Obama Twists Romney’s Economic Record

Summary

A new ad from the Obama campaign takes aim at Mitt Romney’s performance as governor of Massachusetts, claiming he had “one of the worst economic records in the country.” But the ad overreaches with several of its claims.

  • The ad states that job creation in Massachusetts “fell” to 47th under Romney. That’s a bit misleading. Massachusetts’ state ranking for job growth went from 50th the year before he took office, to 28th in his final year. It was 47th for the whole of his four-year tenure, but it was improving, not declining, when he left.
  • The ad’s claim that Romney “cut taxes for millionaires” isn’t as black-and-white as billed. Romney opposed a plan to impose a capital gains tax retroactively, insisting on delaying the hike eight months. That’s different than pushing for a tax cut.
  • The ad claims that Romney raised taxes on the middle class. It’s true that Romney imposed a number of fees, but none of them targeted middle-income persons. Also, Romney proposed cutting the state income tax three times — a measure that would have resulted in tax cuts for all taxpayers — but he was rebuffed every time by the state’s Democratic Legislature.
  • The ad claims Romney “left the state $2.6 billion deeper in debt.” It’s true that long-term bond debt — used for capital improvements — rose under Romney, as it had in the years before he took office. But Romney wasn’t piling up yearly deficits to support operating expenses the way the federal government is, because Massachusetts requires balanced budgets.
  • The ad claims that when Romney was governor, “Massachusetts lost 40,000 manufacturing jobs, a rate twice the national average.” That’s close to true, but the state lost a greater number of manufacturing jobs in the four years before Romney took office, and more in the four years after he left. In fact, the rate of job loss in manufacturing slowed during Romney’s time as governor.
  • The ad claims Romney “outsourced call center jobs to India.” Not exactly. What he did was veto a measure that would have prevented the state from doing business with a state contractor that was locating state customer-service calls in India. Democrats who controlled the Legislature could have overridden the veto, but didn’t. The veto was supported by leading newspapers as a savings to taxpayers.

Analysis

Massachusetts ‘Fell’ to 47th?

The ad puts a new twist on a well-worn statistic used by Democrats (and by Republican rivals during the primary) that when Romney was governor, Massachusetts “fell to 47th in job creation.” It’s true that over Romney’s four years as governor, the state ranked 47th out of 50 states in percentage of job growth. It had ranked 37th in the four years prior. And it’s also true that Massachusetts added only 49,100 net jobs for an increase of about 1.5 percent, which was far slower than the national average of 5.3 percent, according to data from the Bureau of Labor Statistics. But there’s another way to look at the numbers.

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Obama Campaign Ad: We’ve Heard It All Before

Announcer: It started like this.

Romney: I speak the language of business. I know how jobs are created.

Announcer: But it ended like this: One of the worst economic records in the country. When Mitt Romney was governor, Massachusetts lost 40,000 manufacturing jobs — a rate twice the national average — and fell to 47th in job creation, fourth from the bottom. Instead of hiring workers from his own state, Romney outsourced call-center jobs to India. He cut taxes for millionaires like himself, while raising them on the middle class. And left the state $2.6 billion deeper in debt. So now, when Mitt Romney talks about what he’d do as president, remember, we’ve heard it all before.

Romney: I know how jobs are created.

Announcer: Romney economics. It didn’t work then, and it won’t work now.

We looked at BLS figures for each year of Romney’s tenure. (This is tricky business. State rankings can shift depending on which start and stop dates one selects. We looked at January to January, seasonally adjusted figures to coincide most closely to when Romney took office Jan. 2, 2003 and left office Jan. 4, 2007). In the 12 months before he took office, the state ranked 50th in job creation, and for his first 12 months in office, that remained 50th. But by his final year the state ranked 28th. That’s still mediocre, but an improvement, and not a decline, as the ad would lead viewers to believe.

It’s a point made by Romney backers — including campaign spokesman Eric Fehrnstrom on ABC’s “This Week” on June 3., and senior adviser Ed Gillespie on “Fox News Sunday” the same day. But they exaggerate slightly by comparing Romney’s first year to his last, and by saying he went from 50th to 30th. But that would absolve Romney of all responsibility for job creation in his first year, a concession Republicans never grant to Obama.

