Feeds:
Posts
Comments

Posts Tagged ‘CBO’

I commented yesterday about the silly idea, being promoted by a few politicians, to impose a tax on toilet paper. That post mostly was an opportunity to have some fun mocking greedy government because even a dour pessimist like me doesn’t expect that idea to get very far.

But there’s a new tax idea that sounds equally absurd, but actually is a much greater threat to taxpayers. The bureaucrats at the Congressional Budget Office have issued a report suggesting a tax based on the number of miles driven. Since such a tax almost surely (despite initial assertions to the contrary) would be in addition to existing gas taxes, this would be a way for politicians to grab more of our money.

But that’s not the only thing we should worry about. To impose such a tax, the government obviously would need the ability to track our vehicle usage. At the risk of stating the obvious, my driving patters are not the government’s business.

Here’s a blurb from a report in The Hill.

The Congressional Budget Office (CBO) this week released a report that said taxing people based on how many miles they drive is a possible option for raising new revenues and that these taxes could be used to offset the costs of highway maintenance at a time when federal funds are short.

The report discussed the proposal in great detail, including the development of technology that would allow total vehicle miles traveled (VMT) to be tracked, reported and taxed, as well as the pros and cons of mandating the installation of this technology in all vehicles.

…The report was requested by Senate Budget Committee Chairman Kent Conrad (D-N.D.), who held a hearing on transportation funding in early March. In that hearing, Transportation Secretary Ray LaHood said the Obama administration is hoping to spend $556 billion over the next six years, much of which would go to federal transportation improvement projects.

Conrad said in response that federal funds are tight, and in asking for recommendations on how to raise that money, he noted the possibility of a VMT tax as a way to solve the problem of collecting less in taxes as people move to more fuel-efficient vehicles.

Advertisements

Read Full Post »

This won’t surprise anyone with a pulse, but Obama, Reid, Pelosi, et al, were disingenuous about the costs of Obamacare. The Congressional Budget Office has released revised numbers and government-run healthcare will cost 8.6 percent more than what was projected in last year’s forecast. This doubtlessly is just the first of many “re-estimates” that will occur, with each one showing the program to be far more costly than initially projected.

This obviously shows the mendacity of Democrat politicians, but let’s also make sure that CBO takes a lot of the blame. The bureaucrats deliberately low-balled expenditure estimates to please their political masters. If Republicans had any brains, they would fire all of them.

Here’s a brief blurb from the Wall Street Journal’s editorial on the topic.

CBO says the entitlement’s health insurance subsidies will cost $1.13 trillion between 2012 and 2021, not $1.04 trillion, the prior estimate. This 8.6% jump is the result of revised assumptions, the so-called technical factors in CBO’s budget model. The bill’s total cost now stands at $1.445 trillion, according to another recent CBO estimate. Remember that all of these are fictitious numbers that reflect Congressional gaming of CBO conventions to make it seem as if ObamaCare “saves” money. But now, even under these conventions, CBO is conceding that it significantly underestimated the bill’s cost. If the propeller heads decide to add a few more trillion dollars in new spending, they might get somewhat closer to the bill’s true cost.

And because I like to brag when I get something right (to be fair, everyone knew the CBO numbers were dishonest and wrong, so I wasn’t exactly making a brilliant observation), I invite people to re-watch my video explaining how the politicians and their minions were lying to us.

Read Full Post »

Many of the politicians in Washington, including President Obama during his State-of-the-Union address, piously tell us that there is no way to balance the budget without tax increases. Trying to get rid of red ink without higher taxes, they tell us, would require “savage” and “draconian” budget cuts.

I would like to slash the budget and free up resources for private-sector growth, so that sounds good to me. But what’s the truth?

The Congressional Budget Office has just released its 10-year projections for the budget, so I crunched the numbers to determine what it would take to balance the budget without tax hikes. Much to nobody’s surprise, the politicians are not telling the truth.

The chart below shows that revenues are expected to grow (because of factors such as inflation, more population, and economic expansion) by more than 7 percent each year. Balancing the budget is simple so long as politicians increase spending at a slower rate. If they freeze the budget, we almost balance the budget by 2017. If federal spending is capped so it grows 1 percent each year, the budget is balanced in 2019. And if the crowd in Washington can limit spending growth to about 2 percent each year, red ink almost disappears in just 10 years.

