Fact Checking the Fact Checkers: The Washington Post Gets its Pinocchios Dead Wrong on Biden, Palin and Health Care

As a policy wonk who has long been involved in presidential campaigns, I greatly appreciate the role that independent fact checkers play in keeping all the candidates on the facts and keeping the debate focused on the issues. In general, you can count me as a fan of the work that Michael Dobbs and the Washington Post do with their already famous "Pinocchio" rating. But their awarding of two "Pinocchios" -- for "significant omissions or exaggerations" -- to Joe Biden for his health care exchange with Governor Palin in last night's debate was just plain off the mark.

Full disclosure: I advise the Obama campaign and in that role had a chance to offer my two cents to Senator Biden's team in preparation for last Thursday's debate. But the facts below make clear that from any perspective, Senator Biden was precise and accurate in his statements Thursday night. In fact, while the Washington Post unfairly criticizes Joe Biden , they remain inexplicably silent over the repeated and significant omissions from Governor Palin and John McCain on their health care plan.

Let's start at the beginning. The McCain health plan calls for completely eliminating the current tax exemption for employer-provided health care. Viewed alone, it would raise as much as $3.6 trillion in tax revenues. Yet, the McCain plan uses the revenues to provide a $5,000 tax credit for families and a $2,500 credit for singles as a replacement for the current exemption. The McCain team has consistently argued -- and Sarah Palin last night reinforced -- that their plan is "budget" or "revenue" neutral.

As with any revenue neutral tax reform, the McCain plan creates both a group that benefit and another group that would be worse off. While virtually every American would be better off with the Obama plan as opposed to the McCain plan, it is the case that there are some -- such as young, healthy and currently uninsured workers -- who would be better off under the McCain plan than under the status quo. The fact that a tax reform proposal leaves some people worse off should not, of course, automatically doom the idea. But it is fair to ask those making such proposals to be transparent and clear about its impact. Unfortunately, during the entire campaign the McCain-Palin ticket has gotten away with describing only the sugar in their plan and never the medicine. Even when pressed, Senator McCain tries to suggest that those paying higher taxes would just be the well-off with "Cadillac plans." But the truth is that even in the short run, his plan would likely raise taxes on millions of middle class families who live in high-cost areas or who negotiated to give up higher wages for good insurance with low deductibles and co-payments. Virtually every analysis shows that over time, health inflation will move millions and millions more middle class families into the 'tax increase' category.

There is another downside to the McCain plan that even its serious advocates should acknowledge. If you end the tax exemption for workers for health care provided by their employer, it becomes less attractive for employers to keep providing it. Moreover, as young and healthy workers move into the individual market, the remaining pool for employers to cover becomes even more costly to insure and expensive for employers to cover. A study by several economists in Health Affairs found that 20 million people will be dropped under McCain's plan. An earlier study from the Journal of Public Economics found that a plan similar to McCain's would lead to 28 million people being dropped.

This is a real problem for two reasons. One, only in the idealized world of economic modeling would employers who drop coverage for workers make up the difference by instantly handing over big raises to those workers -- especially in the midst of such a weak labor market. The 20-28 million who would see their employer provided coverage dropped would thus be left to try buying the $12,680 family health care (the national average) policy they previously had in the individual market with only a $5,000 tax credit.

Two, without the rock-solid proposals to eliminate discrimination due to illness that Obama has proposed, families who are dropped and who have a child or spouse with a pre-existing condition face a real danger of being shut-out from insurance altogether or be forced to choose coverage at extremely high premiums. Even experts who support proposals like McCain's acknowledge that without strong and bold new reforms of our unforgiving, wasteful and discriminatory individual market for health care, the results for families with pre-existing conditions could be devastating.

