Stretching the Truth in Arkansas

The conservative group Americans for Prosperity stretches the truth to attack Sen. Mark Pryor of Arkansas for “higher gas and grocery bills.”

AFP blames Pryor’s vote to ban drilling in Alaska’s Arctic National Wildlife Refuge (ANWR) for higher gas prices. But the Energy Information Administration says drilling in ANWR would translate to little, if any, drop in prices at the pump.

As for higher grocery bills, AFP cites Pryor’s vote to increase ethanol production, which raised the demand for corn and the price of livestock. But the Department of Agriculture says the impact on overall retail food prices was less than 1 percent.

The Arkansas race is one of nine competitive races considered critical to whether Republicans can regain control of the Senate. Already, there has been more than $7.5 million in outside money spent on the race, according to the Center for Responsive Politics.

The ad from Americans for Prosperity claims Pryor has “made things harder” for the state’s unemployed and working families “living paycheck to paycheck.” It shows images of downcast men and women, who could be “your neighbor, your friend, your daughter.”

It’s true, as the ad claims, that were 84,000 Arkansans out of work in May, according to the Bureau of Labor Statistics. But that’s the fewest number since November 2008.

As for the claim that Pryor has voted with President Obama 90 percent of the time, that was true last year, according to a vote analysis by CQ Weekly. But as we noted once before, Pryor also voted against Obama more than any other Senate Democrat last year.

More importantly, AFP provides weak evidence to support its claims that Pryor is responsible for such things as “higher gas and grocery bills” and “higher healthcare costs from Obamacare.”

Gas Prices

AFP cites three votes Pryor cast against domestic drilling to support its assertion that Pryor is responsible for higher gas prices. The three votes were for amendments which would have banned drilling in Alaska’s Arctic National Wildlife Refuge (ANWR).

ANWR covers over 19 million acres of land and water in northeastern Alaska. In 1980, the Alaska National Interest Lands Conservation Act (ANILCA) designated most of the area as protected wilderness, except for a section of about 1.5 million acres. This area along the coast — since referred to as the “1002 Area” after the section of the bill that defined it — is subjected to studies that relay to Congress the potential impacts of oil and gas exploration and development. ANILCA placed the area in limbo, and whether or not to authorize drilling in ANWR has been a political issue for nearly 40 years.

A 2008 report by the Energy Information Administration examined the impact of drilling in ANWR and concluded that oil production in that area would not significantly influence world oil prices. The projected potential price reduction would be around 41 cents to $1.44 per barrel of low-sulfur, light (LSL) crude oil in 2026/2027. The price of oil is currently a little over $100 per barrel. According to EIA, U.S. refineries produce about 19 gallons of motor gasoline from one barrel of crude oil. So, that translates to pennies per gallon at the gas pump. But since oil is a global commodity, EIA warned that there may not be any impact at all.

EIA, 2008: Assuming that world oil markets continue to work as they do today, the Organization of Petroleum Exporting Countries (OPEC) could neutralize any potential price impact of ANWR oil production by reducing its oil exports by an equal amount.

For some context, the average price of regular conventional gasoline was $2.34 per gallon when Pryor cast the last of the three votes cited by AFP, and it was $3.56 on July 14, according to EIA data. The price of gasoline fluctuated a good deal between those dates, and was $1.83 per gallon when Obama took office in January of 2009. In 2011, we looked into some of the claims about whether Obama was to blame for higher gasoline prices and found that much of the rhetoric was misplaced.

Finally, the claims about higher gas and grocery bills come immediately after the ad blames Pryor for “voting with Barack Obama 90 percent of the time.” That may leave the false impression that Pryor voted with Obama to raise prices, but, in fact, the ANWR votes cited by AFP were cast in 2003 and 2005, long before Obama became president — although then-Sen. Obama voted in favor of the two bills in 2005.

In 2005, a section of the Energy Policy Act created the Renewable Fuel Standard program. That program mandates that a specified level of renewable fuel be blended into gasoline. In 2007, the program was expanded, increasing the required volume of renewable fuel. The rapid increase in demand for ethanol, which increased prices of livestock and corn products.

However, increased renewable fuel mandates were not the only cause of rising food prices. Other factors, such as “low global stocks, droughts, exchange rates, policy responses by some major trading countries, and rising incomes in some countries such as India and China, have also contributed to price increases,” according to the USDA.

