…because I’m an economist and a mom–that’s why!

CBO: Baselines Matter, Especially Regarding Tax Policy

August 24th, 2011 . by economistmom


Here’s a chart in CBO director Doug Elmendorf’s blog post on their just-released budget and economic outlook that says at least a thousand words about the importance of tax policy in deficit reduction–particularly any deficit reduction that we’ll accomplish in the next decade.  This shows deficits as a share of GDP.  Note that 3 percent has been considered a good target given an economy that grows at about that annual pace.  Note that CBO’s economic forecast shows that’s not going to cut it as “sustainable” over the next few years though–with real GDP growth not coming above 3 percent until 2013 and then coming back down below 3 percent later in the decade.  Note very plainly in the chart above that deficits under the “policy-extended” scenario where expiring tax cuts are extended and deficit-financed (as usual) are closer to 5 percent of GDP, a far cry from the copacetic (just over) 1 percent of GDP deficits under CBO’s current-law baseline.

As CBO explains in their blog post as well as in the report’s summary (emphasis added):

If some of the changes specified in current law did not occur and current policies were continued instead, much larger deficits and much greater debt could result (see figure below [or the one above in this blog post]). For example, if most of the provisions in the 2010 tax act that were originally enacted in 2001, 2003, 2009, and 2010 were extended (rather than allowed to expire on December 31, 2012, as scheduled); the alternative minimum tax was indexed for inflation; and cuts to Medicare’s payment rates for physicians’ services were prevented, then annual deficits from 2012 through 2021 would average 4.3 percent of GDP, compared with 1.8 percent in CBO’s baseline projections.

The difference in dollars between the current-law and policy-extended scenarios, just in terms of revenue levels and not counting interest costs, is more than $4.7 trillion over ten years.  (See Table 1-8 on pages 26-27 of the CBO report.)  What should this tell us (and the policymakers)?  Stick to the current-law baseline in terms of revenue levels, and we’ll do just fine.  Does that mean we have to stick to current law and send Congress home so they can’t pass any new laws and are forced to let the tax cuts expire at the end of 2012?  No, as appealing as that might be!  It does mean policymakers have to commit to strict pay-as-you-go rules (at least in principle) and pay for any tax cuts they wish to extend in the future.  And I don’t think that’s so hard to do, even in practice, and I don’t think we need to worry that paying for future tax cuts will devastate the economy, even with the probability that we’ll end up clinging to the economically-clumsier but politically-sexier ways of raising that revenue.  The additional revenue will turn out to be far better than none, no matter what the tax policy looks like.

(My next Tax Notes column, coming out next Monday, focuses on the different ways to get to the current-law revenue baseline, so more on how to do it later.)

UPDATE (12:45 pm)The Concord Coalition has updated its “plausible baseline.” Note that deficits under the plausible baseline are just about three times larger than under the CBO current-law baseline.  (But please remember that “plausible” doesn’t have to mean “most likely”–as I explained a couple years ago.)

40 Responses to “CBO: Baselines Matter, Especially Regarding Tax Policy”

  1. comment number 1 by: AMTbuff

    It seems to me that the primary purpose of these baselines is to mislead the public for political advantage.

    In business, a baseline always corresponds to a stable, sustainable business model. No such baseline exists for the US government. Therefore all the available baselines are useless garbage. Forget about them. Focus on making the long-term spending curve meet the long-term revenue curve through immediate policy changes, not by promising to fix it later by magic.

    When I see someone use a baseline as a foundation of his argument, I can be confident that he is applying a political slant. I give such presentations very little credence.

  2. comment number 2 by: SteveinCH


    Three numbers stick out to me from the CBO report.

    Growth rate of revenues: 7.3%

    Growth rate of spending: 4.6%

    Growth rate of prices plus population: 2.9%

    In my view, those are the three numbers that should accompany every budget or assessment of a budget. Then politicians would have to answer uncomfortable questions like, “What kind of ‘austerity’ plan grows spending at nearly 200 basis points above the growth rate of inflation plus population?”

