Odd that you two did not talk about the history of the prohibition on dynamic scoring.
As I understand it, Congress tied its own hands in order to avoid distorted and unrealistic boosterism ("monorail!") that would promise miracle growth from every tax-cut, or from every increase in immigration.
Republicans have spent the last 50 years lying about the economic benefits of tax-cuts for the wealthy ("trickle-down," "Laffer curve," etc.), so Democrats have a reason not to allow them to use "dynamic scoring" i.e. to make shit up. And Republicans are pretty sure that highly educated immigrants will vote Democratic, so they have a reason not to allow your proposal to be dynamically-scored.
Both sides suspect that it is just too easy to use this method to lie for partisan advantage when a party has captured the House. So they grudgingly forgo using it so as not to let the other side abuse it. What does your proposal do to change that underlying dynamic?
“Republicans have spent the last 50 years lying about the economic benefits of tax-cuts for the wealthy (‘trickle-down’…”
Thomas Sowell on how academics, politicians, and the news media have been lying about “Trickle Down” for 90 years:
“…the reasons for proposing such tax cuts are often verbally transformed from those of the advocates— namely, changing economic behavior in ways that generate more output, income and resulting higher tax revenues— to a very different theory attributed to the advocates by the opponents, namely ‘the trickle-down theory.’
“No such theory has been found in even the most voluminous and learned histories of economic theories, including J.A. Schumpeter’s monumental 1,260-page History of Economic Analysis. Yet this non-existent theory has become the object of denunciations from the pages of the New York Times and the Washington Post to the political arena. It has been attacked by Professor Paul Krugman of Princeton and Professor Peter Corning of Stanford, among others, and similar attacks have been repeated as far away as India. It is a classic example of arguing against a caricature instead of confronting the argument actually made.
“While arguments for cuts in high tax rates have often been made by free-market economists or by conservatives in the American sense, such arguments have also sometimes been made by people who were neither, including John Maynard Keynes and Democratic Presidents Woodrow Wilson and John F. Kennedy. But the claim that these are ‘tax cuts for the rich,’ based on a ‘trickle-down theory’ also has a long pedigree.
“President Franklin D. Roosevelt’s speech writer Samuel Rosenman referred to ‘the philosophy that had prevailed in Washington since 1921, that the object of government was to provide prosperity for those who lived and worked at the top of the economic pyramid, in the belief that prosperity would trickle down to the bottom of the heap and benefit all.’ The same theme was repeated in the election campaign of 2008, when presidential candidate Barack Obama attacked what he called ‘the economic philosophy’ which ‘says we should give more and more to those with the most and hope that prosperity trickles down to everyone else.’”
I'm shocked that proponents of trickle-down theory don't like it when people refer to it that way.
Also, it doesn't really matter whether economists have written about the idea. It's plainly true that Republican politicians have and that's what is being disputed.
I mean, I would argue that the republicans basically ARE arguing for the caricature.
Others in this thread have made totally cogent arguments with reasonable conclusions like "I don't think the idea of cutting tax rates boosting growth is ridiculous at certain values of taxation."
But that's not the line of argument we get from congressional republicans. Even if we do get that occasionally from individuals, the actual policy proposal every time republicans hold any amount of power is "any and all energy should be put towards cutting taxes for the wealthiest Americans, and if anybody has any questions just make some vague claims about "growth" and "freedom".
I agree it's annoying to have your position caricatured. But if someone says "we've just got a bunch of tax-and-spend democrats in Washington", Democrats can say "we actually have been much better at balancing budgets than republicans" but what's the republican response to "It sure seems like you like to cut taxes for the rich, and you make a lot of claims about that being good for everyone - where are the results?"
I'm not sure there's much point to confronting an argument that reflects neither the claims of Republican Party leadership nor the economic preferences revealed by their actual legislative behavior. Just to take the most obvious example, do you even think Donald Trump could coherently explain the argument you want to have? And if not, what's the point? I think that's a really lousy state of affairs, but it's the state of affairs we've got.
The thing is, trickle-down economics seems in some ways like it's a *stronger* proximate explanation for the putative public-goods argument for lowering marginal taxation rates than the "wedge between supply and demand" Econ 101 explanation of taxation, and in that respect it's worth examining, because what Sowell is referring to is far too obviously not actually a good reflection of microeconomic decisionmaking.
To wit, whatever keeps Elon Musk doing Elon Musk things, it's probably not that he doesn't have enough money. He is literally the richest man on the planet, and already was *before* the stupid Twitter acquisition. Same with Zuckerberg and, (pre-retirement) Bezos (and note that Amazon is still doing fine under Jassy just like Apple is under Cook). The highest earners aren't really constrained by their propensity to consume in any sense other than either "buying status points" or their incapacity to acquire whole cities from the ground up as individuals - which might be cool I guess as an experiment but isn't really the kind of transaction that most people are all that concerned about forgoing.
Additionally, the argument that lower returns to income will cause people to work less just....don't reflect how high-paying earners actually work. Salaried employees largely either *don't have* hours that can return marginal gain in the first place, or professionals with billable hours have inflexible employer-set targets. It doesn't mean anything to lower taxation-based returns because there's no lever that they can pull that proximately allows them to adjust their labor inputs in return (the exception being maybe doctors or attorneys, in private practice, but there are fewer and fewer of the former and the big money in law is weighted towards larger firms that aren't necessarily structured in a way that's easily amenable to adjusting individual output in response to taxation.). Ronald Reagan talking about how he didn't do an additional picture because of 90% tax rates is neither reflective of the current tax environment nor all but a handful of incredibly idiosyncratic workers (nor even a particularly important transaction to take place with Ronald Reagan rather than the essentially infinite supply of aspiring talented actors and actresses in this country, most of whom would be in a major motion picture for peanuts.)
Because there are such obvious hurdles to higher income taxes (rather than consumption taxes, which really do drive a wedge between supply and demand more mechanistically) actually being mediated into reduced economic output, it's extremely easy to be skeptical of the Econ 101 explanation since it's doesn't seem to accurately capture or reflect whatever incentive gradient some of the most high profile and productive capital owners are actually working on -- just as productive researchers in academia, despite obvious brilliance, are clearly working for compensation that isn't just straight cash given the relative payscales in academia versus the private sector (and potentially the economic opportunity costs of a Ph.D and postdoc).
At the end of the day, I consider "return more capital to people who are proven to deploy it effectively in the service of economic growth" to be a much *stronger* argument for lower taxation than this notion that 92-fucking-years-old-and-richer-than-anyone Warren Buffett faces incentive problems to keep working, at great cost to society, unless we lower his taxes.
(I'm hoping I parsed your comment correctly, it sounded like you supported the idea of trickle-down economics at first and then refuted it with examples like Musk/Bezos)
My understanding of the argument is that it isn't necessarily salaried employees at the margin of their current job but.
1) If you're going into high-stress corporate law for the pay, a sufficiently-high marginal tax rate may not change your billable hours, but it might change whether you even want that job.
2) If you're going to be an entrepreneur and invest in starting a new business, the tax rate on your potential earnings (and I'm thinking of the people here who might make a few million of a business, not already-successful Bezos/Musk) could be a factor.
Our tax rates right now, as you say, are nowhere near the 90% top marginal tax rate before, and an entrepreneur doesn't do it _just_ for the money, but it still seems true to me that a given marginal tax rate might over-punish growth.
(At the other end, support for non-employer based healthcare, stronger safety net etc, can _also_ spur an entrepreneur to take a risk, so 0 taxation/support doesn't seem ideal either for this)
I definitely think we're still ok to raise taxes on high earners (even if < $400k) but I don't think the idea of cutting tax rates boosting growth is ridiculous at certain values of taxation.
