Collender says that we can count on the Trump administration and the GOP Congress to try to peddle absurd fantasies of economic growth in order to claim that their tax-cutting budgets are responsible.
The Wall Street Journal’s ace economy reporter Nick Timiraos had the story this past Friday: The Trump administration is planning to use unrealistically optimistic assumptions about how fast GDP will grow to make it look like its spending and tax policies don’t increase the deficit.In other words, Trump and his economic team will be saying , it'll be great(Trump voice) “Things will be fine and growth will be terrific, just terrific. And the deficit and debt will go away. It'll be gone. Just believe me, it'll be an outstanding economy!”
To say the least, this first set of economic assumptions and the resulting phony deficit will be fake news – lies, in other words – from Trump. Most other credible economists – including from Wall Street, the Congressional Budget Office and the Federal Reserve – either will disagree with Trump outright or, to be diplomatic, will say that what the White House is assuming is in the extreme upper range of what’s acceptable….
We’ve known since the campaign that the Trump promises of tax cuts, increases in military spending and a new $1 trillion infrastructure program would result in a big increase the federal deficit and national debt unless they were matched with similarly large tax hikes and spending cuts. But with Congress almost certain to reject tax increases unless they’re used to pay for corporate rate reductions, Social Security and Medicare cuts possible but not likely, interest rates and federal interest payments rising in the coming years and not enough other domestic spending left to be a complete offset, economic occult from Trump was a virtual certainty.
That’s why the triumphant return of “Rosy Scenario,” which hasn’t been seen much since David Stockman used overly optimistic economic assumptions to understate the deficit in Ronald Reagan’s first budget more than 3 decades ago, was always so likely.
Rosy scenario won’t be Trump’s only gimmick. Among other things, expect a new version of Reagan’s “magic asterisk” that says substantial spending cuts will be proposed in the future but doesn’t specify what they will be, tax cuts that are assumed to expire at some point after the end of the Trump administration so the long-term deficit and debt magically appear to be lower and an excessive use of the Overseas Contingency Operations (OCO) Fund to spend more than the cap on military spending.
As mentioned by Collender, this is a longtime GOP ruse done to try to keep the public from realizing the true cost of GOP tax cuts, along with the increased deficits and budget cuts and deficits that follow. It is along the same lines of “dynamic scoring”, a measure that allows tax cuts to "pay for themselves” with higher growth, regardless of the evidence and history of corporate and consumer behavior when tax cuts happen. House Speaker and alleged Wisconsinite Paul Ryan insisted that the Congressional Budget Office change its standard to dynamic scoring in 2015, to try to minimize the actual fiscal damage that GOP tax cuts would cause.
After that gimmick was introduced, Jared Bernstein of the Center on Budget and Policy Priorities explained last July how the magic of dynamic scoring was used to keep a tax proposal from Ryan and other House Republicans from blowing a massive hole in the deficit- even though it would in the real world.
Speaker Paul D. Ryan (Wis.) and the House Republicans just released a new tax plan that the D.C.-based Tax Foundation (TF) scored as losing $2.4 trillion over 10 years, mostly to benefit wealthy households and multinational corporations. Based on our aging population alone, which will require more spending on Social Security and Medicare, that’s really reckless budgeting. But when TF revs up its magic dynamic scoring machine, that $2.4 trillion loss falls to $191 billion (I would have rounded to $190 billion, but these guys have a sense of humor).That’s the same Kansas that is so messed up now that the GOP-controlled State Legislature just approved of tax hikes to try to close budget deficits between 2017 and 2019 that are more than $1 billion.
How does the GOP tax cut pay for 92 percent of itself? Good question, sort of. That is, we can try to get into the guts of the model and figure out what they did to get it to spit out such huge offset effects, but before that, it’s really important to stop and do a reality check. Perhaps I lack imagination, but based on other analyses I’ve seen on the macroeconomic effects of tax cuts, common sense, and the history of such promises around supply-side tax cuts like this, I find the magnitude of this estimate inconceivable.
On that last point alone (past supply-side claims), how many times do we have to go through this foolishness? The Reagan and Bush tax cuts hemorrhaged revenue, and the Clinton and Obama tax increases on rich folks raised billions. I’ve looked under every rock I could find for correlations of supply-side effects, and I come up empty. Ever since some waiter made the mistake of giving Art Laffer a napkin to draw on, this supply-side crowd has been wrong. The most recent exhibit is ongoing in Kansas, where, after Laffer and Stephen Moore of the Heritage Foundation predicted that tax cuts would provide an “immediate and lasting boost” to the economy, those cuts blew a massive hole in the state budget, a hole accompanied by none of the advertised growth effects.
We’re seeing a similar type of supply-side failure in our state, where tax cuts passed by the WisGOP State Legislature and signed by Scott Walker have led to revenue being below budget in each of the last 3 fiscal years. One of the biggest reasons behind these shortfalls is the Manufacturers and Agriculture tax credit, a giveaway to the rich and corporate that was only supposed to lower revenues by $617 million in the first 7 years after it took effect, but now is projected to cost the state’s budget a total that exceeds $1.4 BILLION.
It’s not just supply-side failures that lead me to worry about BS and fiscal failures at the state level. And a tweet from today is symptomatic of why I’m concerned. In recent months, the Wisconsin Department of Revenue has joined several other state agencies in using their social media accounts to send out propaganda supporting Governor Scott Walker. Here’s an example from today.
Call me crazy, but shouldn’t the DOR be giving tax tips to the public this time of year instead of trying to sell Governor Walker’s budget? But there’s a deeper problem here, which is that the Department of Revenue is also in charge of releasing the monthly revenue figures to the public, which the Legislative Fiscal Bureau uses to make revenue projections that can make or break the state budget, and lead to numerous policy decisions as that budget is debated. If the Department of Revenue is releasing good revenue figures in coming months, why would we automatically believe that to be true, given the pro-Walker propaganda they are sending out these days?
And if those revenue figures, and Walker Administration data in general, are being given their own “rosy scenarios”, then it greatly raises the possibility of the wrong choices being made, and increased damage and more drastic adjustments having to be made later as a result. That’s why the only data I would trust from the Wisconsin DOR over the next few months would be if it said that revenue data was disappointing. Don’t get me wrong, I’ll report revenue figures that are good and try to analyze the options that might come from that, but I would be VERY skeptical that they would be real.
The fact that we are immediately skeptical of what a GOP government might give to the public when it comes to economic and fiscal data is a bad thing, but typical of what the GOP wants in an era of “post-truth politics.” And it’s why they want to eradicate public employee unions and civil service protections for government employees, so people who aren’t elected hacks aren’t allowed to call “BULLSHIT” on their statements, or at least not to let the truth come out until after the votes are cast and there’s little that can be done to fix the wreckage.