of Medicare. And these cuts are no small thing. For instance, Sen Wyden mentions Ryan's Medicaid cuts, which total $800 Billion. Of course there will be impacts:

"The Urban Institute estimates that between 14 million and 27 million people would lose coverage because of Ryan's spending restrictions."

No wonder this plan isn't really bipartisan. So you have the presidential candidate passing off a nearly impossible solution as serious budget talk, and you have his VP proposing draconian right wing measures and calling them bipartisan. Both are accusing Obama of having no plan for Medicare reform, yet Obama has the most serious and detailed plan of all three. And then they attack him for the plan they claim he does not have! What is going on?! Some conservative pundits actually possess the cognitive dissonance to buy into this. But will the American people?

The Roundup: 

Mediscare Edition

Private-Market Tooth Fairy Can’t Cut Medicare Cost

"The bottom line is that, if anything, Medicare Advantage bids are above, not below, traditional Medicare -- once you do the analysis correctly, on an apples-to-apples basis. So regardless of whether you use the CBO analysis of Ryan 1.0, or the evidence to date with Medicare Advantage to analyze Ryan 2.0, the conclusion is the same.

We don’t want to put all our chips down on the health-care competition tooth fairy."

And yes, he notes that the CBO analysis is of Ryans 2011 plan:

"I focused on the 2011 plan because that is the only one that CBO has evaluated in terms of total, not just federal, cost.

The difference in the new version of the Ryan plan is that traditional Medicare would coexist with private plans. To suggest that this would change everything is to make an odd argument: Moving entirely to private competition would not generate big savings, but moving partially would."

The Morning Plum: Romney and Ryan muddy the Medicare waters
Great read!
Greg Sargent goes over the various back and forth blows from the Obama and Romney campaign. Both campaigns think they will carry the medicare message. However, Democrats may need to explain whats really going on here between both campaigns' plans for Medicare:

"The difference is not over whether to do something about Medicare over the long haul; it’s over how to do it. The true nature of this difference is what Romney’s strategy is designed to obscure" (emphasis mine)

Paul Ryan and the Problem With Competitive Bidding

"Private corporations all rely on competitive bidding, and it just hasn't done much to hold down costs. That's because the real source of America's high medical costs is the fact that we simply pay more than other countries for everything we get: more for doctors, more for procedures, more for hospital stays, more for drugs, and — yes — more for insurance. If you really want to hold down costs, you have to hold down costs at the source, and Paul Ryan's Medicare plan has no mechanisms for doing this. It relies solely on competitive bidding, and there's very little chance that this alone can keep Medicare costs from outpacing his "fallback" growth cap. It's a near certainty that his growth cap will be the real mechanism for reining in costs."

PolitiFact: Do Mitt Romney and Paul Ryan want to turn Medicare into a voucher program?
After bitching about the 2011 lie of the year, democrats are finally getting it together and making accurate statements about Ryan's Medicare plan:

We agree that in the world of policy wonks, there are distinctions between "vouchers" and "premium support," having to do with the type of inflation adjustment used and the degree of marketplace regulation imposed. Compared with his original plan, Ryan’s most recent plan does move closer to fitting the definition of pure premium support. But substantively, it’s still somewhere in between the two approaches.

But the Romney-Ryan approach pretty much matches the dictionary definition of "a form or check indicating a credit against future purchases or expenditures." We think that describes the general way Ryan's plan would work. For a political discussion aimed at voters rather than policy wonks, we think Obama’s use of the term "voucher" is close enough to earn it a rating of Mostly True. (emphasis mine)

David Frum: Paul Ryan Declares Generational War
Paul Ryan's criticism of Obamacare and the $700 billion in Medicare savings essentially amounts to a generational war:

"The talking point isn't even about changing Medicare, its about keeping the entitlements for the old, and not spending any of that money on the young. You could title this speech: Entitlements for Me, Not for Thee. Spending money on 'deserving' old people is good, spending on anyone else is a waste."

PolitiFact: Ryan's plan includes $700 billion in Medicare "cuts," says Stephanie Cutter

"Cutter said that Romney attacked Obama for cutting $700 billion out of Medicare, but "Paul Ryan protected those cuts in his budget." Again, with this item we are not addressing whether they are cuts, but simply whether she is correctly characterizing Ryan's plan.

