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OH: PolitiFact or Fiction No. 9: Obamacare is biggest tax hike in U.S. history

By   /   July 24, 2012  /   News  /   2 Comments

Part 8 of 17 in the series PolitiFact or Fiction

PolitiFact Ohio practices opinion journalism under the guise of fact-checking. They often get things wrong — particularly, we’ve noticed, in their coverage of U.S. Senate candidates Sherrod Brown (Democrat) and Josh Mandel (Republican). So we bring you PolitiFact or Fiction, a semi-regular review of pronouncements issued by PolitiFact Ohio, a blog run by staff at the Cleveland Plain Dealer and supported by Politifact.com.

By Jon Cassidy | Ohio Watchdog

COLUMBUS — Will Obamacare turn out to be the biggest increase in U.S. history?

Josh Mandel

Reacting to the recent Supreme Court ruling, Ohio Republican and U.S. Senate candidate Josh Mandel said that was “likely” to be the case.

PolitiFact Ohio determined Friday that Mandel’s claim was “pants on fire”— the news organization’s lowest designation on its self-described Truth-O-Meter.

It was no surprise, of course. Where the Ohio Senate race is concerned, we’ve already established in this series that PolitiFact Ohio works overtime to find fault with Mandel. In this case, they didn’t have to work hard: The national PolitiFact had already called Florida Gov. Rick Scott a liar for making the same claim last year.

And that brings us to our first problem with this latest story: reporter Tom Feran just copied a bunch of numbers from that older PolitiFact article, ignoring current data.

Feran (who sends supportive tweets to the Occupy movement in his free time) used official estimates from March 2010, even though those numbers have been updated repeatedly since then, most recently in March and June of this year.

That’s how he determines that Obamacare’s taxes will total $437.8 billion by 2019, when the current official estimates are for nearly twice that — $842 billion in new taxes and penalties collected over the next decade, not to mention $1.76 trillion in costs.

The authority on these types of projections is the non-partisan Congressional Budget Office, which won’t finish its calculations until later this week. Maybe they’re just not as good at math as PolitiFact. (Note: On Tuesday afternoon, after this article was published, the CBO released its estimates regarding the effect of the recent Supreme Court ruling. The office expects a reduction in federal costs of $84 billion in the 2012-2022 period, as some states may choose not to participate in the Medicaid expansion. This article does not reflect the adjustment, as it does not change any of its comparisons or conclusions.)

There are several ways to evaluate Mandel’s claim: raw (or “nominal”) dollars, inflation-adjusted (real) dollars, the tax burden relative to population size, and the tax as a percentage of the economy. By three of these four measures, Obamacare is bigger than any of the other tax hikes on record.

Guess which measurement PolitiFact picks?

We’re all familiar with adjustments for inflation, and it’s not hard to understand why you’d control for population growth. That’s a straightforward comparison; it shows Obamacare is bigger than any other tax in U.S. history.

But PolitiFact looks at the size of the tax as a percentage of Gross Domestic Product, for reasons it doesn’t explain. In 1942, Congress passed a tax equal to 5 percent of GDP to pay for WWII, which is a higher percentage of the economy than Obamacare’s taxes.

When you measure anything that way, you control for population and inflation, but you also factor out all real economic growth. We’re more than three and a half times richer, in real terms, than we were in 1942. Why would PolitiFact ignore that?

Let’s put it basketball terms. PolitiFact is making the case that George Mikan is the greatest player of all time, based on his dominance of a weak, all-white 1950s National Basketball Association, where most guys shot under 40 percent.

Mikan was great relative to his day, but the NBA is absolutely better today, just like the economy is absolutely bigger. When you’re checking an absolute claim like “biggest” or “greatest,” you can’t build much of a case on relative terms.

Feran, like writers at The Nation and Mother Jones, bases his argument on a paper published by Treasury Department analyst Jerry Tempalski that looks at one-year revenue effects of major legislation since 1940. But, like a kid copying the wrong homework, he didn’t even look at the current version of the paper.

He transposes a list of big taxes from a 2006 version of the paper, then writes, “The list does not include the health care law, which passed in 2010, and a spokeswoman for the Department of Treasury said it hasn’t been updated.” So he did his own math.

Oops. The paper was updated in June 2011 and does indeed rank Obamacare — fourth, actually. In year four of Obamacare (as far out as the paper goes), the tax is $71.7 billion in 2009 dollars, which would make it the fourth-biggest tax ever.

But even that number underestimates the tax implications of Obamacare. By 2022, Obamacare taxes and penalties are up to $135 billion annually, which blows away every other tax hike cited by the fact-checkers at PolitiFact.

The big taxes highlighted by the Tempalski paper are mostly budget deals, which may have raised taxes in the short term, but didn’t create expensive programs that had to be funded over the long term.