    We should also have the numbers for spending and receipts at a percent of GDP so we can see that even with unprecedented levels of revenue, we still cannot seem to balance the budget and we only come close because of forecast levels of discretionary spending that are never going to happen and our customary AMT and doc-fix voodoo.

  3. comment number 3 by: Brooks


    I understand your criticism and concern about the usage of baselines, and yes, quite often the choice of baseline is used as part of a political argument, and often stealthily since the reader/listener isn’t aware of the significance of the choice of baseline.

    But that said, I think baselines serve a useful purpose, and perhaps even essential, and the two most common concepts of baselines — current law and current policy — seem to be sensible and useful.

    A current policy baseline is intended to communicate the course we’re on if we don’t change policy, and thus, as we consider various possible sacrifices to solve our long-term fiscal imbalance problem, if the question is “What policies do we want to change and how much vs. what we’ve got (or how/what we do) now?”, a current law baseline is the appropriate starting point, and the impact of potential policy changes are measured vs. that baseline. So, for example, if the question at hand is to what extent (if at all) to increase tax rates vs. current tax rates, a current policy baseline is the starting point.

    Alternatively, if talking about policy changes vs. future policies (and any other budget-related law) already planned as reflected in law the current law baseline is the appropriate starting point. Whether it’s planned increases in retirement age or planned increase in tax rates (due to “expiration” of “cuts” or not — semantics aren’t key; clarity is key) policy changes projected per a current law baseline reflect deals already made for the future, including most notably deals as part of the solution to the fiscal imbalance problem.

    The fact that simply referring to “a tax rate increase” is ambiguous without knowing which baseline the speaker has in mind (current law or current policy) doesn’t mean that either baseline is inherently unhelpful or harmful simply because lack of clarity can be confusing or can be a means of misleading people.

    If I may paraphrase the NRA, baselines don’t mislead people; people mislead people.

  4. comment number 4 by: Brooks


    Meant to say:
    as we consider various possible sacrifices to solve our long-term fiscal imbalance problem, if the question is “What policies do we want to change and how much vs. what we’ve got (or how/what we do) now?”, a current policy baseline is the appropriate starting point

  5. comment number 5 by: Brooks

    I’d also like to add that, notwithstanding my paraphrasing of the old NRA slogan, I’m not a fan of the NRA, nor have I ever found that argument convincing as an argument against gun control.

  6. comment number 6 by: SteveinCH


    In your discussion of baselines, you need to differentiate between programmatic spending (which can be done on current law/current policy basis) and discretionary spending which has to be done by assumption (equal to inflation, equal to nominal GDP growth, etc). That “baseline” is effectively whatever you want it to be. Current law and current policy are effectively meaningless.

  7. comment number 7 by: Brooks


    Yes. And my point is just that baselines are useful and perhaps even necessary for discussing and addressing this issue, and the key thing is just that the core assumptions of the baseline are clear and thus meaning of deviations from that baseline are clear.

    For discretionary spending, one could reasonably hold spending in real terms at current year levels (i.e., adjust only for inflation) and inform the audience of that assumption, or one could use some other basis for some other type of baseline, for example if one expects some category of discretionary spending — e.g., education — to grow with population (or population of some segment, such as school-age children) such that we aren’t reducing spending per relevant person vs. current policy.

    As I tried a bit to explain (not that I think it’s anything really new to anyone here), different baselines simply mean different things. A rough, crude way one could think of some version of a current policy baseline is as analogous to seeking to maintain the current standard of living and way of life of various segments of the populuation (who is eligible to get what types and levels of support in material terms, who is taxes how much for what, etc.), whereas current law baseline is roughly analogous to our plan for such things. I k now that’s a rough way to put it and probably flawed, but I think that’s close to the essence of it. A household could have the equivalent of a current policy baseline of how much they each work & earn and spend on each member of the household, and the equivalent of a current law baseline that reflects a commitment made to the 16 year-old to send her in a couple of years to Megatuitiana University. Each baseline could be used for a different perspective on the households “fiscal” choices.