Cutter is correct that the Ryan budget plan included cost savings that were part of the future health care law. Just recently, the Romney campaign backed away from that play, saying Romney’s plan would restore the spending that the health law is set to curtail, such as extra funding for private insurers under the Medicare Advantage plan." (emphasis mine)

As PolitiFact has noted before, these are not technically cuts. The reason they assigned a "true" rating is because it is of no consequence to cutter's speech. Cutter is essentially saying that what people are protesting in the Obama law, these "cuts," are preserved in the Ryan plan. So they should not criticize Obama for it without also criticizing Ryan.

Romney's Health Care Plan Freaks Out Utah Republicans

"When asked what they thought should be done to fix health care, Love and McCain offered up an unintentional endorsement of some of the very laws that they've been campaigning angrily against for the past two years, Obamacare and the federal stimulus package." (emphasis mine)

Mitt Romney: Paul Ryan Medicare Plan And Mine Are The Same, 'If Not Identical' 

A possible unintended consequence of the Ryan plan?

Update 8/21/12:

David Cutler: Hey Republicans! Stop Misusing My Medicare Study!
Supporters for the Ryan/Romney Medicare plan misrepresent a study on the effects of premium support healthcare systems.

David Brooks Badly Misrepresents the Romney/Ryan Medicare Plan
 
Update 8/26/12:

Ezra Klein: The problem with Romney’s Medicare chart: It’s not true

"You could take one of two views on this. You could say that Ryan’s and Obama’s plans put Medicare on a sustainable fiscal path, while Romney’s doesn’t, because that’s pretty much what the CBO will say, and they’re the folks who judge these things. Or you could say that none of the plans really make Medicare solvent — that they’re all just theory and prayer. What you can’t say is that Romney has released a plan that makes Medicare solvent." (emphasis mine)

The Roundup: Socialized Healthcare Edition

Andrew Coyne: It’s time the provinces were brought to account on health-care wait times 
Andrew Coyne dewlls on the problem of long waiting times in Canada. Such a thing is unacceptable. However, the decision to abolish Canada's public insurance system is more unacceptable.

"To be clear, between shortening wait times and abolis hing the public insurance monopoly, the first is vastly preferable. Insurance markets are tricky things, especially for something like health care where, if you will, the consumer is also the product. Left to themselves, insurance providers would be tempted to refuse coverage to people they think are likely to need it. For their part, consumers might choose not to pay for insurance as long as they were well, only doing so when they get sick."

However, wait times are actually not that bad in most countries with socialized healthcare.


David Frum: Victims Without Insurance

"In this charitable country, no doubt funds will be found for Caleb Medley and his family. But what if Caleb hadn't been shot in a spectacular crime? What if he'd just been injured in an ordinary accident or succumbed to an ordinary disease ? The most likely answer is that his hospital would absorb a lot of the cost and find ways to load that cost onto other paying customers - socialized medicine, American-style."

Mitt Romney Calls for the U.S. to Copy Israel's Big-Government Single-Payer Health System

The AARP busts 5 myths about Canada's healthcare system.

The Roundup: Taxes And Budget Debate Edition

Private equity firms: Job creators or job destroyers? 
The jury is still out. Why? Maybe because these firms aren't interested in creating American jobs. So are they afraid of the results?

Would an income tax hike hurt hiring? 
One thing not mentioned: A lot of these tax increases only happen on the portion of their income above $250,000. For a business making $250,001, only $1 would be affected the the rate increase. So I'm curious where the concentration of those businesses lie, close to the $250,000 mark or high enough for the tax increases to be significant.

David Frum: The Deficit Won't Go Down Till The Private Sector Goes Up 
Many economists have been saying large government deficits have come about as a result of the recession, NOT runaway government growth. The evidence to back this up is quite strong. Deficits for 2009 were originally projected to be ~$200 bi llion... until the recesion hit and deficits were then projeted to be ~$1.2 trillion. The Obama administration raised that to ~$1.4 trillion. This also further undermines the popular conservative belief that we need to jump into immediate austerity to fix out budget problem.

