This election is about choices. The most important choices a president makes are about protecting America at home and around the world. A president's first obligation is to make America safer, stronger and truer to our ideals. Three years ago, the events of September 11 reminded every American of that obligation. That day brought to our shores the defining struggle of our times: the struggle between freedom and radical fundamentalism. And it made clear that our most important task is to fight and to win the war on terrorism. In fighting the war on terrorism, my principles are straight forward. The terrorists are beyond reason. We must destroy them. As president, I will do whatever it takes, as long as it takes, to defeat our enemies. But billions of people around the world yearning for a better life are open to America's ideals. We must reach them. To win, America must be strong. And America must be smart. The greatest threat we face is the possibility Al Qaeda or other terrorists will get their hands on a nuclear weapon. To prevent that from happening, we must call on the totality of America's strength -- strong alliances, to help us stop the world's most lethal weapons from falling into the most dangerous hands. A powerful military, transformed to meet the new threats of terrorism and the spread of weapons of mass destruction. And all of America's power -- our diplomacy, our intelligence system, our economic power, the appeal of our values -- each of which is critical to making America more secure and preventing a new generation of terrorists from emerging. National security is a central issue in this campaign. We owe it to the American people to have a real debate about the choices President Bush has made and the choices I would make to fight and win the war on terror. That means we must have a great honest national debate on Iraq. The president claims it is the centerpiece of his war on terror. In fact, Iraq was a profound diversion from that war and the battle against our greatest enemy, Osama bin Laden and the terrorists. Invading Iraq has created a crisis of historic proportions and, if we do not change course, there is the prospect of a war with no end in sight. This month, we passed a cruel milestone: more than 1,000 Americans lost in Iraq. Their sacrifice reminds us that Iraq remains, overwhelmingly, an American burden. Nearly 90 percent of the troops -- and nearly 90 percent of the casualties -- are American. Despite the president's claims, this is not a grand coalition. Our troops have served with extraordinary bravery, skill and resolve. Their service humbles all of us. When I speak to them when I look into the eyes of their families, I know this: we owe them the truth about what we have asked them to do and what is still to be done. In June, the president declared, "The Iraqi people have their country back." Just last week, he told us: "This country is headed toward democracy. Freedom is on the march." But the administration's own official intelligence estimate, given to the president last July, tells a very different story. According to press reports, the intelligence estimate totally contradicts what the president is saying to the American people. So do the facts on the ground. Security is deteriorating, for us and for the Iraqis. 42 Americans died in Iraq in June -- the month before the handover. But 54 died in July -- 66 in August and already 54 halfway through September. And more than 1,100 Americans were wounded in August -- more than in any other month since the invasion. We are fighting a growing insurgency in an ever widening war-zone. In March, insurgents attacked our forces 700 times. In August, they attacked 2,700 times -- a 400% increase. Falluja, Ramadi, Samarra, even parts of Baghdad -- are now "no go zones" -- breeding grounds for terrorists who are free to plot and launch attacks against our soldiers. The radical Shiite cleric, Muqtada al-Sadr, who is accused of complicity in the murder of Americans, holds more sway in the suburbs of Baghdad. Violence against Iraqis from bombings to kidnappings to intimidation is on the rise. Basic living conditions are also deteriorating. Residents of Baghdad are suffering electricity blackouts lasting up to 14 hours a day. Raw sewage fills the streets, rising above the hubcaps of our Humvees. Children wade through garbage on their way to school. Unemployment is over 50 percent. Insurgents are able to find plenty of people willing to take $150 for tossing grenades at passing U.S. convoys. Yes, there has been some progress, thanks to the extraordinary efforts of our soldiers and civilians in Iraq. Schools, shops and hospitals have been opened. In parts of Iraq, normalcy actually prevails. But most Iraqis have lost faith in our ability to deliver meaningful improvements to their lives. So they're sitting on the fence instead of siding with us against the insurgents. That is the truth -- the truth that the commander in chief owes to our troops and the American people. It is never easy to discuss what has gone wrong while our troops are in constant danger. But it's essential if we want to correct our course and do what's right for our troops instead of repeating the same mistakes over and over again. I know this dilemma first-hand. After serving in war, I returned home to offer my own personal voice of dissent. I did so because I believed strongly that we owed it those risking their lives to speak truth to power. We still do. Saddam Hussein was a brutal dictator who deserves his own special place in hell. But that was not, in itself, a reason to go to war. The satisfaction we take in his downfall does not hide this fact: we have traded a dictator for a chaos that has left America less secure. The president has said that he "miscalculated" in Iraq and that it was a "catastrophic success." In fact, the president has made a series of catastrophic decisions from the beginning in Iraq. At every fork in the road, he has taken the wrong turn and led us in the wrong direction. The first and most fundamental mistake was the president's failure to tell the truth to the American people. He failed to tell the truth about the rationale for going to war. And he failed to tell the truth about the burden this war would impose on our soldiers and our citizens. By one count, the president offered 23 different rationales for this war. If his purpose was to confuse and mislead the American people, he succeeded. His two main rationales -- weapons of mass destruction and the Al Qaeda/September 11 connection -- have been proved false by the president's own weapons inspectors and by the 9/11 Commission. Just last week, Secretary of State Powell acknowledged the facts. Only Vice President Cheney still insists that the earth is flat. The president also failed to level with the American people about what it would take to prevail in Iraq. He didn't tell us that well over 100,000 troops would be needed, for years, not months. He didn't tell us that he wouldn't take the time to assemble a broad and strong coalition of allies. He didn't tell us that the cost would exceed $200 billion. He didn't tell us that even after paying such a heavy price, success was far from assured. And America will pay an even heavier price for the president's lack of candor. At home, the American people are less likely to trust this administration if it needs to summon their support to meet real and pressing threats to our security. Abroad, other countries will be reluctant to follow America when we seek to rally them against a common menace -- as they are today. Our credibility in the world has plummeted. In the dark days of the Cuban Missile Crisis, President Kennedy sent former Secretary of State Dean Acheson to Europe to build support. Acheson explained the situation to French President de Gaulle. Then he offered to show him highly classified satellite photos, as proof. De Gaulle waved the photos away, saying: "The word of the president of the United States is good enough for me." How many world leaders have that same trust in America's president, today? This president's failure to tell the truth to us before the war has been exceeded by fundamental errors of judgment during and after the war. The president now admits to "miscalculations" in Iraq. That is one of the greatest understatements in recent American history. His were not the equivalent of accounting errors. They were colossal failures of judgment -- and judgment is what we look for in a president. This is all the more stunning because we're not talking about 20/20 hindsight. Before the war, before he chose to go to war, bi-partisan Congressional hearings... major outside studies... and even some in the administration itself... predicted virtually every problem we now face in Iraq. This president was in denial. He hitched his wagon to the ideologues who surround him, filtering out those who disagreed, including leaders of his own party and the uniformed