Category Archives: Budget

Cooking the Public Books

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The phrase for today, boys and girls, is “dynamic scoring.” We’ll likely be hearing a lot about dynamic scoring when the new Congress convenes, because dynamic scoring is high on the Republican agenda.

What is dynamic scoring? This has to do with the Congressional Budget Office, the doggedly nonpartisan office that analyzes whatever Congress is up to that might impact the federal budget. The CBO has always used what’s called “static scoring,” which actually isn’t all that static, to make projections.  Edward D. Kleinbard, a law professor at the University of Southern California and a former chief of staff of the Congressional Joint Committee on Taxation, explains:

Whenever new tax legislation is proposed, the nonpartisan Congressional Budget Office “scores” it, to estimate whether the bill would raise more or less revenue than existing law would.

In preparing estimates, scorekeepers try to predict how people will respond to a new tax law. For example, if Congress contemplates raising the excise tax on cigarettes, scorekeepers consider existing trends in cigarette consumption, the likelihood that the higher taxes will induce some smokers to quit, and the prospect that higher prices will increase incentives for cigarette smuggling. There are no truly “static” revenue estimates.

How would dynamic scoring be more dynamic? Might I remind you this is a Republican idea? Could you guess if I told you Paul Ryan is a big fan of dynamic scoring? That’s right, folks — dynamic scoring adds an assumption that tax cuts will raise revenues.

So if Republicans get their way, future CBO projections will will filled with rainbows, unicorns and confidence fairies.

 A lot of Republicans also want to replace the CBO chief to appoint someone who will reliably give them analyses more to their liking. In other words, they want to “capture” the CBO and turn it into a propaganda tool for the Republican Party. Whether they’re going to get away with this isn’t clear. Note that they object to the current guy, Doug Elmendorf, not because CBO projections have been wrong, but because they don’t always fit right-wing narratives.

Elmendorf’s term actually ends today, but apparently he’s going to stay on the job until Congress decides what it is doing. This may take awhile.

The Devil in the Details

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This week House Republicans choked on Paul Ryan’s budget plan. Yes, the plan Republicans and baggers have long praised as a work of genius and exquisite wonkiness suddenly didn’t look so hot. That’s because they finally had to deal with the details.

Krugman:

The big if hard-to-report story in DC last week was the ongoing collapse in governance, as Republicans proved themselves unable to reconcile their ideological commitment to drastically lower government spending with the reality that they and their constituents actually benefit from said spending. They’re willing to impose savage cuts on the poor — but even that gets them nothing like the spending cuts they claim they’ll make. Yet rather than acknowledge this reality, they’re basically sticking their heads in the sand.

Times Editorial Board:

A $44 billion measure based on the tooth-and-claw Ryan blueprint approved by the same House just three months ago had to be yanked from the floor when not enough Republicans showed up to vote yes. An embarrassed leadership was forced to concede that the size of the proposal’s cuts to transportation, housing and urban development had become intolerable even to the fiscal zealots among the rank and file, who no longer had the stomach to walk the austerity talk.

Part of the problem, as I understand it, is that the famous policy wonky Ryan Budget that House Republicans have passed at least twice that I can remember was actually long on promise but short on detail. It was more wishful than wonky, to be honest. And when it finally came time for the congress critters to get specific about exactly what programs had to be cut, and how much, they choked. They realized that the cuts would hurt actual flesh-and-blood voting constituents, plus their political careers, and not just the generic welfare queens and other fabled archetypes of parasitism rattling around in their heads. The Times continues,

… the House’s skittishness at the decidedly unpopular costs of some of the party’s budget strictures presented a revealing tableau of both hypocrisy and weakness: Republicans could not pass their own cramped vision of the future.

The Ryan Budget never added up, or subtracted down, or whatever, the way Ryan claimed it would. Ezra Klein explained back in March 2012,

CBO hasn’t looked at whether Ryan’s budget will achieve the results Ryan says it will. Rather, it looked at what will happen assuming Ryan’s budget achieves the results that Ryan says it will.

On the third page, CBO writes, “Chairman Ryan and his staff specified rules by which revenues and spending would evolve.” They then detail what those rules were:

Ryan tells CBO to assume his tax plan will raise revenues to 19 percent of GDP and then hold them there. He tells them to assume his Medicare plan will hold cost growth in Medicare to GDP+0.5 percentage points. He tells them to assume that spending on Medicaid and the Children’s Health Insurance Program won’t grow any faster than inflation. He tells them to assume that all federal spending aside from Medicare, Medicaid and Social Security will fall from 12.5 percent of GDP in 2011 to 3.75 percent of GDP in 2050.