In fact, the USDA said, in 2008, that the inflated price of corn had very little affect on overall retail food prices. According to the USDA’s Economic Research Service, “higher corn prices increase animal feed and ingredient costs for farmers and food manufacturers, but pass through to retail prices at a rate less than 10 percent of the corn price change.” Because food using corn as an ingredient makes up less than one-third of retail food spending, the report states, “overall retail food prices would rise less than 1 percentage point per year above the normal rate of food price inflation when corn prices increase by 50 percent.”

In April 2009, the nonpartisan Congressional Budget Office estimated that about 10-15 percent of the rise in food prices in 2008 could be attributed to ethanol subsidies. Food prices that year rose 5.1 percent, so the effect of ethanol subsidies was responsible for less than a 1 percent increase in the price of food that year.

CBO, April 2009: CBO estimates that from April 2007 to April 2008, the rise in the price of corn resulting from expanded production of ethanol contributed between 0.5 and 0.8 percentage points of the 5.1 percent increase in food prices measured by the consumer price index (CPI). Over the same period, certain other factors — for example, higher energy costs — had a greater effect on food prices than did the use of ethanol as a motor fuel.

The retail cost of food has, historically, risen about 2.5 percent to 3 percent a year, said Ephraim Leibtag of the USDA’s Economic Research Service. Factors such as weather, production issues and changing consumer demand, all effect the overall price of food, he said. And a spike in the price of any single commodity, such as corn, generally translates to only a small overall increase in retail food prices.

It is worth noting that the Energy Independence and Security Act passed the Senate with bipartisan support, 86-8. (Seven Republicans and one Democrat opposed it; and then-Sens. Obama, Hillary Clinton, Joe Biden, as well as John McCain, did not vote). And it was signed by then-President George W. Bush, not Obama, although the ad implies otherwise.

Food prices are up under Obama, but not as much as they were before he took office. The index measuring the average consumer price of all food and beverages (including restaurant meals) was 10.7 percent higher in May than it was when Obama took office five and a half years earlier, according to figures from the Bureau of Labor Statistics. For some perspective, food prices rose by 21.9 percent in the five and a half years prior to Obama taking office.

Health Care Costs From Obamacare

The ad also claims Pryor’s vote for the Affordable Care Act, aka Obamacare, is responsible for higher health care costs. AFP cites a Forbes story reporting on an analysis from the conservative Manhattan Institute that concluded that individual market premiums would rise by an average of 49 percent due to the new health care law.

But the ad does not mention that it is referring only to those who buy insurance on their own as opposed to through an employer. Just over 120,000 Arkansans, or 4 percent of the state’s population, purchased insurance on the individual market in 2012, according to the nonpartisan Kaiser Family Foundation.

A couple other big qualifiers (which we have noted previously when the Manhattan Institute report has been cited in attack ads): The institute didn’t adjust for the fact that the ACA requires certain minimum benefits, which many pre-ACA individual market plans didn’t meet. By and large, the post-ACA plans are more robust (whether purchasers like or want that or not). So it is not comparing similar types of plans before and after the ACA. And the institute’s figures don’t account for federal subsidies, which the Congressional Budget Office estimated would be extended to 80 percent of all those buying exchange plans nationwide.

As we have said repeatedly, premiums in the individual market can go up or down, perhaps significantly, depending on the individual.

And most Arkansans — 40 percent of the population — have insurance through their workplaces. Nationwide, employer-sponsored premiums for family plans went up 3.8 percent, on average, in 2013, according to the Kaiser Family Foundation’s annual employer health benefits survey. Since the ACA was passed in 2010, those premiums have gone up 5.9 percent, on average, per year, while in the five years before the ACA, premiums went up 4.8 percent, on average, per year.

When we have explored this issue in the past, we noted that experts attributed a small increase in work-based premiums directly to the ACA. When family premiums jumped 9 percent from 2010 to 2011, for example, experts told us that the law was responsible for a 1 percent to 3 percent increase, with the remainder due to higher medical costs. That was expected, as the law required the elimination of preexisting condition exclusions for children, the coverage of dependents on their parents’ plans up to age 26, free coverage of preventive care, and an increase in caps on annual coverage. Since that initial jump, however, the yearly employer-based premiums have risen at historically low rates.

Another 38 percent of Arkansans have government-sponsored health insurance, primarily Medicare or Medicaid, which would not be affected by the changes in the individual market.