military. The result is a long litany of misjudgments with terrible consequences. The administration told us we'd be greeted as liberators. They were wrong. They told us not to worry about looting or the sorry state of Iraq's infrastructure. They were wrong. They told us we had enough troops to provide security and stability, defeat the insurgents, guard the borders and secure the arms depots. They were wrong. They told us we could rely on exiles like Ahmed Chalabi to build political legitimacy. They were wrong. They told us we would quickly restore an Iraqi civil service to run the country and a police force and army to secure it. They were wrong. In Iraq, this administration has consistently over-promised and under-performed. This policy has been plagued by a lack of planning, an absence of candor, arrogance and outright incompetence. And the president has held no one accountable, including himself. In fact, the only officials who lost their jobs over Iraq were the ones who told the truth. General Shinseki said it would take several hundred thousand troops to secure Iraq. He was retired. Economic adviser Larry Lindsey said that Iraq would cost as much as $200 billion. He was fired. After the successful entry into Baghdad, George Bush was offered help from the UN -- and he rejected it. He even prohibited any nation from participating in reconstruction efforts that wasn't part of the original coalition -- pushing reluctant countries even farther away. As we continue to fight this war almost alone, it is hard to estimate how costly that arrogant decision was. Can anyone seriously say this president has handled Iraq in a way that makes us stronger in the war on terrorism? By any measure, the answer is no. Nuclear dangers have mounted across the globe. The international terrorist club has expanded. Radicalism in the Middle East is on the rise. We have divided our friends and united our enemies. And our standing in the world is at an all time low. Think about it for a minute. Consider where we were... and where we are. After the events of September 11, we had an opportunity to bring our country and the world together in the struggle against the terrorists. On September 12, headlines in newspapers abroad declared "we are all Americans now." But through his policy in Iraq, the president squandered that moment and rather than isolating the terrorists, left America isolated from the world. We now know that Iraq had no weapons of mass destruction and posed no imminent threat to our security. It had not, as the vice president claimed, "reconstituted nuclear weapons." The president's policy in Iraq took our attention and resources away from other, more serious threats to America. Threats like North Korea, which actually has weapons of mass destruction, including a nuclear arsenal, and is building more under this president's watch -- the emerging nuclear danger from Iran -- the tons and kilotons of unsecured chemical and nuclear weapons in Russia -- and the increasing instability in Afghanistan. Today, warlords again control much of that country, the Taliban is regrouping, opium production is at an all time high and the Al Qaeda leadership still plots and plans, not only there but in 60 other nations. Instead of using U.S. forces, we relied on the warlords to capture Osama bin Laden when he was cornered in the mountains. He slipped away. We then diverted our focus and forces from the hunt for those responsible for September 11 in order invade Iraq. We know Iraq played no part in September 11 and had no operational ties to Al Qaeda. The president's policy in Iraq precipitated the very problem he said he was trying to prevent. Secretary of State Powell admits that Iraq was not a magnet for international terrorists before the war. Now it is, and they are operating against our troops. Iraq is becoming a sanctuary for a new generation of terrorists who someday could hit the United States. We know that while Iraq was a source of friction, it was not previously a source of serious disagreement with our allies in Europe and countries in the Muslim world. The president's policy in Iraq divided our oldest alliance and sent our standing in the Muslim world into free fall. Three years after 9/11, even in many moderate Muslim countries like Jordan, Morocco, and Turkey, Osama bin Laden is more popular than the United States of America. Let me put it plainly: The president's policy in Iraq has not strengthened our national security. It has weakened it. Two years ago, Congress was right to give the president the authority to use force to hold Saddam Hussein accountable. This president, any president would have needed the threat of force to act effectively. This president misused that authority. The power entrusted to the president gave him a strong hand to play in the international community. The idea was simple. We would get the weapons inspectors back in to verify whether or not Iraq had weapons of mass destruction. And we would convince the world to speak with one voice to Saddam: disarm or be disarmed. A month before the war, President Bush told the nation: "If we have to act, we will take every precaution that is possible. We will plan carefully. We will act with the full power of the United States military. We will act with allies at our side and we will prevail." He said that military action wasn't "unavoidable." Instead, the president rushed to war without letting the weapons inspectors finish their work. He went without a broad and deep coalition of allies. He acted without making sure our troops had enough body armor. And he plunged ahead without understanding or preparing for the consequences of the post-war. None of which I would have done. Yet today, President Bush tells us that he would do everything all over again, the same way. How can he possibly be serious? Is he really saying that if we knew there were no imminent threat, no weapons of mass destruction, no ties to Al Qaeda, the United States should have invaded Iraq? My answer is no -- because a commander in chief's first responsibility is to make a wise and responsible decision to keep America safe. Now the president, in looking for a new reason, tries to hang his hat on the "capability" to acquire weapons. But that was not the reason given to the nation; it was not the reason Congress voted on; it's not a reason, it's an excuse. Thirty-five to forty countries have greater capability to build a nuclear bomb than Iraq did in 2003. Is President Bush saying we should invade them? I would have concentrated our power and resources on defeating global terrorism and capturing or killing Osama bin Laden. I would have tightened the noose and continued to pressure and isolate Saddam Hussein -- who was weak and getting weaker -- so that he would pose no threat to the region or America. The president's insistence that he would do the same thing all over again in Iraq is a clear warning for the future. And it makes the choice in this election clear: more of the same with President Bush or a new direction that makes our troops and America safer. It is time, at long last, to ask the questions and insist on the answers from the commander in chief about his serious misjudgments and what they tell us about his administration and the president himself. If George W. Bush is re-elected, he will cling to the same failed policies in Iraq -- and he will repeat, somewhere else, the same reckless mistakes that have made America less secure than we can or should be. In Iraq, we have a mess on our hands. But we cannot throw up our hands. We cannot afford to see Iraq become a permanent source of terror that will endanger America's security for years to come. All across this country people ask me what we should do now. Every step of the way, from the time I first spoke about this in the Senate, I have set out specific recommendations about how we should and should not proceed. But over and over, when this administration has been presented with a reasonable alternative, they have rejected it and gone their own way. This is stubborn incompetence. Five months ago, in Fulton, Missouri, I said that the president was close to his last chance to get it right. Every day, this president makes it more difficult to deal with Iraq -- harder than it was five months ago, harder than it was a year ago. It is time to recognize what is -- and what is not -- happening in Iraq today. And we must act with urgency. Just this weekend, a leading Republican, Chuck Hagel, said we're "in deep trouble in Iraq ... it doesn't add up ... to a pretty picture [and] ... we're going to have to look at a recalibration of our policy." Republican leaders like Dick Lugar and John McCain have offered similar assessments. We need to turn the page and make a fresh start in Iraq. First, the president has to get the promised international support so our men and women in uniform don't have to go it alone. It is late; the president must respond by moving this