He tells them to assume that if we all wish real, real hard, the budget will balance.

Back to Krugman:

There’s a long history here — Republicans have been for lower spending in the abstract, but unable to find things they actually want to cut, for a long time. But the more immediate source of their present difficulties is the Ryan budget. Remember how that budget was initially greeted with cheers and adulation? But the CBO wasn’t fooled; in fact, its report came as close as I’ve ever seen to being openly sarcastic, especially with regard to the kinds of spending that now have Congress paralyzed:

The path for all other federal spending excluding interest—that is, for discretionary spending and mandatory spending apart from that for Social Security and the major mandatory health care programs—was specified by Chairman Ryan’s staff. The remaining part of mandatory spending includes such programs as federal civilian and military retirement, the Supplemental Nutrition Assistance Program, unemployment compensation, Supplemental Security Income, the refundable portion of the earned income and child tax credits, and most veterans’ programs. Discretionary spending includes both defense spending and nondefense spending—in roughly equal amounts currently. That combination of other mandatory and discretionary spending was specified to decline from 12 percent of GDP in 2010 to about 6 percent in 2021 and then move in line with the GDP price deflator beginning in 2022, which would generate a further decline relative to GDP. No proposals were specified that would generate that path.

By budget office standards, that last sentence is uproarious.

A lot of right-wing governing ideas are like this. As long as they’re just talk bouncing around the echo chamber, being preached by fanatical gasbags long of wind but short of facts, the troglodytes can think themselves brilliant and congratulate themselves on their great ideas. But when dragged into the cold light of day and put to work actually doing something, the ideas are revealed to be the broken, twisted, ill-conceived things that they are.

Tough Talk

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Frothy complains that Mittens is a wimp about taxes.

Our economy and American families are struggling, and the country needs bold reforms and major restructuring, not tinkering at the margins. …my opponent in the Republican primaries, Mitt Romney, had a last-minute conversion. Attempting to distract from his record of tax and fee increases as governor of Massachusetts, poor job creation, and aggressive pursuit of earmarks, he now says he wants to follow my lead and lower individual as well as corporate marginal tax rates.

It’s a good start. But it doesn’t go nearly far enough. He says his proposed tax cuts would be revenue neutral and, borrowing the language of Occupy Wall Street, promises the top 1% will pay for the cuts. No pro-growth tax policy there, just more Obama-style class warfare.

Mittens is tinkering at the margins? Ezra Klein says,

Mitt Romney is promising that taxes will go down, defense spending will go up, and old-people programs won’t change for this generation of retirees. So three of his four options for deficit reduction — taxes, old-people programs, and defense — are now either contributing to the deficit or are off-limits for the next decade.

Romney is also promising that he will pay for his tax cuts, pay for his defense spending, and reduce total federal spending by more than $6 trillion over the next 10 years. But the only big pot of money left to him is poor-people programs. So, by simple process of elimination, poor-people programs will have to be cut dramatically. There’s no other way to make those numbers work.

In fact, Mittens recently proposed a 20% across-the-board cut in income tax rates. This is much more drastic than what he has been proposing, but he has to keep moving Right to stay in the race.

Not to be outdone, Frothy is proposing a ten-point Economic Freedom Agenda, which he says will balance the budget in four years. Yes, and I’m Jean Dujardin. And the dog.

Here are his ten points, briefly:

  1. Drill, baby, drill; frack, baby, frack; and pipeline, baby, pipeline.
  2. Deregulate.
  3. Cut taxes.
  4. Cut taxes.
  5. Lay off public employees.
  6. Repeal “Obamacare” and replace it with the better plan Republicans keep promising but can’t seem to find anywhere.
  7. Pass a balanced budget amendment.
  8. Make lots of free trade agreements.
  9. Cut the hell out of “entitlement” programs.
  10. “Revive housing” by finally killing off Fannie and Freddie.

Seriously. I left out some details, but the whole plan is such a fantasy the details are kind of irrelevant. Obviously if the country goes this way in no time we’ll be in such a hole that Greece will look good.