Lies, Damn Lies, and Statistics: The Free Lunch Fools at the White House
Mark Thoma points to two examples of fiscal dishonesty from the Bush Administration. First up is Allan “not Glenn” Hubbard abusing statistics to suggest that the Health Savings Accounts proposal is not just another tax cut for the rich. Edwin Park and Robert Greenstein document how Mr. Hubbard’s claims are misleading.
Next up is an article from David Broder on the effect on the long-run solvency of the Federal government from the 2001 and 2003 tax cuts:
Those rate reductions, when enacted, had expiration dates of 2010, designed to keep their long-term costs within the limits set by the budget resolutions of which they were a part. The president is urging Congress to make those tax cuts permanent, but his proposal is controversial and has not yet passed. This year, however, the budget the president submitted on Feb. 6 simply assumes that the tax cuts have been made permanent – and thus includes them in the “baseline” for all future years. The effect, according to the center’s analysis, is that “legislation to make these tax cuts permanent will be scored as having no cost whatsoever.” In fact, this analysis says, “The administration’s proposal, by changing the rules after the 2001 and 2003 tax cuts were enacted but before they are extended, would ensure that the cost of continuing the tax cuts in the years after the current sunset dates would never be counted. The costs in those years were not counted when the tax cuts were first enacted. . . . Now, the administration is proposing that the tax cuts for those years also be ignored when the tax cuts are extended. To fail ever to count the cost of the tax cuts in the years after the sunset dates . . . would represent one of the largest and most flagrant budget gimmicks in recent memory.” How large? The Congressional Budget Office scores the cost of making these tax cuts permanent at $1.6 trillion over the next decade. The administration’s estimate is somewhat less – $1.35 trillion … The key passage says, without elaboration, that “the 2001 Act and 2003 Act provisions were not intended to be temporary, and not extending them in the baseline raises inappropriate procedural roadblocks to extending them at current rates.”That sentence must be parsed. The basis for saying those two tax cuts were “not intended to be temporary” is that when Bush recommended them to Congress, he said they should be permanent. But Congress put time limits on them – which Bush now finds it inconvenient to acknowledge.
Joel Friedman and Robert Greenstein provide more discussion of these ten-year projections. But I have always wondered about ten-year projections. If these tax cuts were indeed intended to be permanent, shouldn’t someone be evaluating the present value of the lost tax revenues over a longer horizon – such as down in generational accounting. In fact, page 68 of Laurence Kotlikoffs’ The Coming Generational Storm informs us that Treasury Secretary Paul O’Neill asked Kent Smetters and Jagadeesh Gokhale to prepare such an analysis for inclusion in the President’s 2004 budget. However, Treasury Secretary Snow decided to yank this analysis for the budget and its supporting appendices. Why? Because their analysis showed just how expensive these tax cuts would be if they were made permanent.
Of course, our GOP dominated Congress refuses to challenge the premises of the free lunch fools in the White House. Unless we elect more Democrats to Congress this November – the fiscal gap and the honesty gap will continue.