week to gain and regain international support. Last spring, after too many months of resistance and delay, the president finally went back to the U.N. which passed Resolution 1546. It was the right thing to do -- but it was late. That resolution calls on U.N. members to help in Iraq by providing troops, trainers for Iraq's security forces, a special brigade to protect the U.N. mission, more financial assistance, and real debt relief. Three months later, not a single country has answered that call. And the president acts as if it doesn't matter. And of the $13 billion previously pledged to Iraq by other countries, only $1.2 billion has been delivered. The president should convene a summit meeting of the world's major powers and Iraq's neighbors, this week, in New York, where many leaders will attend the U.N. General Assembly. He should insist that they make good on that U.N. resolution. He should offer potential troop contributors specific, but critical roles, in training Iraqi security personnel and securing Iraq's borders. He should give other countries a stake in Iraq's future by encouraging them to help develop Iraq's oil resources and by letting them bid on contracts instead of locking them out of the reconstruction process. This will be difficult. I and others have repeatedly recommended this from the very beginning. Delay has made only made it harder. After insulting allies and shredding alliances, this president may not have the trust and confidence to bring others to our side in Iraq. But we cannot hope to succeed unless we rebuild and lead strong alliances so that other nations share the burden with us. That is the only way to succeed. Second, the president must get serious about training Iraqi security forces. Last February, Secretary Rumsfeld claimed that more than 210,000 Iraqis were in uniform. Two weeks ago, he admitted that claim was exaggerated by more than 50 percent. Iraq, he said, now has 95,000 trained security forces. But guess what? Neither number bears any relationship to the truth. For example, just 5,000 Iraqi soldiers have been fully trained, by the administration's own minimal standards. And of the 35,000 police now in uniform, not one has completed a 24-week field-training program. Is it any wonder that Iraqi security forces can't stop the insurgency or provide basic law and order? The president should urgently expand the security forces training program inside and outside Iraq. He should strengthen the vetting of recruits, double classroom training time, and require follow-on field training. He should recruit thousands of qualified trainers from our allies, especially those who have no troops in Iraq. He should press our NATO allies to open training centers in their countries. And he should stop misleading the American people with phony, inflated numbers. Third, the president must carry out a reconstruction plan that finally brings tangible benefits to the Iraqi people. Last week, the administration admitted that its plan was a failure when it asked Congress for permission to radically revise spending priorities in Iraq. It took 17 months for them to understand that security is a priority, 17 months to figure out that boosting oil production is critical, 17 months to conclude that an Iraqi with a job is less likely to shoot at our soldiers. One year ago, the administration asked for and received $18 billion to help the Iraqis and relieve the conditions that contribute to the insurgency. Today, less than a $1 billion of those funds have actually been spent. I said at the time that we had to rethink our policies and set standards of accountability. Now we're paying the price. Now, the president should look at the whole reconstruction package, draw up a list of high visibility, quick impact projects, and cut through the red tape. He should use more Iraqi contractors and workers, instead of big corporations like Halliburton. He should stop paying companies under investigation for fraud or corruption. And he should fire the civilians in the Pentagon responsible for mismanaging the reconstruction effort. Fourth, the president must take immediate, urgent, essential steps to guarantee the promised elections can be held next year. Credible elections are key to producing an Iraqi government that enjoys the support of the Iraqi people and an assembly to write a Constitution that yields a viable power sharing arrangement. Because Iraqis have no experience holding free and fair elections, the president agreed six months ago that the U.N. must play a central role. Yet today, just four months before Iraqis are supposed to go to the polls, the U.N. Secretary General and administration officials themselves say the elections are in grave doubt. Because the security situation is so bad and because not a single country has offered troops to protect the U.N. elections mission, the U.N. has less than 25 percent of the staff it needs in Iraq to get the job done. The president should recruit troops from our friends and allies for a U.N. protection force. This won't be easy. But even countries that refused to put boots on the ground in Iraq should still help protect the U.N. We should also intensify the training of Iraqis to manage and guard the polling places that need to be opened. Otherwise, U.S forces would end up bearing those burdens alone. If the president would move in this direction, if he would bring in more help from other countries to provide resources and forces, train the Iraqis to provide their own security, develop a reconstruction plan that brings real benefits to the Iraqi people, and take the steps necessary to hold credible elections next year -- we could begin to withdraw U.S. forces starting next summer and realistically aim to bring all our troops home within the next four years. This is what has to be done. This is what I would do as president today. But we cannot afford to wait until January. President Bush owes it to the American people to tell the truth and put Iraq on the right track. Even more, he owes it to our troops and their families, whose sacrifice is a testament to the best of America. The principles that should guide American policy in Iraq now and in the future are clear: We must make Iraq the world's responsibility, because the world has a stake in the outcome and others should share the burden. We must effectively train Iraqis, because they should be responsible for their own security. We must move forward with reconstruction, because that's essential to stop the spread of terror. And we must help Iraqis achieve a viable government, because it's up to them to run their own country. That's the right way to get the job done and bring our troops home. On May 1 of last year, President Bush stood in front of a now infamous banner that read "Mission Accomplished." He declared to the American people: "In the battle of Iraq, the United States and our allies have prevailed." In fact, the worst part of the war was just beginning, with the greatest number of American casualties still to come. The president misled, miscalculated, and mismanaged every aspect of this undertaking and he has made the achievement of our objective -- a stable Iraq, secure within its borders, with a representative government, harder to achieve. In Iraq, this administration's record is filled with bad predictions, inaccurate cost estimates, deceptive statements and errors of judgment of historic proportions. At every critical juncture in Iraq, and in the war on terrorism, the president has made the wrong choice. I have a plan to make America stronger. The president often says that in a post 9/11 world, we can't hesitate to act. I agree. But we should not act just for the sake of acting. I believe we have to act wisely and responsibly. George Bush has no strategy for Iraq. I do. George Bush has not told the truth to the American people about why we went to war and how the war is going. I have and I will continue to do so. I believe the invasion of Iraq has made us less secure and weaker in the war against terrorism. I have a plan to fight a smarter, more effective war on terror -- and make us safer. Today, because of George Bush's policy in Iraq, the world is a more dangerous place for America and Americans. If you share my conviction that we can not go on as we are that we can make America stronger and safer than it is then November 2 is your chance to speak and to be heard. It is not a question of staying the course, but of changing the course. I'm convinced that with the right leadership, we can create a fresh start and move more effectively to accomplish our goals. Our troops have served with extraordinary courage and commitment. For their sake, and America's sake, we must get this right. We must do everything in our power to complete the mission and make America stronger at home and respected again in the world. Thank you, God bless you, and God bless the United States of America. Paid for by Kerry-Edwards 2004, Inc.

