Summary

The GOP candidates took some liberties when discussing jobs, Social Security, immigration, health care and other issues during the presidential debate at the Ronald Reagan Library:

Perry exaggerated when he called Social Security a “Ponzi scheme” that won’t be there for “kids that are 25 or 30 years old today.” Social Security’s finances — while troubled — are an open book, not an investment scam, and the program could still support 74 percent of promised benefits in 2085.

Romney misrepresented Perry’s position on Social Security, suggesting the Texas governor advocated “abolishing” it in his book. Perry’s book criticized Social Security without proposing any changes to it.

Romney misleadingly claimed that the Massachusetts health care overhaul affected just 8 percent of the state’s residents, while the federal law will affect “100 percent of the people.” But both plans require nearly everyone to have insurance or pay a penalty.

Perry claimed Obama was poorly informed or an “abject liar” on the subject of public safety along the U.S.-Mexico border. But Perry misrepresented what Obama actually said, which was accurate; overall, crime rates in border towns have in fact declined.

Bachmann said gasoline was just $1.79 a gallon when Obama became president, suggesting he is to blame for the current high prices. But gasoline prices — which are set by world markets — were higher under Republican President George W. Bush just months before Obama took office.

Analysis

Texas Gov. Rick Perry — one of eight presidential candidates taking aim at Democratic President Barack Obama — made his debate debut Sept. 7 at the Ronald Reagan Presidential Foundation and Library. The evening featured sharp exchanges, particularly on job creation and Social Security.

Perry’s ‘Ponzi’ Exaggeration

Perry insisted Social Security is a “monstrous lie” to future generations and a “Ponzi scheme.”

Perry: “[I]t is a monstrous lie. It is a Ponzi scheme to tell our kids that are 25 or 30 years old today, you’re paying into a program that’s going to be there. Anybody that’s for the status quo with Social Security today is involved with a monstrous lie to our kids, and it’s not right. …

And Perry repeated that even after former Massachusetts Gov. Mitt Romney criticized him for using such language:

Perry: You cannot keep the status quo in place and not call it anything other than a Ponzi scheme. It is. … [T]hat’s provocative language — maybe it’s time to have some provocative language in this country.

Opinions differ about whether Perry’s choice of words is politically wise. Factually, however, his statements are gross exaggerations.

The system is certainly in financial trouble and can’t pay all the future benefits it promises without a substantial tax increase. And it does pay current beneficiaries mainly from the taxes paid by current workers (and their employers) who expect to draw benefits in the future. Perry is correct to that extent, and the system’s trustees have warned about that repeatedly over the years. The most recent report states that Social Security is “not sustainable under currently scheduled financing, and will require legislative modifications if disruptive consequences for beneficiaries and taxpayers are to be avoided.”

But the system doesn’t meet the common definition of a “Ponzi,” which is a criminal fraud, relying on deception. The Securities and Exchange Commission, for example, says a Ponzi is “an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.” Ponzi schemes draw their name from Charles Ponzi, who in the 1920s promised his victims that he could provide a 50 percent return in 90 days by putting their money into a speculation scheme involving postage stamps. In reality, Ponzi simply paid early “investors” big returns with the money eagerly offered by others who came later — pocketing millions for himself — until the bubble inevitably collapsed. Bernard Madoff’s more recent fraud — while much larger — was another example of a Ponzi scheme. Madoff and Ponzi lied to their victims about where their money was going, while Social Security’s finances — while troubled — are an open book.

Furthermore, Perry is simply wrong to say that Social Security won’t “be there” at all when today’s young workers retire. Even without a tax increase, the trustees state that when the system’s trust funds are exhausted about 25 years from now, the current tax rates should still pay for 77 percent of scheduled benefits in 2036, and a little less each year thereafter. Current taxes could still support 74 percent of promised benefits in 2085. So Perry’s “monstrous lie” claim is another big exaggeration. The fact is the system would still “be there” for today’s 25-year-olds, even if no changes are made to current law. It would just provide a substantially lower level of benefits than promised.

(Footnote: We’ll give Perry and others who use the Ponzi analogy this much. In one respect, it can be argued that Social Security is actually worse than a Ponzi scheme. Ponzi fooled his victims into giving him their money voluntarily. The government, however, makes Social Security taxes mandatory for nearly all workers and employers.)

‘Abolishing Social Security?’

