Donald Trump is about to engage in an epic generational theft on Americans, and he’s going to use a classic budget trick to pull it off.
It’s called dynamic scoring, which is just a fancy way of justifying massive increases in the national debt.
But first, Trump’s plan: The president-elect has promised a $500 billion stimulus to be spent on infrastructure, and at the same time he’s promised dramatic tax cuts.
According to analysis from the Tax Policy Center, the tax plan will exacerbate income inequality and deprive the government of much needed cash for operations.
His proposal would cut taxes at all income levels, although the largest benefits, in dollar and percentage terms, would go to the highest-income households. The plan would reduce federal revenues by $9.5 trillion over its first decade before accounting for added interest costs or considering macroeconomic feedback effects. The plan would improve incentives to work, save, and invest. However, unless it is accompanied by very large spending cuts, it could increase the national debt by nearly 80 per cent of gross domestic product by 2036, offsetting some or all of the incentive effects of the tax cuts.
Naturally, this sounds awful. However, considering the fact that Congress is about to be completely controlled by fiscally conservative Republicans, one would think Trump is about to face some opposition.
But he won’t. And that’s because there is a way to make Washington’s budgets sound more sensible than they actually do. That’s where dynamic scoring, much beloved by deficit hawks like Paul Ryan, comes in.
It basically allows the government to estimate the future benefit of tax cuts to the economy, after making a load of assumptions — including about what a future government might do in response to falling tax revenue.
Those imagined benefits are then added to future budget projections and… BOOM, you’ve got a healthy looking balance sheet for America.
The Republican-controlled House adopted dynamic scoring last year, but it’s still up for debate in the Senate where Democrats like Bernie Sanders (VT) have been critical of the practice. They say it politicises the budgeting process.
That’s in part because there’s no exact way to dynamically score anything. There’s no set process, and no set rules on the assumptions made. So when GOP Congressmen put pressure on the non-partisan Joint Committee on Taxation to use dynamic scoring, it was unclear to Tom Barthold, the economist who heads the group, exactly what that means.
What we do know, though, that both the Reagan and Bush administrations argued that tax cuts, especially for the wealthy, would pay for themselves. In both instances, this got us in trouble.
More from the Tax Policy Center:
If “dynamic scoring” means that Congress can use any macroeconomic model it wants, then we are thrown back 100 or 150 years in terms of the rigour of our thinking. There are too many models with a very wide variety of assumptions and implications. It is not exactly true that you can find a model that will support any claims, but this is sometimes uncomfortably close to the truth.
So all Trump has to do is zoom in on the model that shows that cutting taxes for the rich while spending tons of money will be great for the economy, and this plan is a go.
How hard do you think it will be to find that in Washington?
The opinions expressed in this article are those of the author.
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