    The point is just that assumptions should be made clear and baselines used as a tool for discussion, rather than throwing out the baseline baby with the bathwater.

  8. comment number 8 by: Brooks

    On the education example, I should have said “vs. current spending”, not “vs. current policy”.

  9. comment number 9 by: Arne


    While I actually agree that Congress is too prone to let programs grow too fast, the numbers you quoted are somewhat meaningless. (an artifact of the way the report is formatted) Much of the revenue growth comes simply because the period includes the time when their baseline says the tax cuts will expire.

  10. comment number 10 by: SteveinCH


    It doesn’t really matter. The only baseline that matters is today. A budget is a proposal for growth relative to today. Doing it relative to a baseline, any baseline, is only making the math more complex.

    Sure the revenue growth rate is faster because of the assumed tax rate changes. But I’m not sure why that matters.

    In the end, what needs to happen on budget matters is we need to be able to explain them in a way that the average citizen can understand. Baselines are complex. Having multiple baselines is ridiculously complex. People (most of them) understand growth rates so which do you think is more understandable. The CBOs presentation of multiple baselines or saying.

    “The government’s plan is to grow spending x% per year, revenues y% per year, and add $z to the national debt over the next 10 years.

    To me, that presentation is concise, comprehensible, and accurate. The baseline discussion fails the first two tests.

  11. comment number 11 by: SteveinCH


    With deference, baselines do not mean any such thing as you purport. They represent the cost of providing what you expect you will want to provide, the way you are currently providing it. They would never be accepted in any well managed company since companies have cost constraints.

    I think the baseline baby should be thrown out. If the target audience is the average American, as it needs to be, the baseline discussion is far to complex to be illuminating.

    I’m sure you disagree but I think you prefer precision to comprehensibleness (if that’s a word).

  12. comment number 12 by: AMTbuff

    The baseline is the bathwater, not the baby.

  13. comment number 13 by: Brooks


    Suppose someone wants to know “If Congress & the president don’t change fiscal policy to reduce future deficits, how large will our debt get over time (what’s the projection over the years)?”

    You need some projection to answer that question. And you need some set of assumptions for that projection. And that projection is then that baseline. Or you could give a couple of different answers based on a a different set of assumptions, i.e., a different baseline.

    But without any projection — i.e., without any baseline — how do you answer the question?

    And if that person wants to know what debt/GDP would be in 10 years if we let the Bush tax cuts expire (i.e., let tax rates rise) as scheduled vs. if we extend them throughout the 10 years, how would you give them a projected debt/GDP figure without starting with some baseline projection?

  14. comment number 14 by: SteveinCH

    Those policies can be expressed as growth rates from current if that is the specific proposal.

    I’m not saying not to do a projection Brooks as they are necessary. Labeling one projection as “the baseline” simply doesn’t make sense.

  15. comment number 15 by: Vivian Darkbloom

    As I said before, ceilings are more useful and important than baselines. Put differently, we should concentrate first on clear goals which cannot easily be fudged. This might be, for example, balancing the budget or setting a limit on debt to GDP or deficits to GDP or spending to GDP or taxes to GDP, or whatever. Once that is done, and only then, are baselines meaningful and helpful and the choice of baseline becomes less important and the use of multiple baselines would be more or less irrelevant in the process. They can then be helpful if measured against that future goal, but are meaningless if they are not designed to lead to a defined target. So, if the goal is to balance the budget, a baseline might be useful as a tool to measure how difficult that goal is to meet and over what time frame. If someone were to set a goal for me to acheive annual sales of $10 billion within the next five years, I’d sure want to know where I was starting from. If the starting point is $10, I might logically conclude that the goal is not feasible. The problem with public finances is that nobody can agree on targets, nor does either side necessarily want to commit itself to one, so, by necessity, the discussion is diverted to the relatively unuseful discussion over how far from an artificially constructed baseline one wants to move. It’s called hiding the ball and shirking responsibility.

    If a company were to decide they need to reduce costs, I think the normal thought process would not be to arbitrarily pick a percent, say 5 percent, and agree “let’s reduce costs by that amount”. I think they would rather decide that to reach a given profit goal, costs might need to be reduced by X$ at a given point in time and then translate the figure into a percentage; not the other way around.