Romney misrepresented Perry’s position on Social Security:

Romney: The issue in the book “Fed Up,” governor, is you say that by any measure, Social Security is a failure. You can’t say that to tens of millions of Americans who live on Social Security and those who have lived on it. The governor says look, states ought to be able to opt out of Social Security. Our nominee has to be someone who isn’t committed to abolishing Social Security, but who is committed to saving Social Security.

It’s true that Perry’s book describes Social Security as a “failure,” but it does not go so far as to recommend “abolishing” it. Perry’s book says (on page 62): “By any measure, Social Security is a failure.” And it goes on:

Perry, “Fed Up”: Now, if you say Social Security is a failure, as I have just done, you will inherit the wind of political scorn. Seniors might think you want to cut the benefits they have paid for. Politicians will seek to take advantage, stirring up fear about benefits that will be lost if you elected another “heartless Republican.”

Perry’s book also says that the American public has been “hoodwinked” into believing that the program is financially sound, and it claims that Americans would have been better off if they had been given the option of whether or not to participate in the Social Security program, as happened in some Texas counties that opted out of the system for their government employees before 1983. But contrary to Romney’s statement, Perry’s book doesn’t say directly that “states ought to be able to opt out” now. And in the book, Perry makes no call for “abolishing” the program. Perry, in fact, just criticizes without offering any remedies at all. His top strategist, Dave Carney, told reporters after the debate that the Perry campaign would “eventually” release its own plan for reforming the Social Security system. Perry’s communications director, Ray Sullivan, said, “We’ve got a lot of time to talk about specific solutions down the road.”

Misrepresenting Massachusetts Health Care Plan

Romney claimed that the Massachusetts health care overhaul affected just a small portion of the state’s residents, while the federal law would affect everyone. But both plans apply to nearly all residents by including an individual mandate requiring everyone, except for some hardship exemptions, to have insurance or pay a penalty. And both focus primarily on covering the uninsured.

Romney: In our state, our plan covered 8 percent of the people, the uninsured. … [Obama’s] plan is taking over 100 percent of the people, and the American people don’t like it and should vote it down.

There are many, many differences in the details of the Massachusetts and federal laws, but as we’ve said before, they share a basic framework — an individual mandate, subsidies for low-income residents, a Medicaid expansion, a health insurance exchange, and requirements for employers. The federal law goes further, offering more subsidies, more help for small businesses along with tougher requirements on employers, and various measures designed to lower health care costs.

The main goal of both is to cover more of the uninsured, and to do so while preserving the primarily employer-based insurance structure. In 2004, before the Massachusetts law was passed, 7.4 percent of Massachusetts residents were uninsured, according to the state Division of Health Care Finance and Policy (see page 12). Romney said 8 percent, but that statistic can vary, depending on how being uninsured is measured. Under the Massachusetts plan, that figure went down to 1.9 percent in 2010. Nationally, 16.7 percent of the population is uninsured, as of 2009, according to the Census Bureau. And, like the Massachusetts endeavor, the federal overhaul is aimed at reducing that figure.

But clearly other groups are affected by these laws. The individual mandate requiring residents to have coverage, for instance, affects nearly everyone. (There are hardship exemptions under both laws for those who cannot afford insurance.) Also, those who purchase their own insurance can now do so through the Massachusetts exchange, and the percentage of employers offering coverage to their workers has gone up since the law was enacted — from 70 percent in 2005 to 76 percent in 2009, according to the Division of Health Care Finance and Policy (see page 9). The nonpartisan Massachusetts Taxpayers Foundation estimated that the added coverage has cost employers at least $750 million more than they were spending before. Small businesses were hoping for a positive impact — to see their costs decline because of offerings through the state exchange — but that hasn’t happened.

Similarly, the federal law reaches beyond the uninsured. Those buying their own insurance may end up with different coverage and pricing under the state-based exchanges, and there will be some movement in employer-based coverage. The nonpartisan Congressional Budget Office has estimated a net decline in work-based coverage of 1 million persons by 2019, with 6 million to 7 million who would have otherwise received employer coverage not getting it — most would be eligible for Medicaid or subsidies — 7 million to 8 million gaining employer coverage under the law, and 1 million to 2 million opting for exchange-based coverage rather than an employer’s offer (see pages 19-20).

It’s simply a misrepresentation to characterize the Massachusetts law as affecting only 8 percent of state residents and the federal law as affecting every single person.

Border Declaration

Perry claimed that President Obama said during a visit to El Paso, Texas, that the Mexico-U.S. “border is safer than it’s ever been.” He accused the president of either being an “abject liar” or receiving poor intelligence. But Perry misquoted Obama, and the factual record backs up what the president really said. In his May speech, Obama said border security had improved, but he also said “we’ve got more work to do” and made no explicit statement calling the border the safest in history.

