***UPDATE (Tuesday 4 pm): Here’s the link to the video on C-SPAN.org. I have no idea when it actually aired. I’m sure I will cringe at a few of my words, but I’ll try to redeem myself with clarifying posts in the next few days. AARP’s page with link to video and transcript is here.***
So, I’m speaking at an AARP lunch forum today, appearing with economic advisors from the two campaigns (Doug Holtz-Eakin for the McCain campaign, and Jeff Liebman for the Obama campaign), AARP’s policy director John Rother, and David Wessel of the Wall Street Journal.
David plans to ask me how the candidates’ economic plans “add up” regarding the federal budget. I plan to respond that that depends on how you define “add” as well as how you define “up.”
I’m unable to “add” anything in a strict, quantitative sense, because I have not seen precise and definitive cost estimates of the candidates’ proposals–in fact, I haven’t seen much that would be considered a precise description of specific proposals. In a qualitative, “sizing-up” sense, I’m looking at how the candidates’ plans seem to compare to both the official CBO (current-law) baseline, as well as a more “realistic” baseline of “current policy extended” (which can be derived from CBO estimates of the cost of policy alternatives not included in the official baseline/current law–table 1-5 in their budget outlook report).
And so how you define “up” matters a lot, because I think both candidates are explicitly (Obama) or implicitly (McCain) pitching a form of fiscal responsibility that starts from a “Bush policy extended” budget path. That means that when the Obama campaign establishes a policy goal to “pay for” all their new initiatives, that means they’ll only not worsen the deficit relative to that “policy extended” baseline. That’s very different from sticking to a strict pay-go rule that’s tied to the current-law baseline, because the current-law baseline gets us to budget balance at the end of a first term, but the policy-extended baseline gets us to a deficit of around 3% of GDP ($500-$600 billion in 2013).
But the McCain campaign is claiming something quite explicit and precise, saying that a McCain administration would balance the budget in four years. Balance means zero unified deficit, so even if they’re thinking in “policy extended” pay-go terms, they’re really talking in “current law” pay-go terms. When you pay attention to the list of new and extended tax cuts the McCain campaign is proposing, it seems like they couldn’t possibly land at much better than the policy-extended deficits of 3% of GDP–that by starting out at revenue levels even lower than the policy-extended baseline, they’ve got even more to make up on the spending side–amounts that seem far from realistic.
The Washington Post wonders about this math, too, in today’s editorial. (Here’s what the McCain campaign shared with them.) I can’t wait to hear how Doug Holtz-Eakin explains it today. Hopefully David Wessel won’t waste too much time asking me questions, because obviously I’m not the one with the answers–just more questions!
Will update you all later today on what we learned.