The year before Romney took office, employment in Massachusetts fell by 1.84 percent. That put it in 50th, dead last. Massachusetts remained 50th in Romney’s first year, but the ranking steadily improved year by year. In Romney’s last year in office, the state saw a 1.32 percent increase in jobs, ranking Massachusetts 28th. Again, those are one-year snapshots as opposed to the cumulative four-year number.

Our fact-checking colleagues at the Washington Post put together a chart comparing the jobs records of Obama, as president, and Romney, as Massachusetts governor, at similar points in their terms of office. Ironically, what the chart shows is a fairly similar trajectory under both men.

Glenn Kessler, Washington Post, June 1: The similarities are actually more striking than the differences. Both men took office as the economy was plunging, but the hole (in percentage terms) turned out to be much deeper for Obama. The jobs picture started to turn around for both men at about the same time, but because Romney’s job deficit was comparatively smaller, he moved into positive territory sooner — though it still took him 36 months.

Voters have been bombarded with jobs statistics throughout this campaign season and that doesn’t seem likely to abate any time soon. What should be clear by now is that jobs data can be sliced in many different ways to suit one’s purposes. And we will offer our usual caveat that most economic experts we speak to caution not to put too much weight on blaming or praising governors for state jobs statistics.

“The governor has very little control over our local economy,” said Michael Widmer, of the nonpartisan Massachusetts Taxpayers Foundation. “The numbers are the numbers, but the larger reality is that these external forces are what really drove it. The numbers reflect larger economic realities.”

Tax Cuts for Millionaires?

The ad claims that as governor, Romney “cut taxes for millionaires like himself.” Like many political claims, there’s a grain of something here, but it’s not as black-and-white as the ad suggests. More accurately, Romney delayed for one year a proposed retroactive tax hike that disproportionately hit the wealthy. We’ll explain.

In 2002, before Romney became governor, the Legislature enacted a package of tax increases to deal with a deficit crisis. The package included a capital gains tax that was slated to go into effect in May 2002. But that tax was challenged in court and the state’s Supreme Judicial Court ultimately struck down the tax, ruling that it was unconstitutional for the tax to go into effect halfway through the year. That left the state Legislature with two possible remedies: have the tax kick in on Jan. 1, 2003 — and refund eight months’ worth of capital gains tax revenue — or make it retroactive to Jan. 1., 2002, adding another four months’ worth of tax revenue. The Democratic Legislature decided to make it retroactive to the start of 2002.

The Boston Globe reported that as a result, 48,000 taxpayers got a tax bill seeking the additional four months’ capital gains taxes, retroactively. The amount owed was an average of $4,200 each. About $78 million was owed by just 278 wealthy people who would have to pay an average of $281,000 each, the Globe reported. So that’s where the ad’s claim about tax cuts for millionaires comes from.

Romney argued it was unfair for people who made decisions, like selling their home, based on the tax law in place at the time to be forced to retroactively buck up. Romney argued that “the state made a mistake, and in all fairness, we have to make sure that people are not taxed retroactively.” He proposed that anyone who paid the tax in 2002 get a rebate.

The Boston Globe’s editorial page said it was simply the right thing to do. The nonpartisan Massachusetts Taxpayers Foundation also urged the state Legislature to refund the 2002 money.

The Legislature was inundated with angry letters from folks who got notices of their retroactive tax bills. And in December 2005, Senate President Robert Travaglini and House Speaker Sal DiMasi, both Democrats, said folks could ignore those tax bills.

According to the Boston Herald, “Travaglini and DiMasi said they weren’t caving to public outrage over the issue — just trying to right a wrong.”

“It’s based on fairness,” Travaglini said.

Romney promptly signed legislation to refund any increased tax paid in 2002 and have the tax hike begin in 2003, and he vowed to donate anything he received back to charity. And, we should note, the tax was still in effect from 2003 forward.

Raised Taxes on the Middle Class?

The Obama ad claims that Romney cut taxes for the wealthy, “while raising them on the middle class.”

Although Romney opposed across-the-board tax increases, he did raise a number of fees. In 2003, Romney doubled fees for court filings (which include marriage licensing fees), professional registrations and firearm licenses. Romney also quintupled the per gallon delivery fee for gasoline. All told, the fees raised more than $400 million in their first year.

