After Obamacare report, Republicans want to kill the CBO
Charging that “most people understand that the CBO did the job it was asked to do by the then-Democrat majority,” House Majority Leader Eric Cantor warned, “bill has the potential to bankrupt this federal government as well as the states.” As CBS News reported in early 2011, Cantor quickly doubled down:
Cantor also disputed the claim, put forth by the nonpartisan Congressional Budget Office, that the health care reform bill passed by Congress last year will actually reduce the deficit by $143 billion, calling the figure “budget gimmickry.”
“I think what we do know is the health care bill costs over $1 trillion,” Cantor told Hill. “And we know it was full of budget gimmickry. And it spends money we don’t have in this country.”
As Ezra Klein of the Washington Post explained at the time, “Republicans are aware that this looks, well, horrible. So they’re trying to explain why their decision to lift the rule requiring fiscal responsibility is actually fiscally responsible.”
What’s important about Cantor’s argument is not that he’s wrong. It’s why he’s saying something he knows to be wrong. There are plenty of reasons to oppose the health-care reform bill. You might not want to spend that money insuring people, or you might not think the legislation goes far enough in reforming the system. But as a matter of arithmetic, using the math that Congress always uses, the bill saves money. It cuts enough spending and raises enough taxes to more than pay for itself, both in the first 10 years and in the second 10 years.
“Repealing health-care reform would cost hundreds of billions of dollars,” Klein rightly concluded, “and Eric Cantor knows it.”
If you have any doubt on that point, just look at the CBO’s December 2015 assessment of Rep. Tom Price’s H.R. 3762, the “Restoring Americans’ Healthcare Freedom Reconciliation Act.” When CBO scored H.R. 3762, it told Senate Budget Committee Chairman Mike Enzi that its Obamacare “repeal” provisions would reduce deficits by $474 billion between 2016 and 2025. Conservatives were overjoyed. But those giddy GOPers didn’t acknowledge that their bill was only a partial repeal. They skipped over what Health Affairs rightly called “the $879 billion footnote.” As that magic footnote in the legislation drafted by Rep. Fred Upton (R-MI) and Sens. Orrin Hatch (R-UT) and Richard Burr (R-NC) declares:
All provisions of PPACA and HCERA are repealed except for the changes to Medicare.” (Emphasis added). [Note: PPACA and HCERA are the two statutory components of the law now known as the ACA — or Obamacare.] [Emphasis mine.]
That difference, it turns out, makes all the difference. “Saving that single element,” HA explained, “turns the CBO’s current deficit raising cost projection for repeal from $137 to $353 billion negative to $449 to $665 billion positive.” It’s no wonder embarrassed Republicans don’t want CBO scoring their new repeal legislation, or just don’t want CBO at all.
But the Republican crusade against Congressional calculus hardly ends there.
Consider, for example, the Republican effort to brand President Obama’s 2009 stimulus program a “failure” that did “not create a single job.” While GOP presidential nominee Mitt Romney was touring the country propagating the “Obama made the economy worse” fraud, CBO Director Douglas Elmendorf was calmly bludgeoning the fabulists of the Republican Party.
As the Washington Post reported in June 2012, the House Budget Committee heard testimony from the CBO chief answering a simple question: Did the $787 billion Obama stimulus work? Unfortunately for Republican propagandists, Elmendorf clearly refuted Mitt Romney’s claim that the American Recovery and Reinvestment Act (ARRA) was “the largest one-time careless expenditure of government money in American history.”
Under questioning from skeptical Republicans, the director of the nonpartisan (and widely respected) Congressional Budget Office was emphatic about the value of the 2009 stimulus. And, he said, the vast majority of economists agree.
In a survey conducted by the University of Chicago Booth School of Business, 80 percent of economic experts agreed that, because of the stimulus, the U.S. unemployment rate was lower at the end of 2010 than it would have been otherwise.
“Only 4 percent disagreed or strongly disagreed,” CBO Director Douglas Elmendorf told the House Budget Committee. “That,” he added, “is a distinct minority.”
