I & I Editorial BoardWhen the Congressional Budget Office reported that the Republicans’ “big, beautiful” reconciliation bill would boost deficits and throw millions off insurance rolls, it was treated as gospel truth.
The CBO is, after all, a “non-partisan” agency, staffed by just-the-facts-ma’am budget and economic experts who don’t have any axes to grind.
Maybe that’s true. But it’s not partisan bias that is the problem. It’s the CBO’s terrible track record when it comes to predicting the impact of tax and health care policies.
By the CBO’s accounting, the House reconciliation bill would cut tax revenue by $3.7 trillion and cut spending by $1.3 trillion over the next 10 years, resulting in deficits that are $2.4 trillion larger than they’d otherwise be.
To make matters worse, the proposed Medicaid spending cuts would throw nearly 11 million people off insurance rolls, according to the CBO.
That combination just happens to make for the perfect Democratic talking point – “Republicans want to cut taxes for the rich at the expense of the poor!!” – which is why its new forecasts are front-page news. And when the White House suggested that the CBO’s projections were biased, the mainstream press rushed to the CBO’s defense.
But wait a second. These are 10-year projections. They are based on a raft of assumptions about incredibly complicated systems.
So, the important question is, just how good is the Congressional Budget Office at making such predictions?
The answers are easily found, although you’d never know it based on the media’s total lack of interest.
Let’s take a look at the “cost” of those tax cuts.
First, it’s important to note that the bulk of the “tax cuts” aren’t tax cuts at all. The Republican bill would simply prevent a massive tax increase that would take place if Congress were to let the 2017 tax cuts expire.
The CBO assumes that, should those tax cuts expire, nothing else will change. The economy will keep rolling along, businesses and individuals won’t change their behavior in the face of a sudden tax hike, job growth will remain unchanged.
That is a fantasy. More likely, a sudden spike in taxes would cause a recession, which would explode federal deficits and throw millions out of work.
What’s more, the CBO’s attempt to forecast tax revenues has already been proved deeply flawed. In early 2018, it projected tax revenues that would result from Trump’s tax cuts, which he signed in late 2017.
Before the Trump tax cuts were enacted, the CBO forecast that revenues from 2018 through 2024 would total $28.2 trillion. After the tax cuts, it said revenues would be $27 trillion. The actual result: $28.5 trillion. In other words, the Trump tax cuts more than paid for themselves, and that’s despite the intervening COVID recession, which cratered tax revenues in 2020.
Why was the CBO so far off the mark? Because it didn’t account for the extra economic growth that the Trump tax cuts, along with his energy policies and deregulatory push, generated.
Well, surely the CBO is better at predicting the impact of Medicaid spending cuts, right?
Let’s check the record.
When Obamacare was enacted in 2010, the CBO said that the law’s expansion of Medicaid would increase the number of enrollees by 16 million in 2019. The actual number was 34 million. And that, mind you, is despite the fact that not every state expanded Medicaid as the CBO expected.
The CBO also predicted that 24 million people would be getting insurance through the subsidized Obamacare “exchanges” by 2019. Turns out, only 14 million were.
And it projected that only 23 million people would be uninsured in 2019. Actual number: 30 million.
Even by government standards, those are massive forecasting mistakes.
This isn’t to say that the CBO is run or staffed by dunderheads. It’s that any 10-year forecast is going to be completely unreliable. No one can competently predict how things will unfold a decade from now with any degree of accuracy.
So, what good are the long-term projections the CBO is making now? And why in the world does anyone pay attention to them? Feel free to offer your answers in the comment section below.
— Written by the I&I Editorial Board
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I never had much confidence in these 10 year projections. The obvious problem is the federal government’s spending. Generating additional revenue along with spending cuts need to happen or our fiscal mess will become catastrophic. Time will tell if the U.S.A. falls off the precipice or pulls herself back from the brink. The former will be ugly.
What also happens in the intervening ten years that can and will change whatever is done this year? The CBO gets so much attention because the press has convinced people that they are non-partisan accountants of the budget.
It is definitely partisan for democrats. Just look at the members donation records.
Why don’t they make predictions based on a president’s four year term? Even better, a House member’s two year term?
CBO is always and necessarily wrong because they score bills like this “statically”, as the article mentions; what will be the impact if nothing else changes? But, of course, in real life everything always changes in response to other changes. To capture THAT requires “dynamic scoring”. But as a moments thought will indicate, dynamic scoring is impossibly complex. In truth, CBO would do everyone a service if they closed their doors rather than promulgating numbers that can be known with certainty to be wrong as soon as they are calculated.
I subscribed to CBO emails for years, a long record of predictions that always required adjustments to allow for real life, which is like humans, unpredictable. I concluded the CBO was much like the postal service, burdened by Congress and their tasks made impossible by the body they were invented to serve – and reality. Who can peer 10 years into the future with accuracy and who has the ego to publish those guesses?
Even the RATE of change in society is dynamic…. “accelerating”; which means that the amount of change in any future periods will be increasing over time. Change isn’t just linear, it’s more like exponential. So even if we COULD have in the past looked ten years into the future with some degree of confidence — those days and such projections are long gone.