But none of those fees specifically targeted the middle class, or even fell more heavily on the middle class. In fact, some of them  — such as boat registration fees — probably fell more on the wealthy. The most revenue came from a fee on registering a deed with the state when you purchase a home. That certainly hit middle-income taxpayers, but also wealthy and lower-income people.

We should also note that in 2004, 2005 and 2006, Romney proposed cutting the state’s income tax rate from 5.3 percent to 5 percent — which would have provided a bit of tax relief to everyone, including the middle class. In every case, his efforts were rebuffed by the Democratic Legislature.

Misleading on Debt

The ad also makes the misleading claim that Romney “left the state $2.6 billion deeper in debt.” Massachusetts requires balanced budgets, so Romney wasn’t piling up yearly operating deficits that added to state debt — the way the federal government has. Instead, the ad refers to long-term bond debt, used for capital improvements, such as paving roads, building bridges and repairing public college buildings and courthouses.

It’s true that the long-term debt went from $16 billion on Jan. 1, 2003, just before Romney took office, to $18.7 billion on Oct. 1, 2006, three months before he left. That’s an increase of $2.7 billion. But that’s nothing out of the ordinary. From June 30, 1999, to Jan. 1, 2003 (a comparable length of time), the long-term debt in Massachusetts went from nearly $12 billion to $16 billion, a $4 billion increase.

So, the increase under Romney isn’t exactly startling news. If anything, it could be argued that the state debt grew by less than it did in a similar time period before Romney was sworn in.

“It’s pretty much standard operating procedure that the amount of debt we issue grows at a reasonable rate from year to year,” for roads, bridges, prisons, etc., said Widmer, of the Massachusetts Taxpayers Foundation. “One would expect that.”

Widmer said the state has always had a high debt load, and a governor would have to cut — or stop — capital spending in order to address it. As for Romney, Widmer told us that his approach was typical of other governors. “He didn’t put his foot on the accelerator any more, or really take it off.”

(The Washington Post found that some operational costs, such as pay for workers on capital projects, were moved to the capital budget. So the long-term debt would include some operational expenses. But the practice predated Romney: The Post tracked it back to 1990.)

Manufacturing Facts

The Obama ad is close to correct when it says that Massachusetts “lost over 40,000 manufacturing jobs” under Romney. (We calculate a slightly lower job loss, using different figures than the Obama administration.) But the state lost a greater number of manufacturing jobs in the four years before Romney took office, and also in the four years after he left. In fact, the rate of job loss slowed during Romney’s time as governor.

From January 2003 to January 2007, Romney’s time in office, the state lost 37,800 manufacturing jobs, according data available from the Bureau of Labor Statistics. However, the loss was 67,500 manufacturing jobs in the four years before Romney’s governorship, and it was 44,900 in the four years after.

The Obama campaign calculates a total of 40,600 manufacturing jobs lost under Romney by using December 2002 to December 2006 figures. However, since BLS monthly figures are for the week that includes the 12th day of each month, the January figures represent the totals for the weeks closest to when Romney took office and left office, which was in early January.

The ad says the job loss under Romney was “twice the national average,” and that’s also close to true. The 11.3 percent drop during Romney’s tenure was nearly twice the 5.8 percent drop in manufacturing jobs nationally. Even though the number of jobs lost was greater in the four-year periods both before and after Romney took office, the discrepancy between the state and national performance was markedly worse under Romney.

In the four years before Romney took office, both the state and the nation lost a higher number of manufacturing jobs. The nation lost 2.6 million (a 14.7 percent drop) and Massachusetts lost 67,500 (a 16.7 percent drop). In the four years after Romney left office, the state lost 44,900 jobs (15 percent drop), while the nation did slightly worse — posting a 2.4 million job drop (17 percent decrease).

Widmer, of the Massachusetts Taxpayers Foundation, said the loss of manufacturing jobs under Romney was part of a long-term trend. Massachusetts is a high-cost state, he said. Everything from health care to energy costs more in Massachusetts. As a result, he said, it is expensive for manufacturing.

