Riedl’s Myth 5
This is another in the continuing look at Brian Riedl’s ten myths.
For those keeping score at home, here at Angry Bear we’ve already posted in detail on Myths 1 through 4…
PGL’s post on Riedl Myth 1
My post on Riedl Myth 1.
Alkali19’s post on Myths 2 and 4
My post on Riedl Myth 3
Also, reader NS has given us an overview of the Riedl approach.
Moving right along…
“Myth #5: The Bush tax cuts are to blame for the projected long-term budget deficits.
Fact: Projections show that entitlement costs will dwarf the projected large revenue increases.”
Riedl has a graph to illustrate how spending is projected to increase faster than tax revenues. The caption on the graph says “Source: Calculations Based on data from CBO Long Term Budget Outlook, December 2005.”
Riedl goes on: “Overall, revenues are projected to increase from 18 percent of GDP to almost 23 percent. Spending is projected to increase from 20 percent of GDP to at least 38 percent. Even repealing all of the 2001 and 2003 cuts would merely shave the projected budget deficit of 15 percent of GDP by less than 1 percentage point, and that assumes no negative feedback from raising taxes.”
Anyway, I’m concerned about two things. One is that the CBO is required to make all kinds of assumptions, which makes using its forecasts problematic. The second is exactly what Riedl means by “based on data from CBO Long Term Budget Outlook, December 2005.” In particular, the words “based on.” To get an idea of what they might be, Riedl himself described many of them here. Considering the extensive use of cherrypicking, misleading data, and a few downright inaccuracies I certainly am not about to trust Riedl’s, um, “corrections”, especially when I don’t have the methodology for the corrections in front of me. (Note to Riedl – some of us make sure readers know they can have our spreadsheets whenever we do anything that isn’t completely straightforward. Its called transparency. It makes people trust us a bit more when they can check our work.)
Unlike Riedl, I’m not paid for this and I have to earn a living. So I’m not going to do the forecasting myself right at this time. I would merely like to point out that Riedl seems to be doing a static analysis based on percentages of GDP. I would also note – it is easier to forecast the past than the future. So let’s try a simple static Riedl-style analysis on the past.
Since Riedl used data from OMB Table 1.3 for some of his Myths, let’s do the same. Table 1 below shows the Federal Revenues, Outlays, Surplus or Deficit for the unified budget (i.e., it includes revenues from Social Security) for 1997 through 2005. (I stopped at 2005 because Table 1.3 does not yet have actual data for 2006.) Note that there were surpluses in 1998, 1999, and 2000. If you go back to table 1.3, you’ll note that the deficit shrunk every year from beginning in 1992 to 2000 – Riedl strikes me as the kind of guy who would give credit to the Republican Revolution that began in 1995 rather than Clinton, who took office in 1993.)
Table 1 also includes “change in revenue from 2000” and “change in outlays from 2000”, 2000. Note that changes in revenue since 2000 have been bigger than changes in spending. The boys at the Heritage Foundation might believe that going from a 2.4 percent of GDP surplus in 2000 to a 2.6 percent of GDP deficit is due more to 1.7 percent of GDP increase in spending than a 3.4 percent reduction in tax revenue, but the rest of us have a grasp of simple arithmetic. (Well, not everyone – Andrew Sullivan did link approvingly to this nonsense.)
Table 2 looks at changes in revenue and changes in spending from 1999. (I’m not Riedl – I don’t want anyone accusing me of picking the best year.) Table 3 uses 1998. Table 4 uses 1997, the last deficit year. Table 5 uses 2001. I note that the only times changes in spending exceed changes in tax revenues were in years that Clinton ran a surplus – put another way, some years the increase in the surplus were more due to tax revenues, some years they were more due to spending cuts. But the changes since GW took office – well, the effect of tax cuts is greater than the effect of spending increases, at least when it comes to killing the surplus.
Update. Oooh. We have temporarilly attracted Riedl’s attention. See the comments, which appear to be mostly generic, but there’s also this:
“some angry bear guy bizarrely answered my data showing CBO’s 2006-2050 budget projections (which are available from CBO)duh) with an odd and completely irrelevant rant about budget deficits and surpluses between 1997-2005.” That clearly is me and this post. (I note… nothing that in any way relates to the other posts we’ve had on the 10 Myths. This was the best he could do. I also note… I forgot about his Myth #2 (The Bush tax cuts substantially reduced 2006 revenues and expanded the budget deficit.) when writing this post, and Riedl apparently forgot about it when writing his response. Because if 1997 to 2005 doesn’t help understand the forward projections, it sure as heck deals with today, doesn’t it?)
All I can is this… I linked to another Riedl paper showing Riedl himself doesn’t trust the CBO projects. Fine. I don’t either. Riedl also tells us he corrected the data and asks us to trust his corrections to the CBO data. We’ve had several posts up in the past few days about Riedl’s article. We’ve noted several points where he cherrypicks data or is misleading. (I note again – no comment about some angry bear guys doing that.) So why the heck should I trust Riedl’s corrections without having seen them? Because he tells us he made them? If they’re available, why not point out where when he’s using these corrections?
I don’t expect Riedl to be back. In his mind, no doubt, he’s answered all the questions.