    As far as communicating all this to the public, I think baselines are unavoidable. For example, if the target would be to balance the budget by 2020, it would be unavoidable for the public not to be told that spending will be reduced by $X, and taxes will be increased by $Y, and here’s your share which is $Z and, by the way, have a nice day. All of this, but the last bit, requires a baseline of some sort.

    Maybe this is just saying in a different way what AMT and Steve are saying. Baselines should never be the *foundation* of an argument; but, I think they are unavoidable in determining feasiblity and in the implementation and communication of a clear policy goal.

  16. comment number 16 by: Arne

    “those are the three numbers that should accompany every budget or assessment of a budget”

    “It doesn’t really matter”

    My point was simply that if you are going to use numbers, they need to be comprehensible. Because they use a 2013-2021 timeframe, the numbers you quoted don’t mean much.

  17. comment number 17 by: SteveinCH

    I don’t agree with you Arne. I think they matter a lot. I think politicians who plan to increase taxes by 7.5% a year every year for the next decade should have to answer why they plan to do that. Why is that a good idea? I think the notion of 7.5% a year every year for the next 10 years is quite comprehensible to the average American but you’re free to disagree.

  18. comment number 18 by: SteveinCH


    Respectfully, I disagree with your second to last paragraph. Let’s say we were committed to balancing the budget by 2021. There are lots of ways we could do this and none of them require a baseline to get there. For example, I could say…starting from today, my plan to balance the budget will require taxes to increase by 6% a year every year and spending will only increase by the rate of inflation (2%). You could then dig under that to talk about personal taxes, FICA taxes, etc. and categories of spending as well. All using today as “the baseline”. Today is a real baseline. Anything else is entirely fabricated to suit someone’s ends.

    Feasibility is NOT determined by difference from an artificial baseline. I’ll take my favorite example, education spending. The baseline approach says…well, we were planning to spend $x on education but we’ve decided to spend $x-2 so we’re cutting spending by 2. That’s simply false in almost all cases. We’re actually growing spending by 1 instead of 3. The real world doesn’t talk about changes from baselines, it talks about changes from current conditions. And even when it creates things that look like baselines (e.g., costs will rise at inflation plus volume - 1 percent), they are linked to factors that are external to the thing being measured, not based on what the guy running the cost center would like the projection to be. That game was played out about 2 decades ago.

  19. comment number 19 by: Vivian Darkbloom


    Thanks for the comment and the respect.

    But, respectfully, I don’t think you are disagreeing. What I’m saying is that you need a baseline to communicate the change. You seem to agree, because your example posits a plan for “taxes to increase by 6% a year”. But, 6% starting from what? You say “today”, by which I’d have to guess you mean a current law baseline that assumes no changes in that current law after today, even if those changes are programmed. Is that right? If so, that *is* a baseline, and one that makes perfect sense to me if, in fact, I’m interpreting your comment correctly. For what it’s worth, I prefer your baseline to current law (with programmed changes) or “current policy”, but I’m still puzzled as to why you think you disagree with me. For example, I note that your example contains a specific target (balancing the budget) together with a baseline (today’s baseline) which is consistent with what I wrote. For what it’s worth, if one were to set that same target and use a different baseline to communicate the change, I would think it inferior to your suggestion, but superior to what is the predominent status quo.

  20. comment number 20 by: SteveinCH

    Maybe we’re disagreeing on what a “baseline” is. When Washington uses the term, it is a term that refers to projected changes over time and changes versus those changes. So, Washington might say that the recently passed spending changes represent a 3% reduction from the baseline level of spending over the next 10 years (about $45 trillion). But that 3% is relative to a number that nobody knows. I’d rather express is as growing spending at 4.6% a year from its current value over the next 10 years. Thus the only “baseline” is current year spending and taxes.

    We can certainly agree to call current spending and taxes the baseline but that’s not what Washington typically refers to when it uses that term.

    When you decide that the current amount of something is the baseline, you don’t need to describe the assumptions that went into the baseline because there aren’t any. Current law becomes current policy and no forward looking assumptions are required for the baseline. Forward looking assumptions are still required for the budget but that’s a wholly different conversation.

    That’s why I think we are disagreeing. As I see you using the word “baseline”, it still feels like you are using a 10 year projection as opposed to simply using the current numbers. Perhaps I misinterpreted however.

  21. comment number 21 by: Vivian Darkbloom

    I’m perhaps confused but, again, it seems to me what you are saying is that we use current law and not adjust current law for future programmed changes. If you say “Id rather express it as growing spending at 4.6 percent a year from its current value over 10 years” are you not still using a 10 year projection but from a fixed and immutable starting point? So, I’d be happy to meet you in the middle on this and use your “baseline” or whatever you want to call it. Admittedly, “Washington” does not use it, but that is not to say it is not a “baseline”. I would settle for the “Steve baseline” or the “second base line” as opposed to the “first base line” or the “third base line”. To my knowledge, there is no “second base line”, in baseball, at least, but if there were, I would indeed be meeting you in the middle.

  22. comment number 22 by: SteveinCH

    LOL. Nice Vivian. I love the notion of a second base line. The mental image I get has more to do with dating than with budgeting but oh well.

    I guess what I’m saying is that we assess policy choices relative to today. Thus, the President’s budget could be described as increasing spending by X% a year and revenues by Y% a year over the 10 year period from today. That is how I would prefer to describe it.

    The counterfactual of what would have been but for the President’s proposal is to me, completely irrelevant. It’s not whether the President’s proposal is better or worse than some other alternative universe he desires us not to partake of but whether it is good.

    So said differently, I wouldn’t evaluate relative to a baseline, I’d simply describe each policy relative to today. Thus, the recent budget deal could be described as reducing the projected growth rate of spending from about 4.9% to about 4.6% (I think those numbers are roughly accurate). That to me is a simpler description than describing it as a $1 trillion reduction relative to the “baseline” (depending on which baseline you use). It also more appropriately reflects (in my view) the magnitude of the change.

  23. comment number 23 by: AMTbuff

    I’ve heard of a third base line and I’ve heard of a first base line, but I’ve never heard of a second base line. ;)

    VD, what Steve prefers is a step back from what Washington calls the “current policy” baseline. “Current policy” means next year’s numbers under an extrapolation of current tax rates and current spending commitments. Steve wants to use “current year actual” as the baseline. That baseline. which all businesses use, is too low to suit the preferences of politicians.

  24. comment number 24 by: Brooks


    Any baseline is merely a projection of some definition of a “status quo fiscal course” we are on. It answers the ambiguous question “If we don’t change, what will happen (to spending, to revenues, to deficits, to debt/GDP, etc.)?”

    So if someone asks “If Congress and the president don’t make changes, what will debt/GDP be in 10 years”, there are different ways to address that question, and each require a different projection (i.e., a different baseline). If by “changes” one means “changes vs. current law for taxation and mandatory spending and current real levels of discretionary spending”, then that means essentially if we don’t “change” vs. a current law baseline (and the assumptions include the scheduled increase in tax rates, scheduled increases in retirement age, etc.). If by “changes” one means “changes vs. what current policies provide to or extract from various types of people (current tax rates, current retirement age, etc.) then an appropriate projection (baseline) would reflect no changes vs. those assumptions (and that could be called a “current policy baseline” IF all the assumptions, notably including those for discretionary spending, are made clear, although I don’t want you to be hung up on labels and how you think some people misuse them so I’m not sure if it’s a good idea that I’M including that term).

    Forget for the moment about anyone in political discourse using the term “baseline”. Focus on the conceptual matter here, not labels.

