“Making Stuff Up”: A Republican Ruse To Make Tax Cuts Look Good
As Republicans take control of Congress this month, at the top of their to-do list is changing how the government measures the impact of tax cuts on federal revenue: namely, to switch from so-called static scoring to “dynamic” scoring. While seemingly arcane, the change could have significant, negative consequences for enacting sustainable, long-term fiscal policies.
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.
These conventional estimates do not, however, include any indirect feedback effects that tax law changes might have on overall national income. In other words, they do not incorporate macroeconomic behavioral changes.
Dynamic scoring does. Proponents point out, correctly, that if a tax proposal is large enough, then those sorts of feedback effects can aim the entire economy on a slightly different path.
Such proponents argue that conventional projections are skewed against tax cuts, because they do not consider that cutting taxes could lead to higher economic output, which would make up at least some of the lost revenues. They maintain that dynamic scoring will, therefore, be both more neutral and more accurate than current methodologies.
But the reality is more complex. In order to look at the effects across the entire economy, dynamic modeling relies on many simplifying assumptions, like how well people can predict the future or how much they care about their children’s future consumption versus their own.
Economists disagree on the answers, and different models’ predicted feedback effects vary wildly, depending on the values selected for those uncertain assumptions. The resulting estimates are likely to incorporate greater uncertainty about the magnitude of any revenue-estimating errors and greater exposure to the risk of a political thumb on the scale.
Consider the nonpartisan scorekeepers’ estimates of the consequences of a tax-reform bill proposed last year by Representative Dave Camp, Republican of Michigan. Using different models and plausible inputs, the scorekeepers estimated that, under the bill, total gross domestic product might rise between 0.1 percent and 1.6 percent over the next decade — a 16-fold spread in projected outcomes. Which result should be the basis of congressional scorekeeping?
But the bigger problems lie deeper. Federal deficits are on an unsustainable path (as it happens, because of undertaxation, not excessive spending). Simply cutting taxes against the headwind of structural deficits leads to lower growth, as government borrowing soaks up an ever-increasing share of savings.
The most optimistic dynamic models get around this by assuming that the world today is in fiscal equilibrium, where the deficit does not grow continuously as a percentage of gross domestic product. But that’s not true. If you add the reality of spiraling deficits into those models, they don’t work.
To make these models work, scorekeepers must arbitrarily assume either that we tax more and spend less today than is really the case — which is what they did for the Camp bill — or assume that a tax cut today will be followed by a spending cut or tax increase tomorrow. Economists describe such a move as “making counterfactual assumptions”; the rest of us call it “making stuff up.”
In practice, these models are political statements. They show the biggest economic effects by assuming that tax cuts are financed by unspecified future spending cuts. The smaller size of government, not the tax cuts by themselves, largely drives the models’ results.
Further, the models are not a step toward more neutral revenue estimates, because they assume that, while individuals make productive investments, government does not. In reality, government spending contributes significantly to economic output. Truly dynamic modeling would weigh the forgone economic returns of government investments against the economic gains from lower taxes.
The Republicans’ interest in dynamic scoring is not the result of a million-economist march on Washington; it comes from political factions convinced that tax cuts are the panacea for all economic ills. They will use dynamic scoring to justify a tax cut that, under conventional scorekeeping, loses revenue.
When revenues do in fact decline and deficits rise, those same proponents will push for steep cuts in government insurance or investment programs, because they will claim that the models demand it. That is what lies inside the Trojan horse of dynamic scoring.
By: Edward D. Kleinbard, Law Professor at the University of Southern California and a former Chief of Staff of the Congressional Joint Committee on Taxation; Op-Ed Contributor, The New York Times, January 2, 2015
“The Strategy Of Confederate Republicans”: I’m Glad That The GOP Has Decided To Come Out Of The Closet As Openly Racist
Steve Scalise, the House Republican Whip-elect, appears to be surviving the flap over his appearance at a David Duke-organized event. It’s good to be able to welcome the New Year with a word of praise for the party I oppose. I’m glad that the GOP has decided to come out of the closet as openly racist.
The event itself has been misdescribed in the press as “white supremacist;” in fact, David Duke’s keynote speech didn’t even mention black-white issues, instead focusing on anti-Jewish themes. “Neo-Nazi” would give a much clearer picture of what EURO was really about.