Bush falsely claims Kerry voted repeatedly to raise premiums. Kerry's spot blaming Bush alone for the latest increase isn't much better.

09.16.2004

Summary

A Bush ad falsely claims that Kerry "voted five times to raise Medicare premiums." Actually, Kerry voted for maintaining the same premium formula that had been in place since well before he was elected to the Senate.

The Bush ad also falsely implies that Kerry referred to required premium increases as "a day of vindication," when Kerry actually was referring to items such as increased health coverage for children.

Bush's ad is meant to counter a Kerry TV spot that isn't much better. Kerry's ad falsely implies that Bush alone was responsible for next year's increase in Medicare premiums. Actuaries say rising costs and other factors account for nearly half of the 17.4% increase, and have nothing to do with Bush's Medicare legislation. And some of the costs imposed by Bush's legislation are aimed at providing increased benefits for seniors who choose HMO's over traditional Medicare.

Analysis

Who Pays for Medicare?

A bit of history is in order here. The Medicare program is divided into two separate categories - Parts A and B. Part A covers hospital costs, while B includes outpatient costs and doctor bills.

Bush Ad "Medicare Hypocrisy" Announcer: John Kerry...attacking the President on Medicare. But it was Senator Kerry who voted five times to raise Medicare premiums. Kerry voted to require premium increases...calling the passage of the bill "a day of vindication." The same John Kerry who was absent for 36 of 38 Medicare votes last year...even one giving seniors prescription drug coverage. John Kerry, he actually voted for higher Medicare premiums before he came out against them.