My point is that there's a formulation of trickle-down economics that isn't stupid, but that it's primarily about allocation of capital and not, as Sowell seems to be suggesting, about marginal reductions in output due to marginal reductions in return. The exemplars of capitalism just don't display anything that can plausibly be said to reflect this relationship and the people in the position of being salaried employees have far too much sand in the gears to plausibly make those kind of output adjustments even if they're less intrinsically motivated.
Regarding cutting taxes to boost growth: It's not facially ridiculous but I just think that the response to marginal taxation (at present rates, obviously wrong-side-of-the-Laffer curve is its own domain) is so noisy and heavily mediated - and so many of the incentives at play so obviously non-financial in nature - that I'm just very skeptical of it as having much in the way of growth-boosting, particularly from a societal-aggregate perspective. I mean hell, if marginal taxation rates really reduced economy activity by as much as their boosters claim, you'd expect relatively higher-tax CA and New York to get become economically eclipsed by relatively lower-tax Washington (no income tax), Florida and/or Massachusetts[2] due to differential growth rates. In practice, this is not what we see.
Regarding mechanism by which this *could* occur, I think your proposed (1) has some potential merit although I also think that in my day to day life marginal taxation anywhere near current rates (whether up or down) just doesn't factor that manner of decisionmaking[1].
I'm a bit more skeptical of (2) because I think that the sort of lottery-ticket returns people get in entrepreneurship for are too high and have too many other mediating factors --being one's own boss / running one's own business -- and because "a few million" is a fine exit, but given the opportunity cost of investment gains [and consumption] on a tech salary, it's not really what anyone's shooting for in entrepreneurship to the extent that it's money-motivated: you're basically gunning for something in the vein of generational wealth (certainly that's what VC's are gunning for as far as investment vehicles) knowing that you have extremely high variance, and while abstractly cutting a potential return from, say, $100 million to $50 million should reduce the incentive to found startup commensurately, in practice those are both in the same "generational wealth" conceptual bucket and I'm skeptical that there would be anything like a commensurate reduction in incentive for that reason -- there are just too many non-monetary considerations involved.[3]
I will note that it probably is worth being clear about definitions here: I think there is admittedly kind of a definitions problem going here: I think the the idea that higher returns to capital fosters *growth* is plausible - which I think is the reasonable formulation of "trickle-down economics," but I think the idea that higher returns to capital will be given to labor for no reason is stupid.
[1] I also think that the financial returns to industry often poorly track social returns (put another way, money is an okay but often not great proxy for "economic productivity"). Corporate law, for example, pays well but its societal returns are basically negligible: litigation is a pure cost center, and contract drafting is just transaction costs. Someone capable of doing either than or cutting-edge R&D would generate higher societal returns in the latter case. See also Krugman et al. on the "over-financialization" of the U.S. economy at the expense of industries that actually make things.
[2] Notwithstanding the name "Taxachusetts" it's still cheaper than New York.
[3] Obviously the exact numbers matter *a lot* to VCs, and for that reason we *should* be sympathetic to "let capital have its capital to deploy efficiently," but that's why I think that this formulation is much stronger than the "marginal reductions in output" one.
"I will note that it probably is worth being clear about definitions here: I think there is admittedly kind of a definitions problem going here: I think the the idea that higher returns to capital fosters *growth* is plausible - which I think is the reasonable formulation of "trickle-down economics," but I think the idea that higher returns to capital will be given to labor for no reason is stupid."
Fair - I've only ever thought of the first part and assumed that that was what was meant, but I can see a politician trying to sell the latter, or a hopeful listener believing the latter.
My impression is that the latter is kind of the naive implication of what people usually mean when they refer to Reaganomics or "trickle down economics" -- it much more closely approximates the physical mechanism of "trickling down" when you increase salaries intra-firm rather than someone else opening a competing firm and/or new industry across the street.
I think you’re conflating two separate bad ideas on the left: That the federal government should tax billionaire’s wealth and that marginal income tax rates on the top income bracket should be increased.
You may have a point that Reagan’s anecdote is pretty narrowly focused on a really weird business, but that’s not the point. Rather, the point is that incentives matter to all income levels and that changes to tax levels result in changes to behavior. It may be true that a salaried worker’s behavior in terms of the number of hours worked is constrained, but that doesn’t he will have no reaction to decreased take-home pay.
I am saying that to the extent incentives matter at income levels like those of Musk, Bezos, Zuckerberg, Cook, and Buffet -- basically the most productive persons it is possible to identify -- it seems implausible to me that "incentives matter" in anything like the sense that economists mean when they say "people respond to incentives."
That is, the people winning capitalism have so much cash that their marginal gains from productive work are basically meaningless relative to their existing wealth (nor, as with the examples of Cook and Jassy, will stock-based wealth evaporate if they step down.) So whatever incentives they are responding to, they are at this point essentially abstract and to first-order non-monetary, because the value of the marginal dollar (or million dollars) is negligible in terms of their capacity to consume additional goods and services. This kind of intrinsic rather than extrinsic motivation is also, as I understand it, extremely common among top-flight researchers (who, again, are generally forgoing private sector monetary gains in the first place by going into academia). These people work because they think their work is important. [1]
Salaried workers may have a reaction to decreased take-home pay, but unless we have widely varying marginal tax brackets, very high marginal rates, and heterogeneous alternative job opportunities at a better leisure / work tradeoff with comparable after-tax salaries available to the worker, it seems like those reactions are likely to be extremely muted in the event of an across-the-board tax increase [other than reduced consumption due to decreased pay, obviously] at the level of any individual worker's capacity to respond to that change: the first two seem empirically unlikely both at present and under most proposals (I am not saying 90% marginal rates are a good idea), and the latter presumably reflects the same job opportunities available already that the workers in question haven't taken.
[1] In this they are sort of the antithesis of those holding Graeber's "bullshit jobs" for whom their labor inputs are so abstracted from any kind of productive outptut that they feel like their pay comes from a place not too conceptually different from digging a hole and filling it in again.
Reduced consumption by salaried workers is one possible reaction. Reduced savings is another. Either way, inherent in any income tax increase is the dubious idea that the federal government can always put the dollars to better use than the people who earned them.
Arguing that the Feds are going to spend money less well than the private sector is a perfectly fine argument to make against raising taxes, but I think it belongs in a different conceptual bucket than reduced returns to labor allegedly reducing labor inputs (which has to contend with the income effect in any case).
I pretty much agree. Do we believe immigration reform failed because the numbers didn’t pencil out? That doesn’t parallel with my recollection of events, which I remember being driven by words like “caravan”, “hordes”, “rapists”, “murder”, “terrorist”.
This post is all sensible stuff, but I struggle to think of a single policy domain where the current bottleneck is the accounting.
Like I feel like there’s an assume a can opener quality that’s untested here.
Can the cbo accurately predict these consequences to a level acceptable to everyone. Like one of the first things I learned about economics is unintended consequences are a real thing that plagues policy making immemorially. How confident are we that the cbo can predict the consequences of things in the economy if we let them try.
Like of course if they can this would be a good thing for them to do but I’m unsure if they can.
Absolutely. If you were challenged to come up with two topics that would provoke a fight among economists, you could do a lot worse than "macroeconomic effects of taxation" and "macroeconomic effects of immigration".
We don’t need to think these estimates will be especially good. We just need to think these estimates will be more accurate, and less biased, than assuming that nothing changes.
"We just need to think these estimates will be more accurate, and less biased, than assuming that nothing changes."