Perry: For the president of the United States to go to El Paso, Texas, and say that the border is safer than it’s ever been, either he has some of the poorest intel of a president in the history of this country, or he was an abject liar to the American people. It is not safe on that border.

It got our attention when he called Obama an “abject liar,” so we looked at exactly what Obama said during his speech in which he called for “comprehensive reform” of the nation’s immigration laws. He discussed border security in the middle of his speech, when he addressed demands that the federal government needs to secure the border before it passes new immigration laws. He boasted that his administration had “strengthened border security beyond what many believed was possible,” citing a sharp increase in border patrol agents that began under President George W. Bush.

Obama, May 11: Under their leadership, we have strengthened border security beyond what many believed was possible. They wanted more agents at the border. Well, we now have more boots on the ground on the southwest border than at any time in our history. The Border Patrol has 20,000 agents — more than twice as many as there were in 2004.

Obama was close to correct about border patrol agents. Their numbers nearly doubled from 10,819 in fiscal year 2004 to 20,558 in fiscal year 2010.

The president also boasted that improved border security was “getting results,” citing increases in seizures of drugs, weapons and currency. He also said violent crimes in southwest border counties had declined 30 percent — a figure cited in testimony by Homeland Security Secretary Janet Napolitano and Border Patrol Chief Michael Fisher. That’s on a per capita basis over the last two decades, according to an Associated Press report. USA Today also did an analysis of crime trends in cities along the US-Mexico border, based on FBI reports from 1998 to 2009, and found similar results.

USA Today, July 18: The analysis found that rates of violent crime along the U.S.-Mexico border have been falling for years — even before the U.S. security buildup that has included thousands of law enforcement officers and expansion of a massive fence along the border. U.S. border cities were statistically safer on average than other cities in their states. Those border cities, big and small, have maintained lower crime rates than the national average, which itself has been falling.

As for El Paso itself, the city website shows that the number of violent crimes reported to the FBI steadily declined each year from 4,386 in 2001 to 2,426 in 2006. The steep decline in violent crimes occurred even though the city’s population grew by 8 percent from 2000 to 2006, Census figures show.

FBI statistics show the number of violent crimes have gone up in El Paso since then, but have remained relatively flat for the past two years at more than 2,800 in 2009 and again in 2010.

In wrapping up his discussion of border security, Obama said: “Of course, we shouldn’t accept any violence or crime. And we’ve always got more work to do. But this progress is important and it’s not getting reported on.”

Obama was clearly touting that progress, but Perry went too far when he claimed that Obama said the “border is safer than it’s ever been.”

Bachmann on Gasoline Prices

Rep. Michele Bachmann claimed that gasoline was just $1.79 a gallon at the time that Obama became president. That’s about right. But gas prices still never have been as high during the Obama administration as they were during the peak period under President George W. Bush.

Bachmann: Don’t forget the day that President Obama took office, gasoline was $1.79 a gallon. It’s entirely possible for us to get back to inexpensive energy.

The Minnesota congresswoman is in the ballpark about the price of gas when Obama took office. The average cost of a gallon of gasoline was slightly higher at $1.847 on Jan. 19, 2009, according to the Energy Information Administration. That was just one day before Obama was sworn in as president. Seven days later, the average price for a gallon of gas had dropped to $1.838.

But the cost of gasoline had been as high as $3.835 four months earlier in September, and it was at $4.113 two months before that in July. In fact, gas reached a high of $4.114 per gallon the week of July 7, 2008. The highest gas price during Obama’s presidency was $3.965 the week of May 9, 2011.

Furthermore, Bachmann’s suggestion that Obama is responsible for high gas prices is misleading, as we wrote in our March 24 article, “Is Obama to Blame for $4 Gasoline?”

Jobs, Jobs, Jobs

In one of the more feisty exchanges, Perry and Romney took jabs at each other for the rate of job growth during their respective terms as governor, each claiming his opponent’s record did not live up to that of his predecessors. Here’s how the exchange unfolded:

Perry: Michael Dukakis created jobs three times faster than you did, Mitt. Romney: Well, as a matter of fact, George Bush and his predecessor created jobs at a faster rate than you did, governor. Perry: That’s not correct. Romney: Yes, that is correct.

Who is correct? Perry’s right about Dukakis. And Romney is right about Bush and his predecessor, Ann Richards. So Perry was wrong when he said Romney was incorrect.

Still with us?

