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Is Romney Speeding–or Just Heading Somewhere Else?

October 9th, 2012 . by economistmom

batmobile-flying-610x400

Bill Gale clarifies the debate over the Romney tax plan with an analogy even those who aren’t tax policy geeks can understand:

[L]et’s get out of the hyper-charged world of tax policy for a second.

Suppose Governor Romney said that he wants to drive a car from Boston to Los Angeles in 15 hours. And suppose some analysts employed tools of arithmetic to conclude that “If Governor Romney wants to drive from Boston to LA in 15 hours, it is mathematically impossible to avoid speeding.” After all, the drive from LA to Boston is about 3,000 miles, so to take only 15 hours would require an average of 200 miles per hour. Certainly other road trips are possible — but the particular one proposed here is not.

(Note: this is just an example that uses the logic to be employed; I am not suggesting that Romney has in any way broken a law.)

Especially in this inflamed campaign environment, one can imagine the frenzied responses. The Obama campaign might put ads out that say Romney wants to speed or is going to speed. Romney’s campaign might respond by saying the study is a “joke” and “partisan,” that he supports speeding laws and would never, ever speed, and it is ridiculous to suggest that he would. The Romney campaign and its surrogates might say that the analysts must be wrong because they don’t even know what his road plan is or which car he would drive. Besides, Romney never really said he wanted to go LA, he might want to go somewhere closer; he could get to LA without speeding if he took more than 15 hours; he could get somewhere else in 15 hours without speeding. And so on.

With a few substitutions, this is almost exactly how the tax debate has evolved. Substitute “the various tax cuts Romney has proposed” for “driving from Boston to LA;” substitute revenue-neutrality for “in 30 hours; substitute “tax increases on households with income below 200k and tax cuts for higher income households” for “speeding” and you have the basic story: Romney can’t do all of the tax cut proposals he has advocated, remain revenue neutral, and avoid taxing households with income below $200,000 or cutting taxes for higher income households.

My bet is that he’s not really going to speed, because he’s not really going to get anywhere close to LA.  (Were he to become president, there would be detours and roadblocks along the way, labeled “Congress.”  And with both “D” and “R” stickers on the signs, by the way.)  But for now he wants to keep up the illusion that he has this super-fast, flying race car that can magically and legally get the job done.  Maybe Romney’s tax plan is like the Batmobile.

83 Responses to “Is Romney Speeding–or Just Heading Somewhere Else?”

  1. comment number 1 by: Brooks / Gordon

    The Obama campaign has doubled down on the “$5 trillion tax cut” straw man claim http://www.youtube.com/watch?v=T14DT3xbFAk&feature=youtu.be, which was stupid to begin with and stupider to double down on, as I explain at http://economistmom.com/2012/10/romneys-tax-plan-what-we-learned-or-not-from-the-debate/#comment-91284

    Now Obama should reposition his argument as follows in his next debate, and this would take between 1:30 and 2 minutes if delivered smoothly:

    This is too important to let Governor Romney confuse people about so let’s get this perfectly straight, clear, and accurate: The only thing specific in Governor Romney’s tax plan is that he’ll cut tax rates, with most of the tax cuts going to the wealthy. The direct effect of that is $5 trillion added to the deficit so that wealthy people can pay a lot less in taxes. He claims he will make up all of that $5 trillion in two ways. One is a higher rate of economic growth, and one of the reasons our debt has grown over the last few decades is because of wildly optimistic expectations about the effect of lower taxes on growth rates, and we can’t afford to make that mistake again. And the other way he claims he’ll make up the revenue is by reducing tax deductions and credits, but he says absolutely nothing about which tax deductions and credits he’ll reduce, and here’s why — and this is from the non-partisan Tax Policy Center and the fact-checkers: He can’t avoid adding to deficits without increasing taxes on the middle class to make up for the lower taxes on the wealthy, because after he gives that big tax cut to the wealthy, there aren’t enough deductions and credits he can close to make up for all that lost revenue, so the wealthy will end up paying much less, and either the middle class will have to pay more to make up the difference, or deficits will grow, all so that the wealthy can pay less in taxes. Households making over $200,000 would pay less in taxes, and households making under $200,000 would have to pay more to make up the difference, or he would add to deficits that we’d all have to pay for later. That’s just math, and that’s the truth. Period.

    Of course, this should be gamed out. Romney perhaps would respond by saying essentially:

    First of all, other studies say that that study is wrong and that one was done by a former Obama Administration economist so it’s hardly non-partisan, but let me make this as clear as humanly possible: I will not seek — and in fact I would veto — legislation that would reduce the portion of taxes paid by the wealthy, and I will not increase taxes on the middle class, and even if — just for the sake of argument — IF it turns out that the only way to keep those commitments is to cut tax rates by something less than 20%, that’s what I’ll do, but I will NOT violate those commitments of NOT adding to the deficit, NOT reducing the portion of taxes paid by the wealthy, and NOT raising taxes on the middle class. Period.