I feel like we need to parse this statement. Then *who* is assuming that "nothing changes"? I understand that's what the CBO is outputting. But does that drive legislative action? Do the CBO estimates put handcuffs on Congress so it can't vote for legislation because CBO hasn't shown that it will, e.g., increase GDP? Can't Congress just say, "we think this will help the economy"? And so shouldn't Congress just ignore that aspect of the CBO conclusions if it otherwise feels the legislation is warranted?
To be fair, I do recall how Democrats tied themselves into pretzels when debating Obamacare and the latest CBO estimate of the impact on the deficit came out. And that probably changed aspects of the legislation. But I don't recall the Republicans ever doing the same with any of their legislation. And I think here the Republicans have the better case.
The main thing that the CBO score constrains is the reconciliation process. The Senate rules allow you to pass a bill with only majority support, as long as CBO says that it won't increase the long-term deficit, beyond the ten-year window. (This rule is why the Bush 2001 and 2003 tax cuts made the cuts for the middle class expire after ten years, while cuts for corporations and the rich were permanent. That way the plan looked budget-neutral after the ten year cut-off. Their expectation is that they'll be able to bully Democrats into extending the middle-class cuts later, without giving back all of the cuts for the rich. Trump didn't even bother with those shenanigans, his "tax cut" just outright raised taxes on the upper middle class in blue states, due to the sharp limitation of the SALT deduction.)
I also agree that these estimates will probably be more accurate individually.
I worry strongly that the degree of accuracy will be strongly biased for certain things, so I'm not sure the end result will be less biased.
e.g., the 'moderate' immigration scoring proposal to at least consider the taxes these immigrants pay, even as median income citizens seems reasonable, but if you only added that scoring and left all other scoring with current inaccuracies, would that over-bias towards immigration? (I happen to support immigration, so woo! but could happen on anything)
I'm concerned that the authors don't seem to seriously address any arguments against their proposal.
Not only that, but it's not clear how uncertainty could be assessed for any piece of legislation, and that uncertainty would vary wildly by topic depending on available data and its relevance to a future scenario, which is often unknowable.
To a arge degree the whole point of the CBO score is that everyone knows what it means and how to check it. It's true that this fact limits the CBO score in some ways that cut against particular legislation, but the natural question is whether that inadequacy should be noted by supporters and detractors and incorporated into the discussion about the bill, or whether it should be folded into the score in some opaque way.
I think the short answer is that there are a lot of modeling tools that show good results when you run them against past policy changes on immigration and R&D. The issue is just that, as dysphemistic treadmill noted above, once you open the Pandora's Box of dynamic scoring, a Congressional majority can simply instruct CBO to use an unreasonable version of it. As I recall the GOP ordered CBO to give them scores using some really absurd assumptions to show that the Ryan budget would reduce the deficit, using a bunch of "magic asterisks". I believe one of the authors here was at CBO during those shenanigans.
Yeah, that didn’t seem to be addressed here, more raised as a specter and then left lurking.
Even if we can arrive at some objectively good dynamic scoring for immigration, unless we can figure out why dynamic scoring on tax cuts is out of whack then I don’t see how we can use it well.
I can't see such scores being very persuasive to people who are not already in favor of what is being proposed.
The piece mentions dynamic effects of cutting taxes. Will progressives believe a score that claims large positive dynamic effects? Or how would they react to a report that tax hikes on high income earners have a significant negative impact on growth?
Or take social spending on families with children. A progressives economist will argue that such spending pays a dividend in terms of more productive workers, lower healthcare costs, less crime, etc. I expect that a conservative economist would estimate these effects as small and uncertain.
Basically, any estimate of dynamic effects will depend strongly on your ideological priors; much more so than the current scores. I doubt you can create a process that's broadly trusted.
I don't see how turning the CBO into an ideological football where the rosters change based on which party controls Congress will benefit anyone. Let it do very technical and tightly-defined work and not try to give the answer to the ultimate question to life, the universe, and everything.*
The meaning of life *was* 42, until Doug Adams revealed that the meaning of life was 42 and millions of people read his book and found out that the meaning of life had been 42.
But the result of this disclosure put so much inflationary pressure on the meaning of life that it has been much higher than 42 for several decades now.
You've got to consider the second- and third-order effects!
Unfortunately, the anticipated comedic comeback has been indefinitely delayed due to mismanagement by our Humor Department of the comedy material supply chain.
It would be so much better to just eliminate the filibuster and let the Senate govern by simple majority. This whole legislative Cirque de Soleil is brought about by that Byrd Amendment and the possibility of special reconciliation rules that might let something or other pass 51-49, if only they can “score” it won’t increase the deficit after 10 years.
"...special reconciliation rules... if only they can “score” it won’t increase the deficit after 10 years."
Right: now you are shedding light on the kinds of legislative and institutional issues that prevent Congress from adopting dynamic scoring.
The fresh-faced "but it's a good idea!" pitch that our guest-authors give us leaves it mysterious why no one has adopted the good idea. Which is a shame, since Elmendorf certainly and Williams probably are legislative veterans who could shed a lot of light on what is really going on under the surface.
Accurate forecasts are intrinsically good! A majority-rule Senate would reduce the partisan-football aspect of accurate forecasting, to the rhetorical level instead of the trigger for whether 51 or 60 Senators are needed to pass the thing.
The authors cite GOP efforts to use dynamic scoring to push through tax cuts. Can't we retroactively apply dynamic scoring and see what the outcomes were? Or are there too many variables to isolate the effects of the tax cuts... in which case, wouldn't the same objection apply to the authors' proposal?
Indeed, I'm really wondering about this as well. Tax revenue apparently went up after the TCJA was passed. The counterpoint is that it would have gone up more if not for TCJA. Who's right? I'm honestly not sure.
Dynamic scoring seems better than the current approach, but who is the target audience for these analyses?
I've seen people use CBO/JCT projections as evidence for positions they already agree with, but I get the impression that most people consuming their reports _to learn something_ are already familiar with their methodological shortcomings.
I can imagine the scores working on the marginal House member during Secret Congress negotiations every once in a while.
But as soon as an issue becomes highly publicized and thus polarized, the scores don't mean anything, because ideology comes back in. Do we really think that the average primary-pressured Republican is going to vote for Section 80303 just because of a CBO/JCT score on a contentious appropriations bill? Do we really think their voters are going to accept "But the CBO score was really good!" as a reason? Or do we -- and that congressperson -- expect those voters to just object on general anti-immigration grounds?
I’m not disputing that this is a marginal improvement. It just doesn’t improve *much*. If it can be done without much hoohaw, and it makes Secret Congress work better, then great!
But if it ends up requiring ANY political capital to be spent in Real Congress, then fuck it, the juice simply isn’t worth the squeeze.
Yea I dunno how to weed out high quality confidence in a dynamic score vs ideological predisposition. If you could...obviously it would be a good marginal improvement (some very good ideas would be fought for id assume)
The assumption is that it would make the Secret Congress work better because the CBO/JCT would provide deep insight into the larger ramifications of any proposed policy on the future of the economy.
Meh. I think it's fair. Secret Congress is where all but the craziest of craziest drops their ideological and partisan masks and negotiates over what they actually care about, all behind the closed doors where it's safe to actually negotiate.
In that space, of course CBO/JCT scores aren't exactly the *end* of the discussion, but the scores are *incontrovertibly* grappled with more *honestly* in those discussions.
So, Mitt Romney isn't going to agree with every single dynamic score he's ever handed, but he's going to agree on their validity as a basic mutual starting point for negotiation, and use the space of Secret Congress to get the best compromise deal he can.