These numbers, incidentally, assume that the 2001 and 2003 tax cuts are made permanent (they are now scheduled to expire in two years). They also assume that the AMT is adjusted for inflation, so the chart shows that we can balance the budget without any increase in the tax burden.

I did these calculations last year, and found the same results. And I also examined how we balanced the budget in the 1990s and found that spending restraint was the key. The combination of a GOP Congress and Bill Clinton in the White House led to a four-year period of government spending growing by an average of just 2.9 percent each year.

We also have international evidence showing that spending restraint – not higher taxes – is the key to balancing the budget. New Zealand got rid of a big budget deficit in the 1990s with a five-year spending freeze. Canada also got rid of red ink that decade with a five-year period where spending grew by an average of only 1 percent per year. And Ireland slashed its deficit in the late 1980s by 10 percentage points of GDP with a four-year spending freeze.

No wonder international bureaucracies such as the International Monetary fund and European Central Bank are producing research showing that spending discipline is the right approach.

This video provides all the details.

Read Full Post »

Grousing about the GOP’s timidity in the battle against big government will probably become an ongoing theme over the next few months, and  let’s start with two items that don’t bode well for fiscal discipline.

First, it appears that Republicans didn’t really mean it when they promised to cut $100 billion of so-called discretionary spending as part of their pledge. According to the New York Times,

As they prepare to take power on Wednesday, Republican leaders are scaling back that number by as much as half, aides say, because the current fiscal year, which began Oct. 1, will be nearly half over before spending cuts could become law.

This is hardly good news, particularly since the discretionary portion of the budget contains entire departments, such as Housing and Urban Development, that should be immediately abolished.

That being said, I don’t think this necessarily means the GOP has thrown in the towel. The real key is to reverse the Bush-Obama spending binge and put the government on some sort of diet so that the federal budget grows slower than the private economy. I explain in this video, for instance, that it is simple to balance the budget and maintain tax cuts so long as government spending grows by only 2 percent each year.

It is a good idea to get as many savings as possible for the remainder of the 2011 fiscal year, to be sure, but the real key is the long-run trajectory of federal spending.

The other item for discussion is the GOP’s apparent interest in retaining Douglas Elmendorf, the current Director of the Congressional Budget Office.

Many of you will remember that the CBO cooked the books last year to help ram through Obamacare. Under Elmendorf’s watch, CBO also was a relentless advocate and defender Obama’s failed stimulus. And CBO under Elmendorf published reports saying higher taxes would improve economic performance.

But Elmendorf’s statist positions apparently are not a problem for some senior Republicans, as reported by The Hill.

The new House Budget Committee chairman, Rep. Paul Ryan (R-Wis.), gave a very public endorsement of the embattled head of the Congressional Budget Office during his first major speech as committee head Wednesday night. …“You’re doing a great job at CBO, Doug,” Ryan said after receiving the first annual Fiscy Award for his efforts at tackling the national debt. He added that he looked forward to crunching budget numbers with him in the future.

In the long run, the failure to deal with the problems at CBO (as well as the Joint Committee on Taxation) may cause even more problems than the timidity about cutting $100 billion of waste from the 2011 budget. Given the rules on Capitol Hill, it makes a huge difference whether CBO and JCT are putting out flawed numbers.

I’ve already written that fixing the mess at CBO and JCT is a critical test of GOP resolve, and I actually thought this would be a relatively easy test for them to pass. It is an ominous sign that Republicans aren’t even trying to clean house.

Read Full Post »

I’ve already written about the terrible work of the Congressional Budget Office. The CBO did an awful job on the stimulus, for instance, repeatedly asserting that diverting money from the private sector to government somehow would create jobs. CBO also was a disaster on Obamacare, claiming that a giant new entitlement program would reduce budget deficits. And the legislative bureaucracy even has argued that higher tax rates boost growth.

That sounds absurd (and it is), but CBO is not the only taxpayer-funded bureaucracy on Capitol Hill producing this kind of nonsensical analysis. The Congressional Research Service just published a new report asserting that higher tax rates will boost economic performance. Here’s an excerpt from that CRS publication.

