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deficits Archive

Tuesday

24

January 2012

0

COMMENTS

Friday

7

January 2011

1

COMMENTS

What You Need to Know About CBO Scoring

Written by , Posted in Big Government, Health Care, Welfare & Entitlements, Taxes

Claims that Obamacare would reduce the deficit ought never to have passed the laugh test, but because the bill was written specifically to game the CBO score, many think repealing it will actually add to the deficit. This is wrong. To understand why, you need to know a little bit about how CBO operates.

First, CBO stands for the Congressional Budget Office. It is part of the legislative branch. It is not, therefore, independent of politics. Both chambers of Congress appoint the Director of the CBO, but he can be removed by a simple resolution of either chamber. In other words, he has a strong incentive to ensure that his organization produces research that pleases politicians. This means, among other things, a heavy bias toward tax and spend policies.

Here’s an example of a CBO double standard that favors big government. When it comes to tax rates, CBO uses a baseline known as current law. This means, for instance, that when the Bush tax rates were extended, CBO said this “cost” money because they were set to expire under existing law, even though the rates were not changed from what they were last year. But when it comes to government spending, CBO takes an entirely different approach. Rather than current law, they use current policy. If a spending program is set to expire under current law, CBO will go ahead and count it as being continued in the baseline because that is the current policy, thus ensuring that there is no “cost” to extending the program. CBO may be “non-partisan,” but that doesn’t prevent its methodology from being ideological.

Second, CBO is significantly constrained in what it can analyze by law. It must respond to requests and bills as they are presented by Congress. It doesn’t matter, for instance, if Congress tells CBO they will not pass some recurring expense down the road despite the fact that they always have in the past, CBO must take them at their word and score any current legislation in front of them accordingly. It is a garbage-in-garbage-out organization. As you can imagine, this can lead to analysis that is near useless in the real world where politicians routinely say one thing and do another.

Third, CBO’s analytical methodology is opaque and historically inaccurate. Despite the current level of unemployment, for instance, CBO has constantly claimed ridiculous job creation numbers as a result of Obama’s stimulus. These same models have failed to accurately predict the observed data.  CBO’s Director confessed that they used Keynesian models to score the stimulus, which guarantees the result merely based on the policy, and not from any observed data. It doesn’t matter what the real world data shows, CBO’s model will always show the stimulus as producing millions of jobs. Who are you going to believe, so to speak, their Keynesian models or your lying eyes?

Yet here we sit, with the faux-authority of the CBO being used to beat anyone over the head who understands that you can’t nationalize health care and expand coverage without significantly increasing costs. I’d suggest that CBO is in need of serious reform, but that’s been the case for decades and it hasn’t happened. Given the likelihood that it won’t happen in the decades ahead either, it’s probably best to just abolish the organization altogether. Between Congressional offices and non-profit think-tanks, there are more than enough outfits capable of analyzing the economic costs of legislation, and at least when these other organizations do it, there isn’t a false pretense that their numbers are beyond reproach. No numbers are beyond reproach and no is methodology above criticism, no matter how desperately the proponents of big government try to claim otherwise.

Wednesday

28

April 2010

0

COMMENTS

Welcome To New Washington, Same As Old Washington

Written by , Posted in General/Misc.

President Obama has always talked big about changing the way things are done in Washington.  He has unquestionably failed to deliver.  The latest example involves his Fiscal Commission.  At their first meeting, he said, “for years, folks in Washington deferred politically difficult decisions and avoided telling hard truths about the nature of the problem.”

And how exactly do the “folks in Washington” defer difficult decisions? Oh, that’s right, they form a commission that they can later pretend to listen to, then ultimately sideline.  We don’t need any more commissions, Mr. President.  We need politicians like you to name something – anything – that you are capable of cutting.  Right now.  Stop the posturing, pontificating, and politicking and just do it.

Friday

5

February 2010

1

COMMENTS

No Deficit In Hypocrisy For Krugman

Written by , Posted in Economics & the Economy

Paul Krugman’s latest op-ed says deficits don’t matter.  It’s all just hysterics driven by politics:

These days it’s hard to pick up a newspaper or turn on a news program without encountering stern warnings about the federal budget deficit. The deficit threatens economic recovery, we’re told; it puts American economic stability at risk; it will undermine our influence in the world. These claims generally aren’t stated as opinions, as views held by some analysts but disputed by others. Instead, they’re reported as if they were facts, plain and simple.

…So why the sudden ubiquity of deficit scare stories? It isn’t being driven by any actual news. It has been obvious for at least a year that the U.S. government would face an extended period of large deficits, and projections of those deficits haven’t changed much since last summer. Yet the drumbeat of dire fiscal warnings has grown vastly louder.

To me — and I’m not alone in this — the sudden outbreak of deficit hysteria brings back memories of the groupthink that took hold during the run-up to the Iraq war. Now, as then, dubious allegations, not backed by hard evidence, are being reported as if they have been established beyond a shadow of a doubt. Now, as then, much of the political and media establishments have bought into the notion that we must take drastic action quickly, even though there hasn’t been any new information to justify this sudden urgency. Now, as then, those who challenge the prevailing narrative, no matter how strong their case and no matter how solid their background, are being marginalized.

Krugman’s head is firmly in the sand on today’s massive, runaway deficit.  He’s clinging desperately to the Keynesian claptrap about spending our way to prosperity and one day, after government has grown so big and the economy is in stimulated utopia and we’re all millionaires, reigning in public spending.

But it wasn’t always so.  In 2003, when the 10-year deficit projection was a mere fraction of what it is today, Krugman was sounding the alarm:

Last week the Congressional Budget Office marked down its estimates yet again. Just two years ago, you may remember, the C.B.O. was projecting a 10-year surplus of $5.6 trillion. Now it projects a 10-year deficit of $1.8 trillion.

And that’s way too optimistic. The Congressional Budget Office operates under ground rules that force it to wear rose-colored lenses. If you take into account — as the C.B.O. cannot — the effects of likely changes in the alternative minimum tax, include realistic estimates of future spending and allow for the cost of war and reconstruction, it’s clear that the 10-year deficit will be at least $3 trillion.

So what? Two years ago the administration promised to run large surpluses. A year ago it said the deficit was only temporary. Now it says deficits don’t matter. But we’re looking at a fiscal crisis that will drive interest rates sky-high.

…But what’s really scary — what makes a fixed-rate mortgage seem like such a good idea — is the looming threat to the federal government’s solvency.

So smaller deficits under Bush are a “fiscal crisis” and part of a “looming threat to the federal government’s solvency.”  But today’s massive deficits under the Democrats just don’t matter, and anyone who says otherwise is a scaremonger promoting “deficit hysteria.”

Just another day in hypocrite paradise.