Part B is optional. Those who want it must pay a premium for coverage, and 90 percent of Medicare recipients do. The government pays part of medical costs through general tax revenues, and the premiums cover the rest. 

When Medicare began in 1965, patient premiums originally picked up half of the total cost of the program. But seniors complained as premiums quickly started to rise, and so Congress put a cap on the premium rates. That was replaced in 1982 when Congress set premiums at 25% of the total Part B costs, which allowed premiums to rise more quickly (and slowed the rising cost to taxpayers).  That was the situation facing Kerry when he joined the Senate in 1985.

Five Votes to Increase Premiums?

The Bush ad claims Kerry voted "five times to raise Medicare premiums.”  But as evidence, the campaign cites five votes on large appropriations bills. Among the provisions of these spending bills were extensions of the 25% formula, which had been framed as a temporary measure, set to expire automatically. Had the 25% formula not been extended, premiums would have been lower and payments by taxpayers higher.

Four of these measures passed with broad bipartisan support, including three in which a majority of Republican senators joined in support. The only one of the five votes that wasn't bipartisan was on President Clinton's 1993 deficit-reduction legislation raising the top federal income-tax rates and cutting spending. Extending the Medicare formula was an almost unnoticed feature of that landmark legislation, which passed without a single Republican vote in favor.

Saying these five votes were "to raise Medicare premiums" is incorrect. They were votes to maintain the formula for determining premiums as it was. The Bush ad would be correct to say that Kerry voted against allowing Medicare premiums to fall (and the burden on taxpayers to rise) -- but then so did most Republicans, most of the time.

"A Day of Vindication?"

The Bush ad strikes another false note when it says, "Kerry voted to require premium increases...calling the passage of the bill 'a day of vindication.'" This is extremely misleading and quotes Kerry out of context.

The ad refers to the Balanced Budget Act of 1997 (BBA), which made the 25% formula permanent so that Congress would not have to continually renew the rate.

It passed overwhelmingly, 85-15 , with most Republicans in favor.

It is true that premium costs would have fallen had Congress allowed the 25% formula to lapse, reverting to a formula that would have decreased premiums and increased the expense to taxpayers. Only in that sense did Kerry vote "to require premium increases." Jeff Lemieux, founder and executive director of Centrists.org and a former health analyst at the Congressional Budget Office, told FactCheck.org:

Lemieux: Technically, they (the Bush campaign) are right. Premiums would have been lower if they didn't pass BBA '97 . However, no one expected this to happen.

The Bush ad goes off the track when it implies that Kerry called the mandated premium increases a "day of vindication," which is not what he was referring to in his speech on the Senate floor that day.  Here is what he really said:

Kerry: This legislation before us now incorporates many of the provisions I and others on this side of the aisle fought to have included.  For that reason, this is a day of vindication for Americans who believe, as Democrats have proven, that it is vital to balance the federal budget and extend health care to children, provide broader educational opportunities, ensure the future for our senior citizens and safeguard our environment.

Notice that Kerry referred specifically to the overall effort to balance the budget, and also to items that Democrats had wanted included: "health care to children" and "broader educational opportunities." He made no reference to Medicare premiums.

Bush's Medicare Modernization Act of 2003

Kerry Ad "Immediate Help" Announcer: George Bush touting his Medicare bill to the nation. President Bush: "I believe we have a moral responsibility to honor America's seniors. Now seniors are getting immediate help..." Announcer: The very next day, George Bush imposes the biggest Medicare premium increase in history, while prescription drug costs still skyrocket.  The wrong direction for America. (On Screen: "Medicare Premiums to Rise Record 17%" Charlotte Observer - 9/4/04; "Medicare Recipients Face Steep Rise in Premiums" Hartford Courant - 9/4/04; "Drug Prices Sour" UPI 7/9/04) Announcer: John Kerry. A plan to lower the cost of health care and take America in a new direction.

The Bush ad says Kerry missed 36 out of 38 Medicare votes in 2003 including "one giving seniors prescription drug coverage." That's true: Kerry was campaigning during most of the votes on Bush's Medicare bill in 2003, and he did miss the final vote on the Medicare Modernization Act (MMA) that passed 54-44 and extended prescription drug benefits to seniors. Kerry would have voted against it, making the vote 54-45.

The ad fails to mention that Kerry was present for a key vote on the bill that took place a day earlier, when his vote was much more likely to make a difference.This was a procedural vote to waive budget restrictions - since MMA would violate Congressional spending rules - and therefore it required 60 votes to pass as opposed to a simple majority. Kerry was present this time and voted against the motion, but it passed 61-39  Had only two senators voted differently, MMA would not have been brought to the final vote.

Bush and the 17% Premium Increase

On September 5, the weekend that the Department of Health and Human Services announced the 17% hike in Medicare premiums, the Kerry campaign released an ad that said Bush "imposes the biggest Medicare premium increase in history." Their facts are correct - this year will be the biggest increase in Medicare premiums since the program began. However, Bush didn't "impose" the increase unilaterally, as the ad claims. The increase was announced as part of the annual HHS cost estimate for projected healthcare spending in the coming fiscal year. Lemieux, the health analyst, told FactCheck.org:

Lemieux: It is just wrong to say that Kerry is responsible for the increase, and it may be a bit of a stretch to blame this on Bush, since it is not explicitly his doing

HHS bases the estimate on the previous year's expenditures, and then factors in any new changes while accounting for the overall inflated cost of healthcare. This year's estimate for 2005 reflects the changes in spending that resulted from the President's Medicare bill, and also from other factors.

