The mythical peace dividend and other fantasies from Obama’s speech

President Barack Obama addresses the Democratic National Convention in Charlotte, N.C., on Thursday.
(AP Photo/Jae C. Hong)

President Barack Obama laid claim to a peace dividend that doesn’t exist when he told the nation he wants to use money saved by ending wars to build highways, schools and bridges.

The wars were largely financed by borrowing, so there is no ready pile of cash to be diverted to anything else.

The claim was one of several by Obama in his acceptance speech Thursday at the Democratic National Convention in Charlotte, N.C., and by Vice President Joe Biden in earlier remarks that did not match the facts. A look at some of their assertions:

OBAMA: “I’ll use the money we’re no longer spending on war to pay down our debt and put more people back to work — rebuilding roads and bridges, schools and runways. After two wars that have cost us thousands of lives and over a trillion dollars, it’s time to do some nation-building right here at home.”

THE FACTS: The idea of taking war savings to pay for other programs is budgetary sleight of hand, given that the wars were paid for with increased debt. Obama can essentially “pay down our debt,” as he said, by borrowing less now that war is ending. But he still must borrow to do the extra “nation-building” he envisions.

He made a similar statement in his State of the Union address, and it is no less misleading now than in January. And the savings appear to be based at least in part on inflated war spending estimates for future years.

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OBAMA: “We will reform and strengthen Medicare for the long haul, but we’ll do it by reducing the cost of health care, not by asking seniors to pay thousands of dollars more.”

THE FACTS: Some of the proposals the Obama administration has floated in budget negotiations with Congress would ask Medicare beneficiaries to pay more. Among them: revamping co-payments and deductibles in ways that could raise costs for retirees and increasing premiums for certain beneficiaries.

Obama even indicated a willingness to consider raising the eligibility age, currently 65, to 67. As word of some of the proposals leaked out, the president faced a backlash from fellow Democrats. He has since said he would not accept Medicare cuts as a part of a deficit reduction deal, unless it also includes higher taxes on the wealthy. Still, some level of increased costs for middle-class and upper-income Medicare recipients is likely to be part of any future deficit reduction deal.

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OBAMA: “We can help big factories and small businesses double their exports, and if we choose this path, we can create a million new manufacturing jobs in the next four years.”

THE FACTS: Obama has claimed an increase of some 500,000 manufacturing jobs over the past 29 months. But this is cherry picking by the president. From the beginning of Obama’s term 3 1/2 years ago, manufacturing jobs have declined by more than 500,000, according to the Labor Department’s Bureau of Labor Statistics. Manufacturing jobs have been on a steady decline for nearly two decades.

Even though there has been a modest uptick in manufacturing jobs this year, unless there is a major turnaround, it seems unlikely that Obama’s goal of 1 million new manufacturing jobs can be reached by his target date of 2016.

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OBAMA: “And now you have a choice: We can give more tax breaks to corporations that ship jobs overseas or we can start rewarding companies that open new plants and train new workers and create new jobs here in the United States of America.”

BIDEN: “Gov. Romney believes that in the global economy, it doesn’t much matter where American companies put their money or where they create jobs. As a matter of fact, he has a new tax proposal — the territorial tax — that experts say will create 800,000 jobs, all of them overseas.”

THE FACTS: Republican presidential candidate Mitt Romney‘s proposal is actually aimed at encouraging investment in the U.S., not overseas.

The U.S. currently has a global tax system that is filled with credits, exemptions and deductions that enable many companies to avoid U.S. taxes and provides an incentive for corporations to keep their profits in other countries. Whether Romney’s plan would spur investment in the U.S. is debatable, but it’s not a plan aimed at dispersing profits abroad.

Experts differ on the impact of a territorial system on employment in the U.S. But Biden’s implication that Romney’s plan sends jobs abroad is not supported by the expert opinion he cites.

Kimberly Clausing, an economics professor at Reed College in Portland, Ore., said a pure territorial tax system could increase employment in low-tax countries by 800,000. But that did not mean U.S. jobs moving overseas. Clausing later wrote: “My analysis does not speak to the effects on jobs in the United States.”

