A Project of The Annenberg Public Policy Center

Distortions Galore at Second Presidential Debate

Examples: Bush forgets he owns a tree-growing company. Kerry again inflates job-loss figures.


Summary

Both candidates played loose with the facts at the second Presidential Debate in St. Louis Oct. 8. Bush claimed Kerry’s health-care plan would lead to rationing and “ruin the quality of health care in America,” a claim unsupported by neutral experts. Kerry claimed the Bush administration had forced the Army Chief of Staff to retire for pushing to send more troops to Iraq, but in fact he retired on schedule.

We offer a sampler of the dubious and sometimes false statements made by each of the candidates.

Analysis

Bush’s Timber-Growing Company

Bush’s Timber Company

Kerry: The president got $84 from a timber company that owns, and he’s counted as a small business. Dick Cheney’s counted as a small business. That’s how they do things. That’s just not right.

Bush: I own a timber company?

That’s news to me.

(LAUGHTER)

Bush got a laugh when he scoffed at Kerry’s contention that he had received $84 from “a timber company.”  Said Bush, “I own a timber company? That’s news to me.”

In fact, according to his 2003 financial disclosure form, Bush does own part interest in “LSTF, LLC”, a limited-liability company organized “for the purpose of the production of trees for commercial sales.” (See “supporting documents” below.)

So Bush was wrong to suggest that he doesn’t have ownership of a timber company. And Kerry was correct in saying that Bush’s definition of “small business” is so broad that Bush himself would have qualified as a “small business” in 2001 by virtue of the $84 in business income.

Kerry got his information from an article we posted Sept. 23 stating that Bush on his 2001 federal income-tax returns “reported $84 of business income from his part ownership of a timber-growing enterprise.” We should clarify: the $84 in Schedule C income was from Bush’s Lone Star Trust, which is actually described on the 2001 income-tax returns as an “oil and gas production” business. The Lone Star Trust now owns 50% of the tree-growing company, but didn’t get into that business until two years after the $84 in question. So we should have described the $84 as coming from an “oil and gas” business in 2001, and will amend that in our earlier article.

Underfunded by $28 Billion?

No Child Left Behind “Underfunded” 

Kerry: No Child Left Behind Act, I voted for it. I support it. I support the goals.

But the president has underfunded it by $28 billion.

Kerry claimed the “the president has underfunded [the No Child Left Behind law] by $28 billion,” but that’s an opinion and not a fact.

Actually, as we reported last March, funding for the federal Department of Education grew a whopping 58% under Bush during his first three years, and Bush proposed another 5% increase for the fiscal year that began Oct. 1, including sizable increases in spending for children from low-income families and for special education for disabled children. Even the Kerry campaign’s own data — which they provided to FactCheck.org at our request — shows funding for programs specific to the No Child Left Behind law have increased by $2.7 billion, or 12%, since the new law was enacted.

What Kerry is referring to is an often-repeated Democratic charge that Bush broke a “promise” to fund the law at the maximum Congress allowed, or authorized. Though Kerry said Bush’s funding falls short of that maximum by $28 billion the figure usually given by Bush critics is $27 billion. And actually, Bush made no such promise. What he did promise was to “provide the resources necessary.” Many state officials and education experts do argue that even more funds are needed to provide resources necessary to meet the ambitious goals and standards set by the No Child Left Behind Act. Still, what’s “necessary” is a matter of opinion.

“They’re Working”

Drug Discount Cards “Working?”

Bush: There are other ways to make sure drugs are cheaper. One is to speed up generic drugs to the marketplace, quicker. Pharmaceuticals were using loopholes to keep brand — brand drugs in place, and generics are much less expensive than brand drugs. And we’re doing just that.

Another is to pass — to get our seniors to sign up to these drug discount cards, and they’re working.