Bush's Medicare bill does account for 9.9 percentage points of the total 17.4% increase in premiums, according to Medicare actuaries.  The Center for Medicare and Medicaid Services estimated that the general inflation adjustment (prior to the MMA) and the increased use of services would together require an increase of about 4.8% in premiums. Other factors include replenishing reserve funds drawn down by higher-than-expected costs in the past.

A large part of the Bush-mandated premium increase goes to provide a very small increase in fees for physicians -- just a 1% rise, much lower than the overall rate of inflation. It looms much larger in the accounting, however, because the law prior to MMA would have imposed a 4% cut in fees. So Bush's law gets the blame for reversing that fee cut as well as allowing a modest increase for doctors.

Congress increased payments to doctors to address a problem created by the 1997 Balanced Budget Act, which had slowed the growth of costs (and premiums) by severely restricting payments to physicians and other providers of health care. But a consequence of the cuts was that a number of doctors and healthcare providers dropped out of the program altogether.

Another portion of the Bush-mandated increase is due to higher payments to HMO's offering alternatives to traditional Medicare under so-called "Medicare Advantage" plans. Administration officials argue that these payments will lead to increased benefits for those who choose the plans, while Democrats argue that this will "force" seniors into HMOs.

None of the 17% increase is due to drug benefits. A big part of President Bush's Medicare bill creates for the first time a prescription drug benefit plan for seniors.  The plan does not take effect until 2006, but even then it will not have any impact on the Part B premiums.The prescription drug program will fall under a new section, Part D, which will have its own premium rates worked out through private insurers.

Sources

 

Julie Rovner, “Bush, Kerry Debate Medicare Price Hike,” NPR News, 13 September 2004.

Julie Rovner, "Medicare Officials Announce Largest Increase in Premiums in Program's History," NPR News, 3 September 2004.

“Medicare Increases Prove To Be Complicated Political Fodder,” National Journal's Congress Daily, 9 September 2004.

US Senate Roll Call Votes 97^th Congress – 1^st Session H.R 3198 Vote #379 19 December 1985.  

US Senate Roll Call Votes 99^th Congress – 1^st Session H.R. 3545 Vote #419 21 December 1987.

US Senate Roll Call Votes 101^st Congress – 1^st Session H.R. 3299 Vote #243  13 October 1989.

US Senate Roll Call Votes 103^rd Congress – 1^st Session H.R. 2264 Vote #247  6 August 1993.

US Senate Roll Call Votes 105^th Congress – 1^st Session H.R. 2015 Vote #209  31 July 1997.

Jeff Lemieux, Centrists.org, personal interview 14 September 2004.

John Shatto, Office of the Actuary, Center for Medicare & Medicaid Services, personal interview 14 September 2004.

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Misinforming Voters From The Stump

Bush and Kerry both pepper their standard political speeches with misleading claims.

09.17.2004

Summary

It's not just the TV ads that contain bum information. Both Bush and Kerry pepper their "stump speeches" with dubious factual claims. In this article we examine three excerpts from each candidate's recent appearances.

In one of them Bush claims "real after-tax incomes are up almost 10 percent," and in another Kerry repeats his claim that jobs being created now "pay us $9,000 less than the jobs that are going overseas." It's hard to imagine how both of those statements could be true. We find that both are distortions.

Kerry misrepresents Bush's position on Social Security. Bush cites a disputed cost estimate for Kerry's health-care plan. Kerry exaggerates the current cost of the Iraq war. Bush paints a rosy picture of job growth while failing to mention that there's been a net loss of jobs since he took office.

Analysis

Listening to the candidates on the campaign trail, it sometimes seems they are describing parallel universes. Bush claims income is increasing. Kerry claims jobs are going overseas and those that are left pay thousands less. Both are being deceptive.

Bush on Income

Bush on Incomes Colmar, PA: Sept 9, 2004 Bush:Because of tax relief, the middle class is paying less in federal taxes. The average family of four with an income of $40,000 got nearly a $2,000 tax cut. (Applause.) Real after-tax incomes are up almost 10 percent since December of 2000.

Bush seldom fails to tout the benefits of his tax cuts -- selectively -- and lately has added a claim that after-tax incomes have risen 10% since he took office, a figure that is deceptive.

He says "Real after-tax incomes are up almost 10 percent since December of 2000," Clinton's last full month in office. That's from the Department of Commerce, a statistic  called "real disposable income." It refers to the total of all inflation-adjusted income earned by all persons, minus taxes.

Bush fails to mention that much of the increase is due to simple population growth.  Adjust it for that, and the per-capita growth is less than 6%.
And even that doesn't tell you who got the income. Roughly half of all personal income goes to the most affluent one-fifth of the population.

Typical families and households haven't seen such an increase. The Census Bureau's annual survey shows that inflation-adjusted income for the median household -- the midpoint -- fell by $1,535 in Bush's first 3 years, a decline of 3.4 percent.

In fairness, it should be noted that those Census figures don't reflect the improvement in the economy that's taken place in 2004, nor do they reflect Bush's tax cuts. The Census figures on after -tax income for 2003 aren't yet available, but even after-tax income was still falling in 2002 according to the most recent Census figures available.

