ELECTION 2020

Fact Checker: Attack on Ernst goes a bit further than the facts

An ad on Facebook criticizes U.S. Sen. Joni Ernst over tax vote. (Screen capture)
An ad on Facebook criticizes U.S. Sen. Joni Ernst over tax vote. (Screen capture)

The nation is watching the tight race between Democrat Theresa Greenfield and incumbent Republican Joni Ernst for one of Iowa’s U.S. Senate seats.

A six-second ad paid for by the Democratic Senatorial Campaign Committee claims, “Joni Ernst gave trillions in tax breaks to corporate special interests. She’s not on our side.”

The text with the ad on Facebook, which shared it Sept. 16 as sponsored content, goes on to claim that Ernst “wants to pay for it by cutting our Medicare.”

Graded a B

Analysis

Claim 1: The DSCC, the campaign arm of Senate Democrats, cited Ernst’s vote in December 2017 on the Tax Cuts and Jobs Act as the basis of its claim, so we’ll take a look at the bill’s fiscal impact on corporations.

Ernst was one of 51 senators who voted in favor of passing the bill largely along party lines — all but one Republican voted in favor and all Democrats opposed it.

The GOP-backed legislation made temporary cuts to individual tax rates, which are slated to end after 2025 unless renewed, and cut the maximum federal corporate income tax rate from 35 to 21 percent.

According to the Joint Committee on Taxation, which reports to the Senate and House finance and budget committees, the reduced corporate tax rate will save corporations $1.35 trillion through 2027.

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To help support its claim that the tax cuts benefited the corporations more than their workers, the DSCC pointed to news coverage from Vox, a left-leaning news organization, showing that by December 2018, nearly the end of the first year the new tax law took effect, companies had bought back a record $1.1 trillion of stock.

An Associated Press review of S & P 500 Index came up with a lower figure — $806 billion in corporate stock buybacks in 2018, which topped the previous record of $590 million set in 2007.

But there’s a difference in opinion of whether the new tax law caused a boost in stock buybacks or whether there is a correlation.

Jeff Hoopes, a University of North Carolina at Chapel Hill associate professor of accounting, told the Fact Checker, “There was an existing trend in repurchases, and I think you could do some reasonable analyses and show that the increase in repurchases after the (tax bill) was merely a continuation of that trend ...”

Greg Brown, director of the nonprofit Kenan Institute for Private Enterprise based at UNC, explains in a YouTube video that companies doing more share buybacks may invest and grow more than a typical company. He said money returned to shareholders doesn’t simply disappear and it is most likely being invested in other businesses or in a bank that can then use the funds to make loans.

A May 2019 Congressional Research Service report found that “while evidence does indicate significant repurchases of shares, either from tax cuts or repatriated revenues, relatively little was directed to paying worker bonuses, which had been announced by some firms.”

Grade: Researchers debate who is benefiting from stock buybacks, but UNC experts suggest these repurchases aren’t inherently bad. Regardless, the $1.35 trillion corporations are projected to save from tax cuts over the GOP bill’s first 10 years in effect is not quite the “trillions” that the ad claims — yet — but given the large slash to the corporate tax rate, savings will mount high over several decades. The ad doesn’t specify a timespan, so we give that claim an A.

Claim 2: Next, we’ll look at whether Ernst targeted Medicare to fund the tax cuts.

Ernst voted against an amendment to the bill that did not pass but proposed a point of order against legislation cutting benefits from Social Security, Medicare or Medicaid — entitlement programs whose government funding is automatic and that cover anyone who qualifies. Members of Congress use points of order to enforce a chamber’s rules and potentially open debate about an alleged violation of its legislative procedures.

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Congressional Budget Office projections showed the tax bill would increase the federal deficit by $1.9 trillion, stoking concerns among opponents that lawmakers would look to cut funding from entitlement programs to offset the ballooning deficit.

Left-leaning news website Iowa Starting Line in February shared a clip of a conversation Ernst had in March 2019 in which an unknown man asked her thoughts on Georgia Sen. David Perdue’s efforts to cap spending on Medicare, Medicaid and Social Security to manage the nation’s deficit: “It is interesting hearing your classmate David Perdue has been pretty frank about the changes that need to happen to Medicare and Medicaid. Are you on the same page with him on that?”

Ernst replied, “I think we all are because we understand that our nondiscretionary spending is growing like this. Everyone focuses on discretionary spending because that is what we can control in Congress. The rest is on autopilot and is out of control. We have to figure out ways to honor the commitments that have been made, but make changes for the future. How we do that, I don’t know.”

PolitiFact reviewed a claim by President Donald Trump that his administration strengthened Social Security and Medicare. The fact-checking organization cited a presentation at the American Enterprise Institute, a market-oriented think tank, by Paul Spitalnic, the chief actuary at the Centers for Medicare and Medicaid Services.

Spitalnic said the Hospital Insurance Trust Fund — which funds Medicare’s core program, Part A, which covers hospital care — had lost three years of solvency after Trump’s first year in office. He directly attributed the loss of one of those years to the GOP tax bill: “The Tax Cuts and Jobs Act of 2017 decreased individual tax rates and as a result, there is somewhat less income coming into the trust fund.”

Grade: The tax reform package didn’t strengthen the forecast for Medicare and Ernst has indicated a desire to rein in nondiscretionary spending. But even her vote against the amendment to the 2017 bill that would have protected Medicare benefits from cuts isn’t proof she wanted to funnel funds for the health care program toward corporate tax cuts. We give this claim a D.

Conclusion

If the text accompanying the ad on Facebook hadn’t introduced a new claim, this ad would’ve received higher marks. Still, we give more weight to the claim featured most prominently in the video because many viewers may only hear this claim and never click on the ad to see the accompanying text, The Medicare claim sinks the ad’s grade to an overall B.

Criteria

The Fact Checker team checks statements made by an Iowa political candidate/officeholder or a national candidate/officeholder about Iowa, or in ads that appear in our market.

Claims must be independently verifiable.

We give statements grades from A to F based on accuracy and context.

If you spot a claim you think needs checking, email us at factchecker@thegazette.com.

This Fact Checker was researched and written by Marissa Payne of The Gazette.

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We value your trust and work hard to provide fair, accurate coverage. If you have found an error or omission in our reporting, tell us here.

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