The Congressional Leadership Fund criticizes Gary McDowell (D-MI) for supporting state-level tax increases and President Obama’s Recovery Act, suggesting that McDowell’s agenda “helped sink Michigan’s economy.” But the tax increases, which were accompanied by spending cuts, were part of a compromise to close the deficit and keep the state government operating. And the Recovery Act created jobs — in America, not China — and helped prevent an even deeper recession.
McDowell Voted For Tax Increases In Deal To Close Deficit And Keep Government Running
To support the claim that McDowell supported “one of the largest tax hikes in state history,” the ad cites his votes on H.B. 5194 and H.B. 5198 on September 30, 2007.
Deal To End Partial Government Shutdown Raised Income Tax And Expanded Sales Tax. According to the Associated Press: “The state Legislature agreed early Monday to raise the income tax and expand the sales tax to services in a deal with the governor that quickly ended a partial state government shutdown. […] The Legislature agreed to raise Michigan’s income tax rate from 3.9 percent to 4.35 percent and expand the 6 percent sales tax to some services. Granholm signed both measures. Structural changes to state government including the management of teacher and other public employee benefits also are part of the package.” [Associated Press via Nexis, 10/1/07]
Tax Increases Were Coupled With Spending Cuts To Eliminate Deficit. According to the Associated Press: “The tax increases should erase most of a projected $1.75 billion deficit in Michigan’s next budget. The final budget for the new fiscal year will include $440 million in spending cuts, including no inflationary funding increase for public universities and community colleges, Granholm said.” [Associated Press via Nexis, 10/1/07]
McDowell Said “Nobody Wants To Raise Taxes,” But It Was “Necessary To Keep The State Moving Forward.” According to the Detroit Free Press: “‘I’m ready to do whatever’s necessary to keep the state moving forward,’ said Rep. Gary McDowell, a Democrat who represents a Republican-leaning district in the Upper Peninsula. He said he is prepared to vote for increasing the income tax and expanding the sales tax. ‘I anguished over it. Nobody wants to raise taxes, especially me. But I know it’s the right thing to do.'” [Detroit Free Press, 9/30/07]
Recovery Act Created American Jobs, Boosted GDP, And Cut Taxes
Recovery Act “Succeeded In…Protecting The Economy During The Worst Of The Recession.” From the Center on Budget and Policy Priorities: “A new Congressional Budget Office (CBO) report estimates that the American Recovery and Reinvestment Act (ARRA) increased the number of people employed by between 200,000 and 1.5 million jobs in March. In other words, between 200,000 and 1.5 million people employed in March owed their jobs to the Recovery Act. […] ARRA succeeded in its primary goal of protecting the economy during the worst of the recession. The CBO report finds that ARRA’s impact on jobs peaked in the third quarter of 2010, when up to 3.6 million people owed their jobs to the Recovery Act. Since then, the Act’s job impact has gradually declined as the economy recovers and certain provisions expire.” [CBPP.org, 5/29/12]
At Its Peak, Recovery Act Was Responsible For Up To 3.6 Million Jobs. According to the nonpartisan Congressional Budget Office:
CBO estimates that ARRAs [sic] policies had the following effects in the third quarter of calendar year 2010:
- They raised real (inflation-adjusted) gross domestic product by between 1.4 percent and 4.1 percent,
- Lowered the unemployment rate by between 0.8 percentage points and 2.0 percentage points,
- Increased the number of people employed by between 1.4 million and 3.6 million, and
- Increased the number of full-time-equivalent (FTE) jobs by 2.0 million to 5.2 million compared with what would have occurred otherwise. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers). [CBO.gov, 11/24/10]
Recovery Act Included $288 Billion In Tax Cuts. From PolitiFact: “Nearly a third of the cost of the stimulus, $288 billion, comes via tax breaks to individuals and businesses. The tax cuts include a refundable credit of up to $400 per individual and $800 for married couples; a temporary increase of the earned income tax credit for disadvantaged families; and an extension of a program that allows businesses to recover the costs of capital expenditures faster than usual. The tax cuts aren’t so much spending as money the government won’t get — so it can stay in the economy.” [PolitiFact.com, 2/17/10]
Jobs In China? The Money In Question Went Specifically To U.S. Jobs
Claim That Administration Sent Billions In Taxpayer Money To Foreign Firms Cites Washington Times Article That Refers To “$2.3 Billion Of Manufacturing Tax Credits.” From the September 9, 2010, article cited in the ad: “The Department of Energy estimated that 82,000 jobs have been created and has acknowledged 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.” [Washington Times, 9/9/10, emphasis added]
PolitiFact: Washington Times Is Mixing Up Two Programs, ARRA “Explicitly Links The Credits To Creation Of Manufacturing Jobs In Green Industries In The United States.” From a PolitiFact.com analysis of a similar claim in 2010:
The ad says the accusation is based on a story published Sept. 9 in the Washington Times that says “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.” […]
It’s an assertion that originates from a series of stories by the Investigative Reporting Workshop at American University in Washington. The workshop report, “Blown Away,” documents how foreign-based companies are using stimulus grants to develop wind farms in the United States.