Bruce Bartlett: Will Defense Cuts Kill the Anti-Tax Pledge?

"Republicans are between the rock of defense cuts that they view as unpalatable and the tax pledge hard place. There is no doubt that Democrats would agree to a tax increase to offset the defense sequester, but would oppose any other altern ative except, perhaps, putting off the entire sequester, including domestic spending cuts, for a year. It’s doubtful that the GOP’s Tea Party wing would support that."

The Republican Plan to Tax the Poor

"According to CTJ, virtually all of these tax increases would apply to families making less than $50,000—people for whom a few hundred dollars can make a huge difference. Unfortunately for them, the media is focused instead on how Obama's tax increases on incomes above $250,000 will make life intolerable for rich people."

Paul Krugman: The Hobbled Recovery

"Business investment has actually gone up a lot; maybe you think it should have gone up even more, but it’s not the heart of the problem. On the other hand, we’ve had a lot of cutbacks in government — mainly at the state and local level, but federal aid could have avoided that. (emphasis mine)

This isn’t a picture of an economy hobbled by Big Government; it’s a picture of an economy hobbled by premature austerity."

Brad DeLong: Hopeless Unemployment

"The current balance of probabilities is that two years from now, the North Atlantic’s principal labor-market failures will not be demand-side market failures that could be easily remedied by more aggressive policies to boost economic activity and employment. Rather, they will be structural market failures of participation that are not amenable to any straightforward and easily implemented cure."

Paul Krugman: The Secret of Our Un-success

"The Wall Street Journal — yes, the WSJ — explains: Government Cutbacks Separate This Expansion From Others. Over at Angry Bear, Spencer shows that private GDP — GDP not including government spending — has risen almost exactly as fast under Obama as during the “Bush Boom”; of course, if government spending hadn’t been falling despite a weak economy, there would have been more jobs, and private spending would have risen faster." (emphasis mine)

Paul Krugman: Poles Apart

"So actually Poland’s success suggests that (a) big government isn’t so bad (b) sometimes its good to debase your currency. Doesn’t anyone tell Romney to do his homework?"

Paul Krugman: Dooh Nibor

"The question one might ask is, did TPC – which is actually painstakingly and painfully nonpartisan – make questionable assumptions to get its results, so that some other set of assumptions might portray Romneynomics in a more favorable lig ht? And the answer is no: TPC actually bent over backwards to literally give Romney every possible benefit of the doubt.

...

So they’re actually giving Romney every possible benefit of the doubt – and still his plan is a redistribution from the middle class to the rich. In practice it would surely be much worse." (emphasis mine)

WP Fact Checker: Obama’s new campaign ad on dueling budget plans

"Romney’s continued failure to provide enough specifics about his plans certainly lets the Obama campaign openly speculate about the impact. The president, by contrast, is required to present a real budget with actual figures — but as we ha ve shown, he can still play budget tricks to make the numbers add up. So even more detail from Romney might not make the budget dispute any clearer."

Why Washington Accepts Mass Unemployment 
A MUST-READ ON THE POPULAR VIEW OF THE RECESSION AMONG THE WASHINGTON ELITE!

"There are signs we’ve hit bottom. Nothing to worry about here. Why risk the possibility of a small outlay merely to provide relief to hundreds of thousands of des perate people? This is such a perfect statement of the way the American elite has approached the economic crisis. They concede that it is a problem. But there are other problems, you know."

FactCheck: Does Romney Pay a Lower Rate in Taxes Than You?

"“Bottom line,” said Eric Toder co-director of the Urban-Brookings Tax Policy Center, “if you look at income taxes only, Obama’s statement is not true for most Americans. If you add in payroll taxes, however, it is probably true for lots of people.” (emphasis mine)

No matter how you slice it, Toder said, Romney’s tax rate is very low for someone with his level of income. The average income tax rate for the top 0.1 percent (which is where Romney falls) is 23.6 percent."

Nine takeaways on Romney’s tax plan 
Romney's tax plan will hopefully become his biggest handicap in this election. This is the bottom line. Surveys show the American population generally thinks Romney is more able to handle the debt and deficit than Obama. Understanding the f laws with Romney's plans for growth and fiscal reforms should help Americans doubt Romney's competency on these core issues. It will help ensure Romney either fixes the problems with his plan (doubtful, since the problems are fundamental), or loses this election for the right reasons.

