Dynamic Scoring: Be Careful What You Wish For
After watching this administration use knowingly false budget assumptions to pass through its first tax cut package in the Summer of 2001, I didn’t think there would be many more surprises left in store as Bush returned this year for another rape of the public coffers with his “stimulus package”. After saying with a straight face that a dividend tax elimination for affluent seniors was needed to create jobs and stimulate the economy, even Wall Street initially guffawed its way to disagreement, only to be bludgeoned into submission by the threats and extortion from the Karl Rove/Grover Norquist tag team.
Bush rolled out a package with a ten-year cost of over $750 billion not including interest costs, before giving Congress his bill for the invasion and occupation of Iraq, while giving contradictory reasons for the package (“first, it’s a stimulus package; no wait, it’s a reform package”). Tom DeLay initially said that the package was too small and insisted that the House GOP would use Bush’s package as a starting point, in total detachment from the burgeoning deficits and unknown costs from the war.
Realizing that there was no empirical basis to justify such a revenue loss on the numbers alone, the GOP changed the rules by which budget-busters are to be evaluated. Budget nimrods like House Budget Committee Chairman Jim (“I have a bag over my head”) Nussle insisted that "dynamic scoring" be used by the CBO to calculate the benefits of any Bush tax cut. The GOP has been harping for years to use this “voodoo economics” method of selling dubious tax cut schemes, wherein the full (alleged) benefit from the growth-inducing effects of the package are also included in the estimated costs of lost revenue from such packages, no matter how specious are the assumptions behind the schemes. (Keep in mind that as far as the GOP is concerned, this does not apply to the additional interest costs arising from new debt caused by lost federal revenue.) In other words, we will now institutionalize the Laffer Curve into all long-range forecasts from this point on, even though Laffer’s theory suffered from the real experience of the 1980’s.
Well, a funny thing happened on the way to Lafferizing the GOP’s scam. When the CBO used dynamic scoring at the GOP’s insistence to calculate the impact of Bush’s tax scam, it found that the package will never pay for itself by returning us to balanced budgets. Worse yet, the CBO numbers indicate a current-year deficit of over $500 billion (that’s billion with a “b”) when you factor in the likely costs of invasion and Iraqi nationbuilding/occupation. Alan Murray of the Wall Street Journal went so far as to claim the results are lethal to supply side economics.
While the GOP was shooting itself on Bush’s tax cut, their House and Senate budget plans were revealed to require serious cuts in entitlement programs in order to pay for Bush’s giveaway.
The Senate and House budgets now in conference each would increase deficits by nearly $2 trillion through 2013, with the House budget adding $1.9 trillion to deficits and the Senate budget adding $1.7 trillion.
The House budget would cut taxes a total of about $500 billion more than the Senate, with most of this difference represented by the dividend tax cut, which is heavily tilted toward people with quite high incomes. The House budget would essentially finance large additional tax cuts for high-income people primarily through deep domestic budget cuts that would heavily affect the poorest and most vulnerable Americans — including low-income children, working families, and elderly and disabled people — as well as state and local governments.
Neither budget advances the cause of fiscal discipline, since both would result in substantially larger deficits and increased debt. The large budget cuts in the House plan and the smaller-but-still-substantial domestic discretionary spending reductions in the Senate plan would do little to provide fiscal discipline since their fiscal effects would be overwhelmed by the tax cuts.
It appears that the GOP has dealt itself a losing hand for next year’s elections. As I said last night, although it may be easy for Karl Rove and George Bush to manipulate the media coverage overseas to ignore the real costs of our war and occupation and its consequences, the media does a better job of staying on message at home. Two things the media seems to cover really well are deficits and job losses.
I think they will have ample opportunity to cover both in the next twelve months.