These days it seems that a mysterious group called “the CBO” rules the world. Or at least Washington. Unfortunately, they’re not very good at predicting things. It’s a good thing the Congressional Budget Office doesn’t do the weather forecasts, or we’d all be walking down the street with umbrellas on sunny summer afternoons.
The CBO and the Joint Committee on Taxation (JCT) predict what will happen with spending, tax revenues, and deficits from new bills and congressional budgets.
They have made headlines of late with their absurd warning that the Trump tax bill to extend the 2017 tax cuts and other reforms like eliminating taxes on tips would add some $4.6 trillion to the debt over 10 years.
That’s a scary number, but we know this is wrong. The fundamental flaw with the model is that it doesn’t take account the improved economy from keeping tax rates low and providing tax relief for small businesses and workers. The White House estimates that this bill combined with pro-America energy policies and deregulation can raise the economic growth rate to nearly 3% — which would mean at least another $2 trillion added revenues.
When I pointed this out in the Wall Street Journal and on Fox News two weeks ago, the Speaker of the House Mike Johnson reiterated these defects in the CBO predictions.
Then the Washington Post “Fact Checker” Glenn Kessler claimed that CBO does a fine job and Speaker Johnson was guilty of a four Pinocchio nose lie. He called Johnson’s claim “nonsense.”
Oh, really? It turns out self-proclaimed Fact Checker who is getting the numbers all wrong.
The Post argued that the CBO really does dynamic scoring to take into account the response to the changes in tax laws. That’s only half right. It takes into account micro-changes: such as, a tax on cigarettes will mean fewer people will buy cigarettes.
But this misses the point. The CBO does not measure the economy-wide benefits of lower tax rates and thus it doesn’t adjust for higher employment and growth – which happens every time we cut tax rates.
We also know that the 2017 scoring of the Trump Tax Cut has already underestimated the revenues from the first six years of the law by a massive $1 trillion or more.
Yet the Fact Checker explains this giant error with a lame “the sun was in my eyes” excuse for dropping the ball. Kessler notes that no one in 2017 could have predicted the COVID pandemic and the ensuing lockdowns. That is absolutely true. But the pandemic actually reduced revenues from what they would have otherwise been by at least $1 trillion because commerce slowed to a crawl. Yet even with the unexpected pandemic CBO still managed to underestimate the revenues generated from the tax cut.
Sounds like the Speaker was right and the Fact Checkers struck out.
Everyone makes mistakes. But we know that the CBO/JCT have a habit of overstating the benefits of raising taxes and underestimating the benefits to the economy from cutting tax rates. CBO/JCT, for example, have almost always lowballed the economic effects of cutting the capital gains tax.
The problem is the CBO modeling errors are NOT random. They typically get it wrong in the same direction. Which is an even bigger problem because the JTC never opens its books to show how it makes its “garbage in-garbage out” projections.
Maybe Speaker Johnson should demand they do that immediately. Or maybe it’s time for a new model based on real-world scoring. It’s time to put accuracy over ideology.
Big decisions that have enormous trillion-dollar consequences for our economy are being made with a cracked crystal ball.
Stephen Moore is a senior fellow at the Heritage Foundation and a co-founder of Unleash Prosperity. His latest book is: “The Trump Economic Miracle.”
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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