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OBAMA: “You can choose a future where we reduce our deficit without wrecking our middle class. Independent analysis shows that my plan would cut our deficits by $4 trillion.”

THE FACTS: Three years ago, Obama pledged to cut in half the deficit “we inherited” by the end of his first term, a mark he’s set to miss by a wide margin. The deficit when he took office was $1.2 trillion, and the $800 billion stimulus bill Obama signed soon afterward increased the shortfall to over $1.4 trillion. The White House predicts this year’s federal budget deficit will end up at $1.2 trillion, marking the fourth consecutive year of trillion dollar-plus red ink.

Obama’s new $4 trillion target over 10 years resets the goalposts with some fancy budget footwork. For one thing, it includes $1 trillion in cuts already signed into law. And it assumes that Congress will pass the administration’s plan to raise the capital gains tax, boost taxes on households earning over $250,000 a year and impose a minimum 30 percent tax on incomes above $1 million. It also assumes a reduction in the amount of interest the government must pay on its debt.

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BIDEN: “After the worst job loss since the Great Depression, we’ve created 4.5 million private sector jobs in the past 29 months.”

THE FACTS: This seems to be a favorite statistic, because many speakers at the convention cited it. But it’s misleading — a figure that counts jobs from when the recession reached its trough and employment began to grow again. It excludes jobs lost earlier in Obama’s term, and masks the fact that joblessness overall has risen over Obama’s term so far.

As well, in the same 29 months that private sector jobs grew by 4.5 million, jobs in the public sector declined by about 500,000, making the net gain in that period about 4 million.

Overall, some 7.5 million jobs were lost during the recession that began in December 2007 in President George W. Bush’s term and ended officially in June 2009 with Obama as president.

Never since World War II has the economy been so slow to recover all the jobs lost in a downturn.

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OBAMA: “Millions of students are paying less for college today because we finally took on a system that wasted billions of taxpayer dollars on banks and lenders.”

THE FACTS: “Technically it is true,” said Bryan Cook, director of the Center for Policy Analysis at the American Council on Education. “How much of a savings is not clear.”

Large increases in federal Pell Grants, GI Bill benefits and the 2009 American Opportunity Tax Credit led to a significant increase in the amount of aid provided to students who qualify for these benefits. The current per year maximum Pell Grant is $5,550 — $900 higher than it was in 2008 for a program that serves more than 9 million students.

Under the Obama administration, Congress passed legislation requiring all federal loans be issued through the Education Department; previously, they were also issued by private lenders. This will also probably mean students pay less in the long term.

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OBAMA: “In 2014, our longest war will be over.”

THE FACTS: Although most U.S. troops will leave Afghanistan by the end of 2014, thousands are likely to stay and continue a U.S. presence for years. There is no telling what fighting they might be drawn into, despite the decision to end the U.S. combat role.

Military leaders and administration officials have not yet said how many will stay, asserting that such decisions are far from being made. But analysts say the U.S. envisions a post-2014 force of as many as 20,000 American troops to continue training the Afghan forces, hunt terrorists and keep watch on Iran and other nations in the region.

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BIDEN: “What they didn’t tell you is that the plan they’ve put down on paper would immediately cut benefits to more than 30 million seniors already on Medicare. What they didn’t tell you is the plan they’re proposing would cause Medicare to go bankrupt by 2016.”

THE FACTS: Biden wasn’t referring to any Medicare plan of Romney or running mate Paul Ryan, but to the consequences of fully repealing Obama’s health care law, which is unpopular with seniors even though it has sweetened Medicare in certain ways. A Medicare plan put forward by Ryan in Congress would have no immediate effect because it would apply only to future retirees.

Obama’s health care law improved Medicare benefits, adding better coverage for beneficiaries with high prescription costs as well as removing co-pays for a set of preventive benefits. If the law is repealed, those benefits would be lost unless Congress decides otherwise.

Similarly, Romney’s promise to restore Obama’s $716 billion in Medicare cuts could have unintended consequences for the program. The cuts don’t affect seniors directly, instead falling on hospitals, insurers and other service providers. Restoring the higher payments to providers would accelerate the depletion of Medicare’s trust fund for inpatient care, from 2024 currently to 2016, unless Congress acts to stave that off.