The same may not be able to be said for Tommy Tuberville, but Tommy's lack of respect for common values doesn't necessarily mean we shouldn't seize every opportunity to build more common ground with Mitt.
Progressives are not inclined to believe that reducing deficits increase growth and Republicans believe that only Democratic deficits decrease growth and that only from increased spending. Republican deficits, in contrast have magical growth consequences.
Reconciliation bills can’t be projected to increase the federal deficit after 10 years, right? Would changed to how the CBO calculates scoring change what is allowable under reconciliation bills?
I don’t think the issue of appropriately scoring the economic impact of high skilled immigration is the real blocker to legislation passing. Congress has shows almost exclusively over the past two decades that they will pass huge laws without regard for budget implications if the political will or necessity arises. It’s just tied to immigration generally and so negatively coded for the right, that won’t change soon.
I don’t think there’s a conflict. What you’re saying is that if something is politically popular, it can get through no matter how bad the score looks. But the point is that if something is politically controversial, then a bad score could tip some votes against, and so the better scoring might sometimes make the difference.
I think you would be hard pressed to find a single congressmember or senator who's voting on immigration will be swayed at all by the CBO or CRS estimates
As an economist who builds models, any attempt at qualifying impact of things like immigration and R&D is so impricise that if you present the error bands you get laughed out of the room. You're better off saying there is unquantified upside benefit in addition to the static score or you can provide a demonstrative example of the upside: if we assume x and y positive impact, the resulting revenue is z.
"it’s an open secret that proposals to increase the number of high-skilled immigrants are currently tabulated by the U.S. government as being a net cost to the U.S. economy rather than a net benefit. . . The [CBO and JCT] tabulated that it would cost the federal government $3.1 billion over 10 years."
Those are two different things: the cost to the government is *not* the cost to the economy.
OK, and #2:
"Moreover, dynamic scoring can evolve as additional economic research emerges."
In other words, this will be a moving target, to be interpreted by each actor as they see fit, and in the meantime we will get numbers parading as metaphysical certainty which will typically be just educated guesses.
Here's the problem: this is arguing for the CBO and the JCT to tell us what policies are good for the US as a whole. But I don't *want* these organizations to do that. I simply want them to tell us, in the simplest terms, what will happen to spending and revenues. It's then up to Congress (and the people) to decide if this policy is good for the nation as a whole
Every time we depart from the KISS model, and add more assumptions, parameters and whatnot to these analyses, we increase the range of uncertainty and reduce the level of confidence. But those approximate answers will have the sheen of science and certainty even when they're anything but. It's fine to be uncertain as to future outcomes, but it's not okay to pretend that's not the case.
Sometimes you just make bets. Had it been subject to CBO investigation, I sure would have hated it had ARPA's packet-switching communication system had a cost-benefit analysis done on it. Would it have concluded that this bit of R&D would eventually return untold trillions of dollars to the US and global economy? Nope. Might that have killed it in the crib? You bet it might have.
(Rolling eyes) I would simply accurately forecast how legislation will affect a $22 trillion economy over a multiyear span, perfectly accounting for all unintended consequences, with the foresight of a modern Nostradamus. Surprised no one's thought of this before.
Actually, scratch that. I would instead take my skills of predicting the future and apply it to the stock market instead, where I will easily make quadrillions of dollars perfectly modeling how extremely complex systems will function over a long time span
What is actually stopping a switch to dynamic scoring? Why didn't the Republican trifecta of 2017-18 make the switch for the TCJA, for example, where presumably it would've made the scores look better for them politically?
My understanding is that dynamic scoring is complicated and in some cases speculative - which is why it’s not traditionally been used. Forecasting potential feedback loops and interactions with other policies (or expected policies) quickly adds more degrees of freedom and could give you a wide variety of possible outcomes.
That doesn’t really explain why politicians don’t do it of it’s in their interests - but perhaps the chairs of the relevant committees are concerned about those effects?
Can’t a request for dynamic scoring be done in an ad hoc basis with corresponding guidance on the variables to include? Or does that add to much sand to the gears of policy advancement?
The tricky thing about dynamic scoring is that you can end up with model that predicts virtually anything, depending on what assumptions you decide to feel into it. The same is true for really any statistical model that tries to predict hard-to-predict stuff, whether it's population growth, the effect of mask rules on COVID spread, or the effect of some EPA rule on carbon emissions.
In theory, the people doing these models should be dispassionately looking at the data and drawing the honest, best conclusions they can, but often it doesn't work out that way, especially on politically charged topics where lots of powerful people have strong incentives to make the model come out a certain way, in order to enhance an ideological objective.
The fact that there exists no way to make so-called "nonpartisan" institutions really nonpartisan, as long as they are run by humans, makes it really difficult to draw conclusions that everybody on both sides of the aisle can trust.
Is it actually true that a score of $3.1B over ten years was a real cause in the STEM-visa proposal not being included in either of the reconciliation packages the Dems did in 2021-22? Because that seems like a really small number given the size of each of the packages. And I thought the issue with any immigration proposal the Dems proposed was that the Senate Parliamentarian struck them?
I suspect the reason the STEM-visa proposal has not become law is because it takes 60 votes to break a filibuster, and there are not 60 votes for it. Many Democrats want to hold the STEM-visa provision as a chip they can give to Republicans in "comprehensive immigration reform" negotiations. Many Republicans do not want "comprehensive immigration reform" if that includes any concessions on illegal immigrants in the country--and an increasing number do not want any immigration provisions that increase the number of immigrants, as the STEM-visa proposal presumably would.
Slow Boring's essay about immigration raises an interesting question - at least in my mind.
I wonder how much unconscious bias there is in the minds of legislators towards people who are not of European ancestory. We desperately need qualified immigrants. Certin people in Congress are opposed to any immigration not coming from Europe - that is white Christain people.
Examples of tis bias - the problems of Hispanic immigrants from South America, Afgan immigrants have been waiting for almost two years for entry permits, and the difficulties faced by many from South East Asia.
This bias need not be spoken, but merely understood between some people. The politics of racial hatred is hurting our country and must be brought to an end.
Historically the country has been just as opposed to large scale immigration from Europe as well. Look at the push back that was applied to waves of German immigrants, then Irish or Italian. Not saying there isn't some racial bias, but its more about the size of the wave then where its from.
> Afgan immigrants have been waiting for almost two years for entry permits
Just to be fair, this and some other issues aren't problems created by Congress, right? It's the executive branch not doing it's job expeditiously. I don't think it's hatred driving that, just the all-too-common lack of state capacity (passport renewals is another similar issue).
In the coming Age of AI enhanced STEM, I think overuse of immigration would cause a real glut of STEM people. I'm still for immigration, but the reality on the ground has changed.
Odd that you two did not talk about the history of the prohibition on dynamic scoring.
As I understand it, Congress tied its own hands in order to avoid distorted and unrealistic boosterism ("monorail!") that would promise miracle growth from every tax-cut, or from every increase in immigration.
Republicans have spent the last 50 years lying about the economic benefits of tax-cuts for the wealthy ("trickle-down," "Laffer curve," etc.), so Democrats have a reason not to allow them to use "dynamic scoring" i.e. to make shit up. And Republicans are pretty sure that highly educated immigrants will vote Democratic, so they have a reason not to allow your proposal to be dynamically-scored.
Both sides suspect that it is just too easy to use this method to lie for partisan advantage when a party has captured the House. So they grudgingly forgo using it so as not to let the other side abuse it. What does your proposal do to change that underlying dynamic?
