Taking Liberties in Philadelphia

Politico.com, March 31, 2008: "Sen. Obama didn't fill out these state Senate questionnaires - a staffer did - and there are several answers that didn't reflect his views then or now," Tommy Vietor, a spokesman for Obama's campaign, said in an e-mailed statement. "He may have jotted some notes on the front page of the questionnaire at the meeting, but that doesn't change the fact that some answers didn't reflect his views. His 11 years in public office do."

Gasoline Prices
Clinton said she believes "market manipulation" is a factor in the rise of fuel prices but offered no evidence to support that.

Clinton: Number one, we are going to investigate these gas prices. The federal government has certain tools that this administration will not use, in the Federal Trade Commission and other ways, through the Justice Department, because I believe there is market manipulation going on, particularly among energy traders.

In an article we posted on an earlier Democratic debate, when John Edwards raised this issue, we noted that the Federal Trade Commission has repeatedly looked into allegations of market manipulation and fixing of gasoline prices. So far, it has found nothing to prosecute, not even in the post-Hurricane Katrina gas price spikes. FTC Chairman Deborah Platt Majoras testified before the Senate Committee on Commerce, Science, and Transportation on May 23, 2006, about the post-Katrina price increases. According to the FTC's press release, the investigation found 15 instances of "price gouging," but the FTC added: "Other factors such as regional or local market trends ... appeared to explain these firms' prices in nearly all cases."

The FTC isn't sitting on its hands as prices shoot skyward, at least according to information on its Web site. As part of a project begun in 2002, it monitors retail gas prices in 360 U.S. cities and wholesale prices in 20 urban areas, collects daily data from the Department of Energy and private groups, and crunches all the information to look for suspicious pricing. When lights start flashing, it consults with other government agencies and state attorneys general to determine next steps, including investigations. But the FTC does not disclose its ongoing investigations.

Capital Gains Misinformation
Moderator Gibson also made a dubious claim that cuts in capital gains tax rates raised government revenues. Regarding the two most recent cuts in the capital gains rate, to 20 percent under President Clinton and to 15 percent under President Bush, Gibson said:

Gibson: And in each instance, when the rate dropped, revenues from the tax increased. The government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?

Gibson's claim is partially right. Cutting the capital gains tax rate does stimulate at least a temporary, short-term increase in revenue by giving owners of appreciated assets (such as real estate or stocks) an incentive to sell them and turn their paper profits into cash. The boost in capital gains income can offset the loss to the government from the lower rate.

The long-term revenue effects of changes to the capital gains tax rate are less certain, however. For example, in 1990, when Congress was considering a 30 percent cut in the capital gains tax rate, Congress' Joint Committee on Taxation and the Treasury's Office of Tax Analysis both attempted to compute the revenue effects of the cuts. OTA predicted at $12 billion increase in revenue over five years. JCT predicted an $11 billion loss over five years. Academic studies have produced similarly conflicting results.

The nonpartisan Congressional Budget Office concluded in 2002 that cuts to the capital gains tax rate "may not be enough to produce additional receipts over a long period" but "may do so over a few years." Similarly, Jane Gravelle, a tax policy specialist with the Congressional Research Service, says that the empirical evidence on capital gains tax rate changes "does not clearly point to a specific response and revenue cost," adding that the latest research shows "more modest" change than economists had previously thought.

Gibson also said Obama could nearly double the capital gains rate. Obama actually indicated he would push for a much smaller increase.