OPINION: Not even dynamic scoring can make this tax bill look like anything other than what it is — generational theft.
House
Speaker Paul Ryan and Senate Majority Leader Mitch
McConnell Pablo Martinez
Monsivais/Getty Images
In Washington, there’s a magical way to make a budget look
balanced even when it’s not — it’s called „dynamic scoring.“
Basically, it allows bean counters to use growth projections to
offset income lost from tax cuts.
Dynamic scoring involves using economic models that supposedly
show the effects of fiscal policy like a tax cut on growth. The
idea is that a tax cut, by putting more money in investors‘ and
consumers‘ pockets, can add more juice to the economy, helping to
make up for larger deficits caused by lost tax revenue.
And since the 1980s, when a bunch of the GOP legislators
currently trying to ram the Tax Cuts and Jobs Act down
America’s throat were much younger people, it has been a bandaid
on budget-busting bills — using generous projections to show
increased economic growth generated by tax cuts that would help
the cuts pay for themselves.
That’s called getting something for nothing, and if that’s not
magic I don’t know what is. Unfortunately, this time around the
Tax Policy Center (TPC) estimates that not even the magic of
dynamic scoring can make this tax bill look good. It simply does
not generate enough economic growth to make up for lost revenue
from the cuts.
„We find the legislation would boost US gross domestic
product (GDP) 0.7 percent in 2018, have little effect on GDP in
2027, and boost GDP 0.1 percent in 2037,“ the TPC report
said.
Using regular math, and not the magical math of dynamic
scoring, the Senate Finance bill would increase deficits by about
$1.4 trillion from 2018 through 2027, TPC said. Around 2028 some
of the tax breaks for individuals start to expire, and then „the
bill would reduce deficits by about $174 billion before taking
into account macroeconomic effects and extra interest.“
Throw dynamic scoring into the mix and the bill’s cost only
goes down by an additional $34 billion. That results in a „small
net decline in deficits of about $208 billion over the second 10
years,“ according to TPC.
In other words, not even magic can make this bill
revenue-neutral. Even generous models show it will add to the
deficit, and add to the debt burden future (and some current)
American tax payers have to take on.
Tax Policy
Center
The TPC reasons that the tax cut will boost demand from
households a bit in the short run, but since the labor market is
almost at full employment, that won’t be anything to write home
about. It could also boost the labor supply temporarily too — but
only temporarily since those benefits will “ be reversed
after nearly all individual income tax provisions expire in
2025,“ causing most individuals‘ taxes to go up.
Corporations will get to keep their tax break, but once
deficits go up, the TPC says that high interest rates could
temper their investments.
„…all these models tell roughly the same story: The Tax
Cuts and Jobs Act won’t produce dramatic increases in the economy
nor would it come close to paying for itself,“ the report
concluded.
This goes against what Treasury Secretary Steve Mnuchin said to
Congress back in January.
„We do believe in dynamic scoring and, with the appropriate
growth, I think we want to make sure that tax reform doesn’t
increase the deficit,“ he said.
Of course, maybe he didn’t realize what the tax bill would do
since his office never actually produced an
analysis of its economic effects. We imagine the task
would have taken too much time away from critical
Bond-villain-role-playing/arm-length-leather-glove-shopping time
with his wife.
We wouldn’t want that.
Jacquelyn Martin/AP
Last year around this time I wrote that Trump would try
to use
this budget trick to steal from an entire generation. I was
right, but I didn’t realize how ugly this would be. I didn’t
realize how little anyone in the GOP would care about even
appearing to avoid adding to the national debt.
One thing is putting lipstick on a pig. Another is realizing the
lipstick keeps melting off of its snout and saying — oh
whatever, Wilbur still looks ready for the county fair. Pack him
up, no one will notice.
Dynamic scoring doesn’t go far enough to plug the holes in this
tax bill, but since no one in the GOP actually cares about the
appearance of fiscal responsibility, the administration might as
well have not even bothered to use it.