“Republicans have spent the last 50 years lying about the economic benefits of tax-cuts for the wealthy (‘trickle-down’…”
Thomas Sowell on how academics, politicians, and the news media have been lying about “Trickle Down” for 90 years:
“…the reasons for proposing such tax cuts are often verbally transformed from those of the advocates— namely, changing economic behavior in ways that generate more output, income and resulting higher tax revenues— to a very different theory attributed to the advocates by the opponents, namely ‘the trickle-down theory.’
“No such theory has been found in even the most voluminous and learned histories of economic theories, including J.A. Schumpeter’s monumental 1,260-page History of Economic Analysis. Yet this non-existent theory has become the object of denunciations from the pages of the New York Times and the Washington Post to the political arena. It has been attacked by Professor Paul Krugman of Princeton and Professor Peter Corning of Stanford, among others, and similar attacks have been repeated as far away as India. It is a classic example of arguing against a caricature instead of confronting the argument actually made.
“While arguments for cuts in high tax rates have often been made by free-market economists or by conservatives in the American sense, such arguments have also sometimes been made by people who were neither, including John Maynard Keynes and Democratic Presidents Woodrow Wilson and John F. Kennedy. But the claim that these are ‘tax cuts for the rich,’ based on a ‘trickle-down theory’ also has a long pedigree.
“President Franklin D. Roosevelt’s speech writer Samuel Rosenman referred to ‘the philosophy that had prevailed in Washington since 1921, that the object of government was to provide prosperity for those who lived and worked at the top of the economic pyramid, in the belief that prosperity would trickle down to the bottom of the heap and benefit all.’ The same theme was repeated in the election campaign of 2008, when presidential candidate Barack Obama attacked what he called ‘the economic philosophy’ which ‘says we should give more and more to those with the most and hope that prosperity trickles down to everyone else.’”
I'm shocked that proponents of trickle-down theory don't like it when people refer to it that way.
Also, it doesn't really matter whether economists have written about the idea. It's plainly true that Republican politicians have and that's what is being disputed.
"It's plainly true that Republican politicians have and that's what is being disputed."
Yeah, but don't you hate it when people argue against a caricature instead of confronting the argument actually made?
I mean, I would argue that the republicans basically ARE arguing for the caricature.
Others in this thread have made totally cogent arguments with reasonable conclusions like "I don't think the idea of cutting tax rates boosting growth is ridiculous at certain values of taxation."
But that's not the line of argument we get from congressional republicans. Even if we do get that occasionally from individuals, the actual policy proposal every time republicans hold any amount of power is "any and all energy should be put towards cutting taxes for the wealthiest Americans, and if anybody has any questions just make some vague claims about "growth" and "freedom".
I agree it's annoying to have your position caricatured. But if someone says "we've just got a bunch of tax-and-spend democrats in Washington", Democrats can say "we actually have been much better at balancing budgets than republicans" but what's the republican response to "It sure seems like you like to cut taxes for the rich, and you make a lot of claims about that being good for everyone - where are the results?"
I'm not sure there's much point to confronting an argument that reflects neither the claims of Republican Party leadership nor the economic preferences revealed by their actual legislative behavior. Just to take the most obvious example, do you even think Donald Trump could coherently explain the argument you want to have? And if not, what's the point? I think that's a really lousy state of affairs, but it's the state of affairs we've got.
The thing is, trickle-down economics seems in some ways like it's a *stronger* proximate explanation for the putative public-goods argument for lowering marginal taxation rates than the "wedge between supply and demand" Econ 101 explanation of taxation, and in that respect it's worth examining, because what Sowell is referring to is far too obviously not actually a good reflection of microeconomic decisionmaking.
To wit, whatever keeps Elon Musk doing Elon Musk things, it's probably not that he doesn't have enough money. He is literally the richest man on the planet, and already was *before* the stupid Twitter acquisition. Same with Zuckerberg and, (pre-retirement) Bezos (and note that Amazon is still doing fine under Jassy just like Apple is under Cook). The highest earners aren't really constrained by their propensity to consume in any sense other than either "buying status points" or their incapacity to acquire whole cities from the ground up as individuals - which might be cool I guess as an experiment but isn't really the kind of transaction that most people are all that concerned about forgoing.
Additionally, the argument that lower returns to income will cause people to work less just....don't reflect how high-paying earners actually work. Salaried employees largely either *don't have* hours that can return marginal gain in the first place, or professionals with billable hours have inflexible employer-set targets. It doesn't mean anything to lower taxation-based returns because there's no lever that they can pull that proximately allows them to adjust their labor inputs in return (the exception being maybe doctors or attorneys, in private practice, but there are fewer and fewer of the former and the big money in law is weighted towards larger firms that aren't necessarily structured in a way that's easily amenable to adjusting individual output in response to taxation.). Ronald Reagan talking about how he didn't do an additional picture because of 90% tax rates is neither reflective of the current tax environment nor all but a handful of incredibly idiosyncratic workers (nor even a particularly important transaction to take place with Ronald Reagan rather than the essentially infinite supply of aspiring talented actors and actresses in this country, most of whom would be in a major motion picture for peanuts.)
Because there are such obvious hurdles to higher income taxes (rather than consumption taxes, which really do drive a wedge between supply and demand more mechanistically) actually being mediated into reduced economic output, it's extremely easy to be skeptical of the Econ 101 explanation since it's doesn't seem to accurately capture or reflect whatever incentive gradient some of the most high profile and productive capital owners are actually working on -- just as productive researchers in academia, despite obvious brilliance, are clearly working for compensation that isn't just straight cash given the relative payscales in academia versus the private sector (and potentially the economic opportunity costs of a Ph.D and postdoc).
At the end of the day, I consider "return more capital to people who are proven to deploy it effectively in the service of economic growth" to be a much *stronger* argument for lower taxation than this notion that 92-fucking-years-old-and-richer-than-anyone Warren Buffett faces incentive problems to keep working, at great cost to society, unless we lower his taxes.
(I'm hoping I parsed your comment correctly, it sounded like you supported the idea of trickle-down economics at first and then refuted it with examples like Musk/Bezos)
My understanding of the argument is that it isn't necessarily salaried employees at the margin of their current job but.
1) If you're going into high-stress corporate law for the pay, a sufficiently-high marginal tax rate may not change your billable hours, but it might change whether you even want that job.
2) If you're going to be an entrepreneur and invest in starting a new business, the tax rate on your potential earnings (and I'm thinking of the people here who might make a few million of a business, not already-successful Bezos/Musk) could be a factor.
Our tax rates right now, as you say, are nowhere near the 90% top marginal tax rate before, and an entrepreneur doesn't do it _just_ for the money, but it still seems true to me that a given marginal tax rate might over-punish growth.
(At the other end, support for non-employer based healthcare, stronger safety net etc, can _also_ spur an entrepreneur to take a risk, so 0 taxation/support doesn't seem ideal either for this)
I definitely think we're still ok to raise taxes on high earners (even if < $400k) but I don't think the idea of cutting tax rates boosting growth is ridiculous at certain values of taxation.
My point is that there's a formulation of trickle-down economics that isn't stupid, but that it's primarily about allocation of capital and not, as Sowell seems to be suggesting, about marginal reductions in output due to marginal reductions in return. The exemplars of capitalism just don't display anything that can plausibly be said to reflect this relationship and the people in the position of being salaried employees have far too much sand in the gears to plausibly make those kind of output adjustments even if they're less intrinsically motivated.