…it is ambiguous whether tax cuts lead to more or less work, saving, and investment. The expiration of the tax cuts would nevertheless reduce the budget deficit, absent other policy changes, which economic theory predicts would have a positive effect on the economy in the long run.

To be fair, CRS doesn’t actually claim higher taxes are good for growth. And neither does CBO. But CRS and CBO both assert that there is no clear evidence that higher taxes hurt growth. Budget deficits, however, supposedly have a very negative impact on economic performance according to these Capitol Hill bureaucrats. More specifically, CRS and CBO believe that government borrowing leads to higher interest rates, and they think that higher interest rates reduce investment. And since investment is a key to long-run growth, this leads them to endorse any policy – including higher taxes – that reduces red ink.

Taking the CRS and CBO analysis to its logical extreme (and neither bureaucracy has stated that there are limits to their methodology), tax rates of 100 percent would be the most effective way of maximizing prosperity.

This video explains that the real problem is spending, and that deficits are just a symptom of a government that is too big. This is not to say that CRS and CBO are completely wrong. We have record budget deficits and very low interest rates today, but it’s possible that interest rates might be even lower without all the red ink. And it’s certainly true that interest rates are one of the many factors that determine investment choices, so there’s nothing wrong with including them in the equation.

But magnitudes matter. For all intents and purposes, CRS and CBO want us to believe that more government borrowing will have a very significant impact on interest rates and that those higher interest rates will have a very negative impact on investment. Yet neither bureaucracy offers any evidence for these linkages, in large part because the academic research shows that the relationships between deficits, interest rates, and investment are weak.

By contrast, CRS and CBO have no problem supporting higher tax rates – including more double taxation of income that is saved and invested. Yet there is considerable evidence that punitive tax rates have a significant impact not only on decisions to earn income and be productive, but also on decisions whether to consume today or to save and invest (and thus consume in the future). CRS and CBO also assume, rather naively, that politicians would use any additional revenue for deficit reduction instead of new spending.

Let’s call this the triumph of left-wing theory over real-world evidence. To add insult to injury, the sloppy analysis at CRS and CBO is financed by our tax dollars. So we pay bureaucrats so they can tell politicians to seize more money from us. Gee, what’s not to love about a scam like that?

P.S. If Republicans are actually serious about restraining government spending, CRS and CBO are target-rich environments. Just saying.

Read Full Post »

While I’m glad Republicans are finally talking about smaller government, I’ve expressed some disappointment with the GOP Pledge to America. Why “reform” Fannie and Freddie, I asked, when the right approach is to get the government completely out of the housing sector. Jacob Sullum of Reason is similarly underwhelmed. He writes:
In the “Pledge to America” they unveiled last week, House Republicans promise they will “launch a sustained effort to stem the relentless growth in government that has occurred over the past decade.” Who better for the job than the folks who ran the government for most of that time? …Republicans, you may recall, had a spending spree of their own during George W. Bush’s recently concluded administration, when both discretionary and total spending doubled — nearly 10 times the growth seen during Bill Clinton’s two terms. In fact, says Veronique de Rugy, a senior research fellow at George Mason University’s Mercatus Center, “President Bush increased government spending more than any of the six presidents preceding him, including LBJ.” Republicans controlled the House of Representatives for six of Bush’s eight years.
Redemption is a good thing, however, so maybe the GOP actually intends to do the right thing this time around. One key test is whether Republicans do a top-to-bottom housecleaning at both the Congressional Budget Office and the Joint Committee on Taxation.
These Capitol Hill bureaucracies are not well known, but they have enormous authority and influence. As the official scorekeepers of spending (CBO) and tax (JCT) bills, these two bureaucracies can mortally wound legislation or grease the skids for quick passage.
Unfortunately, that clout gets used to dramatically tilt the playing field in favor of bigger government. It was CBO that claimed that Obama’s stimulus created jobs, even though the head of CBO was forced to admit that the jobs-created number was the result of a Keynesian model that was rigged to show exactly that result . You would think that would shame the bureaucrats into producing honest numbers, but CBO continues to produce absurd job creation estimates regardless of the actual rate of unemployment.
CBO favors deficits and debt when it is asked to analyze proposals for more spending, but it rather conveniently changes its tune when the discussion shifts to tax increases. Since we’re on the topic of twisted economic analysis, CBO actually relies on a model which, for all intents and purposes, predicts that economic performance is maximized with 100 percent tax rates.
The Joint Committee on Taxation, meanwhile, is infamous for its assumption that taxes have no impact – at all – on economic output. In other words, instead of showing a Laffer Curve, JCT would show a straight line, with tax revenues continuing to rapidly climb even as tax rates approach 100 percent.  This creates a huge bias against good tax policy, yet JCT is impervious to evidence that its approach is wildly flawed.
And don’t forget that CBO and JCT both bear responsibility for Obamacare since they cranked out preposterous estimates that a giant new entitlement would lead to lower budget deficits.
Not that we need additional evidence, but the head of the CBO just repeated his higher-taxes-equal-more-growth nonsense in testimony to the Senate Budget Committee. With this type of mindset, is it any surprise that fiscal policy is such a mess?
Douglas Elmendorf said extending breaks due to expire at year’s end would increase demand in the next few years by putting more money in consumers’ pockets. Over the long term, he said, the tax cuts would hurt the economy because the government would have to borrow so much money to finance them that it would begin competing with private companies seeking loans. That, in turn, would drive up interest rates, Elmendorf said.
I’ve already written once about how the GOP sabotaged itself when it didn’t fix the problems with these scorekeeping bureaucracies after 1994. If Republicans take power and don’t raze CBO and JCT, they will deserve to become a permanent minority party.

