As with the previous two debates (one presidential and one vice presidential), we will take an opportunity to go back and fact check some statements we missed or expand on the things we got to that deserve more than a 140 character explanation.

• Share of Taxes Paid: Governor Romney got more specific this time about his criterion for not lowering taxes on high-income taxpayers. He specifically said, "The top 5 percent of taxpayers will continue to pay 60 percent of the income tax the nation collects. So that'll stay the same. Middle-income people are going to get a tax break." He is correct that the top 5 percent currently pay 60 percent of the income tax, according to Tax Policy Center. This would also be the case next year, assuming that the 2001/2003/2010 tax cuts and the patch to the Alternative Minimum Tax are extended, which Governor Romney supports.
• Tax Rate Reductions: We pointed out last night that President Obama erroneously stated that reducing tax expenditures could only reduce tax rates by 4 percent. Here's the full statement: "And -- and what's at stake here is one of two things, either Candy -- this blows up the deficit because keep in mind, this is just to pay for the additional spending that he's talking about, $7 trillion - $8 trillion before we even get to the deficit we already have. Or, alternatively, it's got to be paid for, not only by closing deductions for wealthy individuals, that -- that will pay for about 4 percent reduction in tax rates." In this case, he conflates Governor Romney's proposed tax cuts and defense increase with the conclusion of a Joint Committee on Taxation study which stated that reducing tax expenditures while raising $4.5 trillion of revenue (compared to current policy) would allow for only a 4 percent reduction in tax rates. We pointed out the flaws with that study in a recent paper (shorter version here), namely that the revenue target is higher than most all other tax reform plans aim for and that the study missed some big tax expenditures. In any case, the JCT conclusion does not apply to Gov. Romney's plan since his revenue target is neutral relative to current policy, rather than $4.5 trillion higher.
• Student Loans: Last night, we confirmed a statement by President Obama that he had "cut out the middleman" with regards to student loans. We were referring to a part of the Health Care and Education Reconciliation Act that eliminated the Federal Family Education Loan program, which made payments to private lenders and guaranteed their loans and replaced it with a direct loan program. CBO scored this change as saving $58 billion from 2010-2019, so he was also correct in stating how much the change on net reduced the deficit.
• Upper Income Tax Cuts: In detailing the cost of Governor Romney's promises, President Obama added up $5 trillion for his proposed tax cuts, $2 trillion for defense spending increases, and $1 trillion for the upper-income tax cuts. We took issue with the inclusion of the latter policy since President Obama also has claimed credit for saving a similar amount by ending the upper-income tax cuts. Obviously, you can't have it both ways. Either the baseline is an extension of all the tax cuts -- in which case President Obama is saving money while Governor Romney is following the status quo -- or the baseline is an extension of the middle-class tax cuts, which means President Obama is following the status quo and Governor Romney is losing revenue.
• Cap on Deductions: Governor Romney once again brought up a proposed cap on tax expenditures that taxpayers could use, which we discussed previously. He has mentioned a $17,000 cap before and said $25,000 in this debate. Last night, we said that this cap would unlikely be large enough to pay for his roughly $5 trillion tax cut. Today, the Tax Policy Center estimated that a $17,000 cap on itemized deductions would raise $1.7 trillion and $25,000 cap would raise about $1.3 trillion after accounting for his other tax changes. However, Governor Romney said that the cap would apply not just to itemized deductions but to exclusions and credits as well. It's unclear how much additional revenue this would raise, but it seems likely the cap would still fall short of the size of the tax cut.
• Employment: Governor Romney repeated his claim that he would create 12 million new jobs in four years. It has been said previously that Moody's Analytics and Macroeconomic Advisors have predicted in their economic baseline that employment would increase by about 12 million over the next four years without any changes other than the lack of a fiscal cliff. CBO predicts that employment will rise by about 9 million between the first quarter of 2013 and the first quarter of 2017, even though it assumes that the fiscal cliff will take place.

The last debate is strictly on foreign policy, so fiscal policy is unlikely to come up. It has had its moments, though, during the debates this fall.

Tonight at 9 PM on the grounds of Hofstra University is the second presidential debate and the only debate with a town hall format. This will allow questions from audience members, and with such a broad consensus that something needs to be done about the national debt, we expect at least a few questions on fiscal policy in tonight's debate. As before, we will be live fact checking from Twitter (@BudgetHawks) and our live feed will appear below.

With the final debate to focus specifically on foreign policy, this may be the last chance for the candidates to clearly lay out how they are going to deal with our unsustainable debt problem. The previous presidential and vice presidential debates both featured an interesting back and forth on fiscal policy, although the candidates did stray from the facts at times. If you haven't already, check out our fact checking from the first and second debates to know what to watch out for.

Check back tonight to see our fact checking of the debate as it unfolds.

Tweets by @BudgetHawks

Our colleagues Jason Delisle and Alex Holt of the New America Foundation's Federal Education Budget Project have released a new paper "Safety Net or Windfall?" on the 2010 changes to federal student loan program's Income-Based Repayment (IBR) plan. The IBR plan was designed to help with student's loan repayment by limiting payments to 15 percent of their income and forgiving the remaining balance after 25 years. In 2010, the administration proposed changes to limit payments to only 10 percent of student's incomes and forgive any balance after 20 years.

While the proposal was intended to help middle class families with student loan debt, the changes actually benefit higher-income earners with graduate or professonal degrees the most. Because IBR is based on Adjusted Gross Income (AGI) and not an individual's entire gross income, it benefits those who have significant contributions to retirement plans or employer-sponsored health insurance, which is more typical of higher-income earners rather than lower income earners. Also, the maximum repayment caps limit monthly payments even for those with incomes that no longer qualify for reduced payments in the IBR program, leaving windfall benefits for those whose student loan repayments may no longer be a significant burden.

To address these issues, the authors list a few recommendations to scale back repayment limits for high-income and high-debt borrowers. These include maintaining the 10 percent cap only for those at or below 300 percent of the poverty line, instituting the loan forgiveness after twenty years only for those with $40,000 or less in loans (those with greater loans would be eligible after 25 years), and eliminating the maximum payment cap for those whose incomes no longer qualify.

You should also check out their IBR calculator that will show the direct impact of the proposed changes for monthly payments and loan forgiveness. Both the paper and calculator are an interesting insight into how the student loan program currently works and how it can be changed to better serve its intended purpose.

The paper can be found here and the calculator can be found here.

The Mercatus Center has released a new paper by Social Security Trustee Charles Blahous entitled "The End of Social Security Self-Financing." In the paper and an accompanying article, Blahous writes of the challenges faced by Social Security in continuing to finance its benefits with revenues from the payroll tax. Blahous argues that the transfer of general revenues to the Social Security Trust Fund in the payroll tax cut that's been in place for the last two years is a break from the self-financing precedent.

The Social Security Trust Funds will be exhausted by 2033, at which point the program faces an abrupt across-the-board cut in benefits to cover the gap. However, recent transfers from general revenues could blurr the lines between the program's finances and the Treasury's, possibly spelling harm, according to Blahous, for both the program and the federal budget by making reforms more difficult to enact.

Blahous writes about the long history of Social Security self-financing, how it is unlike other elements of the safety net, and how Social Security was intended to be a pension program with funds linked to lifetime contributions. By linking benefits to contributions from the payroll tax, Social Security was never to compete with other spending programs.

^{Source: Blahous}

Social Security solvency can still be achieved, however, but only if lawmakers are willing to make the program's future a priority. We have talked before about some possible combinations of changes, including raising the retirement age, raising the payroll tax cap, or changing benefits to grow by the index of "chained CPI." These might be politically difficult choices, but it is important to recognize that shifting the burden of Social Security to the general budget will force equally difficult choices in other areas.

Whatever combination of policies lawmakers believe is the solution, they need to make the tough choices in a bipartisan way while working to protect the people who rely on the program the most. General fund transfers that are not paid for should be avoided. Social Security can certainly continue to be self-financing, but lawmakers are going to need to put everything on the table.

After live fact-checking the vice presidential debate on Twitter, we will take some time to go back and expand on some of our fact-checking and include some things we may have missed.

• Defense: We said last Thursday that Gov. Romney's proposal to increase base defense spending to four percent of GDP would cost $1.6 trillion. This estimate comes from our "Primary Numbers" report on the budget plans on the Republican presidential candidates. It calculates the increase relative to a baseline that excludes the automatic sequester but includes the initial discretionary spending caps from the Budget Control Act.
• Taxes: Last Thursday, we said Vice President Biden's claim that the extension of the 2001/2003/2010 tax cuts for people making over $1 million would cost $800 billion was wrong. There are a few different ways to look at what he said. The cost of the tax cuts specifically targeted at people making over $1 million is $463 billion, according to the Joint Committee on Taxation (as reported by the Center on Budget and Policy Priorities). But people making over $1 million also benefit from tax provisions that are not targeted towards them--for example, the rate reductions below the top rate. If he meant this, by our best estimate he may have actually been understating the total benefit of the tax cuts to millionaires. Either way, he would have been correct to say that the extension for people making over $250,000 would cost about $800 billion (excluding an extension of the estate tax provision). 
• Stimulus: We said last week that total stimulus in response to the Great Recession totaled well over $1 trillion. This counts the $831 billion stimulus in 2009 plus extensions of various policies like unemployment insurance benefits, state fiscal relief, and the homebuyer tax credit. There has also been new stimulus such as the 2010 tax credit for newly hired workers and the 2010 tax cut. If you exclude the extension of the 2001/2003 tax cuts, there has been about $1.6 to $1.7 trillion of stimulus since 2009, according to data on Stimulus.org.
• Insurance Coverage: During the debate, Congressman Ryan said "Look at all the string of broken promises. If you like your health care plan, you can keep it. Try telling that to the 20 million people who are projected to lose their health insurance if Obamacare goes through." We assumed he was referring to the number of people on net projected to lose employer-provided health insurance and said that the number was actually 4 million. Our number comes from CBO's most recent estimate of changed in insurance coverage due to the Affordable Care Act in 2022. Most likely, Congressman Ryan got his number from a March 2012 CBO document showing four alternate coverage estimates based on different behavioral responses. These scenarios show employer coverage dropping by 10, 12 and 20 million people and 3 million people gaining coverage in one scenario. Using the worst alternate scenario instead of CBO's official estimate is misleading at best.
• Medicare Trust Fund: Congressman Ryan said with regards to the health care reform law "Obamacare takes $716 billion from Medicare to spend on Obamacare. Even their own chief actuary at Medicare backs this up. He says you can't spend the same dollar twice. You can't claim that this money goes to Medicare and Obamacare." This is correct. We have said before that it is incorrect to claim that the Medicare savings can both extend the life of the Medicare Part A trust fund and offset the costs in the legislation. CBO assumes that Medicare Part A is fully funded with general revenue, so their analysis implicitly assumes that the former does not happen (since Part A does not go insolvent). Also, Medicare chief actuary Richard Foster has said that claiming credit for both is double-counting at least once. In March 2011 testimony, he said "In practice, the improved HI financing cannot be simultaneously used to finance other Federal outlays (such as the coverage expansions) and to extend the trust fund, despite the appearance of this result from the respective accounting conventions." Finally, we'd note that Foster is not the White House's "own" actuary; in fact, he has been in that position since 1995.
• Medicare Drug Prices: Vice President Biden said that the Administration proposed to save $156 billion by "allow[ing] Medicare to bargain for the cost of drugs like Medicaid can." This is an incomplete description of the policy. The actual Administration policy (page 12 here) is to require drug manufacturers to provide rebates to Medicare for beneficiaries who receive Medicaid or the Low Income Subsidy in Part D--rebates that are currently only required in the Medicaid program. CBO has scored allowing Medicare as a whole--rather than individual prescription drug plans--to negotiate drug prices as saving a negligible amount (see here, here, and here), since they figure the negotiations would not bring drug prices below what they already are. By contrast, the Administration policy includes an explicit rebate (essentially bypassing negotiations), so cost savings materialize to the tune of $156 billion as estimated by OMB and $137 billion as estimated by CBO. Vice President Biden got the number right, but the description of the policy was slightly off.
• Small Businesses: Vice President Biden claimed last night that 97 percent of small businesses have income below $250,000, which we said was true. That statistic comes from a JCT report here.

