Swordsmyth
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These days, it seems that a mysterious group called “the CBO” rules the world. Or at least Washington. Unfortunately, they’re not very good at predicting things and their bad calls can lead to bad policy results.
The Congressional Budget Office and the Joint Committee on Taxation (JCT) predict what will happen with spending, tax revenues and deficits from new bills and congressional budgets.
They have made headlines of late with their absurd warning that the Trump tax bill to extend the 2017 tax cuts and other reforms, like eliminating taxes on tips, would add some $4.6 trillion to the debt over 10 years.
That’s a scary number, but we know this is wrong. The fundamental flaw with the model is that it doesn’t take into account the improved economy from keeping tax rates low and providing tax relief for small businesses and workers. The White House estimates that this bill, combined with pro-America energy policies and deregulation, can raise the economic growth rate to nearly 3% — which would mean at least another $2 trillion in revenues.
When I pointed this out in The Wall Street Journal and on Fox News two weeks ago, House Speaker Mike Johnson reiterated these defects in the CBO predictions.
Then Washington Post “Fact Checker” Glenn Kessler claimed that CBO does a fine job and Mr. Johnson was guilty of a four-Pinocchio nose lie. Mr. Kessler called Mr. Johnson’s claim “nonsense.”
Oh, really? It turns out that it’s the self-proclaimed Fact Checker who is getting the numbers all wrong.
The Washington Post argued that the CBO really does dynamic scoring and takes adjusts for the changes in tax laws. That’s only half right. It takes into account micro changes, such as that a tax on cigarettes will mean fewer people will buy cigarettes.
But this misses the bigger point. The CBO does not measure the economy-wide benefits of lower tax rates, and thus it doesn’t adjust for higher employment and growth — which happens every time we cut tax rates.
We also know that the 2017 scoring of the Trump tax cut has already underestimated the revenues from the first six years of the law by a massive $1 trillion or more.
Yet the Fact Checker explains this giant error with a lame “the sun was in my eyes” excuse for dropping the ball. Mr. Kessler notes that no one in 2017 could have predicted the COVID-19 pandemic and the ensuing lockdowns. That is absolutely true. But the pandemic actually reduced revenues from what they would have otherwise been by at least $1 trillion because commerce slowed to a crawl during the lockdowns. Yet even with the unexpected pandemic, CBO still managed to underestimate the revenues generated from the tax cut.
Sounds like Mr. Johnson was right and the fact checkers struck out.
Everyone makes mistakes. But the CBO/JCT have a habit of overstating the benefits of raising taxes and underestimating the benefits to the economy from cutting tax rates. CBO/JCT, for example, have almost always low-balled the economic effects of cutting the capital gains tax.
The problem is the CBO modeling errors are not random. They typically get it wrong in the same direction. My colleague, Tomas Philipson, who served at the Council of Economic Advisers under President Trump in his first term, notes that the JTC never opens its books to show how it makes its “garbage in, garbage out” projections.
Maybe Mr. Johnson should demand they do that immediately. Or maybe it’s time for a new model based on real-world scoring. It’s time to put accuracy over ideology.
Big decisions that have trillion-dollar consequences for our economy are being made with a cracked crystal ball.
www.washingtontimes.com
The Congressional Budget Office and the Joint Committee on Taxation (JCT) predict what will happen with spending, tax revenues and deficits from new bills and congressional budgets.
They have made headlines of late with their absurd warning that the Trump tax bill to extend the 2017 tax cuts and other reforms, like eliminating taxes on tips, would add some $4.6 trillion to the debt over 10 years.
That’s a scary number, but we know this is wrong. The fundamental flaw with the model is that it doesn’t take into account the improved economy from keeping tax rates low and providing tax relief for small businesses and workers. The White House estimates that this bill, combined with pro-America energy policies and deregulation, can raise the economic growth rate to nearly 3% — which would mean at least another $2 trillion in revenues.
When I pointed this out in The Wall Street Journal and on Fox News two weeks ago, House Speaker Mike Johnson reiterated these defects in the CBO predictions.
Then Washington Post “Fact Checker” Glenn Kessler claimed that CBO does a fine job and Mr. Johnson was guilty of a four-Pinocchio nose lie. Mr. Kessler called Mr. Johnson’s claim “nonsense.”
Oh, really? It turns out that it’s the self-proclaimed Fact Checker who is getting the numbers all wrong.
The Washington Post argued that the CBO really does dynamic scoring and takes adjusts for the changes in tax laws. That’s only half right. It takes into account micro changes, such as that a tax on cigarettes will mean fewer people will buy cigarettes.
But this misses the bigger point. The CBO does not measure the economy-wide benefits of lower tax rates, and thus it doesn’t adjust for higher employment and growth — which happens every time we cut tax rates.
We also know that the 2017 scoring of the Trump tax cut has already underestimated the revenues from the first six years of the law by a massive $1 trillion or more.
Yet the Fact Checker explains this giant error with a lame “the sun was in my eyes” excuse for dropping the ball. Mr. Kessler notes that no one in 2017 could have predicted the COVID-19 pandemic and the ensuing lockdowns. That is absolutely true. But the pandemic actually reduced revenues from what they would have otherwise been by at least $1 trillion because commerce slowed to a crawl during the lockdowns. Yet even with the unexpected pandemic, CBO still managed to underestimate the revenues generated from the tax cut.
Sounds like Mr. Johnson was right and the fact checkers struck out.
Everyone makes mistakes. But the CBO/JCT have a habit of overstating the benefits of raising taxes and underestimating the benefits to the economy from cutting tax rates. CBO/JCT, for example, have almost always low-balled the economic effects of cutting the capital gains tax.
The problem is the CBO modeling errors are not random. They typically get it wrong in the same direction. My colleague, Tomas Philipson, who served at the Council of Economic Advisers under President Trump in his first term, notes that the JTC never opens its books to show how it makes its “garbage in, garbage out” projections.
Maybe Mr. Johnson should demand they do that immediately. Or maybe it’s time for a new model based on real-world scoring. It’s time to put accuracy over ideology.
Big decisions that have trillion-dollar consequences for our economy are being made with a cracked crystal ball.
Code:
https://www.washingtontimes.com/news/2025/jun/10/congressional-budget-office-almost-always-gets-wrong/Why the Congressional Budget Office almost always gets it wrong
These days, it seems that a mysterious group called “the CBO” rules the world. Or at least Washington.
www.washingtontimes.com