It is true as Bush claims that a family of four making $40,000 a year got nearly a $2,000 tax cut (when compared to tax rates in 2000), according to the independent Tax Policy Center and others. That is, if both children were under age 17 and so qualified for the doubled per-child tax credit. Bush doesn't mention that childless taxpayers didn't make out nearly so well, and those in high income brackets made out much better. We've pointed all that out before

Kerry on Jobs

Kerry is still claiming that jobs being created now pay $9,000 less than jobs that were lost, a fanciful figure as we've noted previously

Kerry on Jobs St. Louis, MO: Sept. 10, 2004 Kerry: I think sending jobs overseas and having a tax cut - tax benefit that actually rewards the company that goes overseas, I think that's "W." Wrong choice, wrong direction, wrong leadership for America. And the right thing to do is to start creating those jobs here, and to do smart things that help us invest in science and technology, and create the high paying jobs of the future so we're not settling for jobs that pay us $9,000 less than the jobs that are going overseas.

In a recent speech in St. Louis, for example, he referred to "jobs that pay us $9,000 less than the jobs that are going overseas." But that relies on  figures from the liberal Economic Policy Institute comparing average pay in broad industries, not the pay of specific jobs that have been lost or gained. Not even EPI claims that its figures show what Kerry says, a $9,000 difference between new and old jobs.

And as we've pointed out before, more detailed government data that focus on occupations, rather than industries, tell a different story. Higher-paid occupations, like managers (who can be in any industry) and health professionals, are growing faster.

A new study  of job quality, by economists at the Federal Reserve Bank of Chicago, states that "Recent estimates of higher-paying industry job growth have rebounded," as  typically happens as the economy expands.

And if new jobs are really paying $9,000 less than the old ones, as Kerry claims, how can average hourly earnings and average weekly earnings be going up? The latest figures on wages from the Bureau of Labor Statistics, released Sept. 16, show that average hourly earnings for rank-and-file workers (about 80% of the private workforce) were 2.6% higher in August than they had been when Bush took office, even after adjusting for inflation.

Kerry would be accurate in saying that today's jobs may be paying less. But the fact is economists disagree about that, and certainly can't calculate an average dollar difference.

Kerry's stump speech seldom fails to attack Bush for a "tax benefit that actually rewards the company that goes overseas," as he did in the St. Louis speech. But as we've said before, that tax provision was there long before Bush took office, and even liberal economists agree it's a pretty small influence on where companies locate factories. Changing that tax provision would do very little in terms of US jobs.

Bush on Kerry's Spending

Bush on Spending Muskegon, MI: Sept 13, 2004 Bush: ..today, there's a independent study, which has been released, which says that his plan would cost the taxpayers $1.5 trillion in new government spending. Not only is his plan going to increase the power of bureaucrats in your lives, but he can't pay for it unless he raises your taxes.

Bush currently is quoting a new study estimating that Kerry's health-care plan will cost $1.5 trillion over 10 years. "He can't pay for it unless he raises your taxes," Bush declares.

The study is from the American Enterprise Institute, a think tank in Washington that describes  itself as favoring "limited government" and "private enterprise." Previously, the Bush campaign quoted a much lower estimate from Ken Thorpe of Emory University in Atlanta, a health-care finance expert who worked in the Clinton administration. Thorpe disputes  the AEI study, saying it is full of mistakes. We can't resolve that argument, but whether the true cost is $1.5 trillion or $638 billion, Kerry's plan is clearly much more expensive than what Bush proposes.

But interestingly, both the Thorpe study and the AEI study agree on two things. First, both studies estimate that 27 million currently uninsured persons would get health coverage. By both estimates, Kerry's plan would cover several times more additional persons than what Bush proposes. The other thing both studies confirm is that Kerry's plan would reduce health-insurance premiums for those already covered, something it is designed to do. (The AEI study calls this a "windfall" and seems to see it as a flaw, rather than a positive factor.)

Bush's speech is misleading when he says Kerry would have to raise "your" taxes to pay for his health plan. Kerry does propose to raise federal income taxes, but only for those making $200,000 a year or more. Bush would be accurate if he said Kerry would raise taxes for "some of you."

Bush on Jobs

Bush On Jobs Colmar, PA: Sept. 9, 2004 Bush: Our country has now seen 12 straight months of job gains. Over the past year, we've added 1.7 million jobs. That is more than Germany, Japan, Great Britain, Canada and France combined. (Applause.) Unemployment is down to 5.4 percent. That is nearly a full point below the rate in the summer of 2003, and it is below the average of the 1970s, the 1980s and the 1990s. (Applause.)

Bush also says "over the past year" the economy has added 1.7 million jobs, and that's true. And he  says the 5.4% unemployment rate for August is lower than the average rate for the 1970's, 1980's and 1990's, which is also true. Here are the averages for those decades, derived from Bureau of Labor Statistics figures:

Average Unemployment Rates

1970's . . .6.2%

1980's . . .  7.3%

1990's . . .  5.8%

In fact, the current jobless rate is just a little better than the 5.6% average unemployment rate for each month since 1948, when the Bureau of Labor Statistics began keeping track.

What Bush leaves out, of course, is that 5.4% is slightly worse than the average for the full eight years of Clinton's two terms, which was 5.2%. And not nearly as good as the under-4% rate reached in several months of Clinton's final year. Bush also says nothing about the fact that as of August,  the number of persons employed in payroll jobs was still 913,000 below what it was when Bush took office in 2001. At the current rate of growth it is almost certain that Democrats will be proven right about Bush being the first President since Hoover to suffer a net job loss over a full four-year term.

Kerry on Iraq Greensboro, NC: Sept. 7, 2004 Kerry: He promised America this war would cost $1 billion, and that oil from Iraq would pay for it. It's almost $200 billion now, and I say to everybody in North Carolina, that's $200 billion that we're not investing in health care in America. That's $200 billion we're not investing in schools in America. That's $200 billion that we're not investing in prescription drugs for seniors.