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Associated Press writers Ricardo Alonso-Zaldivar, Stephen Ohlemacher, Christine Armario and Paul Wiseman contributed to this report.

Copyright 2012 The Associated Press

 

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6 Responses to "The mythical peace dividend and other fantasies from Obama’s speech"

  1. Sandy Price  September 7, 2012 at 9:42 am

    The Democrats may have not sold the base as some would have liked but the Republicans sold exactly why they should not win in November.

    I was a little put off by some of the nastiness from President Obama’s campaign but the Conservatives trashed the Party with an agenda so insulting that only a few could honestly want Gov. Romney in the white house. Putting Romney on the ticket was weeding out those who obviously were unqualified.

    The key word in this election should have been “equality” but the party chose the wrong candidate whose background is chin deep in a religion where equality is not respected. If Romney wins, it will be an indication that equality is only word we use to use.

    I honestly think that equality is something we simply talked about years ago.

  2. Rupert  September 7, 2012 at 10:40 am

    Your probable clarification coild be understandable by the right. But the facts of those positions you pointed out are there for an enlightened mind to see.

  3. woody188  September 8, 2012 at 12:41 am

    It’s odd to hear about a peace dividend from a guy that ordered an invasion and ignored US law concerning such military action and continues to do so.

    It’s strange to hear a man talk about saving Medicare when the mandatory health insurance law commonly referred to as Obamacare called for the drawing down of Medicare/Medicaid to pay for the new law.

    It’s weird to hear a man say he can help big factories and small businesses double their exports when all his policies encourage cheap imports from abroad. Maybe he meant exports from overseas companies and jobs created outside the US?

    It’s uncanny to hear a man brag about job creation, when most of the jobs created do not pay a livable wage, and his policies encourage the migration of cheap laborers into the United States further depressing wages.

    It’s odd to hear a man talk about cutting a deficit in half in 10 years, a deficit that he nearly quadrupled in 3 years.

    It’s eerie that no one said that we will officially declare the freedoms lost to the Unitary Executive were never his to take and all laws enacted based on flawed principle that security trumps freedom and our Constitution and Bush doctrine of preemptive war are null and void. That we are a nation of laws, not of men. And the Unitary Executive cannot pick and choose to enforce laws only on people older than a certain age. That he can’t declare war. That he can’t order assassinations, indefinite detainment, torture, or any other violation of our basic rights.

    Maybe Sandy can act like that woman from the Wendy’s commercials of the 80’s and cry out: “Where’s the freedom?”

    • woody188  September 8, 2012 at 12:45 am

      I have a picture of her on Capitol Hill saying, “I don’t think there’s anybody back there!?!”

    • Jeff  September 9, 2012 at 6:34 am

      Re: medicare. Huh? Obama extended medicare by 8 years by reducing expenses even as he increased services. That’s why Romney tried to spin it in his ads as “taking money away from Medicare”. He reduced costs and used the biggest part of those savings to extend the program. Has someone been lying to you about this? Be very careful where you get your news.

      Which export policies are you talking about?

      Re deficit. That increased by something like 6%. The slowest increase of any president since WWII. Do you have any facts to back up your claims?

      I am not sure what you are talking about with the rest.

      • woody188  September 10, 2012 at 10:45 pm

        Allow me to clarify:

        The Affordable Care Act cuts $716 billion from Medicare. It’s not clear if the Affordable Care Act will replace those cuts.

        Exactly, what export policies! Obama made the claim he could double exports, but he’s done nothing to change trade policy laid out in years before he took office. Our biggest export right now is labor arbitrage to make imports destined for import into the USA. What moron came up with that unsustainable policy?

        The national debt rose $4.939 trillion or 32% since President Obama took office. He increased the deficit per year from around $750 billion to almost $3 trillion per year if war spending is included, which comes down to about a 4 times higher rate. I won’t ask you to back up your claims.

        I’m not surprised you don’t know what I’m talking about. Few do or care to learn. Do you want to take the blue pill and go back to sleep, or do you want to take the red pill and see just how far down the rabbit hole goes?

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