    If someone asks “What will debt/GDP be in 10 years if we let the Bush tax cuts expire as scheduled vs. if we extend them for the whole 10 years?” Well, you have to start with some projection, right? And you have to end up with two projections, one for each tax scenario, and both with other things equal, meaning a whole set of assumptions relating to everything else. The only variable is the tax rate structure (and any effects of one tax rate structure vs. another, if one wants to include dynamic effects), but the rest is held equal in both projections. Now, you still need to clarify to the questioner what assumptions you are making for all those other fiscal things (perhaps current law and real discretionary spending, or perhaps some version of a current policy scenario), but whatever you choose, you are choosing a baseline projection for (among other things) debt/GDP in 10 years.

    Sure, you could answer the questioner with slanted language and simply say that extending the Bush tax cuts would be a “a tax cut” that would be a “change” that would “increase” debt/GDP from X% to Y% (“Y%” being what it would be if we don’t make that “change”). Or you could apply the opposite slant and say that letting them expire would “lower” debt/GDP from Y% to X%, and refer to allowing that expiration as “increasing taxes” (even if by the default of inaction). And yes, politicians and pundits and others can mislead people by failing or opting not to give them the full picture and understanding of what they are using as a reference point.

    But in any case, projections are needed, as you acknowledged earlier but somehow did so while still apparently disputing the appropriate role of baselines.

    Some set of assumptions and related projections are needed to address what I’m calling the “status quo fiscal course”, and that’s what a baseline is. And there should indeed be more than one baseline, because different baselines mean different things, as I’ve tried to explain.

  25. comment number 25 by: Brooks

    Instead of:
    “If Congress and the president don’t make changes, what will debt/GDP be in 10 years”

    I should have worded it more neutrally (between current law vs. current policy and anything else) as:

    “If fiscal changes don’t occur, what will debt/GDP be in 10 years”

  26. comment number 26 by: Vivian Darkbloom


    Your mental image is not exactly what I had in mind. If I understand your image correctly, you’re thinking of reaching bases, and not, per se, the baseline. But, as some say, the journey is the destination. Also, your mental image is completely consistent with my original point—setting goals is the most important thing.

  27. comment number 27 by: SteveinCH


    I’ll try it this way. I would like to compare each projection to a fixed point (today) as opposed to comparing projections to each other. It is that latter course that opens one up to mischief.

    The President’s budget (to take an example) increases spending and revenues by fixed amounts relative to today. Other proposals increase those same numbers by different amounts. I’m fine with as many proposals or potential proposals as one likes. I’d just like to compare each one to today as opposed to simply comparing them to each other.

  28. comment number 28 by: Brooks


    You’re not addressing what I’m saying. But I’ll leave it at that.

  29. comment number 29 by: SteveinCH


    It is odd how you think that every thread should be driven around what you are saying. But I’ll leave it at that.

  30. comment number 30 by: Brooks


    Uph, I was being gracious, as well as possibly sparing myself another long, fruitless run-around as you avoid addressing the points/questions I present, but what you just said is ridiculous. I was directly addressing to the core of the topic of this whole thread (the post and comments discussion), including responding to your comments, and you repeatedly reply without showing any sign that you’re seeking to address the points/questions I presented to you related to your assertions, and now you pretend I’m asking for something unreasonable. Yeesh. How immature.

  31. comment number 31 by: SteveinCH

    As you like it Brooks.

    Here’s my answer to the question you posed above. Who cares what would happen if no changes are made conceptually. If someone proposes making no changes, it’s a relevant discussion. Until then, it really isn’t.

    Making no changes is a silly thing to do over the course of a decade and indeed, it probably hasn’t been done in practice any time in the 20th century. So I would tell the person who asked that question to stop asking silly questions.

    If that’s your justification for a baseline, it is, in my opinion a fairly weak one.

    More broadly though, my point, which you choose to refuse to address is that a baseline is not needed to assess proposals or to compare them. Since the concept, as you admit, creates great potential for mischief, it is better to do away with it.

    I know you disagree but again I think it’s because you are stuck in a certain way of thinking and my impression is that you don’t change your mind about things very often.

    FWIW, I’ll leave it at that is not a gracious comment thought it may appear to you to be one.

  32. comment number 32 by: Brooks


    Re: Here’s my answer to the question you posed above. Who cares what would happen if no changes are made conceptually. If someone proposes making no changes, it’s a relevant discussion. Until then, it really isn’t.