Read Full Post »

One of the many disappointing things about Republicans is that they fail to correct problems when they get power. After the 1994  “Gingrich Revolution,” the GOP had complete control of Capitol Hill. This meant complete authority over the Congressional Budget Office and Joint Committee on Taxation. Did Republicans use this power to fire the old staff and put in people who understood economics? Of course not. I don’t know if this is because Republicans are stupid or if it’s because they’re too timid to take steps that would generate complaints from their enemies. Regardless, what really matters is that CBO and JCT are just as biased today as they were 20 years ago. Diana Furchtgott-Roth of the Hudson Institute exposes CBO’s latest shoddy Keynesian analysis. She is correct, and the people making these same arguments 20 years ago were correct. And I’m afraid people will be saying the same things 20 years from now. Which leads me to think that maybe the best approach is to get rid of these bureaucracies.

…on Tuesday the nonpartisan Congressional Budget Office issued a report showing that the American Recovery and Reinvestment Act of 2009 increased the number of people employed by between 1.4 and 3.3 million people in the second quarter of 2010 and lowered unemployment by 0.7 to 1.8 percentage points.

CBO concludes that without the Recovery Act unemployment, which stood at 9.5% in July, might exceed 10% and possibly be above 11%.

There’s just one problem. CBO’s latest figures are inconsistent with its claims of the effects of the stimulus bill when it was passed in February 2009. If its models failed to accurately predict the effects of the stimulus bill then, why should we believe the models now?

This is important because some are taking the CBO report as proof that the stimulus bill is working and so we need…more stimulus.

…After passage of the stimulus bill, in a March 2009 letter to Iowa Senator Chuck Grassley, CBO predicted that the unemployment rate in the last quarter of 2009 would rise to 9% without the stimulus package, from its then-current level of 8.2%. With the stimulus, CBO said, the unemployment rate would range from 7.8% to 8.5%. The actual rate in December, 11 months after enactment of the stimulus, was 10%, far higher than CBO said it would be absent the stimulus.

…If Americans had known in February of 2009 that the $787 billion stimulus package (whose cost CBO later raised to $862 billion) would not lead to declines in unemployment, but instead a substantial increase in the unemployment rate to 9.5%, opposition to the spending would have been practically universal.

Put it another way – if Americans were asked now whether they would prefer today to have back the February 2009 unemployment rate of 8.2% and the $862 billion spent on stimulus, they would say yes.

Some say things would have been worse if the stimulus funds had not been spent. They assume that more government spending, including the $862 billion stimulus, must be good for the economy. This form of Keynesian economics fell out of fashion decades ago everywhere, except in the halls of power in Washington.

If more government spending always helped the economy, why stop at $862 billion? Why not give each American an unlimited bank account? Then the unemployment rate would likely rise to 100%. But some economists would still offer unverifiable models to “prove” the benefit to the American public.

Read Full Post »

Older Posts »

%d bloggers like this: