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The purported "dynamic" score of the Senate tax bill that the Treasury Department released on Monday was a remarkable document.
For starters, it offers no details or any kind of real score. And most fundamentally, the analysis contradicts the Trump administration's core claim that the tax bill will generate so much growth that it will pay for itself.
On the contrary, they need to stipulate the passage of a whole bunch of other new policies — including draconian spending cuts proposed in Trump's Fiscal Year 2018 budget and already rejected by congress — to get that much growth.
That's broadly in line with what George W. Bush's Treasury Department came up with during a more serious effort to do dynamic scoring of a conservative tax plan — even if you build in the assumptions conservatives like, you only get the growth boost if you offset the tax cuts with spending cuts.
I'm going to repeat that because it's important.
- In political terms, Republican Party politicians often want to say that tax cuts don't blow up the deficit or require offsetting spending cuts because they generate so much growth.
- In policy terms, what conservative economic models say is that tax cuts boost growth in a significant way only when they are offset by spending cuts.
The reason that's important isn't narrow hair-splitting about budget deficits. It's because while economic growth is generally welcome, what we really care about is whether people are better off or not. And here the interplay of government spending and economic growth requires some attention.
At least some of the stuff the government does is supposed to have long-term economic growth benefits. That's why — or at least an important part of the reason why — we have the government fund education and infrastructure. And there's an economic case for a certain amount of the touchy-feely stuff too, particularly as regards helping raise healthy kids and helping parents hold down jobs while raising them.
But the biggest non-defense things the government does is take care of the elderly, the disabled, and the severely ill.
This stuff mostly doesn't cost-out in terms of "the economy" which for scoring purposes means Gross Domestic Product, i.e. the total market value of all the goods and services produced in the United States.
Grandma's Social Security checks help bolster demand during a recession, but otherwise, they don't help us increase our domestic product because Grandma isn't producing anything. She's retired. And Medicare spending money on keeping her alive is a growth disaster since not only does it have a direct cost but the longer she lives the more Social Security checks she gets.
By contrast, a nasty flu pandemic that killed 10 percent of the retired population would push per capita GDP up a fair amount since you'd have fewer capita but the same number of producing workers.
But of course we would consider such a plague to be a very sad event — it is bad for human well-being when old people suffer, get sick, or pass away, so we invest a lot of resources in trying to ensure that old people can have comfortable, dignified retirements even if that doesn't do much for our GDP.
We probably all get this on some level. But it tends to go missing in the policy conversation. Liberals don't like to admit that some of their most cherished programs almost certainly are "bad for the economy" in the sense that these scoring models mean, and conservatives don't like to admit that the growth-boosting punch of their favored tax policies comes from denying resources to sympathetic people.
But if we want to be smart about our policy choices, we need to acknowledge the tradeoffs here, and most of all acknowledge that looking narrowly at policies' growth impact doesn't really tell you what you need to know.
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