In this context, let's review what the candidates said on health care in Thursday's debate. Governor Palin said McCain is "proposing a $5,000 tax credit for families so that they can get out there and they can purchase their own health care coverage." This is the McCain Campaign's consistent line. It gives anyone watching the clear impression that this credit is free. There is not a word of recognition that the new credit will be offset by eliminating the tax exemption for employer provided health care. Not a word of recognition that for at least 20 million families, this proposal will mean they no longer have the choice of receiving health care through their employer. Yet on these rather remarkable omissions -- the Washington Post is silent.

So what did Joe Biden say? He first asked:

"Do you know how John McCain pays for his $5,000 tax credit you're going to get, a family will get?"

In this initial sentence Biden acknowledged that families would get a tax credit under McCain. He simply asked what the McCain and Palin never wants to answer -- how they propose to pay for it. Thus, Biden, unlike Palin, was willing to talk about both the benefits and pain of the McCain health proposal. His second sentence was.

"He taxes as income every one of you out there, every one of you listening who has a health care plan through your employer."

If the Washington Post or anyone can take issue with this sentence, I welcome their explanation. Biden clearly states that the tax is on those who have employer based coverage -- and not everyone. This is unquestionably true.

His third sentence states,

"That's how he raises $3.6 trillion, on your -- taxing your health care benefit to give you a $5,000 plan, which his Web site points out will go straight to the insurance company."

Again, Biden -- unlike Palin -- is painting the whole picture, acknowledging that families will get a tax credit while stating how McCain's own team describes how it is paid for. And it is hard to see how anyone in McCain's camp can complain here when his top economic advisor Doug Holtz Eakin is described as telling both the New York Times and McClatchy newspapers that "the government would save $3.6 trillion over the next decade by eliminating the tax break that currently goes to encourage employer-based health coverage" and that "[McCain's] tax measure would generate about $3.6 trillion over 10 years, which would pay for the tax credits, making the entire proposal budget-neutral."

Biden goes on:

"And then you're going to have to replace a $12,000 -- that's the average cost of the plan you get through your employer -- it costs $12,000. You're going to have to pay -- replace a $12,000 plan, because 20 million of you are going to be dropped. Twenty million of you will be dropped."

Contrary to the Washington Post's erroneous claim that Biden "gave the impression that most Americans would be worse off financially as a result of Sen. John McCain's health-care proposals," Biden said was careful and clear in stating -- twice -- that he was not referring to all Americans but as he said, the "20 million who would be dropped." Then he closed with:

"So you're going to have to place -- replace a $12,000 plan with a $5,000 check you just give to the insurance company. I call that the 'Ultimate Bridge to Nowhere.'"

I am hard-pressed to see how anyone analyzing this statement could find it anything other than a highly precise and accurate statement that deserved praise for its accuracy.

The Washington Post oddly also writes that Biden should have somehow noted that a Tax Policy Center study shows that McCain's plan would be a tax cut for middle class families on average. Yet, the Washington Post fact checkers fail to mention that this Tax Policy Center analysis assumes that the McCain plan costs $1.3 trillion over ten years -- on top of the trillions they have already committed to their corporate tax and upper income tax cuts that they have not offered any serious way to pay for. The McCain camp has for months been arguing as mentioned above that it "generate about $3.6 trillion over 10 years" to claim as Palin did in front of 70 million people that the proposal is "budget neutral." It is puzzling that the Washington Post would want to reward this 'a have it both ways' and "all gain-no pain" effort to flip-flop on their description of their health care plan by occasionally telling a reporter or someone doing a tax analysis that it is suddenly a tax cut that costs $1.3 trillion.

I do appreciate that the Post did state that "according to several studies, the McCain plan would lead to a modest increase in the number of people covered by health insurance in the first year but could lead to an increase in the number of uninsured over the long term" (emphasis added).

But to give Joe Biden any Pinocchios at all for such a narrowly-tailored, precise and factually accurate statement while giving the McCain-Palin team a free ride is baffling. They got the Pinocchios completely backwards in this case. As good fact checkers, I hope the Post will review their analysis and admit that they got this one wrong.