Let’s go to the Bureau of Labor Statistics’ state employment data.

Although Romney didn’t challenge Perry’s claim, let’s start with Dukakis vs. Romney. This is a little tricky, because Dukakis served two terms as governor of Massachusetts, from 1975 to 1979 and again from 1983 to 1991. Combined, Massachusetts added nearly 500,000 jobs when Dukakis was governor, according to BLS data. That’s just over 41,000 jobs a year. In total, Massachusetts saw job growth of 11.3 percent over Dukakis’ first term; and 9.2 percent over his second term. Under Romney – who served from January 2003 to January 2007 — Massachusetts gained just under 46,000 jobs, or 11,450 on average per year. If you look at the raw number of jobs, Dukakis added three times as many per year.

But to measure who saw “faster” job growth, we looked at the average yearly job growth. Dukakis saw jobs grow at an average yearly rate of nearly 1.5 percent, compared with .36 percent a year for Romney. So Perry’s numbers were on solid ground.

OK, now onto Perry vs. Bush.

Under Perry, the number of people employed in Texas went from 9,537,900 in December 2000, when he took office, to 10,619,800 in July 2011, the latest figures available. That’s an 11.3 percent increase. That comes to about 1 percent a year on average.

Bush served as governor from January 1995 to December 2000. During that time, the employment number went from 7,926,200 to 9,537,900. That’s a 20.3 percent increase over the length of his term, or about 3 percent per year on average.

Romney also said Bush’s predecessor did better than Perry. Bush’s predecessor was Ann Richards, who served from January 1991 to January 1995. During her term, the number of employed rose from 7,150,000 to 7,926,200. That’s a 10.9 percent increase, or 2.6 percent per year on average.

In other words, Texas experienced a faster rate of yearly job growth under both Bush and Richards than it has under Perry.

Perry also challenged debate host Brian Williams about some counter-arguments to Texas’ job growth figures.

Williams: But you know by now the counter-argument to that is the number of low-wage jobs and the fact that unemployment is better in over half the states of the union than it is right now in Texas. Perry: Well, the first part of that comment is incorrect, because 95 percent of all the jobs that we’ve created have been above minimum wage.

Actually, both of the claims in Williams’ question were correct.

Texas’ unemployment rate — while still below the national average — is now higher than that of 26 states.

As for Perry’s claim that 95 percent of all the jobs created in Texas have been above the minimum wage, that’s based on federal data for all workers in 2010, according to the Associated Press. That is not a statistic for just those working in newly created jobs — nor does such data exist.

Moreover, Williams was correct about his point about minimum-wage workers in Texas. According to a report from the Bureau of Labor Statistics, there were 550,000 hourly paid Texas workers making at or below the minimum wage of $7.25 per hour in 2010. Among hourly paid employees, that’s 9.5 percent. That ties Mississippi for the highest percentage of hourly workers making at or below minimum wage in the nation, according to BLS data.

Earlier, we looked at a number of other jobs-related claims made by Romney, Perry and former Utah Gov. Jon Huntsman and found that they cherry-picked facts to suit their arguments about job growth in their states during their terms as governors. You can read all about that in our Wire piece, “Spinning Job Growth: By the Numbers.”

— by Robert Farley, Brooks Jackson, Lori Robertson, D’Angelo Gore and Eugene Kiely

Correction, Sept. 15: In our original story we erroneously said Romney was wrong and Perry was right about the record of Ann Richards, one of Perry’s predecessors. We are retracting that call. While there has been a higher percentage of job growth over the entirety of Perry’s term in office, the percentage of jobs created per year, on average, was higher during Richards’ four-year term. And since Romney referred to the “faster rate” of job creation rather than the overall rate, Romney was correct. We have rewritten this section to reflect yearly job creation rates.

Sources

Social Security and Medicare Boards of Trustees, “Status of the Social Security and Medicare Programs; A Summary of the 2011 Annual Reports” May 2011.

U.S. Securities and Exchange Commission, “Ponzi Schemes – Frequently Asked Questions” Accessed 8 Sep 2011.

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Massachusetts Taxpayers Foundation. “Massachusetts Health Reform: The Myth of Uncontrolled Costs.” May 2009.

Elmendorf, Douglas W. CBO’s Analysis of the Major Health Care Legislation Enacted in March 2010. Testimony before Congress. Congressional Budget Office. 30 Mar 2011.

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Trinko, Katrina. “Which GOP Candidate Has the Best Job-Growth Record?” National Review Online – The Corner. 20 Jun 2011