    That’s absurd. Of course it’s relevant to start an exploration of possible changes by asking how big a problem we are starting with, i.e., what our current fiscal course is — how large deficits and debt/GDP (and spending and taxation) are projected to be over the years.

    As for the rest, I’ve explained and how baselines are appropriate, useful, and perhaps even necessary to have productive, rational discussions of policy choices to alter our fiscal course. You just keep replying without addressing anything I’ve said. I’m not going to repeat it all, I don’t have more to add, and I’m not inclined to search for yet another way to explain it given that you seem to be in high-silliness mode.

    Re: FWIW, I’ll leave it at that is not a gracious comment thought it may appear to you to be one.

    Well, it’s gracious compared to what I could have noted at that point: that you were either replying without really listening, or were being thick, or were being deliberately evasive.

  33. comment number 33 by: SteveinCH


    “That’s absurd” isn’t actually an argument. I know you think it is but it isn’t.

    As for the rest, you’re just being you and I’ll leave it at that.

  34. comment number 34 by: Brooks


    Stop embarrassing yourself.

    Obviously I didn’t simply write “That’s absurd.” Rather I followed that remark with a brief explanation as to why it was absurd — i.e., I presented an argument to support that conclusion.

    You then reply:
    “That’s absurd” isn’t actually an argument. I know you think it is but it isn’t.

    Just how silly are you gonna get?

  35. comment number 35 by: SteveinCH


    Your argument wasn’t actually an argument. You followed “that’s absurd” with a sentence that is nothing more than an assertion of your point of view.

    I guess I’ll retract that. You made an argument in the John Cleese sense.


  36. comment number 36 by: Brooks

    Sure Steve. We face a growing problem that calls for the public to accept and support major sacrifices hopefully sooner rather than later, yet you think it’s not important or even relevant that we have some way of communicating some sense of how big the problem will grow how fast on our current fiscal course, so they would have some sense of the urgency and scale of sacrifices that would be wise to make. I (and common sense) beg to differ. Some “status quo fiscal course” projection — i.e., some baseline — is useful to communicate the above and enable rational discussion of policy choices involving potential sacrifices, and that’s the reason I’ve given you (the “argument” you say was lacking) as to why it is absurd for you to contend that there is no use for such a baseline (indeed that it would not even be “relevant”).

    But you probably still aren’t getting any of this, and if you do, you won’t admit it, and will just reply with something to maintain the pretense that you think you have some valid point.

  37. comment number 37 by: Brooks


    Just for kicks, suppose someone asked you what debt/GDP is projected to be in 10 and 20 years. How would you answer? Or would you just say you have no idea because you don’t know what and how laws will be changes or what allocations will be made?

  38. comment number 38 by: Arne

    “I think politicians who plan to increase taxes by 7.5% a year every year for the next decade should have to answer why they plan to do that. ”

    But that is a total distortion. After a large change in 2013 as the tax cuts expire, taxes go up with GDP growth (including recovery from recession), as well as population. On top of that is bracket creep and the AMT problem, but except in 2013, it is never near 7.5%.

    Politicians should always have to answer for what they do, so I don’t disagree, but I object to seeing you distort the data before making your point.

  39. comment number 39 by: SteveinCH

    Explain how it’s a distortion. It’s math. Sure I could be more accurate and say they plan to increase them by x% in year 1, y% in year 2 and so forth but it doesn’t change the CAGR which is 7.5%.

    Arguably, the plan in place is actually worse, on an NPV basis, than 7.5% per year because it’s front loaded. Calling it 7.5% per year is charitable relative to what it is.

  40. comment number 40 by: Dave

    Radical idea: governments are not really responsible enough to engage in projects (or undertake liabilities) which actualize over 20+ years, consequently they are equally irresponsible to the task of projecting anywhere near that far out.

    Stop encouraging them. Impose about a five year horizon over which benefits must be realized and costs must be recognized. Anything committed past that should be perhaps be ultra vires.