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State of the Union: Fact-checking Obama's speech

State of the Union: Fact-checking Obama's speech

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Published by - michael -
President Obama focused about 80% of his State of the Union Address on the economy, offering proposals designed to create jobs, make the United States more competitive with other developed nations and reduce future budget deficits. Those goals can conflict, however.
President Obama focused about 80% of his State of the Union Address on the economy, offering proposals designed to create jobs, make the United States more competitive with other developed nations and reduce future budget deficits. Those goals can conflict, however.

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Published by: - michael - on Jan 27, 2011
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01/27/2011

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State of the Union: Fact-checking Obama's speech
By Richard Wolf and Gregory Korte,
USA TODAY
Tuesday, January 25, 2011
President Obama focused about 80% of his State of theUnion Address on the economy, offering proposalsdesigned to create jobs, make the United States morecompetitive with other developed nations and reducefuture budget deficits. Those goals can conflict, however.Here's a look behind the rhetoric:
Statement:
"Cutting the deficit by gutting our investments in innovationand education is like lightening an overloaded airplane byremoving its engine. It may make you feel like you're flyinghigh at first, but it won't take long before you'll feel theimpact."
• Reality check:
This is the central thesis of Obama's speech — that the United States needs toinvest in clean energy technology, a crumbling physical infrastructure and education in order tocompete better with developing nations such as China and India.The president says any investments should not increase the deficit, but he didn't say how to do that,other than by eliminating billions of dollars in tax breaks to oil companies. House TransportationCommittee Chairman John Mica, R-Fla., has mentioned using money left over from the $814 billionstimulus law passed in 2009. Ed DeSeve, the White House point man on stimulus implementation,said in October that only $110 billion remained unspent, including $45 billion in tax cuts.And the Highway Trust Fund — which also helps pay for mass transit — can't pay for currenttransportation needs without raising the gas tax, now 18.4 cents-a-gallon, the Congressional BudgetOffice says. At the current rate of spending and gas tax collections, CBO analyst Chad Shirley wrotelast week, the highway account "would be unable to meet its obligations sometime during fiscal year 2012.""Big-government advocates have a history of calling nearly all government spending 'investment,'because it sounds better," says Brian Riedl of the conservative Heritage Foundation. "It's verydangerous to claim these investments will pay for themselves."
Statement:
"Now that the worst of the recession is over, we have to confront the fact that our government spendsmore than it takes in. That is not sustainable."
• Reality check:
Obama revised last year's proposal to freeze domestic spending, excluding SocialSecurity, Medicare and Medicaid, defense, homeland security and veterans programs. Now he wantsfive years, not three. But by exempting so much, the freeze would apply to only about $500 billion of a$3.8 trillion budget — "a fairly narrow part," White House economic adviser Gene Sperling admits.
 
The White House claims the freeze would save $400 billion over 10 years. It says the part of thebudget to be frozen, measured as a share of the nation's economy, is lower than it's been in ahalf-century.Republicans want to cut spending much more. House GOP leaders, led by Speaker John Boehner,want to cut $100 billion this year and about $1.5 trillion over 10 years by reverting to 2008 spendinglevels. Conservative Republicans led by Rep. Jim Jordan of Ohio want to go further, saving $2.5 trillionover 10 years by reverting to 2006 spending levels.
Statement:
"Over the years, a parade of lobbyists has rigged the tax code to benefit particular companies andindustries. … Those with accountants or lawyers to work the system can end up paying no taxes at all.But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense, andit has to change."
• Reality check:
By focusing only on corporate taxes, the president is putting off a more sweepingoverhaul of the tax code called for by his bipartisan fiscal commission and other panels.He would eliminate or reduce many of the tax breaks inserted into the tax code for specific industriesand use the money to lower the 35% corporate tax rate, which is the highest among 31 developedcountries ranked by the Organization for Economic Cooperation and Development.Lower rates might be good for most corporations — but fewer than 6 million businesses, or 18% of thenation's total, file as corporations. More than 23 million, or 72%, are sole proprietorships, while 3million more, or nearly 10%, are partnerships. "I am certain that they do not want to be left out of taxreform," says R. Bruce Josten, an executive vice president of the U.S. Chamber of Commerce.
Statement:
"Most of the cuts and savings I've proposed only address annual domestic spending, which representsa little more than 12% of our budget. To make further progress, we have to stop pretending thatcutting this kind of spending alone will be enough. It won't."
• Reality check:
Beyond his proposed domestic spending freeze, which comes with lots of exclusions,Obama didn't take the lead on broader deficit reduction. He spoke about the need to protect SocialSecurity for future generations and to get further savings in health care beyond those envisioned in theoverhaul signed last year, but there were no specifics.Budget watchdogs had hoped Obama would embrace specific proposals from the bipartisancommission that last month voted 11-7 for major spending cuts, tax increases and changes to SocialSecurity and Medicare. The federal budget deficit stands at $1.3 trillion, and the accumulated nationaldebt is $14.1 trillion."A spending freeze is a step in the right direction, but it is only one element of the long-term fiscal planwe need," says Pete Peterson, chairman of the Peter G. Peterson Foundation, a fiscal watchdoggroup. "We cannot become more of an investment economy if we don't have future resources toinvest."
Statement:
"To help businesses sell more products abroad, we set a goal of doubling our exports by 2014 —because the more we export, the more jobs we create at home. Already, our exports are up."
• Reality check:
Obama called for doubling U.S. exports in five years during last year's State of theUnion address. He's on track so far: U.S. exports in the first 11 months of 2010 were up 17%,

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