“We’ve lost manufacturing jobs at a rate faster than the nation for probably 30 years,” Widmer said.

One could argue that Romney didn’t do much to stem that slide, Widmer said, but he isn’t responsible for starting it.

Outsourcing to India?

The ad claims that “instead of hiring workers from his own state, Romney outsourced call center jobs to India.”

As with other claims in the ad, there’s something to this, but not as much as the ad suggests.

The state wasn’t outsourcing contracts. Rather, in some cases, state contractors were subcontracting work to companies overseas. Romney vetoed a bill that would have prevented the state from doing business with companies that outsourced any state work to other countries. The Democratic Legislature did not override Romney’s veto, as it did with most of his vetoes.

At the center of the issue was a contract the state signed with JP Morgan Chase (which later sold the division to CitiGroup) to handle calls about food stamps, and that company outsourced the work to a company in India. At the time, 38 states had similar contracts with JPMorgan Chase to handle food stamp calls. It became an issue everywhere, and Ohio Rep. Marcy Kaptur called for federal legislation to ban it. When the Massachusetts contract was up, the state Department of Transitional Assistance required work to be done in the U.S. It hired another firm that handled the calls from Utah, so the practice ultimately ended, but Massachusetts didn’t get the jobs.

Interestingly, the Obama campaign cited a story from the Washington Post’s Fact Checker to back up its claim. The Fact Checker wrote about the issue on March 29 after Vice President Joe Biden said something similar about Romney outsourcing state jobs to India. The Fact Checker awarded two Pinocchios, saying that Biden had “taken a single fact and blown it out of proportion.”

– by Robert Farley, Lori Robertson and Eugene Kiely

Sources

Robertson, Lori and Farley, Robert. “Romney’s Shaky Job Claims.” FactCheck.org. 05 Jan 2012.

Bureau of Labor Statistics. State and Metro Area Employment, Hours, & Earnings.

Kessler, Glenn. “Obama versus Romney on job creation.” Washington Post Fact Checker. 1 Jun 2012.

Lewis, Raphael. “Romney Poses Yearly Rebates on Capital Gains Tax.” Boston Globe. 19 Nov 2005.

Boston Globe. Editorial: “Taxing common sense.” 29 Nov 2005.

Fitzgerald, Jay. “Oh, Never Mind; Pols to ax retro ’02 capital gains tax.” Boston Herald. 2 Dec 2005.

Jackson, Brooks. “GOP Candidates Debate, Round 2.” FactCheck.org. 17 May 2007.

Greenberger, Scott S. “Senate Republicans hit for retreat on tax cut.” Boston Globe. 20 May 2004.

Estes, Andrea and Sacchetti, Maria. Mass. “House, Senate approve $25.7b budget.” Boston Globe. 1 Jul 2006.

Kessler, Glenn. “Romney and ‘outsourcing’: Biden’s out-of-context fact.” Washington Post Fact Checker. 29 Mar 2012.

Kasler, Dale. “Outsourcing bill creates tough choice for Schwarzenegger.” Scripps Howard News Service. 13 Sep 2004.

Rowland, Christopher. “Measure seeks to ban state outsourcing.” Boston Globe. 18 Jun 2004.

Rothstein, Kevin. “Ted K slams Mitt for outsourcing jobs: Mass. work farmed out to India, Utah.” Boston Herald. 23 Feb 2006.

MacPherson, Karen. “Kaptur criticizes overseas phone jobs.” Toledo Blade. 27 Mar 2004.

Roche, B.J. “When the Buck Stops in India.” Boston Globe. 28 Mar 2004.

Bureau of Labor Statistics. Employment, Hours and Earnings from the Current Employment Statistics survey. accessed 5 Jun 2012.

Bureau of Labor Statistics. State and Area Employment, Hours and Earnings. accessed 5 Jun 2012.

Hicks, Josh. “Slanted take: Obama campaign on Romney’s Massachusetts record.” Washington Post. 5 Jun 2012.

Treasurer and Receiver General of Massachusetts. Official statement on Commonwealth of Massachusetts bonds. 2003.

Treasurer and Receiver General of Massachusetts. Official statement on Commonwealth of Massachusetts bonds. 2006.

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