Regarding cutting taxes to boost growth: It's not facially ridiculous but I just think that the response to marginal taxation (at present rates, obviously wrong-side-of-the-Laffer curve is its own domain) is so noisy and heavily mediated - and so many of the incentives at play so obviously non-financial in nature - that I'm just very skeptical of it as having much in the way of growth-boosting, particularly from a societal-aggregate perspective. I mean hell, if marginal taxation rates really reduced economy activity by as much as their boosters claim, you'd expect relatively higher-tax CA and New York to get become economically eclipsed by relatively lower-tax Washington (no income tax), Florida and/or Massachusetts[2] due to differential growth rates. In practice, this is not what we see.
Regarding mechanism by which this *could* occur, I think your proposed (1) has some potential merit although I also think that in my day to day life marginal taxation anywhere near current rates (whether up or down) just doesn't factor that manner of decisionmaking[1].
I'm a bit more skeptical of (2) because I think that the sort of lottery-ticket returns people get in entrepreneurship for are too high and have too many other mediating factors --being one's own boss / running one's own business -- and because "a few million" is a fine exit, but given the opportunity cost of investment gains [and consumption] on a tech salary, it's not really what anyone's shooting for in entrepreneurship to the extent that it's money-motivated: you're basically gunning for something in the vein of generational wealth (certainly that's what VC's are gunning for as far as investment vehicles) knowing that you have extremely high variance, and while abstractly cutting a potential return from, say, $100 million to $50 million should reduce the incentive to found startup commensurately, in practice those are both in the same "generational wealth" conceptual bucket and I'm skeptical that there would be anything like a commensurate reduction in incentive for that reason -- there are just too many non-monetary considerations involved.[3]
I will note that it probably is worth being clear about definitions here: I think there is admittedly kind of a definitions problem going here: I think the the idea that higher returns to capital fosters *growth* is plausible - which I think is the reasonable formulation of "trickle-down economics," but I think the idea that higher returns to capital will be given to labor for no reason is stupid.
[1] I also think that the financial returns to industry often poorly track social returns (put another way, money is an okay but often not great proxy for "economic productivity"). Corporate law, for example, pays well but its societal returns are basically negligible: litigation is a pure cost center, and contract drafting is just transaction costs. Someone capable of doing either than or cutting-edge R&D would generate higher societal returns in the latter case. See also Krugman et al. on the "over-financialization" of the U.S. economy at the expense of industries that actually make things.
[2] Notwithstanding the name "Taxachusetts" it's still cheaper than New York.
[3] Obviously the exact numbers matter *a lot* to VCs, and for that reason we *should* be sympathetic to "let capital have its capital to deploy efficiently," but that's why I think that this formulation is much stronger than the "marginal reductions in output" one.
"I will note that it probably is worth being clear about definitions here: I think there is admittedly kind of a definitions problem going here: I think the the idea that higher returns to capital fosters *growth* is plausible - which I think is the reasonable formulation of "trickle-down economics," but I think the idea that higher returns to capital will be given to labor for no reason is stupid."
Fair - I've only ever thought of the first part and assumed that that was what was meant, but I can see a politician trying to sell the latter, or a hopeful listener believing the latter.
My impression is that the latter is kind of the naive implication of what people usually mean when they refer to Reaganomics or "trickle down economics" -- it much more closely approximates the physical mechanism of "trickling down" when you increase salaries intra-firm rather than someone else opening a competing firm and/or new industry across the street.
I think you’re conflating two separate bad ideas on the left: That the federal government should tax billionaire’s wealth and that marginal income tax rates on the top income bracket should be increased.
You may have a point that Reagan’s anecdote is pretty narrowly focused on a really weird business, but that’s not the point. Rather, the point is that incentives matter to all income levels and that changes to tax levels result in changes to behavior. It may be true that a salaried worker’s behavior in terms of the number of hours worked is constrained, but that doesn’t he will have no reaction to decreased take-home pay.
I am saying that to the extent incentives matter at income levels like those of Musk, Bezos, Zuckerberg, Cook, and Buffet -- basically the most productive persons it is possible to identify -- it seems implausible to me that "incentives matter" in anything like the sense that economists mean when they say "people respond to incentives."
That is, the people winning capitalism have so much cash that their marginal gains from productive work are basically meaningless relative to their existing wealth (nor, as with the examples of Cook and Jassy, will stock-based wealth evaporate if they step down.) So whatever incentives they are responding to, they are at this point essentially abstract and to first-order non-monetary, because the value of the marginal dollar (or million dollars) is negligible in terms of their capacity to consume additional goods and services. This kind of intrinsic rather than extrinsic motivation is also, as I understand it, extremely common among top-flight researchers (who, again, are generally forgoing private sector monetary gains in the first place by going into academia). These people work because they think their work is important. [1]
Salaried workers may have a reaction to decreased take-home pay, but unless we have widely varying marginal tax brackets, very high marginal rates, and heterogeneous alternative job opportunities at a better leisure / work tradeoff with comparable after-tax salaries available to the worker, it seems like those reactions are likely to be extremely muted in the event of an across-the-board tax increase [other than reduced consumption due to decreased pay, obviously] at the level of any individual worker's capacity to respond to that change: the first two seem empirically unlikely both at present and under most proposals (I am not saying 90% marginal rates are a good idea), and the latter presumably reflects the same job opportunities available already that the workers in question haven't taken.
[1] In this they are sort of the antithesis of those holding Graeber's "bullshit jobs" for whom their labor inputs are so abstracted from any kind of productive outptut that they feel like their pay comes from a place not too conceptually different from digging a hole and filling it in again.
Reduced consumption by salaried workers is one possible reaction. Reduced savings is another. Either way, inherent in any income tax increase is the dubious idea that the federal government can always put the dollars to better use than the people who earned them.
Arguing that the Feds are going to spend money less well than the private sector is a perfectly fine argument to make against raising taxes, but I think it belongs in a different conceptual bucket than reduced returns to labor allegedly reducing labor inputs (which has to contend with the income effect in any case).
I pretty much agree. Do we believe immigration reform failed because the numbers didn’t pencil out? That doesn’t parallel with my recollection of events, which I remember being driven by words like “caravan”, “hordes”, “rapists”, “murder”, “terrorist”.
This post is all sensible stuff, but I struggle to think of a single policy domain where the current bottleneck is the accounting.
"I struggle to think of a single policy domain where the current bottleneck is the accounting."
Yes, but see Common_Lib's post below about how the accounting interacts with the Byrd Rule in the Senate.
Like I feel like there’s an assume a can opener quality that’s untested here.
Can the cbo accurately predict these consequences to a level acceptable to everyone. Like one of the first things I learned about economics is unintended consequences are a real thing that plagues policy making immemorially. How confident are we that the cbo can predict the consequences of things in the economy if we let them try.
Like of course if they can this would be a good thing for them to do but I’m unsure if they can.
Absolutely. If you were challenged to come up with two topics that would provoke a fight among economists, you could do a lot worse than "macroeconomic effects of taxation" and "macroeconomic effects of immigration".
Immigration no.
We don’t need to think these estimates will be especially good. We just need to think these estimates will be more accurate, and less biased, than assuming that nothing changes.
"We just need to think these estimates will be more accurate, and less biased, than assuming that nothing changes."
I feel like we need to parse this statement. Then *who* is assuming that "nothing changes"? I understand that's what the CBO is outputting. But does that drive legislative action? Do the CBO estimates put handcuffs on Congress so it can't vote for legislation because CBO hasn't shown that it will, e.g., increase GDP? Can't Congress just say, "we think this will help the economy"? And so shouldn't Congress just ignore that aspect of the CBO conclusions if it otherwise feels the legislation is warranted?
