Tweet-err: The Obama team’s faulty debt comparison

at 11:00 AM ET, 05/23/2012


(Mary Altaffer/AP)

“@MittRomney giving another debt speech: will he say why he increased MA’s debt by $2.6B, leaving w/largest per capita debt in nation?”

-- Tweet from Obama campaign spokeswoman Lis Smith

Lis Smith is the rapid-response director for President Obama’s campaign team. She issued this comment while engaged in one of those heated and decidedly modern tweet wars with Mitt Romney campaign spokeswoman Andrea Saul last week.

The Obama campaign didn’t explain which debt speech Smith was referring to, but we can safely assume she was tweeting about something similar to the rousing comments the presumptive GOP nominee made during a stop in Des Moines on May 15.

Romney, the former governor of perpetually debt-swamped Massachusetts, said, “A prairie fire of debt is sweeping across Iowa and our nation, and every day we fail to act, that fire gets closer to the homes and children we love.” He also accused Obama of feeding the fire with more spending and borrowing, and he promised, “I will lead us out of this debt and spending inferno. We will stop borrowing unfathomable sums of money we can’t even imagine, from foreign countries we’ll never even visit.”

For the moment, we will leave aside Romney’s claim of a “prairie fire of debt,” since we have previously examined whether Obama is responsible. This time, let’s take a look at Romney’s record in Massachusetts to determine whether Obama’s rapid-response team is on to something. Did the Republican candidate really speak hypocritically about debt?

The Facts

Romney served as Massachusetts governor from January 2003 to January 2007. Annual fiscal reports from the state show that debt increased from $18.5 billion to $16 billion during that time -- very close to the Obama campaign’s $2.6-billion claim.

So that’s the end of the story, right? Not at all.

State and federal debt are very different animals. The latter represents the sum of all deficits the federal government has run up when revenues don’t match mandatory and discretionary spending. This type of debt is not possible for Massachusetts, which is required by law to balance its operating budget.

For what it’s worth, all states except Vermont have self-imposed requirements to balance their budgets. This makes sense, because they can’t print money like the federal government.

Massachusetts’s operating budget, which covers services, maintenance, public-employee payrolls and so on, must not exceed revenues from taxes and fees. As such, the state can only borrow money to pay for capital projects such as repairing roads and bridges, building new hospitals or renovating schools -- all of which are assumed to be value-adding investments.

Think of it like buying a house. If you have $100,000 sitting in the bank, you’ll probably leverage that money to purchase a place worth $500,000 rather than paying up front for a smaller $100,000 home. The home eventually appreciates, and you make up your investment.

We won’t judge whether it’s acceptable for states to borrow money for capital projects rather than paying up front, but it’s certainly standard practice. And it’s perfectly normal for states to increase their debt from year to year, considering that costs rise and the states need to keep their infrastructure from turning to ruins.

As for the U.S. government, it borrows money for all variety of expenses, whether to build capital projects or just pay the recurring costs for entitlement programs such as Social Security, Medicaid and Medicare. There are no limits for federal borrowing beyond the debt ceiling that Congress sets.

The bottom line here is that the Obama campaign didn’t compare apples to apples. Regardless, we’re going to pretend that it did, just for the sake of argument. Let’s look at how Romney’s debt numbers compare to those of his predecessors and successors.

Below are the figures for the administrations that came before and after Romney, counting the first and last budgets that each one fully controlled:

Average annual debt increase

Paul Cellucci-Jane Swift, 2000-2003: 8 percent

Romney, 2004-2007: 4.1 percent

Deval Patrick, 2008-2011: 3.2 percent

Debt increase above annual inflation rate

Cellucci-Swift: 5.8 percentage points higher

Romney: 1.9 percentage points higher

Patrick: 1.5 percentage points higher

As you can see, Romney significantly slowed the rate of increase compared to his predecessors, and Patrick further slowed the growth.

Now let’s compare Obama’s national-debt numbers to Romney’s state-debt numbers, even though they represent different things. For the president, we’ll use historical tables from the White House Budget Office, including projections for the end of the president’s term.

Obama fares worse in this case, with an average annual increase of 10.1 percent compared to Romney’s 4.1-percent. The president’s numbers are also higher than those of his past two predecessors.

It’s important to note that Obama had to deal with a deep recession and a financial crisis, for which he and President George W. Bush approved loads of stimulus and bailout money to bring about a recovery. As such, it’s reasonable for the Obama campaign to defend the president’s numbers.