Still – as even Erick Erickson has pointed out – there was never any doubt of what David Duke, the Klan Wizard, was about. He’s the kind of batsh*t-crazy racist who isn’t sure Jews are actually “white” (and, a generation or two ago, would have had the same doubts about the Irish and the Italians).
So what did Steve Scalise, aspiring Louisiana politician, have to say about David Duke?
The voters in this district are smart enough to realize that they need to get behind someone who not only believes in the issues they care about, but also can get elected. Duke has proven that he can’t get elected, and that’s the first and most important thing.
Well, that couldn’t be clearer, could it? “The first and most important thing” is to get elected. Politicians who frankly campaign on their hatred of blacks and Jews can’t get elected. So voters who “care about” hating blacks and Jews need to find politicians like Steve Scalise, who “believes in” Duke’s message but won’t say so explicitly, because such politicians can get elected.
That sums up the current strategy of the Confederate Republicans about as clearly as I’ve ever heard it summed up: seek the votes of bigots by winking at them, and by pursuing policies that are hostile to African-American interests without being explicitly racist. So it’s entirely appropriate that Scalise should have been chosen for, and remain in, the House Republican leadership.
It’s also entirely appropriate, of course, for those who don’t approve of bigotry not to be taken in. Somebody needs to explain that slowly to the ADL.
By: Mark Kleiman, Professor of Public Policy at The University of California Los Angeles; Ten Miles Square, The Washington Monthly, January 2, 2014
“Questioning Our Questions”: In Faith As In Science, Finding The Right Answers Inevitably Involves Questioning Our Own Questions
It is a mark of our pluralistic moment that I learned of an old joke among rabbis from the writings of a great Christian scholar, Jaroslav Pelikan.
In his book “Jesus Through the Centuries,” Pelikan tells the story of a rabbi who is challenged by one of his pupils: “Why is it that you rabbis so often put your teaching in the form of a question?” To which the rabbi replies: “So what’s wrong with a question?”
Trying to imagine what will matter in a new year is daunting, but it takes no clairvoyance to see that in 2015, one of the struggles around the globe will be between those who acknowledge that religion is as much about questions as answers and those who have such a profound certainty about their answers that they will kill in the name of the divine.
To cast the matter this way, I know, invites dissent from both believers and nonbelievers. The believer can plausibly argue that you can be utterly certain about the truth without killing anyone. Nonbelievers might note that both halves of my formulation undercut religion. If religion is primarily about questions, what truth can it contain? And if it preaches certainty, where is the space for dissent and dialogue?
Holding on to faith’s middle ground — what my friend Arnie Eisen calls “moderate religion” — is one of the most important tasks in the world now. Eisen, chancellor of the Jewish Theological Seminary, is not referring to a faith that is weak or tepid. Rather, he thinks that all traditions need to recognize the radically new situation in which they find themselves.
“The job market is global, and so is the thought-and-values market,” Eisen said in a lecture in November in Jerusalem. “It is more difficult for ‘The People of the Book’ to sustain the belief that it is in any meaningful sense ‘The Chosen People’ — or is ‘the’ anything — because an unlimited diversity of claims is literally in our face every time we look at a screen on a laptop or smartphone.”
Admitting this does not produce all the answers, but, as the rabbi in the story might say, it does lead to the right questions.
My hunch is that Pope Francis’s understanding of Eisen’s point has much to do with his worldwide popularity. A recent Pew survey across 43 nations found Francis with a median favorable rating of 60 percent and an unfavorable rating of just 11 percent.
Political consultants would love to have access to the pope’s secret sauce. Some of the ingredients are clearly personal: Francis conveys the reflectiveness of a holy man and the compassion that most hope religious engagement encourages. But he also manages to juggle the imperative of making tough judgments, especially about injustice and poverty, with an awareness that justice without mercy and understanding (“Who am I to judge?”) lacks both humanity and the sense of a God whose most important characteristic is mercy.
By simultaneously conveying a certainty about what his faith teaches him and a confident openness to those who are seeking answers along other paths, Francis gives an intimation of what holiness needs to look like in the 21st century.