There wasn't as much discussion of fiscal issues in last night's debate compared to the first debate, probably due to both foreign policy and domestic policy needing to be covered. We hope this next Presidential debate, with its town hall format, allows Romney and Obama to give more details about their fiscal plans and how they are going to take on our debt problem.

Vice President Joe Biden and Representive Paul Ryan (R-WI) will take the stage in Kentucky tonight at 9:00 PM E.T. in the Vice Presidential Debate. In the last debate, President Obama and Governor Romney spent a good deal of time in the last debate discussing fiscal policy -- though we hope each candidate gets more into the details tonight.

As in the last debate, our fiscal fact checkers will be tweeting live from @BudgetHawks, checking on the accuracy of fiscal policy claims from the two candidates. Check back to this blog tonight to see our Twitter feed below. If you missed our coverage of the first debate, you can find it here.

With a deficit hawk in Ryan and a veteran of budget negotiations in Biden, we expect tonight's debate to further reveal what each campaign will bring to solve our fiscal problems. Hopefully they follow our 12 Principles of Fiscal Responsiblity. Don't miss it!

Check back tonight to see our fact checkers live tweet the debate.

Tweets by @BudgetHawks

Tonight at 9 PM in Kentucky will be the first and only vice presidential debate between Vice President Joe Biden and candidate Paul Ryan. If this debate is anything like the first presidential debate, fiscal policy should be given a solid amount of attention, especially given Congressman Ryan's position as chairman of the House Budget Committee and Vice President Biden's involvement in debt ceiling negotiations last year.

As chairman of the House Budget Committee, Congressman Ryan's budgets have received plenty of attention in the past two years, but his plans predate his position as chairman. There are two versions of his Roadmap for America's Future, originally put out in 2008 and revised in 2010. When he became Budget Committee chairman, there were two versions of the Path to Prosperity, put out last year and this year.

To see how his plans have evolved over the past five or so years, CRFB put together a comparison of all four plans. Below is a sample of what is contained in the table.

For his part, Vice President Biden was involved in budget negotiations during the debt ceiling debate and should be able to speak at length tonight on fiscal policy and the President's plan. Like the Ryan plan, the President's budget has evolved over the past couple years. Under the President's FY 2012 budget, debt was projected to keep growing relative to the economy, while the FY 2013 budget would stabilize the debt, albeit at relatively high level of 76 percent of the economy. Finally, the recent Mid-Session Review of the FY 2013 budget showed debt on a slight downward path as a share of the economy later in the decade but not over the long-term. The main differences between this year's budget and last year's budget are additional health care savings and revenues.

If anything, it should be an interesting conversation between two individuals who have been heavily involved with fiscal policy. Check out our live fact checking or follow us on Twitter at @BudgetHawks to get our reactions and fact checking from tonight's debate.

The use of dynamic scoring is one of the most contested issues in the budget world. We highlighted the pros and cons of using it and the issues associated with incorporating it into the budget process in a paper earlier this year.