Still, it doesn’t make sense to mention Massachusetts’s debt when it’s not comparable to national debt in terms of its nature, or even in terms of its annual rate of growth.

The Obama campaign might have been better off reminding its Twitter followers about Romney’s tax proposals. After all, the non-partisan Tax Policy Center has estimated that his plan would reduce federal revenues by at least $480 billion per year. It’s not hard to imagine what kind of deficits that would create in the absence of huge spending cuts.

For what it’s worth, Romney has promised to match his tax cuts with spending reductions, but he’s said remarkably little about what that would entail beyond repealing the health-care reform law.

Smith has alluded to this issue in the past. On April 20, she tweeted, “@MittRomney says he’ll balance the budget...but won’t say how he’ll pay 4 $5T in tax breaks for wealthiest Americans.” A similar comment might have served her better this time around.

As for Massachusetts having the highest per-capita debt in the nation after Romney left office, that much is true. But this is nothing new for the Bay State, which has consistently ranked in the top since at least the 1990s, according to the online government spending tracker USGovernmentSpending.com.

Massachusetts ranked first in the nation for highest per-capita debt when Romney took office, and the governor’s finance secretary wrote this in a 2003 summary of the capital budget: “We are burdened by one of the highest debt loads in the country. Massachusetts ranks second behind Connecticut and Hawaii, respectively, in debt as measured in both per capita and percent of personal income terms.”

Romney wasn’t helped much by the fact that he had to complete the final stages of the Big Dig, a massively expensive and problem-ridden project to re-route the main highway artery through Boston. Here’s how a Springfield, Mass.-based newspaper described the financial impact of that project in the middle of Romney’s term: “The Big Dig helped dig a financial hole for Massachusetts, as the state owed more per person in fiscal year 2005 - nearly $8,700 for each resident - than any state in the nation” and “nearly three times as much as the $2,693 average for all states.”

We consulted the non-partisan Massachusetts Taxpayers Foundation to gauge Romney’s handling of state debt as governor. “I didn’t get the sense that he attacked the problem or that he exacerbated it,” said Michael Widmer, the group’s president. “The increases weren’t dramatic compared to state finances, but, nonetheless, debt did increase.”

Smith had this to say about her Tweet: “The facts are clear: Mitt Romney increased Massachusetts’ long-term debt by $2.6 billion and left Massachusetts with the largest per-capita debt in the nation. Along with increasing spending, raising taxes and fees and overseeing anemic job growth, this is the failed public sector record that Americans have to judge him on.”

UPDATE, JUNE 1: We discovered during a separate fact check that Massachusetts has been shifting some of its operational costs -- especially the costs for capital-related state workers -- to its capital budget to avoid violating the state’s balanced-budget requirement. This is an accounting gimmick that pre-dates the Romney administration. We tracked it to at least 1990 (see Exhibit 7 in this report from the Massachusetts Transportation Finance Commission).  

As such, Massachusetts debt helps cover a portion of the state’s operating costs, which is contrary to our initial conclusion. But the fact remains that Romney cut the rate of debt growth by half as governor, while the federal rate of growth has increased under Obama.

 Massachusetts Taxpayers Foundation president Michael Widmer had this to say about the accounting gimmick. “Every governor has said we need to reverse that and it’s not a good thing,” Widmer said. “The problem is, it takes money to end, and the state hasn’t had that money.”

The Pinocchio Test

The Obama campaign was technically correct about the Bay State’s debt increasing by $2.6 billion under Romney, but its point is irrelevant in the context of a national-debt discussion. Smith’s tweet suggests that Massachusetts borrows money to pay its bills in the same way the federal government does. That’s simply not the case. Romney’s state-debt numbers reflect how much the state invested in infrastructure, not the size of the state’s deficits.

Beyond that, Romney’s numbers are actually better than those of Obama when we compare them side-by-side for the sake of argument. And the fact that Massachusetts had the highest per-capita debt in the nation when Romney left office is nothing extraordinary. The president’s rapid-response team earns Three Pinocchios for its tweet.

UPDATE: We reduced our rating for this claim to Two Pinocchios as a result of the new findings noted above.

 

Two Pinocchios




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    About the Blogger

    Glenn Kessler has covered foreign policy, economic policy, the White House, Congress, politics, airline safety and Wall Street.

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