One of my favorite political acts at the end of 2014 was the Senate’s confirmation of Rabbi David Saperstein as the State Department’s ambassador-at-large for international religious freedom. I admire Saperstein for many reasons, but why I think he is perfect for his new job was illustrated during his 2004 visit to my Religion and Politics class at Georgetown University.
It was around the time that Mel Gibson’s “The Passion of the Christ” was released. Saperstein had been a sharp critic of what he (and many others) saw as anti-Semitic tropes in the movie. But several of my students had appreciated the film. Rather than launch into an attack on Gibson’s work, Saperstein invited them to have their say.
When he finally did express his view, Saperstein began with these words: “If you believe that the birth of Jesus Christ is the most important event in human history, you cannot help but be moved by this movie.” Only then did he offer his critique.
Religious freedom will thrive and religion itself will be a force for good only if religious people can convey this sort of empathetic understanding of the truths that others hold dear. In faith as in science, finding the right answers inevitably involves questioning our own questions.
By: E. J. Dionne, Jr., Opinion Writer, The Washington Post, December 31, 2014
“Following The Well-Thumbed Republican Playbook”: The GOP Has A Bad Habit Of Appealing To Avowed Racists
Here’s some advice for House Majority Whip Steve Scalise that also applies to the Republican Party in general: If you don’t want to be associated in any way with white supremacists and neo-Nazis, then stay away from them.
Do not give a speech to a racist organization founded by former Ku Klux Klan grand wizard David Duke, as Scalise did when he was a Louisiana state legislator before running for Congress. Do not pretend to be the only Louisiana politician who could possibly have failed to grasp the true nature of the event, as Scalise did this week when the 2002 speech became public.
Come on, a group called the European-American Unity and Rights Organization (EURO), established by one of the nation’s proudest and most vocal bigots? Who happens to be, Rep. Scalise, from your state?
House Speaker John Boehner (R-Ohio) defended Scalise with the usual tut-tut about how speaking to the white supremacists was “an error in judgment” and how Scalise was “right to acknowledge it was wrong and inappropriate.” Despite this lapse, Boehner said, Scalise is “a man of high integrity and good character.”
As if on cue, friends and supporters chimed in to offer evidence of how demonstrably non-racist Scalise truly is. He was an early supporter of Gov. Bobby Jindal (R), an Indian American, over his white primary opponent! He coached in a predominantly black New Orleans basketball league! In the Louisiana legislature, he voted against a Martin Luther King Jr. holiday — oh, wait.
See, it’s a ridiculous and ultimately meaningless exercise, putting check marks in one column or the other to decide whether a politician “is” or “is not” a racist. We hold officials accountable for what they say and do. Whatever feelings he might have in the deepest recesses of his heart, Scalise was simply following the well-thumbed Republican playbook by signaling to avowed racists that he welcomed their support.
This is nothing new. In fact, it’s like a bad habit that the party can’t seem to quit.
The addiction goes back to 1968, when Richard Nixon’s “Southern strategy” leveraged white racial resentment over federally mandated integration into an electoral majority. The GOP became the party of the South, even as the region — and its racial realities — underwent sweeping change. Mississippi now has more black elected officials than any other state. But do pockets of old-style, unapologetic racism persist, both in the South and elsewhere? You bet they do.
In 2002, Scalise was seeking support for his tax-cutting agenda in the legislature — and, of course, contacts that could further his political career. He was invited to speak to the EURO group by Duke’s longtime political strategist, Kenny Knight, who happened to be Scalise’s neighbor.
As prominent conservative blogger Erick Erickson wrote and tweeted this week: “How Do You Show Up at a David Duke Event and Not Know What It Is?” Erickson was not alone in finding it hard to believe that anyone involved in Louisiana politics could fail to grasp what the meeting was and who was behind it.
Poor Boehner has more of a knack for getting caught in vises than anyone else in politics. Usually he gets squeezed between the GOP’s establishment and tea party wings. This time, he’s mashed between his party’s present and its future.
Today, the Republican Party depends on a broad coalition of voters, weighted toward the South, that ranges in views from traditional Main Street conservatives to anti-government radicals who believe that menacing helicopters are about to descend any minute. One thing these GOP voters have in common is that the vast majority of them are white.
