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A Project of The Annenberg Public Policy Center

Straining the Facts on Federal Spending

A TV ad by a conservative group gives some factually challenged answers to its own rhetorical question, “How exactly does President Obama spend your tax dollars?”

  • It wrongly claims that the boss of the General Services Administration “couldn’t make it to Vegas because she had meetings planned … at Solyndra.” That’s not true. The claim linking the two scandals is based on an inaccurate April 10 report that was quickly corrected — nearly two weeks before the ad first aired.
  • The ad incorrectly characterizes federal loan guarantees to clean-energy firms as “handouts.” In fact, the low-interest loans are supposed to be repaid and only 2 percent have gone bad.
  • It displays the flag of China while stating that $2.3 billion in clean-energy stimulus money went for “jobs overseas.” But Chinese firms got a small fraction of that, and it’s not known how many jobs were created in China or any other foreign country. Companies in Spain, Germany, Portugal, Australia, Japan, Italy, France and the United Kingdom received nearly all of that money, and some foreign-based companies have manufacturing facilities in the U.S.

The American Future Fund, a conservative group started by Republican activists in Iowa, announced on April 24 that it would spend $2 million on a TV ad called “On the Hook.”

It opens with a couple working on their taxes and asks the question, “How exactly does President Obama spend your tax dollars?” The answer, of course, is on big-ticket items like Social Security ($735 billion), defense ($700 billion), Medicare ($480 billion) and Medicaid ($480 billion) — which combined accounted for nearly $2.2 trillion of the $3.6 trillion budget in fiscal year 2011, according to the Congressional Budget Office.

Instead, though, the ad focuses on a few recent examples of misspent federal money that amount to a minuscule slice of the federal pie.

The ad says the Obama administration gave “billions in handouts to green companies like Solyndra, which went bankrupt.” These are federally guaranteed loans, not free “handouts” — although in Solyndra’s case the company did file for bankruptcy and taxpayers are on the hook for most of the $535 million it borrowed.

There are two loan guarantee programs: section 1703, which was created under the Energy Policy Act of 2005, and section 1705, which was created under the American Recovery and Reinvestment Act of 2009. The Energy Department has committed $34.7 billion to nearly 40 projects under the low-interest loan  programs, according to information published on its website. Two of them — Solyndra ($535 million) and Beacon Power Co. ($43 million) — have filed for bankruptcy, according to a March 12 report by the Government Accountability Office. That’s a total of $578 million, or less than 2 percent of the total program. (EnerDel, a maker of electric-car batteries, filed for bankruptcy in February after receiving $55 million of a $118.5 million grant under a separate federal grant program.)

The ad also says the “billions in handouts” went for “jobs overseas.” But the image on the screen is misleading. The ad shows a picture of the Chinese flag and the words “$2.3 billion to jobs in foreign countries.” The statement is largely true, but Chinese companies got little of that $2.3 billion, as we reported when this issue first came up in the 2010 elections.

The ad cites a Sept. 9, 2010, story in the Washington Times, which reported that “as much as 80 percent of some green programs, including $2.3 billion of manufacturing tax credits, went to foreign firms that employed workers primarily in countries including China, South Korea and Spain, rather than in the United States.” That story referenced the reporting of Russ Choma, an investigative reporter then working at American University’s Investigative Reporting Workshop, who wrote that companies based overseas were receiving stimulus money to build wind farms in the U.S. On Sept. 27, 2010, Choma wrote that about $2.38 billion in stimulus money went to foreign developers — but he told us at the time that only $2.6 million went to firms in China. He could not say how many jobs were created in China or any other foreign country.

Choma, Sept. 27, 2010: Some of those foreign-owned turbine manufacturers have factories in the United States and some American-owned turbine manufacturers have factories overseas. We simply don’t know where all of the parts were made. We found several specific examples of major wind farms where we know none of the parts were made in the United States.

But … it should be noted there were no farms that we could find that used turbines entirely built in China, so we can’t say for sure how much of this stimulus money went to create jobs in China. Some money definitely did, but it is safe to say more money went to creating jobs in the U.S. and Europe.

Choma, who now works at the Center for Responsive Politics, told us in an email that he had not updated his figures since September 2010. “They’ve given out a lot more money since then — and I’m sure much of the money, that went to at least the wind companies, continued to go to foreign-owned ones, because that’s who dominates the market.” Regardless, the ad misuses the 2010 figure of $2.3 billion.

The ad accurately portrays the wasteful spending at GSA, which burned more than $800,000 at a conference it held in Las Vegas that included clowns, a mind reader and bicycle building as a team exercise. There were also trips by GSA officials to exotic locales, including one to Hawaii for a brief ribbon-cutting ceremony that prompted the agency’s inspector general to say: “I can’t see how anyone can condone that.”

But the ad strains the facts when seeking to tie together the Solyndra bankruptcy, which likely will cost taxpayers nearly $535 million, and the GSA scandal. The ad says that “in an ironic twist,” the GSA administrator “couldn’t make it to Vegas because she had meetings planned … at Solyndra.” But that was based on an inaccurate April 10 report, which was corrected a day later and nearly two weeks before the ad first aired.

Like the inspector general, we don’t condone government misspending. But neither do we condone stretching the truth. This is one of those cases when sticking to the facts would have better served American Future Fund — and its viewers.

— Eugene Kiely