AEI Economics: Better Late Than Never 
AEI is a bit late to the game, but they are early compared to many Republicans:

"In his podcast Pethokoukis asks the most important question conservatives will have when they hear about this policy for the fist time: Isn't this just promoti ng inflation? In response, Sumner clearly explains why short term inflation is not the same as the Carter-era inflation that many conservatives fear might repeat itself." (emphasis mine)

FACT CHECK: Social Security adds to budget deficit
a MUST READ Fact Check on the question of whether social security is adding to the national debt. It is more complex than most people realize.

Note: Most of our debt does not come from china. Former Sen Judd Gregg has presented a false dichotomy.

Both parties unfazed as ads fail fact-check
The Obama campaign is finally calling out the Romney campaign for its hypocrisy in their insults to Obama's political ads:

""Mitt Romney won the Republican primary only by tearing down each of his opponents with ruthlessly negative campaig ning," said campaign spokeswoman Lis Smith. "His campaign has questioned whether the president understands what it is to be American, attacked his patriotism, and is currently running an ad that a former president [Clinton] and authors of the welfare-to-work legislation have called a flat-out lie. When the Romney campaign finally reaches the high ground, we look forward to greeting them there."" (emphasis mine)

One interesting thing here is that these negative ads seem to be benefiting Obama much more than Romney:

"Political scientist John Geer of Vanderbilt University, who has been testing voter reaction to ads, has found that some of Obama's ads attacking Romney have moved voters. But Romney's attacks, so far, have not.

"People know what they think of Obama. Their judgments can't easily be moved," he said." (emphasis mine)

In addition, some of these political ads may be relying on fact checker debunkings:

"Indeed, with the ad about the cancer death, the Democratic super PAC, Priorities USA Action, appeared to have gone the fact-checkers one better — exploiting attention to the ad's veracity to get free air time for a spot that has not appeared anywhere as a paid commercial. The ad has been replayed extensively on television news segments that have debated it and has been viewed more than half a million times on YouTube. The largest number of views have come from five states — California and four election battlegrounds, Florida, Pennsylvania, Ohio and Virginia, according to Priorities.

The Democratic super PAC has raised considerably less money than its Republican counterpart, making the free publicity particularly valuable.

Asked whether the prospect of controversy leading to free publicity was part of the calculation, Paul Begala, senior advisor to Priorities, did not hesitate.

"Absolutely," he said. "We're provocateurs."" (emphasis mine)

 The Case of the $100 Billion Error¹

"Multiple members of Congress have warned that slashing defense spending by $600 billion would devastate the military, with Sen. Lindsey Graham this month predicting the cuts would deal "a death blow to our ability to defend ourselves."

There's just one problem: The number they cite is wrong.

The law triggering the cuts does not slash the military budget by $600 billion. That figure — which has also been widely cited in the media — overstates the amount of military cuts by more than $100 billion." (emphasis mine)

Paul Ryan’s imaginary expertise¹
Professor Mark Thoma of the University of Oregon explains how Paul Ryan doesn't uderstand basic monetary or fiscal policy. His budget makes unre alistic assumptions which are backed by few details. Is this what we should expect from the "intellectual leader of the Republican Party."

 "Only about one-third of American families will surpass their parents in wealth and income and climb to a new rung on the economic ladder, a new study out today from The Pew Charitable Trusts concludes."

The NFIB is now only representing at most 2% of small businesses.
 
The Tax Foundation is dishonest about income inequality.

Economists who once supported austerity in the UK are changing their minds   

Paul Krugman makes the case that markets are allowing the US to borrow for free, meaning now is the time for short term stimulus and long term austerity.

Paul Krugman explains the euro crises: a central currency with no central government. He then presents potential solutions to the crisis. He Ends by suggesting the euro should be saved but probably won't.

Why does the middle class let politicians get away with unfavorable tax plans? They trust politicians just wouldn't do such a thing. 