Bush defended his opposition to importing cheaper, price-controlled drugs from Canada, saying another way to make drugs cheaper is “to get our seniors to sign up to these drug discount cards, and they’re working.” But in fact they’re not working nearly as well as originally advertised.

Seniors complain the cards are confusing, and healthcare advocates fault the Department of Health and Human Services for failing to effectively publicize the program. The Associated Press reported that of the 7 million poor seniors who are eligible for the card and a $600 subsidy, only 1.3 million have actually signed up to receive the discount.

And as widely reported, total enrollment — counting both poor and non-poor — is at 4.4 million, and over half of those were enrolled automatically by health maintenance organizations. The overall total is still 3 million shy of the number the administration predicted would be enrolled by the end of 2004.

Forced to Retire?

Gen. Shinseki

Kerry: General Shinseki, the Army chief of staff, told him he was going to need several hundred thousand. And guess what? They retired General Shinseki for telling him that.

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Kerry: General Shinseki had the wisdom to say, “You’re going to need several hundred thousand troops to win the peace.” The military’s job is to win the war.

Kerry claimed, as he had in the first debate, that the Army’s Chief of Staff, Gen. Eric K. Shinseki, was forced to retire for saying before the invasion of Iraq that many more troops were needed than the administration was planning to send.

It is true that Shinseki told the Senate Armed Services Committee on Feb. 25, 2003 that “something on the order of several hundred thousand soldiers” would be required for an occupation of Iraq. It is also true that Deputy Defense Secretary Paul Wolfowitz called that estimate “wildly off the mark” in testimony to the House Budget Committee on Feb. 27, 2003. And it is true that the general retired several months later on June 11, 2003.

But the administration didn’t force General Shinseki to retire. In fact, The Washington Times reported Shinseki’s plans to retire nearly a year before his Feb. 25, 2003 testimony. The Times article was published April 19, 2002:

Washington Times: He (Secretary of Defense Donald Rumsfeld) and Army Secretary Thomas White have settled on Gen. John M. Keane, Army deputy chief of staff, to succeed the current chief, Gen. Eric Shinseki. Gen. Shinseki does not retire for more than a year. Sources offer differing reasons for the early selection.

(Update, Oct. 11: We originally quoted in this space an Oct. 9 Washington Post story saying Gen. Shinseki’s pending retirement was leaked “in revenge” for his position on troop levels. Based on that, we said there was “some truth” to Kerry’s statement. However, the Post withdrew their report in a correction published Oct. 11).

$28 Billion a Year?

Defensive Medicine

Bush: Secondly, he says that medical liability costs only cause a 1 percent increase. That shows a lack of understanding. Doctors practice defensive medicine because of all the frivolous lawsuits that cost our government $28 billion a year.

Bush recycled his claim that lawsuits force physicians to practice “defensive medicine” that adds substantially to medical costs, and increases federal spending for health-care programs by $28 billion a year. We de-bunked that one back in January.

As we said then, both the General Accounting Office (recently re-named the Government Accountability Office) and the Congressional Budget Office criticize the 1996 study the Bush administration uses as their main support for that claim. These nonpartisan agencies suggest savings from passage of limits on malpractice damages  — if there are any savings at all — would be relatively small.

Bush’s claim rests mainly on a single 1996 study by two Stanford economists who said caps on damage awards could hold down overall medical costs by 5% to 9%. They studied heart patients who were hospitalized, compared costs in states with and without limits on malpractice lawsuits, and then projected their findings to the entire health-care system.

But both the GAO and the CBO questioned such a sweeping conclusion. When the CBO attempted to duplicate the Stanford economists’ methods for other types of ailments they found “no evidence that restrictions on tort liability reduce medical spending.”

Job Loss

Lost 1.6 Million Jobs?

Kerry: Now, the president has presided over an economy where we’ve lost 1.6 million jobs. The first president in 72 years to lose jobs.