The nation, however, becomes more racially diverse every day, and the Republican Party will have to become more diverse if it is to survive. In picking and electing state-level candidates, the GOP has been doing better with governors such as Jindal, Nikki Haley of South Carolina and Susana Martinez of New Mexico. In attracting voters, not so much.
One way not to attract African American and Latino voters — in fact, one way to drive them away, along with the votes of some whites as well — is to show that the party is still happy to welcome the support of unrepentant racists and anti-Semites.
Maybe someday the Republican Party will say clearly that anyone associated with Duke, his little group or any racist association should find somebody else to vote for. But this message must be sent with actions that have consequences — and it wasn’t sent this week.
By: Eugene Robinson, Opinion Writer, The Washington Post, January 1, 2015
“Minimum-Wage Increases; The Justice Of Redistribution”: To Not Be Victims, Workers Must Be Compensated For Value Of Their Work
As we enter the new year, 3 million low-wage workers in 21 states will gain a small increase in their wages, thanks to increases in state minimum wages. People you know will see a wage increase — your neighbor, your teenage kid, the person who serves you coffee and donuts.
The minimum-wage increase is a good thing because it increases income in a small way to the workers on the low rungs of our economy. A stagnant minimum wage redistributes income from workers to owners and managers and, ultimately, shareholders and customers. As the minimum wage has failed to keep up with inflation and productivity increases, our political economy has redistributed significant income from low-wage workers to owners over the past 40 years. One reason this happened is that workers have no leverage vis-à-vis corporations. They are price takers for their labor.
Minimum-wage increases reverse this redistribution so that workers win back a little bit of what they have lost. Minimum wages should be associated with value added instead of the powerlessness of workers to demand higher wages. But minimum-wage workers are not compensated for the value of their work for their employers. Raising the wage begins to remedy that undercompensation. If the wage goes too high, then employers will not hire workers, because their compensation exceeds the value of their work. But as we have seen, this is not the case with minimum-wage increases, which simply means that for the past decades workers have been paid less than the value of their work for employers.
How does increasing the minimum wage redistribute income? An increase in the wage results in a decrease in the payments to managers and profits for the establishment. That’s redistribution. We can argue that this might not happen because of productivity increases by the worker, but that merely means that the productivity increases (or a portion thereof) that might have gone to the employer instead go to the employee — hence redistribution from owners to workers. Redistribution also can occur between worker and customer. If a restaurant increases prices due to an increase in the minimum wage, in an attempt to avoid a decrease in profits, then the customers pay more. These customers have the disposable income to patronize restaurants. We can make the assumption that the customers have greater incomes than the people who wait on them. Thus, an increase is again redistributive, with the increase coming from increased prices paid by customers. Imagine: In Seattle an Amazon IT person goes out to lunch. (It feels like they all do.) Instead of paying $15 at the Skillet truck, they pay $17. They have lost $2, and the Skillet truck workers will have seen an increase in their wages. Redistribution to minimum-wage workers is good for them and pushes up the floor for the bottom half of all wages.
We too often equate increasing the minimum wage with living standards and poverty levels. This is dangerous for several reasons, including the fact that it sets a precedent for slicing and dicing the minimum wage: Do you have dependents? Do you pay for your own health insurance? How old are you? Are you paying for tuition yourself? All these are important questions, but taken to their logical conclusion, they move the minimum wage into welfare policy, so that an 18-year-old student could get paid less than a 25-year-old who is on her parents’ health insurance, and she might get paid less than a single mom with one kid, who could get paid less than a spouse in a household with three kids, etc. These are life situations best handled by social policy, social insurance and the appropriate provisions of public goods and services. But a focus on the minimum wage as welfare policy debases the fact that we should be raising the minimum wage because we should be insuring that workers are paid the value of their work. That is, such a focus disrespects workers as workers.
A lot of liberals don’t want to call increases in the minimum wage “redistributive.” It brings the reality of class conflict too close to the surface, apparently, and portrays workers as workers, not as victims. But in order for workers to not be victims, they must be compensated for the value of their work. That is not happening now, not in these United States. These state minimum-wage increases begin to reverse the damage, precisely because they are redistributive, from the owners of capital to the workers they employ. That is a good thing — and an excellent beginning for the new year!
By: John R. Burbank, ; The Blog, The Huffington Post, December 31, 2014
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