FACT CHECK: Romney's clunker claim on auto bailout
Thursday, November 10, 2011
WASHINGTON (AP) — Mitt Romney's claim that President Barack Obama "gave GM" to the United Auto Workers stood as one of the overstatements of the night Wednesday when Republican presidential candidates grappled with the economy in their latest debate. Several drifted from reality too in portraying regulations as a killer of jobs, if not the country itself.
A look at some of the claims in the debate and how they compare with the facts:
ROMNEY: President Barack Obama "gave GM to UAW, he gave Chrysler to Fiat."
THE FACTS: That's not what happened in the bailout.
A trust owned by the United Auto Workers received a 17.5 percent ownership stake in GM to help that trust pay for its retirees' health care. That stake has declined since then, after the company went public in November 2010. The trust now owns about 10 percent of General Motors. That's much smaller than the government's stake of about 30 percent, and it doesn't support the notion that the government "gave" the company to the union.
Moreover, the union did not get free rein in return for its share. It was barred from going on strike over wage issues during recent contract talks with GM and Chrysler, as a condition of the bailouts.
Nor did Obama give Chrysler to Fiat.
The Italian automaker Fiat received an initial 20 percent stake in Chrysler as Chrysler emerged from bankruptcy in 2009 in exchange for only management expertise and technology. Since then, Fiat has paid $1.8 billion to boost its stake to 53.3 percent, including a $500 million payment to the U.S. Treasury to purchase the government's 6 percent share of the company.
Debating in Michigan, where the bailout was popular and credited with helping to save automakers, Republican candidates struggled at times to explain why they opposed the deal.
RICK PERRY: "Pull back all the regulations. It's the regulatory world that is killing America. ... It doesn't make any difference whether it's the EPA or whether it's the federal banking, the Dodd-Frank or Obamacare, that's what's killing America."
MICHELE BACHMANN: "Our biggest problem right now is our regulatory burden. The biggest regulatory problem we have is Obamacare and Dodd-Frank (financial regulations). I will repeal those bills."
NEWT GINGRICH: "If the Republican House next week would repeal Dodd-Frank and allow us to put pressure on the Senate to repeal Dodd-Frank, you'd see the housing market start to improve overnight."
THE FACTS: It has become an article of faith in the GOP field that regulations are a leading drag on jobs, but Labor Department data show that few companies where large layoffs occur say government regulation was the reason. Just two-tenths of 1 percent of layoffs since Obama took office have been due to government regulation, the data show.
Moreover, there is little evidence that the regulatory burden is any worse now than in the past or that it is costing significant numbers of jobs. Most economists believe there is a simpler explanation: Companies aren't hiring because there isn't enough consumer demand. And economists believe high levels of economic uncertainty are a leading complication for business, arising more from struggles over taxes and spending in Washington than from regulations — an unwelcome quantity, for sure, but a known one.
The National Federation of Independent Business asks its small-business membership each month to name the single most important problem they're facing. Last month, the most common response was "poor sales," cited by 26 percent. Government regulation came in second, at 19 percent.
Bachmann has plenty of company in the GOP field in blaming the regulatory burden of Obama's health care law for economic ills. But the evidence so far is thin; most of the law's provisions don't take effect until 2014.
Indeed, the health care industry has been one of the few reliable sources of hiring during the recession and its aftermath. The industry has added 313,000 jobs in the past year.
ROMNEY: "If we stay on the course we're on, with the level of borrowing this administration is carrying out, if we don't get serious about cutting and capping our spending and balancing our budget, you're going to find America in the same position Italy is in four or five years from now, and that is unacceptable."
THE FACTS: To be sure, calamity can spread from Europe's debt crisis in any number of ways. Americans are already seeing the effects from losses in their international investments, and governments are swimming in debt on both sides of the Atlantic. There are some important differences, though, between the troubles of Greece, Italy and Europe at large, and the United States.
For one thing, while creditors keep demanding higher and higher interest rate levels from troubled European countries to justify the added risk of such loans, U.S. debt in the form of Treasury bonds and other securities remains among the safest havens of all international investment.
Even the Standard and Poor's downgrade of the U.S. credit rating in August did not result in the United States being forced to pay higher interest rates. Instead, demand for Treasury bonds increased, pushing rates down more.
Also, the United States deals with its debt in part by printing money, if the Federal Reserve so desires. While that might cause inflation down the road, it also can make the debt proportionally smaller. In sharing a common currency, the euro, the 17 members of the euro zone do not have that flexibility.
And while there are doubts about the outcome, a special congressional committee is working toward a trillion-dollar-plus reduction in the U.S. deficit, with a deadline for a deal of Nov. 23.
GINGRICH: "Dodd-Frank kills small banks; it kills small business."
HERMAN CAIN: "Then you get the regulators off of the backs of the banks ... get the regulators out of the way, such that the small banks and the medium-sized banks aren't being forced out of the business."
THE FACTS: The financial regulation overhaul known as Dodd-Frank is mostly targeted at large banks and Wall Street firms, which got billions of dollars in 2009 from the government's bailout. Small banks are exempted from many of the requirements.
Also, community banks, which have less than $10 billion in assets and make up 98 percent of U.S. banks, lobbied and received an exemption from the new Consumer Financial Protection Bureau. While they have to follow the rules the new agency sets, they aren't subject to its enforcement authority. Instead, existing regulators will oversee the community banks' compliance.
That hasn't stopped most of the candidates from criticizing the regulations as a drain on small institutions.
Their point that regulators are holding back lending doesn't square with surveys, mostly of larger banks, by the Federal Reserve. Those surveys have found that banks have been easing their credit standards for business loans for the past year.
The survey also found that loan demand fell in the third quarter. Paul Dales, an economist at Capital Economics, wrote Monday that the findings "suggest it is not the supply of credit that's holding the economy back. Instead, the problem is demand for credit."
Associated Press writers Tom Raum and Marcy Gordon contributed to this report.
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