Not content with that response, Kansas Republican Rep. Tim Huelskamp tried again. “Where did Washington mess up?” Huelskamp demanded. “Because you’re saying most economists think it should’ve worked. It didn’t.” As the Post’s Lori Montgomery detailed, Elmendorf drove home the point:
Most economists not only think it should have worked; they think it did work, Elmendorf replied. CBO’s own analysis found that the package added as many as 3.3 million jobs to the economy during the second quarter of 2010, and may have prevented the nation from lapsing back into recession.
That May, Elmendorf’s agency released its latest assessment of the stimulus showing why. At its peak in 2010, the ARRA added up to 3.3 million jobs, cut unemployment by as much as 1.8 percent, and boosted GDP by up to 4.1 percent. It’s also worth noting that the CBO once again confirmed that aid to the states and purchases by the federal government delivers the biggest bang for the buck, while upper income tax cuts provide the least.
Now, few things are as near and dear to the conservative heart as tax cuts for the wealthiest Americans. But sadly for the GOP’s supply-side snake oil salesmen, the CBO time and again debunked right-wing rhetoric insisting that massive windfalls for the wealthy from Uncle Sam pay for themselves and fuel job creation and economic growth.
During and after the stimulus debate, CBO advised that rate reductions for the rich provided the worst “multiplier” of any ARRA program. Then as the nation approached the so-called “fiscal cliff” at the end of the 2012, CBO explained that increasing taxes on the top earners would have virtually no impact on the economy at all. As I noted in November 2012:
In its report (“Economic Effects of Policies Contributing to Fiscal Tightening in 2013”), the CBO warned that the deficit-slashing effects of allowing the Bush tax cuts expire, ending the two-year payroll tax holiday and letting last year’s budget sequestration deal proceed on January 1, 2013 could return the United States to recession. The combination of spending cuts and tax increases could reduce gross domestic product by 2.9 percent and drive the unemployment rate from 7.9 percent today to 9.1 percent by the end of next year.
But as Dylan Matthews explained in the Washington Post, letting upper-income tax rates return to their slightly higher Clinton-era rates (as President Obama has proposed) will play no part in that instant austerity. While extending the Bush rates for all Americans carries a $330 billion overall price tag for Uncle Sam next year, the CBO calculated that $42 billion goes to the top taxpayers…Eliminating that Treasury-draining windfall for the wealthy (by raising rates for the top-two tax brackets, indexing the AMT and raising capital gains, dividend and estate taxes), would slice only 0.1% from economic growth next year.
Making matters worse, CBO analyses (and decades of American history) have made a mockery of that central pillar of GOP economic orthodoxy, “tax cuts pay for themselves.” To battle reality’s well-known liberal bias, Republicans declared war on math itself.
That’s why in 2012, 2013, and again in 2014, Republicans in Congress sought to require that the CBO use so-called “dynamic scoring” to make their budget-busting tax cuts miraculously work. That’s why House Republicans proposed H.R. 3582 (the “Pro-Growth Budgeting Act”) to require that the CBO estimates also use dynamic scoring to incorporate “supply-side assumptions about the growth-generating magic of tax cuts into official budget estimates, enabling conservatives to evade the deficit-boosting implications (and various congressional barriers that come along with them) of their pet proposals for reducing the tax burden of ‘job creators.'” In September 2014, Paul Ryan promised the Wall Street group, the Financial Services Roundtable, “I’d like to improve our scorekeeping so it better reflects reality.” By “improve our scorekeeping,” Ryan means forcing the nonpartisan Congressional Budget Office (CBO) to change the way it forecasts (or “scores”) the impact of tax and budget legislation. And by “better reflects reality,” Paul Ryan means rigging the outcome so GOP tax-cutting bills don’t appear to hemorrhage the red ink they inevitably must. As he lamented at the time, “he scorekeeping we use is not correct.”
After the GOP captured the Senate during the 2014 midterms Ryan got his wish. In 2015, Ryan and the Republicans got their dynamic scoring requirement for all budget-related legislation. And they got a new Republican CBO Director, Keith Hall, to implement it.
But in August 2015, the GOP’s hand-picked successor to the much praised Douglas Elmendorf delivered some bad news for Republican practitioners of “Unicornomics.”
“No, the evidence is that tax cuts do not pay for themselves,” Hall said in response to a reporter’s question. “And our models that we’re doing, our macroeconomic effects, show that.”