Kerry on Iraq

Kerry's stump speech hammers away at Bush for spending money on Iraq instead of domestic needs, but he uses an inflated figure. "It's almost $200 billion now," Kerry said Sept. 7 in Greensboro, NC. But that's too high.

As we pointed out in detail recently, Kerry is using Office of Management and Budget figures which put the cost at just under $120 billion through the end of this fiscal year, which ends Sept. 30. That's what's actually been spent on military operations and reconstruction. Kerry then adds money that is to be spent in the future -- lumping in a lot of funds that actually won't go for Iraq at all, but are earmarked for Afghanistan (a military operation Kerry supports) and the Pentagon's domestic anti-terror operations, such as combat  air patrols over US cities. For details see our earlier article

Kerry on Social Security Greensboro, NC: Sept. 7, 2004 Kerry: Now at that convention in New York last week George Bush actually stood up and said he had a new idea. And you know what that new idea was? The bad old idea of privatizing Social Security and cutting your benefits. So that's W, wrong choices, wrong direction, and we're going to make it right by never privatizing Social Security and never cutting people's benefits.

Kerry on Social Security

No Democratic stump speech would be complete without accusing Republicans of wanting to cut Social Security benefits, and Kerry's does not disappoint. He said Sept. 7 that Bush is proposing "the bad old idea of privatizing Social Security and cutting your benefits."

It is of course true that Bush generally favors creating private accounts that would allow younger workers to put aside some of their Social Security taxes into private accounts invested in government-approved mutual funds, a plan better characterized as partial  privatization. But Kerry mischaracterizes Bush's position when he talks about "cutting benefits."

Bush has said repeatedly he wouldn't cut benefits for those already retired, or near retirement. His campaign website  lists this as "President Bush’s first Social Security reform principle," in fact.

What Bush generally favors (he hasn't proposed a specific plan) is to allow younger workers the option of investing part of their Social Security taxes in private accounts. That could lead to a better return and higher future benefits than under the current system, though there is a risk that it would not if the economy and stock market perform at less than their historical averages.

Kerry also fails to mention that the current Social Security system is unstable, and can't pay for all the benefits it now promises. According to the most recent report  of the Social Security trustees, the system's actuaries calculate that it would take a 13% cut in benefits right now (or a 15% increase in payroll taxes on workers and their employers) to make the system secure for the next 75 years. That's a hard choice Kerry doesn't mention.

Sources

"Personal Income and Outlays," Bureau of Economic Analysis, U.S. Department of Commerce, 30 Aug 2004 (& previous).

DeNavas-Walt, Carmen, Bernadette D. Proctor, and Robert J. Mills, U.S. Census Bureau, "Current Population Reports, P60-226, Income, Poverty, and Health Insurance Coverage in the United States: 2003," U.S. Government Printing Office, Washington, DC 26 Aug 2004.

Alternative Measures of Income for 2001 and 2002 (Revised): Table 3: "Household Income by Race and Hispanic Origin and Income Definition Using Revised Tax Model: 2001 and 2002," U.S. Census Bureau, 8 July 2004.

Bureau of Labor Statistics, "Real Earnings in August 2004," news release 16 Sep 2004.

Joseph Antos, Roland (Guy) King, Donald Muse, Tom Wildsmith, Judy Xanthopoulos, "Analyzing the Kerry and Bush Health Proposals," American Enterprise Institute, 13 Sep 2004.

Kenneth E. Thorpe, "Comparison of Thorpe and American Enterprise Institute Estimates of the Kerry Health Care Plan," Emory University, 15 Sep 2004.

Daniel Aaronson and Sara Christopher, "Employment growth in higher-paying sectors," Chicago Fed Letter Number 206, Federal Reserve Bank of Chicago, Sept. 2004.

"The 2004  Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds," 23 March 2004.

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The New York Times > Opinion > Taxing Global Profits
http://www.nytimes.com/2004/09/17/opinion/17fri2.html?th

Summary:

A new study showing that American multinational companies booked a record $149 billion of profits in tax-haven countries in 2002 is further evidence, if any were needed, that the corporate tax structure is much in need of repair.

The research, done by a former Treasury Department economist and published in a journal that is the tax industry's bible, Tax Notes, looks at American subsidiaries that are located in countries with low or no corporate taxes, like Ireland, Bermuda, Luxembourg and Singapore.

Take a simplified example: Say a company has a subsidiary in Ireland that manufactures a computer part for $10 to be sold to customers in the United States for $50.

The study concludes that the more that American companies can use foreign subsidiaries to lower taxes, the greater their incentive to invest and employ staff abroad.

In a world where capital flows freely, they say, nothing can stop the sheltering of profits.

In 1998 and 1999, for example, business interests successfully lobbied Congress to block Internal Revenue Service regulations that would have curtailed the abuses.

In addition, past and present Congresses and administrations have been lukewarm, at best, in supporting efforts by the Treasury Department and the I.R.S. to enforce existing law.

Global capital presents a big challenge for tax collectors, and there are no easy answers.

After careful study and debate, it might make a lot of sense to enact some other type of tax, like a European-style value-added tax, that could more efficiently capture the profits that currently escape the United States tax system.

What is unacceptable is for antitax forces and their allies in Congress to allow the current system to fail so they have an excuse to "reform" it, often in ways that are as much ideological as they are economic - by, for instance, eliminating taxes on profits, thus shifting the burden to wage earners.

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