Tempalski himself cautions that his paper makes no attempt “to capture the long-run, fully phased-in effect of the tax bills” and that “the use of sunsets and phase-ins in recent legislation” make it “particularly difficult to compare the true long-term revenue effects of recent tax bills.”

If you applied Tempalski’s method to Social Security, you’d look at its year-four costs of $35 million, adjust for inflation, and conclude you were talking about a rinky-dink $536 million program (in 2009 dollars) — and not a program that consumes a fifth of the federal budget.

You can’t insure 39 million people for free

In the next five years, the federal government is going to start paying toward the health care of an additional 39 million people, according to CBO projections.

It won’t be free. The latest estimate from the CBO shows that the law will cost $1.7 trillion between 2015-2022, an average annual cost of $213 billion.

By 2022, the CBO predicts, Obamacare taxes and penalties are up to $135 billion annually. That’s still only half the of the program’s projected annual cost of $265 billion by then, all of which has to paid in taxes.

That dwarfs any tax that Tempalski found in his survey of American history.

The second biggest one-year tax increase in raw dollars: the $65.9 billion annual cost of the Omnibus Budget Reconciliation Act of 1993 when it was fully phased in.

The second biggest one-year tax increase in inflation-adjusted dollars: the $105.5 billion (in 2009 dollars) raised by the Revenue Act of 1942, intended to pay for World War II.

According to Tempalski, the top-three modern taxes were in 1968, 1982, and 1993. If you control for inflation and population growth, the taxes from those years would now be $117 billion, $115 billion, and $97 billion, respectively. That’s less than half the cost of Obamacare.

The World War II tax, though, would cost $243 billion with today’s population and currency values. Obamacare is projected to surpass that by 2021, with a cost of $250 billion.

If Obamacare dwarfs the taxes touted by the fact-checkers, how did they decide Mandel has incendiary trousers — that he’s a liar?

Parrots and stenographers

The basic budget gimmick of Obamacare, for the uninitiated, is to delay most spending under the program until the end of the decade, while collecting taxes throughout. So six years of spending is balanced by 10 years of taxing and a promised one-time $500 billion cut in Medicare.

Try that with your household: take an inheritance and your next 10 years of income, spread it over just six years, and commit to a mortgage at that level.

That’s the sort of budgeting that allows President Obama to claim that the Affordable Care Act is paid for over the next decade. It’s meant to fool people, and it works on a lot of journalists, most of whom generally admit sucking at math.

Once the program is up and running, its costs are projected to be double the tax revenues meant to fund it. That’s what matters over the long-term — not the structure of the phase-in period. It’s one reason former CBO director Douglas Holtz-Eakin predicts the Affordable Care Act will add $2 trillion to the deficit over the next two decades.

When presidential candidate Mitt Romney says the law “adds trillions to our deficits and to our national debt,” national PolitiFact doesn’t just disagree, it says it can “find no factual basis for Romney’s claim.” That’s pretty casual disregard for a former CBO director, but it’s consistent with its prior misunderstanding of health care.

That’s not bad math, though. That’s just sloppy research.

Many journalists simply do not understand numbers. Here’s Angie Drobnic Holan, deputy editor of the whole PolitiFact operation, failing to grasp the difference between revenues and expenditures.

The CBO estimates that Obamacare will cost $1.76 trillion in the 2012-2022 period, but anyone who cites the total is guilty of “extreme cherry-picking,” she writes, because that cost “doesn’t account for the law’s tax increases  . . . .”

Go ahead and slap your forehead. Only a journalist could mistake the bottom line for a mere factoid, or argue that a cost is irrelevant because it’s partially funded by a tax.

By definition, the $1.76 trillion in “money out” does not include $842 billion in “money in” to pay for it. The first number is the bill; the second is the down payment.

Drobnic Holan also notes that the $1.76 trillion doesn’t include “spending cuts or other cost-saving measures,” and, in that, she’s correct.

The Affordable Care Act calls for $500 billion in cuts to Medicare that are supposed to happen without affecting any basic services, right as the Baby Boomers retire. Even if that were possible, or conceivable, there’s one little problem with raiding the Medicare piggy bank. It’ll be empty by 2024.

The debate over the biggest tax increase may revolve around revenue projections and 10-year forecasts, but it’s the total cost, the $1.76 trillion, that we’ll ultimately pay in taxes.

And that’s just a start.

Part of 17 in the series PolitiFact or Fiction


Jon Cassidy was a former Houston-based reporter for Watchdog.org.

  • Great job again, Jon.

    PolitiFact Texas recently graded a Democrat’s claim that the debt doubled under President Bush. Guess which measure was totally ignored?

    That’s right: Debt as a percentage of GDP.


  • Jon

    Wow. That’s wildly inconsistent. It’s defensible in an essay, as we all make mistakes. But it’s a perfect example of why they shouldn’t be issuing grades at all — no standards. Thanks for linking.