Kerry misled when he claimed the economy has lost 1.6 million jobs under Bush. It is true that figures released earlier in the day show the economy is still down by 1.6 million private sector jobs since Bush took office, but the drop in total payroll employment — including teachers, firemen, policemen and other federal, state and local government employees — is down by much less than that — 821,000. Furthermore, the Bureau of Labor Statistics announced, with the release of the latest figures, that its yearly “benchmark” revision would add an estimated 236,000 payroll jobs to the total when made final next February. That means the best current estimate is that 585,000 jobs have been lost under Bush, about one-third of the number Kerry stated.

Kerry may turn out to be correct when he said Bush would be “the first president in 72 years to lose jobs.” Payroll employment has been growing at roughly 100,000 jobs per month for the past four months, and there are only four months to go — October, November, December and January — until the end of Bush’s term in January, 2005. (The number that will actually go into the economic history books won’t be known until February 2006, when the BLS publishes its final benchmark revisions of 2004 data).

Rationing of Health Care?

“Ruin the Quality of Health Care”

Bush: And finally, he said he’s going to have a novel health care plan. You know what it is? The federal government is going to run it.

It’s the largest increase in federal government health care ever. . . .

Government-sponsored health care would lead to rationing. It would ruin the quality of health care in America.

Bush escalated his attack on Kerry’s proposal to expand health-care insurance through an expensive assortment of subsidies and expansions of Medicare and Medicaid. The president stated Kerry’s plan “would lead to rationing” of medical care, and “would ruin the quality of health care in America.”

Bush’s attack in the debate echoed a grossly misleading claim made in his earlier TV ad, which said Kerry’s health plan would put “Washington bureaucrats in control” of medical decisions, putting “big government in charge. Not you. Not your doctor.” That view isn’t supported by neutral experts, however, as we reported on Oct. 4.

Actually, an estimated 97% of Americans who now have health insurance will simply keep the plan they have, according to projections by the independent, politically neutral health-care research firm The Lewin Group.

And The Lewin Group’s vice president, John Sheils, disputes the Bush ad’s claim:

Sheils: I don’t see how, in Kerry’s plan, decisions on medical procedures would be made in Washington under any circumstances, under any proposal.

Republican partisans argue that Kerry’s plan will lead to increased government oversight. For more on what neutral experts say, see our earlier article.

$139 Billion

Windfall for Drug Companies?

Kerry: He put $139 billion of windfall profit into the pockets of the drug companies right out of your pockets. That’s the difference between us. The president sides with the power companies, the oil companies, the drug companies.

Kerry said Bush’s Medicare prescription drug benefit, set to begin in 2006, will “put $139 billion of windfall profits into the pockets of the drug companies, right out of your pockets.”

Kerry bases his claim on one disputed study by two Bush critics who once wrote that his prescription drug bill is “breathtaking in its recklessness.” The study was published last fall by Boston University researchers Alan Sager and Deborah Socolar, who concluded that 35% of the $400 billion cost that was projected at the time — or $139 billion — would be “windfall profits” to drug companies. Their findings are contradicted by a study in March 2004 commissioned by the Pacific Research Institute, which describes itself as a “free-market think tank.” They hired the accounting firm PricewaterhouseCoopers, which estimated drug company profits much lower — from an increase of 3.2% to a possible decline of 1%.

According to Investors Business Daily, the two studies make starkly different assumptions about whether the new drug benefit will cause seniors to buy a lot more medication thereby increasing sales, and also about the extent to which competition among different drug plans will force drug companies to offer rebates and discounts to get the business. (The federal government itself is barred from demanding volume discounts under the terms of Bush’s legislation).