To be fair, I do recall how Democrats tied themselves into pretzels when debating Obamacare and the latest CBO estimate of the impact on the deficit came out. And that probably changed aspects of the legislation. But I don't recall the Republicans ever doing the same with any of their legislation. And I think here the Republicans have the better case.
The main thing that the CBO score constrains is the reconciliation process. The Senate rules allow you to pass a bill with only majority support, as long as CBO says that it won't increase the long-term deficit, beyond the ten-year window. (This rule is why the Bush 2001 and 2003 tax cuts made the cuts for the middle class expire after ten years, while cuts for corporations and the rich were permanent. That way the plan looked budget-neutral after the ten year cut-off. Their expectation is that they'll be able to bully Democrats into extending the middle-class cuts later, without giving back all of the cuts for the rich. Trump didn't even bother with those shenanigans, his "tax cut" just outright raised taxes on the upper middle class in blue states, due to the sharp limitation of the SALT deduction.)
I agree with your statement.
I also agree that these estimates will probably be more accurate individually.
I worry strongly that the degree of accuracy will be strongly biased for certain things, so I'm not sure the end result will be less biased.
e.g., the 'moderate' immigration scoring proposal to at least consider the taxes these immigrants pay, even as median income citizens seems reasonable, but if you only added that scoring and left all other scoring with current inaccuracies, would that over-bias towards immigration? (I happen to support immigration, so woo! but could happen on anything)
I'm concerned that the authors don't seem to seriously address any arguments against their proposal.
Not only that, but it's not clear how uncertainty could be assessed for any piece of legislation, and that uncertainty would vary wildly by topic depending on available data and its relevance to a future scenario, which is often unknowable.
To a arge degree the whole point of the CBO score is that everyone knows what it means and how to check it. It's true that this fact limits the CBO score in some ways that cut against particular legislation, but the natural question is whether that inadequacy should be noted by supporters and detractors and incorporated into the discussion about the bill, or whether it should be folded into the score in some opaque way.
1. Legislation
2. ???
3. Profit!
I think the short answer is that there are a lot of modeling tools that show good results when you run them against past policy changes on immigration and R&D. The issue is just that, as dysphemistic treadmill noted above, once you open the Pandora's Box of dynamic scoring, a Congressional majority can simply instruct CBO to use an unreasonable version of it. As I recall the GOP ordered CBO to give them scores using some really absurd assumptions to show that the Ryan budget would reduce the deficit, using a bunch of "magic asterisks". I believe one of the authors here was at CBO during those shenanigans.
https://www.washingtonpost.com/news/wonk/wp/2014/10/14/paul-ryan-has-a-trick-up-his-sleeve-when-it-comes-to-taxes-it-wont-work/
obviously we should dynamically score ideas that I already agree with and not use it for my ideological opponents' ideas
Yeah, that didn’t seem to be addressed here, more raised as a specter and then left lurking.
Even if we can arrive at some objectively good dynamic scoring for immigration, unless we can figure out why dynamic scoring on tax cuts is out of whack then I don’t see how we can use it well.
I can't see such scores being very persuasive to people who are not already in favor of what is being proposed.
The piece mentions dynamic effects of cutting taxes. Will progressives believe a score that claims large positive dynamic effects? Or how would they react to a report that tax hikes on high income earners have a significant negative impact on growth?
Or take social spending on families with children. A progressives economist will argue that such spending pays a dividend in terms of more productive workers, lower healthcare costs, less crime, etc. I expect that a conservative economist would estimate these effects as small and uncertain.
Basically, any estimate of dynamic effects will depend strongly on your ideological priors; much more so than the current scores. I doubt you can create a process that's broadly trusted.
Exactly, Gunnar.
I don't see how turning the CBO into an ideological football where the rosters change based on which party controls Congress will benefit anyone. Let it do very technical and tightly-defined work and not try to give the answer to the ultimate question to life, the universe, and everything.*
* Which we all know is 42.
" * Which we all know is 42."
You're still stuck in that static mind-set, Marc.
The meaning of life *was* 42, until Doug Adams revealed that the meaning of life was 42 and millions of people read his book and found out that the meaning of life had been 42.
But the result of this disclosure put so much inflationary pressure on the meaning of life that it has been much higher than 42 for several decades now.
You've got to consider the second- and third-order effects!
[Comedic comeback under construction]
"[Comedic comeback under construction]"
That's funny! I lol'ed!
Unfortunately, the anticipated comedic comeback has been indefinitely delayed due to mismanagement by our Humor Department of the comedy material supply chain.
Supply-chain problems caused by the Biden Administration's socialist give-aways!
But seriously -- if the hangup is occurring in your manufacturing process, then you should look into Humor self-assembly.
I mean, the jokes just write themselves.
It would be so much better to just eliminate the filibuster and let the Senate govern by simple majority. This whole legislative Cirque de Soleil is brought about by that Byrd Amendment and the possibility of special reconciliation rules that might let something or other pass 51-49, if only they can “score” it won’t increase the deficit after 10 years.
"...special reconciliation rules... if only they can “score” it won’t increase the deficit after 10 years."
Right: now you are shedding light on the kinds of legislative and institutional issues that prevent Congress from adopting dynamic scoring.
The fresh-faced "but it's a good idea!" pitch that our guest-authors give us leaves it mysterious why no one has adopted the good idea. Which is a shame, since Elmendorf certainly and Williams probably are legislative veterans who could shed a lot of light on what is really going on under the surface.
Accurate forecasts are intrinsically good! A majority-rule Senate would reduce the partisan-football aspect of accurate forecasting, to the rhetorical level instead of the trigger for whether 51 or 60 Senators are needed to pass the thing.
The authors cite GOP efforts to use dynamic scoring to push through tax cuts. Can't we retroactively apply dynamic scoring and see what the outcomes were? Or are there too many variables to isolate the effects of the tax cuts... in which case, wouldn't the same objection apply to the authors' proposal?
Indeed, I'm really wondering about this as well. Tax revenue apparently went up after the TCJA was passed. The counterpoint is that it would have gone up more if not for TCJA. Who's right? I'm honestly not sure.
Fair point on income taxes, but I think corporate taxes are more complicated.
Dynamic scoring seems better than the current approach, but who is the target audience for these analyses?
I've seen people use CBO/JCT projections as evidence for positions they already agree with, but I get the impression that most people consuming their reports _to learn something_ are already familiar with their methodological shortcomings.
Came here to say this.
I can imagine the scores working on the marginal House member during Secret Congress negotiations every once in a while.
But as soon as an issue becomes highly publicized and thus polarized, the scores don't mean anything, because ideology comes back in. Do we really think that the average primary-pressured Republican is going to vote for Section 80303 just because of a CBO/JCT score on a contentious appropriations bill? Do we really think their voters are going to accept "But the CBO score was really good!" as a reason? Or do we -- and that congressperson -- expect those voters to just object on general anti-immigration grounds?
Isn't the point is to make it one step further past the "trim the size of the bill" step?
I’m not disputing that this is a marginal improvement. It just doesn’t improve *much*. If it can be done without much hoohaw, and it makes Secret Congress work better, then great!
But if it ends up requiring ANY political capital to be spent in Real Congress, then fuck it, the juice simply isn’t worth the squeeze.
Yea I dunno how to weed out high quality confidence in a dynamic score vs ideological predisposition. If you could...obviously it would be a good marginal improvement (some very good ideas would be fought for id assume)
The assumption is that it would make the Secret Congress work better because the CBO/JCT would provide deep insight into the larger ramifications of any proposed policy on the future of the economy.
