![]() ![]() Nobody has a clue how long the coronavirus depression is going to last, which will determine how long stabilizers would be activated. Speaker of the House Nancy Pelosi told reporters that she wanted to include something like this, but the threat of a big CBO score prevented her from doing so. ![]() These would be some kind of rescue policy that would keep going until the economy was back up to full strength - like continuing monthly stimulus checks so long as, say, unemployment was above 6 percent and inflation was below 4 percent. Perhaps the most preposterous CBO estimate of late, however, is the one about automatic stabilizers. There would be less money coming in from future interest payments, but if Congress were to pass some appropriation to compensate for this, the government would just be paying the money to itself. It could simply cancel them outright without spending a dime - indeed, President Trump could do this tomorrow on his word alone. The student loan forgiveness cost cited above is similarly weird, because the government already owns almost all the loans in the country. This places an enormous bias against any kind of root-and-branch health care reform, because no matter how you design the policy the CBO is going to produce a gigantic price tag. If the regulations are lax according to the CBO's crystal ball and bird entrails (meaning the insurance isn't very good), then government-mandated private premiums do not count as a tax. ![]() As Jon Walker writes at the People's Policy Project, it treats private health insurance spending as either public or private based on an arbitrary definition of how heavily the market is regulated. The way the CBO treats spending categories is also bizarre. The CBO itself ruefully admitted this mistake in a 2019 publication. This means all their interest payment estimates produced over that time were wrongly inflated, sometimes by a lot. Mike Konczal of the Roosevelt Institute has done preliminary work plotting CBO interest rate forecasts against what actually happened, and it turns out for 30 years straight they have consistently overestimated interest trajectories. (The increase in the national debt during President Reagan's terms was almost entirely driven by interest payments.) But the CBO is not just wrong in a random fashion, overshooting sometimes and undershooting other times. The rate of interest on government debt, for instance, will hugely influence how much any program which ends up being funded by borrowing will cost. More importantly, it is basically impossible to predict the trajectory of either the economy or the price of state programs with any accuracy. It's a ridiculous and childish way to design policy. This led to four years of pointlessly delayed benefits, and allowed Republicans to falsely claim that the program's costs were exploding when later CBO estimates produced dramatically higher estimates (on the order of 1 percent of GDP) because they were including a whole decade of implementation. Most of ObamaCare's implementation was delayed for four years to keep the 10-year spending under $1 trillion. This practice in turn leads to absurd policy gimmicks to rig the 10-year window and make programs appear cheaper than they are. For some proposed federal program, therefore, the wise place to start is not the headline figure of required spending, but the size of spending relative to the whole economy. That requires additional thought in the case of the government, because it has the best credit in the world, and borrows in a currency it can print. When thinking about the price of something, logically what one should consider is the qualities of the item relative to one's ability to pay. Right out of the gate this is a misleading way to do things. To begin, the CBO "scores" legislation by estimating its budget cost over a 10-year window. Democrats should close their ears to this nonsense. This agency exercises a tyrannical control over the parameters of spending discussions in this country, and slants them heavily towards austerity. But as we'll see, their analysis is garbage. But there is a big reason aside from Democrats' knock-kneed cowardice this happens - the Congressional Budget Office (CBO), which informed Democratic leaders they would produce big price tags for both of the above programs. It's like a man who is drowning in the middle of the North Atlantic worrying about how flammable his clothes are. It's hard to describe just how blinkered this is. ![]()
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