Proponents say that it would help quantify the impact of pro-growth policies, while opponents say that it may deliver false promises of higher growth rates and lead to more debt. But the debate on dynamic scoring is much more than a disagreement on the effect of lower income tax rates. In a Wall Street Journal article today, David Wessel identifies three points that usually get lost in the dynamic scoring debate.

One, this is hard.

Even without incorporating macroeconomic effects, putting a price tag on a sprawling piece of legislation is tough. Gauging the likely long-run impact on the huge U.S. economy is even tougher. It is time-consuming. It is incomplete. It requires lots of judgment calls. It depends on economic models that give different answers. It requires number-crunchers to make assumptions about how farsighted consumers are, how worker and business behavior will change, how the Federal Reserve will react. A single number is misleading; multiple scenarios are confusing.

Two, both JCT and CBO do it already.

Since 2003, the House Ways and Means Committee has required JCT to provide an analysis of all tax bills....

CBO also has done this for alternative ways to reduce the deficit, and for projecting consequences of going over the fiscal cliff—the tax increases and spending cuts set for year-end. It surely would do it for a Romney tax-reform or Obama deficit-reduction proposal.

Because these analyses aren't factored into official price tags, they are largely ignored by Congress and the press. They don't have to be.

Three, economists find growth effects smaller than politicians expect....

Big deficit-reduction bills or comprehensive tax reform might add a few tenths of a percentage point to annual economic growth.

Over a generation, that is hugely important. In added tax revenue over the 10-year period that Congress uses, not so much.

Whether or not dynamic scoring is used, lawmakers should be promoting pro-growth policies, not depending on overly optimistic assumptions of higher growth to bring in more revenue. Fixing our fiscal problem will require hard choices.  While growth will lessen the pain of these decisions, it is not a panacea. For more on dynamic scoring, check out our paper.

In a speech at the National Press Club (video here), Sen. Charles Schumer (D-NY) outlined his vision of how to change the tax code. During the question-and-answer session that followed, he also discussed how his tax plan would fit into a deal to avert the fiscal cliff.

In general, Sen. Schumer said that 1986-style tax reform that broadened the tax base and lowered rates would not be appropriate at this point in time, given that the 1986 reform did not raise revenue and did not increase the progressivity of the tax system. Although recent plans such as Simpson-Bowles have included lowered rates, a broadened base, and higher revenue, Sen. Schumer indicated his opposition to using a portion of the revenue raised via reducing tax expenditures to bring down rates on individuals, saying that it would require middle-class tax increases to raise sufficient revenues. The Simpson-Bowles plan, though, was able to make the tax code substantially more progressive, even if it did not insulate all middle-class taxpayers.

In terms of reforming the corporate tax code, Sen. Schumer declared his support for a revenue-neutral corporate rate reduction as a way to maintain global competitiveness and that such changes should be made outside a deficit reduction deal. CRFB recently took a closer look at why the corporate code is in need of reform and the many policies lawmakers could choose from to design a fiscally responsible reform plan.

In detailing his policy preferences, Sen. Schumer reiterated his support for his party's position to allow the upper-income tax cuts to expire at the end of the year. He also said that although he would not tax capital gains at the ordinary income rate of up to 39.6 percent, the current differential between capital gains and ordinary income rates should be narrowed from its current 20 percentage points (between top rates). He also declared his support for eliminating the carried interest loophole. Beyond these specifics, Sen. Schumer said he would go further to reduce tax expenditures in order to raise revenue.

Responding to a reporter's question, Sen. Schumer targeted $4 trillion of savings over ten years as an appropriate target for a deal with $1.5 trillion of that coming from revenue (roughly the same as the President's budget). In terms of entitlement reform, he said that although he opposes raising the Social Security retirement age, this position, among others, remained negotiable. He did not specify which proposals to reform entitlements he would support.

Sen. Schumer's speech at the National Press Club was notable, if for nothing else, than to see what is going through the mind of one of the top Democrats in the Senate when it comes to taxes. Click here to see the full video.