Jury's still out on that one.
Meh. I think it's fair. Secret Congress is where all but the craziest of craziest drops their ideological and partisan masks and negotiates over what they actually care about, all behind the closed doors where it's safe to actually negotiate.
In that space, of course CBO/JCT scores aren't exactly the *end* of the discussion, but the scores are *incontrovertibly* grappled with more *honestly* in those discussions.
So, Mitt Romney isn't going to agree with every single dynamic score he's ever handed, but he's going to agree on their validity as a basic mutual starting point for negotiation, and use the space of Secret Congress to get the best compromise deal he can.
The same may not be able to be said for Tommy Tuberville, but Tommy's lack of respect for common values doesn't necessarily mean we shouldn't seize every opportunity to build more common ground with Mitt.
Progressives are not inclined to believe that reducing deficits increase growth and Republicans believe that only Democratic deficits decrease growth and that only from increased spending. Republican deficits, in contrast have magical growth consequences.
Okay, but that was already stipulated in the article. What are you trying to add?
Reconciliation bills can’t be projected to increase the federal deficit after 10 years, right? Would changed to how the CBO calculates scoring change what is allowable under reconciliation bills?
Ah yes this exactly is discussed elsewhere in the comments!
I don’t think the issue of appropriately scoring the economic impact of high skilled immigration is the real blocker to legislation passing. Congress has shows almost exclusively over the past two decades that they will pass huge laws without regard for budget implications if the political will or necessity arises. It’s just tied to immigration generally and so negatively coded for the right, that won’t change soon.
I don’t think there’s a conflict. What you’re saying is that if something is politically popular, it can get through no matter how bad the score looks. But the point is that if something is politically controversial, then a bad score could tip some votes against, and so the better scoring might sometimes make the difference.
I think you would be hard pressed to find a single congressmember or senator who's voting on immigration will be swayed at all by the CBO or CRS estimates
As an economist who builds models, any attempt at qualifying impact of things like immigration and R&D is so impricise that if you present the error bands you get laughed out of the room. You're better off saying there is unquantified upside benefit in addition to the static score or you can provide a demonstrative example of the upside: if we assume x and y positive impact, the resulting revenue is z.
Nope, I'm not buying this argument.
Two quotes jumped out at me:
"it’s an open secret that proposals to increase the number of high-skilled immigrants are currently tabulated by the U.S. government as being a net cost to the U.S. economy rather than a net benefit. . . The [CBO and JCT] tabulated that it would cost the federal government $3.1 billion over 10 years."
Those are two different things: the cost to the government is *not* the cost to the economy.
OK, and #2:
"Moreover, dynamic scoring can evolve as additional economic research emerges."
In other words, this will be a moving target, to be interpreted by each actor as they see fit, and in the meantime we will get numbers parading as metaphysical certainty which will typically be just educated guesses.
Here's the problem: this is arguing for the CBO and the JCT to tell us what policies are good for the US as a whole. But I don't *want* these organizations to do that. I simply want them to tell us, in the simplest terms, what will happen to spending and revenues. It's then up to Congress (and the people) to decide if this policy is good for the nation as a whole
Every time we depart from the KISS model, and add more assumptions, parameters and whatnot to these analyses, we increase the range of uncertainty and reduce the level of confidence. But those approximate answers will have the sheen of science and certainty even when they're anything but. It's fine to be uncertain as to future outcomes, but it's not okay to pretend that's not the case.
Sometimes you just make bets. Had it been subject to CBO investigation, I sure would have hated it had ARPA's packet-switching communication system had a cost-benefit analysis done on it. Would it have concluded that this bit of R&D would eventually return untold trillions of dollars to the US and global economy? Nope. Might that have killed it in the crib? You bet it might have.
(Rolling eyes) I would simply accurately forecast how legislation will affect a $22 trillion economy over a multiyear span, perfectly accounting for all unintended consequences, with the foresight of a modern Nostradamus. Surprised no one's thought of this before.
Actually, scratch that. I would instead take my skills of predicting the future and apply it to the stock market instead, where I will easily make quadrillions of dollars perfectly modeling how extremely complex systems will function over a long time span
The question isn’t whether we can forecast perfectly. The question is whether we can forecast more accurately than by just assuming nothing changes.
What is actually stopping a switch to dynamic scoring? Why didn't the Republican trifecta of 2017-18 make the switch for the TCJA, for example, where presumably it would've made the scores look better for them politically?
My understanding is that dynamic scoring is complicated and in some cases speculative - which is why it’s not traditionally been used. Forecasting potential feedback loops and interactions with other policies (or expected policies) quickly adds more degrees of freedom and could give you a wide variety of possible outcomes.
That doesn’t really explain why politicians don’t do it of it’s in their interests - but perhaps the chairs of the relevant committees are concerned about those effects?
Can’t a request for dynamic scoring be done in an ad hoc basis with corresponding guidance on the variables to include? Or does that add to much sand to the gears of policy advancement?
The tricky thing about dynamic scoring is that you can end up with model that predicts virtually anything, depending on what assumptions you decide to feel into it. The same is true for really any statistical model that tries to predict hard-to-predict stuff, whether it's population growth, the effect of mask rules on COVID spread, or the effect of some EPA rule on carbon emissions.
In theory, the people doing these models should be dispassionately looking at the data and drawing the honest, best conclusions they can, but often it doesn't work out that way, especially on politically charged topics where lots of powerful people have strong incentives to make the model come out a certain way, in order to enhance an ideological objective.
The fact that there exists no way to make so-called "nonpartisan" institutions really nonpartisan, as long as they are run by humans, makes it really difficult to draw conclusions that everybody on both sides of the aisle can trust.
Is it actually true that a score of $3.1B over ten years was a real cause in the STEM-visa proposal not being included in either of the reconciliation packages the Dems did in 2021-22? Because that seems like a really small number given the size of each of the packages. And I thought the issue with any immigration proposal the Dems proposed was that the Senate Parliamentarian struck them?
I suspect the reason the STEM-visa proposal has not become law is because it takes 60 votes to break a filibuster, and there are not 60 votes for it. Many Democrats want to hold the STEM-visa provision as a chip they can give to Republicans in "comprehensive immigration reform" negotiations. Many Republicans do not want "comprehensive immigration reform" if that includes any concessions on illegal immigrants in the country--and an increasing number do not want any immigration provisions that increase the number of immigrants, as the STEM-visa proposal presumably would.
Slow Boring's essay about immigration raises an interesting question - at least in my mind.
I wonder how much unconscious bias there is in the minds of legislators towards people who are not of European ancestory. We desperately need qualified immigrants. Certin people in Congress are opposed to any immigration not coming from Europe - that is white Christain people.
Examples of tis bias - the problems of Hispanic immigrants from South America, Afgan immigrants have been waiting for almost two years for entry permits, and the difficulties faced by many from South East Asia.
This bias need not be spoken, but merely understood between some people. The politics of racial hatred is hurting our country and must be brought to an end.
Historically the country has been just as opposed to large scale immigration from Europe as well. Look at the push back that was applied to waves of German immigrants, then Irish or Italian. Not saying there isn't some racial bias, but its more about the size of the wave then where its from.
> Afgan immigrants have been waiting for almost two years for entry permits
Just to be fair, this and some other issues aren't problems created by Congress, right? It's the executive branch not doing it's job expeditiously. I don't think it's hatred driving that, just the all-too-common lack of state capacity (passport renewals is another similar issue).
In the coming Age of AI enhanced STEM, I think overuse of immigration would cause a real glut of STEM people. I'm still for immigration, but the reality on the ground has changed.