Other Dubious Claims

  • Bush said Kerry voted 98 times to “raise taxes” during his 19-year Senate career. But as we reported Aug. 30, the Bush campaign’s list of votes includes 43 votes for budget measures that merely set targets for taxes without actually legislating changes to the tax code. And it counts multiple votes on the same bills, including 16 votes on the 1993 Clinton package of tax increases and spending cuts.
  • Bush once again claimed 900,000 “small businesses” would see a tax increase under Kerry’s proposal to raise taxes only on persons making over $200,000 a year. As we showed earlier, that’s an inflated number. The nonpartisan Tax Policy Center calculates that 471,000 small employers would see an increase in taxes.
  • Kerry said that the Duelfer report on the unsuccessful search for weapons of mass destruction in Iraq had demonstrated that United Nations sanctions against Iraq “worked.” Actually, that report “did not draw a firm conclusion about whether the sanctions and inspections succeeded in disarming Iraq,” according to the New York Times Oct. 9.
  • Bush claimed that “we increased that child credit by $1,000,” when in fact it has increased by half that much under his legislation. It was $500 before Bush took office, and his tax-cut bills doubled it.
  • Kerry closed by saying “I have a plan to provide health care to all Americans.” He doesn’t. His plan would extend coverage to between 24 and 27 million Americans who don’t have it now, depending on which estimate one chooses. But none of the estimates predict “all” would be insured. A study by the independent Lewin Group, for example, projects that 92% would have coverage, up from just under 86% in 2003.

 

Sources

2001 Federal Income Tax Returns of George & Laura Bush, Tax History Project.

2003 Public Financial Disclosure of George W. Bush, Opensecrets.org.

Eric K. Shinseki. U.S. Senate Armed Services Committee Hearing. 25 Feb. 2003 .

Eric K. Shinseki, Prepared Remarks at Farewell Ceremony , 11 June 2003 .

Paul Wolfowitz. U.S. House Budget Committee. 27 Feb. 2003 .

Bill Gertz and Rowan Scarborough , “Inside the Ring,” Washington Times, 19 April 2002 .

Bradley Graham. “Retired General Picked to Head Army; Rumsfeld’s Choice of Schoomaker Expected to Rankle Many in Uniform.” The Washington Post 11 June 2003.

Thom Shanker, “Retired Commando Chief Is Chosen to Lead the Army.” The New York Times, 11 June 2003.

Thom Shanker, “Retiring Army Chief of Staff Warns Against Arrogance.” The New York Times, 12 June 2003.

“Speech to the 2004 National Urban League Conference: Remarks of Senator John Kerry,” 22 July 2004.

Remarks by the President to the United States Conference of Mayors,” 25 June 2001 .

Glenn Kessler and Ceci Connolly, “A Primer for Tonight’s First Debate; Both Bush and Kerry Have Set the Stage With Some Misleading Claims,” The Washington Post, 30 Sept. 2004: A06.

Mark Sherman, “Medicare to Mail Discount Drug Cards,” The Associated Press, 21 Sept. 2004.

Robert Pear, “Low-Income Nonapplicants To Get Medicare Drug Cards,” The New York Times, 22 Sept. 2004: A18.

Employment Situation Summary, US Bureau of Labor Statistics, news release, 9 Oct. 2004.

“Bush and Kerry Health Proposals, Cost and Coverage Compared,” The Lewin Group, 21 Sept. 2004.

David Rosenbaum, “Different Interpretations on War, Jobs and Health,” The New York Times, 9 Oct. 2004.

Howard Kurtz, “AD WATCH: Kerry Charges Bush With ‘Giveaway,’” The Washington Post, 17 Sept. 2004 : A06.

Alan Sager and Deborah Socolar, “Prescription Drug Imprudence,” The Washington Post, 27 April 2003 : B06.

Alan Sager and Deborah Socolar, Boston University School of Public Health, “61 Percent Of Medicare’s New Prescription Drug Subsidy Is Windfall Profit To Drug Makers,” 31 Oct. 2003.

Amy Reeves, “Some Argue Competition Will Cap Costs Of Medicare Drug Plan; Controversy Is Hotly Debated; Even drug makers, analysts can’t agree on whether law will bring big pharma profits,” Investors Business Daily, 22 March 2004: A12.