Now, for the overwhelming majority of economists, or just about anyone familiar with the U.S. budget since Ronald Reagan first took the oath of office, Hall’s conclusion is about as close to a self-evident truth as his profession can offer. According to a 2012 survey conducted by the University of Chicago Booth School of Business, the nation’s leading economists would have given Arthur Laffer’s magic tax cut thesis an “F.” In a nutshell, not a single one of the economists surveyed agreed that “a cut in federal income tax rates in the US right now would raise taxable income enough so that the annual total tax revenue would be higher within five years than without the tax cut.” In his comments, David Autor of MIT pointed out, “Not aware of any evidence in recent history where tax cuts actually raise revenue. Sorry, Laffer.” Former Obama administration economist and current University of Chicago professor Austan Goolsbee put it this way:
Moon landing was real. Evolution exists. Tax cuts lose revenue. The research has shown this a thousand times. Enough already.
Bit for the budget alchemists of the GOP, it’s never enough. In 2013, former South Carolina GOP Senator turned Heritage Foundation President Jim Demint fired a new broadside at the Congressional Budget Office. This time, the issue was immigration reform.
Appearing on ABC’s This Week that May, Demint warned that immigration reform “will cost Americans trillions of dollars.” Unsurprisingly, he declared he had proof from the book-cookers at his organization. “The study you’ll see from Heritage this week presents a staggering cost of another amnesty in our country.” And why would the Heritage Foundation see the need for its own forecast?
“Well, CBO said Obamacare wouldn’t cost us anything. They’re basically puppets of the Congress and the assumptions they put in the bill. Heritage is only organization that has done an analysis on the cost.”
Of course, there are only a few problems with Demint’s demagoguery. For starters, the CBO never said the Affordable Care Act “wouldn’t cost us anything.” Instead, the nonpartisan scorekeeper merely found that the ACA’s new tax revenue and savings from elsewhere in the budget would result in a reduction in the U.S. national debt. Needless to say, that’s not what Republicans wanted to hear, which is why House Majority Leader Eric Cantor (R-VA) accused the CBO of “budget gimmickry” and Newt Gingrich called for abolishing the agency altogether.
Making Demint’s case even worse was that other conservative groups echoed the CBO assessment that an immigration reform package like the one now under consideration in the Senate would prove a boon to American taxpayers. The extra costs of benefits including Social Security, Medicare and Medicaid, the CBO explained, would be more than offset by the increasing size of both the U.S. labor force and its economy:
Cost estimates produced by CBO and JCT typically reflect the assumption that macroeconomic variables such as gross domestic product (GDP) and employment remain fixed. However, because S. 2611 would have had the direct effect of significantly increasing the size of the U.S. labor force (resulting in an estimated 3.4 million additional workers in the United States by 2016), CBO and JCT relaxed that assumption and incorporated in the cost estimate the direct effect of the bill on the U.S. population, employment, and taxable wages.
As Politico reported, former CBO chief and McCain economic adviser Douglas Holtz-Eakin made a similar case:
His group put out a paper that concluded immigration reform would speed the pace of economic growth and could reduce the deficit by $2.5 trillion. The growth will come because immigrants will participate in the labor force at higher rates, according to the analysis, but also because they’re more likely to own small businesses.
Jim Demint had one other problem. Even many Republicans blasted his own organization’s comical estimate that immigration reform legislation under consideration would cost the United States $6.3 trillion by 2050. As Arizona Republican Senator Jeff Flake put it, “Here we go again.”
Here we go again, indeed. Just weeks after the Urban Institute concluded that the GOP’s “repeal and delay” strategy for Obamacare would leave some 30 million more Americans without health insurance and “moves the country to a situation with higher uninsurance rates than was the case before the ACA’s reforms,” Keith Hall’s CBO found much the same thing. (That tens of thousands of newly uninsured people would needlessly die each year as a result wasn’t part of either analysis.) In the face of that disturbing message from Congress’ own budget referee, Republicans like Newt Gingrich want to kill the messenger. Why?
It is a left wing, corrupt, bureaucratic defender of big government, and liberalism. Its scoring of ObamaCare was not just wrong, it was clearly corrupt.
In other words, for Republicans the CBO once again might just be bringing some inconvenient truths.
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