Charts: America Has the World's Luckiest Billionaires

Arthur Laffer on income inequality, raising taxes

 Six Policies Economists Love (And Politicians Hate)<sup>1

1</sup>: Update 8/18/12

Debunking Romney (Part 1): Tax Policies

This post is part one of a three part series debunking a few central claims that have been made by the Romney campaign this year. The first part deals with Romnay's tax policies, the recent Tax Policy Center study, and Romney's response to that study. The second part deals with the white paper Romney's advisers wrote to attempt to justify his plan. Finally, the third part deals with Romney's recent Medicare claims, as well as his impossible promises on the subject.  

Although the Obama campaign is no stranger to inaccurate campaign videos, this one was different. This one was actually accurate, receiving a rare "Geppetto" from the Washington Post Fact Checker, indicating its accuracy (note that this is the same Fact Checker Romney has relied upon to call out Obama in the past):

"The rest of the ad concerns the new study by the Tax Policy Center, which examines whether the numbers add up in Romney’s tax plan as described on his Web site. As we have noted, Romney has not detailed how he would cut tax rates by 20 percent and yet eliminate enough tax loopholes to keep the plan revenue neutral.

The study essentially concludes that, no matter what choices are made, taxes will be lower for the very wealthy while raised for most middle and lower income taxpayers. That’s because there are not enough loopholes to close for the rich — and the real money available to boost revenue would come from getting rid of tax credits that mostly benefit middle-income taxpayers, such as the home mortgage deduction. The study came to this conclusion even after trying to grant every positive assumption to the Romney plan.

The ad accurately describes the main points of the study, using headlines such as from The Wall Street Journal to underline its points: “Study: Romney’s Tax Plan Hits Middle Class.”" (emphasis mine)

The study by the non partisan Tax Policy Center really hurt Romney's campaign message. It showed that Romney's promise to cut individual income tax rates without either favoring the wealthy or losing revenue is not mathematically possible. FactCheck also agreed:

Romney has proposed very specific tax cuts. He would make the Bush-era income tax cuts and capital gains tax cuts permanent, then cut all income tax rates by an additional 20 percent across the board, repeal the Alternative Minimum Tax (which hits primarily upper-income taxpayers), and permanently repeal the estate tax (which currently applies only to estates valued at $5 million or more).

Romney has said he would offset the loss of personal income tax revenue (estimated at $360 billion a year by the Tax Policy Center) by reducing tax deductions and credits. And he has said he would do this while making sure that those at the top keep paying the “same share of the tax burden they’re paying now.”

But he has steadfastly refused to say which tax preferences would be cut or reduced. He has pointed to the revenue-neutral proposals for rate-cutting put forth by the deficit commission as evidence that what he proposes is possible in theory, but those proposals pay for the cuts largely by taxing capital gains at the higher rates that apply to ordinary income, a measure Romney has specifically ruled out.

So Romney has failed to produce evidence that what he promises is possible. And we judge that the weight of evidence and expert opinion is clear — it’s not possible. (emphasis mine)

The FactCheck article also does a good job detailing the history of Romney's plan, as well as the study by the TPC. It is well worth a read.

Romney has predictably rejected the study. The Washington Post Fact checker notes:

"The Romney campaign has emphatically rejected the study on several grounds. First, it claims the paper is “biased” because of the involvement of an economist (Adam Looney) who worked on the staff of Obama’s Council of Economic Advisers. Second, it says it ignores “pro-growth elements” of Romney’s plan, such as corporate tax reform and reduced deficits. Finally, it says the study admits it is not really examining Romney’s plan."

We will look at each of these justifications for rejection to see if they hold any water.


Is the paper biased?

The Washington Post Fact Checker calls this claim ridiculous:

"The charge of bias is pretty ridiculous. Looney, the third name on the paper, was an economist, not a principal, on the CEA and spent six years as an economist at the Federal Reserve Board. The economist positions at the CEA, in fact, are nonpartisan. Indeed, another co-author of the study, William Gale, was an economist for the CEA during the George H.W. Bush administration. (emphasis mine)

Ezra Klein of The Washington Post continues:

But the Tax Policy Center is directed by Donald Marron, who was one of the principals on George W. Bush’s Council of Economic Advisers. (emphasis mine)

As the Fact Checker notes, there is also a bit of hypocrisy here:

The Romney campaign would have more credibility to claim bias if it had not approvingly cited the Tax Policy Center as providing “an objective, third-party analysis” when the group critically examined the tax plan of Texas Gov. Rick Perry."

Readers of this column know that we have frequently cited the Tax Policy Center’s work. In a town full of partisans, the group is about as even-handed and nonpartisan as possible. The staff roster consists of serious and credible analysts with experience working in the administrations of both parties. (emphasis mine)

So not only are there economists from both political parties involved in the study, but Romney wants to have it both ways. He wants to cite this think tank when it backs him up, but poison the well when it doesn't.

In addition, as FactCheck points out, the TPC is not alone in its conclusions:

"it’s also the conclusion of an expert from the pro-business Tax Foundation, who states that the Tax Policy Center analysis “correctly identified the Romney plan as a tax cut, at least in static terms, that accrues mainly to high-income earners.”"

Does the paper ignore Romney's pro-growth elements of his plan?

Ezra Klein elaborates on this point:

There’s a reason the study ignores those “positive benefits”: Romney has called for a revenue-neutral corporate tax plan that brings the rate down from 35 percent to 25 percent while also promising to balance the budget. He has not said how he will achieve either goal. Until he does, those positive benefits — if they exist — are impossible to calculate.

If Romney tries to pay for his tax cuts by reducing spending, the results, as the Tax Policy Center notes, would be even more regressive. Romney has promised to increase defense spending and hold benefits steady for the current generation of seniors. The only remaining big spending programs are those that help the poor; that’s where Romney’s cuts would have to be concentrated. Paying for tax cuts for the rich by curtailing programs for the poor is even more of a reverse-Robin Hood act than paying for tax cuts for the rich by cutting the tax expenditures (deductions and the like) of the middle class. (emphasis mine)

Ezra Klein also points out the implausibility of Romney paying for some of his tax cuts with spending cuts:

The Center on Budget and Policy Priorities produced its own analysis of Romney’s plan, based on an assumption that Romney pays for half of his tax cuts through spending cuts. The conclusion: By 2022, Romney would need to cut all non-defense, non-Social Security programs by 49 percent. That is not plausible, to say the least. (emphasis mine)

Indeed at least one person who agreed with the TPC study argued there would be growth. FactCheck notes:

"William McBride of the Tax Foundation, a pro-business nonprofit, writes that reducing the corporate tax rate will spur 1 percent to 2 percent more economic growth. But McBride also writes that TPC “correctly identified the Romney plan as a tax cut, at least in static terms, that accrues mainly to high-income earners.” That’s not a bad thing, he argues, because the U.S. already has “the most progressive income tax system in the industrialized world,” and it is “well past time to consider the costs and benefits of such an extremely progressive system.”

So the conservative Tax Foundation argues that making the tax system less progressive will spur growth. However, there is reason to doubt this. Yes the federal income tax is very progressive. But it is not the only tax faced by US tax payers. When you include all federal, state, and local taxes (which are often regressive), taxes are actually just barely progressive. This means that, if Romney were to make the federal income tax less progressive, US taxes as a whole may lose their progressiveness altogether!

In fact, one of the authors of the TPC study points out just how improbable such growth would be under the Romney plan. FactCheck notes:

"Looney, one of the authors of the Tax Policy Center study, calls that “an implausibly large estimate,” but nevertheless ran the study again assuming that growth rate and an additional 12 million jobs. The result, he told ABC News, is that it would offset only about 15 percent of Romney’s revenue loss from individual tax cuts.

“Even in that case, there’s still a shift in the tax burden from high-income taxpayers to low- and or middle-income taxpayers,” Looney told ABC News. “It’s smaller, but it would require a net tax increase on the middle class.”" (emphasis mine)

And Looney wasn't alone, Brad DeLong also explained how assuming the growth would make up for the shortfall is actually bad arithmetic:

1% extra of GDP--if you could get it--taxed at an average rate of 20% is an extra $32 billion/year of tax revenue. $32 billion/year < $85 billion/year. $32 billion/year is less than 2/5 of $85 billion/year.

This is an arithmetic fail.

And, of course, if you bust open the long-run deficit further--which Romney does, not just through this tax-cut-for-the-upper-class plan but through the repeal of the efficiency-promoting portions of the Affordable Care Act--you don't boost but slow long-run growth. You increase uncertainty about the future: somebody is ultimately going to pay taxes to pay for government spending, we just don't know who. And in the long-run in which we get out of the slump government borrowing does crowd out private investment and slow growth.¹

In all likelihood we don't get a growth boost from this plan, we get a growth slowdown. And so the gap that must be closed is not $85 billion/year, but rather more. (emphasis mine)

More on this in Part 2...

¹Note: Notice DeLong is talking about long-term deficits, not short term. This is not expansionary austerity it is Keynesian economics.


Is the paper not really examining Romney's Plan?

The Washington Post Fact Checker notes how odd this accusation really is:

"It is also a bit rich for the Romney plan to complain that the paper does not really examine Romney’s plan — or is missing key elements — when the major problem with the plan is that Romney has released precious few details about it. The Tax Policy Center analysis makes clear that a full review is not possible because “certain components of his plan are not specified in sufficient detail.” In other words, if Romney would actually spell out those details, then a full review would be possible." (emphasis mine)

So Romney's only justification for this criticism is that he has made his plan UN-judgeable. Special pleading?

In addition, as Ezra Klein reminds us,  the TPC chose the most unrealistically charitable assumptions for Romney's plan:

To help Romney, the center did so under the most favorable conditions, which also happen to be wildly unrealistic. The analysts assumed that any cuts to deductions or loopholes would begin with top earners, and that no one earning less than $200,000 would have their deductions reduced until all those earning more than $200,000 had lost all of their deductions and tax preferences first. They assumed, as Romney has promised, that the reforms would spare the portions of the tax code that privilege saving and investment. They even ran a simulation in which they used a model developed, in part, by Greg Mankiw, one of Romney’s economic advisers, that posits “implausibly large growth effects” from tax cuts.

The numbers never worked out. No matter how hard the Tax Policy Center labored to make Romney’s promises add up, every simulation ended the same way: with a tax increase on the middle class. (emphasis mine)

So it sounds like none of Romney's excuses work to discredit the TPC paper and its implications for Romney's tax policies. You would think this would be a good time to revisit the drawing board. Sadly, Romney instead doubled down on the argument when his economic advisers released a white paper attempting to justify his plan. I take a look at this plan in n Part 2.

Update 8/18/12: Mitt Romney further responded to the TPC study in an interview in Fortune:

I indicated as I announced my tax plan that the key principles included the following. First, that high-income people would continue to pay the same share of the tax burden that they do today. And second, that there would be a reduction in taxes paid by middle-income taxpayers. Those are the key principles of my plan that the Tax Policy Center chose to ignore. (emphasis mine)

Ezra Klein debunks this assertion:

"No, the Tax Policy Center didn’t “ignore” those principles. It tried to test them. And the principles failed.

What’s more, they failed for a comically simple reason. “The total value of the available tax expenditures (once tax expenditures for capital income are excluded) going to high-income taxpayers is smaller than the tax cuts that would accrue to high-income taxpayers, high-income taxpayers must necessarily face a lower net tax burden.”

That is to say, the tax cuts Romney is promising the rich are larger than the available storehouse of tax breaks Romney can close to pay for them. As such, if the plan is going to be revenue neutral, as Romney has pledged, it is mathematically impossible for it to do anything but shift the tax burden away from the rich." (emphasis mine)

Romney continues:

Instead they made various assumptions about what they thought I would do which are not in fact accurate. They made an assumption that I would reduce the home mortgage-interest deduction. I will not do that for middle-income taxpayers, as I have already indicated.

However, we have seen that the TPC already took the most favorable assumptions for Romney in its analysis, getting rid of all upper-class tax expenditures before touching middle class ones. So Romney seems to have missed the point. If they take the middle-class home mortgage interest-deduction off the table in their analysis, they will have to replace it with some other middle class tax increase. As we have seen throughout this article, there is simply no other way to make the budget revenue neutral.

Ezra Klein also notes just this further reinforces the fact that Romney's budget a fantasy:

"So let me get this straight. Mitt Romney, who has refused to officially name even one offset for his tax cut, has taken the bulk of the mortgage-interest deduction off the table. In his 10-year deficit-reduction plan, he has refused to name the spending cuts necessary to hit his targets, but he has taken Social Security, Medicare and defense off the table for cuts.

Tell me again why I’m supposed to believe that this presidential candidate who is systematically ruling out cuts to the most popular spending programs and tax breaks is going to be able to make incredibly unpopular spending cuts and tax changes once in office?"

In a previous article (to be covered more in depth in part 3), Ezra Klein already explained why Romney's decision to take Social Security, Medicare, and defense spending off the table for cuts makes his budget promises practically impossible. Taking the mortgage-interest deduction for middle class taxpayers off the table makes it even worse.

In addition, Romney has attempted to play the "but you are doing it too" game with Obama.

"Now, interestingly, the same center did an analysis of President Obama’s tax plan and concluded that he’s raising taxes on the middle-class." (emphasis mine)

I consider myself something of a connoisseur of the Tax Policy Center’s reports, and I didn’t remember any showing that result. So I asked the Romney campaign: What analysis were they referring to? They pointed me to Table T12-0045, which analyzes President Obama’s 2013 budget request against current policy. Here’s the relevant section:

I know, lots of numbers. But my fellow TPC-ophiles will notice something off the bat: Those numbers do not appear to show a middle-class tax increase. Here’s where to look:

The highlighted boxes show the net tax change for different income quintiles. For the bottom four quintiles — the bottom 80 percent of the country — there is, on average, a tax cut, not a tax increase. And I don’t know where you find the middle class if not in the bottom 80 percent of the income distribution.

But the Romney campaign clarified that they weren’t looking at those columns. They were looking at these columns:

Those columns show the percentage of tax units (a technical term, but think “households” and you’re close enough for our purposes) in a given income group that will see a tax increase under the new plan. As it happens, under Obama’s plan, a majority of the bottom 80 percent sees no tax change. A minority of tax units see a small increase. A somewhat smaller minority see a somewhat larger tax cut. And so, while there’s a tax cut overall, some households see a tax increase.

Because any tax change has winners or losers, we tend to look at averages when assessing whether a tax plan raises or lowers taxes on an individual group. The Romney campaign is asking whether anyone in the group that could be called “the middle class” sees a tax increase, and some do. If I were Politifact, I’d rate Romney’s claim “mostly false,” but you can decide for yourself.

Now, there’s a separate tax policy table (T12-0049, for those keeping track) that looks at Obama’s budget a few years down the road and finds a small tax increase for the fourth quintile. I think you can fairly say that the 60-80th percentile includes at least some of “the middle class,” and so if the Romney campaign was pointing to that table, which perhaps they’ll start doing, I’d say their claim is mostly true. (emphasis mine)

So Romney may be on to something here (Is it safe to say he has also dropped the pathetic "biased" accusation towards the TPC?). Down the road, the highest middle class taxpayers may see a small increase. But, as the Obama campaign noted to Ezra Klein, this is only because of the inclusion of corporate taxes in the TPC analysis. In additionr, these pale in comparison to the increases middle and lower-income taxpayers will see under Romney's plan. If we ignore the revenue neutral aspects of Romney's plan, we get this TPC table:

Romney’s plan is a net tax increase on poorest Americans, as it permits certain stimulus-related tax breaks to expire. But even in this version of the plan, which doesn’t include any offsets and increases the deficit by trillions of dollars, some tax units see an increase. (emphasis mine)

So even without the revenue neutrality, Romney's plan still contains a tax increase on the poorest of Americans. As the TPC points out, once you include attempts to make the plan revenue neutral, you definitely get middle class tax increases, even under the most favorable conditions for Romney. In addition, it should be noted that these "most favorable conditions" are almost completely politically impossible. They include popular tax expenditures Republicans have generally never shown even the slightest interest in repealing. So, in order to keep Romney's plan revenue neutral under realistic political conditions, you would need an even larger tax increase on the middle and lower classes. Maybe Romney should remember the old saying "He who lives in a glass house shouldn't throw stones."