Myths and falsehoods relating to President Obama's budget proposal

Following the release of President Obama's proposal for the fiscal year 2010 budget, media figures and outlets have promoted a number of myths and falsehoods about the proposal. These myths and falsehoods include the suggestion that Obama's proposal would increase taxes on a large percentage of small businesses and the suggestion that using reconciliation to pass major policy goals would represent an unusual or unprecedented tactic. Media have also engaged in a pattern of criticizing Obama for addressing heath care in the budget or elsewhere, given the size of the current and projected U.S. federal debt, without addressing the president's response that health-care reform is essential to the long-term economic and fiscal health of the country.

1. Obama's budget proposal would increase taxes on a large percentage of small businesses

Many media figures and outlets, including CNBC host Joe Kernen, CNBC host Maria Bartiromo, ABC News' Jake Tapper, CNN's Dana Bash, Fox News' Sean Hannity, CNN's David Gergen, Politico, the Associated Press, The Washington Post, and The New York Times, have advanced, uncritically repeated, or failed to challenge the debunked Republican falsehood that Obama's income tax proposals would increase taxes on a large percentage of small businesses. For example, Kernen didn't challenge Sen. Judd Gregg (R-NH) on the March 26 edition of CNBC's Squawk Box after Gregg referred to Obama's proposal as a "tax policy that basically is focused on raising taxes on small businesses especially."

In fact, according to the Tax Policy Center's table of 2007 tax returns that reported small-business income, 481,000 of those returns -- about 2 percent -- are in the top two income tax brackets, which include all filers with taxable incomes that would be affected by Obama's proposals to let portions of the Bush tax cuts for wealthy taxpayers expire and to reduce the tax rate at which families making more than $250,000 could take itemized deductions.

2. Using reconciliation to pass major policy goals would be an unusual or unprecedented tactic

Media figures and outlets have advanced the falsehood that the Democrats' potential implementation of the budget reconciliation process, which would allow Congress to pass "policy changes in mandatory spending (entitlements) or revenue programs (tax laws)" by a simple majority in both Houses, is unusual, unprecedented, or was not recently used by Republicans. A March 31 article in The Hill, for instance, pointed to "GOP critics" claiming that the reconciliation process "was never intended to ram through major legislation" but did not mention that Republicans used the budget reconciliation process to pass several major Bush initiatives, as The New York Times and the blog Think Progress have noted. Similarly, Fox News correspondent Molly Henneberg made the false claim on the March 27 edition of Special Report that "[r]econciliation was last used in 2001 by Republicans to pass the first Bush tax cuts" -- an "error" for which her colleague Bret Baier later "apologize[d]," noting that Republicans had in fact used reconciliation more recently. Indeed, Republicans used the process to pass Bush's initiatives throughout his tenure, including the Economic Growth and Tax Relief Reconciliation Act of 2001, the Jobs and Growth Tax Relief Reconciliation Act of 2003, and the Tax Increase Prevention and Reconciliation Act of 2005.

Additionally, Hannity falsely claimed on March 20 that reconciliation would allow the Obama administration to pass legislation "without any Republicans even having an opportunity to vote." In fact, the budget reconciliation process does not deny Republicans or any member of Congress "an opportunity to vote." According to the House Rules Committee's description of the budget reconciliation process, the version of reconciliation legislation agreed to during the conference process is then "brought back to the full House and Senate for a vote on final passage. Approval of the conference agreement on the reconciliation legislation must be by a majority vote of both Houses."

3. Obama should not attempt health-care reform given the current and projected federal debt

Many media figures have claimed or suggested that given the size of the current and projected U.S. federal debt, the Obama administration's health-care reform proposal is untenable. For instance, Hannity said on March 26 that "Obama wants to expand government. We've got health care, unbelievable amounts of spending -- we're gonna bankrupt the country." However, in making such statements, neither Hannity nor other media figures addressed the argument Obama has repeatedly made in response to such claims: that health-care reform is essential to the long-term economic and fiscal health of the country.

For instance, during the question-and-answer session following his March 24 press conference, Obama said: "What we have to do is bend the curve on these deficit projections. And the best way for us to do that is to reduce health care costs. That's not just my opinion; that's the opinion of almost every single person who has looked at our long-term fiscal situation." Indeed, Office of Management and Budget director Peter Orszag, who formerly headed the Congressional Budget Office, said in March 4 testimony before the House Ways and Means Committee about the administration's 2010 budget that "[t]he principal driver of our Nation's long-term budget problem is rising health care costs." Orszag continued:

If costs per enrollee in our two main Federal health care programs, Medicare and Medicaid, grow at the same rate as they have for the past 40 years, those two programs will increase from about 5 percent of GDP today to about 20 percent by 2050. (As the Congressional Budget Office (CBO) and others have noted, there are reasons to expect cost growth to slow in the future relative to the past even in the absence of policy changes. But the point remains that reasonable projections of health care cost growth under current policies shows that they are the central cause of the Nation's long-term fiscal imbalance.) Many of the other factors that will play a role in determining future fiscal conditions -- including the actuarial deficit in Social Security -- pale by comparison over the long term with the impact of cost growth in the Federal government health insurance programs. Health care is the key to our Nation's fiscal future, and health care reform is entitlement reform. [emphasis added]