Here’s the problem for Hurt and other politicians relying on the Washington Times story: the $2.3 billion in manufacturing credits come from a part of the stimulus act that explicitly links the credits to creation of manufacturing jobs in green industries in the United States, according to the workshop report.
By contrast, the workshop investigation focused on a provision that allowed payments in lieu of tax credits for development of alternative energy sources, including wind farms, without requiring the projects to produce manufacturing jobs in the United States.
“They’re sort of freely mixing the two programs,” Russ Choma, the journalist who produced the workshop report, told PolitiFact. [PolitiFact.com, 10/25/10, emphasis added]
$2.3 Billion Manufacturing Tax Credit Program Was “Based On How Many Domestic Jobs Would Be Created.” From the AU Investigative Reporting Workshop: “Obama was announcing $2.3 billion in tax credits for manufacturers, including foreign companies that are hoping to set up manufacturing in the United States. Unlike the grant program investigated by the Workshop, the administration gave out the tax credits based on how many domestic jobs would be created.” [InvestigativeReportingWorkshop.org, 2/8/10, emphasis added]
Obama Administration Explained That $2.3 Billion In Tax Credits Were “Aimed At Growing America’s Clean Energy Manufacturing Sector.” From Energy.gov: “That’s why the clean energy manufacturing industry that is expanding across the Midwest — spurred in large part by the Advanced Energy Manufacturing Tax Credit, also known as 48C — is so important. As part of the Recovery Act, 183 projects … will receive a total of $2.3 billion in tax credits to establish, expand or re-equip clean energy manufacturing facilities. This federal investment is also being matched by nearly $5.4 billion dollars in private capital, for a total of more than $7.6 billion aimed at growing America’s clean energy manufacturing sector. The impact of these investments is especially significant in the Midwest where 41 projects (accounting for nearly $530 million in tax credits) are underway. With incentives from both the federal and private sectors, clean energy manufacturers are drawing on the traditionally strong manufacturing base of states like Ohio and Michigan to develop the next generation of solar, wind, geothermal, and other renewable energy and energy-efficient technologies.” [Energy.gov, 12/16/10]
The Great Recession, Not McDowell, ‘Sunk’ Michigan’s Economy
Recession Officially Ran From December 2007 To June 2009, Making It The Longest Since World War II. From the National Bureau of Economic Research: “The Business Cycle Dating Committee of the National Bureau of Economic Research met yesterday by conference call. At its meeting, the committee determined that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion. The recession lasted 18 months, which makes it the longest of any recession since World War II. Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months. In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month.” [NBER.org, 9/20/10]
- Recession Resulted In 8.3 Million Job Losses. According to the Associated Press, “the Great Recession killed 8.3 million jobs, compared with 1.6 million lost in the 2001 recession.” [Associated Press via Yahoo! News, 5/4/12]
The Private Sector Has Added 4.7 Million Jobs Over 31 Consecutive Months Of Private-Sector Growth. The following chart shows the monthly change in private-sector jobs dating back to January 2008:
Michigan Has Gained Over 148,100 Jobs Since Recession Ended In June 2009. According to the Bureau of Labor Statistics, there were 3,834,600 people employed in Michigan in June 2009, the last official month of the recession. As of September 2012, the last month for which data are available, there were an estimated 3,982,700 people employed in the state, a gain of 148,100 jobs. [BLS.gov, accessed 10/30/12; NBER.org, 9/20/10]
[NARRATOR:] Northern Michigan needs jobs, but with 30 year politician Gary McDowell they’ve drifted away. McDowell supported Obama’s stimulus, which created jobs in China. And in Lansing, McDowell pushed Gov. Granholm’s devastating agenda that helped sink Michigan’s economy. One of the largest tax hikes in state history. Over $1 billion in new taxes. Defeat Gary McDowell: with him jobs get swept away. Congressional Leadership Fund is responsible for the content of this advertising.” [Congressional Leadership Fund via YouTube, 10/30/12]