First, it was Sarah Palin. Now, it’s former Sen. Fred Thompson. They’re both touting a highly misleading Republican talking point on the expiration of the Bush tax cuts.
Thompson, who ran for the Republican presidential nomination in 2008, warns in a new ad sponsored by the conservative League of American Voters: "Folks, America’s economy is struggling and Congress is about to make it a whole lot worse." He’s talking about the "massive automatic tax increase at the end of this year, when the Bush tax cuts expire," he explains. But Congress isn’t about to let this automatic increase take effect; in fact, congressional leaders say they are about to extend most of the Bush tax cuts.
As we wrote earlier this week, after Palin made a similar claim on "Fox News Sunday," Senate committee hearings on renewing most of the cuts began in mid-July. President Barack Obama and congressional Democrats have supported extending the Bush tax cuts for everyone making under $200,000 a year ($250,000 a year for families). Obama campaigned on this issue, and he has proposed a budget for next year that follows through on the promise.
Despite these well-known facts, Thompson lists the effects of letting the cuts expire, as scheduled, as if this is "about to" happen. It’s not. He says "your income taxes could increase by 10 percent or more," as the words "Every bracket up 10% or more" pop up on screen. He also warns of higher capital gains and dividend taxes. But the Democrats’ plan would only affect the top two tax brackets. About 2 percent of all households in the U.S. earn more than $250,000 a year.
If Congress switches course and does nothing, the tax cuts would expire — that’s true. But Thompson is being disingenuous when he says Congress is "about to" do these things. Similarly, Palin claimed that Democrats were "poised now to cause this largest tax increase in U.S. history." Actually, they’re "poised" and "about to" extend these tax cuts for the vast majority of Americans. Congress even passed budget rules this year allowing them to do so without finding a way to offset the cuts with spending reductions.
Spinning Bernanke’s Words
Thompson goes on to claim that Federal Reserve Chairman Ben S. Bernanke "urged Congress not to raise taxes, saying the economy is just too fragile." That’s not what Bernanke said. Instead, the Fed chairman said that extending the tax cuts was "one way" to help the economy — but said they should be offset in order not to increase the deficit. That’s clear from the very source the ad cites: a July 22 Bloomberg News article reporting on the Fed chief’s testimony at a House hearing.
The story is accurate. We checked the full transcript, and here’s the relevant portion of what Bernanke said, under questioning from Republican Rep. Spencer Bachus of Alabama, slightly edited for length.
Bachus, July 22: What about the tax cuts that are due to expire at the end of this year? Should they be continued?
Bernanke: There’s a lot of different issues involved there. … In the short-term, I would believe that we ought to maintain a reasonable degree of fiscal support, stimulus for the economy. There are many ways to do that. This is one way. There are other ways as well. In the longer term, I think we need to be taking steps to reassure the American people and the markets that our fiscal situation is going to be well-controlled.
Bernanke: Now that means that if you extend the tax cuts, you need to find other ways to offset them.
Former Fed Chairman Alan Greenspan has echoed that view, saying on NBC’s "Meet the Press" Aug. 1 that any extension of the tax cuts should be paid for with other measures. "Look, I’m very much in favor of tax cuts, but not with borrowed money," Greenspan told host David Gregory. "And the problem that we’ve gotten into in recent years is spending programs with borrowed money, tax cuts with borrowed money, and at the end of the day, that proves disastrous."
Last month, Greenspan had told Bloomberg Television that Congress "should follow the law and let [the tax cuts] lapse." Yes, that would mean higher taxes, he said. "The problem is, unless we start to come to grips with this long-term outlook, we are going to have major problems. I think we misunderstand the momentum of this deficit going forward."
At the end of the ad, Thompson says, "Taxes will increase automatically, unless you act." He urges viewers to call their lawmakers. But he has given viewers a misleading picture of what they’re calling about.
We saw Thompson’s ad on CNN. The League of American Voters, a relatively unknown group that shares an address with the conservative Americans for Tax Reform, lists only an e-mail address as contact information on its site. We’ve contacted the group for more information on the TV spot but we haven’t received a response.