    To which Obama should reply:

    Well, I expected Governor Romney to say something like that, because it does sound good, but, frankly, it’s very misleading about a very serious issue. First of all, the math is clear and not controversial. He can’t cut tax rates 20% and keep those commitments. Here’s what would happen: He would first get the tax rate reduction enacted, so the wealthy would get that big tax cut, and then it would be left to Congress to try to work out and actually carry out the closing of tax deductions and credits and other tax breaks. It’s possible Congress will actually make up for the lost revenue, and the only way they can do that is by increasing the tax burden on the middle class. Or Congress will gridlock and not pass those measures, or they would pass them, and then override them year after year so they wouldn’t go into effect just as they’ve done with measures like the alternative minimum tax, and the result would be higher deficits that everyone will have to pay back later, just so that the wealthy can get a huge tax cut.

    But there’s something else – something HUGE — that’s being lost (in addition to Obama’s credibility with many voters, I suspect) in Obama’s strategy of attacking Romney on the supposed “$5 trillion” tax cut, and it’s something Obama should be highlighting big-time: Romney’s plan to extend the Bush tax cuts for “the rich” (along with extending them — at least for now — for everyone else, which Obama supports as well). THAT is the big tax issue Obama can focus on while having the advantage of being true. And it’s simple, as Obama could explain:

    We have to bring down (projected) deficits (so our debt doesn’t grow out of control and eventually kill our economy and saddle Americans with a huge burden of debt repayment) and we have to make choices that reflect our values and good economics. I believe the Bush tax cuts should not be extended for the wealthiest Americans, and that their tax rates should go back up to where they were under the Clinton Administration when our economy was very strong and the rich did just fine along with most other Americans. Since the Bush tax cuts the rich have done much better than most Americans, and now we have a choice: We can ask the rich to go back to contributing more to help reduce deficits, or if we don’t — if Governor Romney gets his way — the middle class will have to sacrifice that much more to reduce deficits. Now, he essentially makes the argument of trickle down economics — that if we cut taxes on the rich, even if that means the middle class has to sacrifice more, all that extra money the rich have will trickle down to most Americans and also the deficit won’t grow. Well, that has been proven to be a false promise again and again, and I don’t think Americans will be suckered by it, frankly. Governor Romney’s priority is protecting the wealthy from going back to the Clinton era tax rates, even though that means the middle class has to sacrifice that much more. That does not reflect our values, and it is bad economics. My priority is the middle class. That is what is fair, and that is what will enable our economy to continue to grow and continue to bring unemployment down while also reducing deficits.

    Please note: all of the above is just my view in terms of political strategy. I’m not advocating here for either candidate or for either candidate’s tax policy objectives.

  2. comment number 2 by: Patrick R. Sullivan

    ‘He can’t avoid adding to deficits without increasing taxes on the middle class….’

    Neither can Obama, and he’s as much as admitted it.

  3. comment number 3 by: AMTbuff

    This election season seems to be eradicating non-partisan analysts, or at least their reputations for being non-partisan. It seems that nobody is disciplined enough to stay out of the partisan fight.

    There is one shining exception: Gene Steuerle. His Government We Deserve blog has scrupulously avoided the partisan talking points of both sides.

  4. comment number 4 by: SteveinCH

    Brooks,

    No offense but your last Obama argument is a wee bit silly. You are talking about less than 20% of the cost of the “Bush tax cuts” And of course, the entirety of that argument ignores the spending side of the equation. The difference between the spending levels in the Romney and Obama budgets is far larger than the entirety of the “Bush tax cuts,” much less those only on high income taxpayers.

  5. comment number 5 by: Brooks / Gordon

    Steve,

    You make an important point, but I disagree that it makes my suggested argument for Obama at all silly.

    The point of that argument wouldn’t be that the additional revenue from “the rich” would mean recovering most of that lost from the “Bush tax cuts”, nor that it does more to reduce deficits than would lower spending under Romney. Your premise seems to be that one or both must be the case for that argument not to be silly. I disagree. The amount of money is still substantial, and thus still represents a substantial trade-off with substantial effects on most Americans in terms of taxes paid by the middle class and also, in the broader sense, in terms of the combination of taxes paid and spending benefiting the middle class. I don’t see why someone making a very plausible point about a substantial trade-off (”the rich” being better off and the middle class worse off under Romney, and vice versa under Obama) would be considered silly.

  6. comment number 6 by: Steveinch

    Brooks, it’s simple to me. The premise of the rich being better off and others being worse off entirely depends on what one does on spending.

    To make ir relatively simple. Lets make a few assumptions.

    1. In the medium term, current policy tax receipts will be 19 percent of GDP.

    2. The change proposed by President Obama will take that 19 percent to 19.5.

    3. The President currently proposes to spend about 23 percent of GDP.

    4. A sustainable deficit is 3 percent of GDP.

    Note the numbers don’t have to be these. The point remains.

    As I understand your argument, you are saying that the tax increase on the rich lowers the tax increase required on the middle class from 1 percent to 0.5 percent but that presupposes 23 percent of spending in GDP. Lets suppose Romney proposes spending 20 percent of GDP. If that’s his plan, no tax increase on the middle class is needed. In fact taxes could decline for some or all.

    Hence the point that focusing on taxes only is incomplete

  7. comment number 7 by: Brooks / Gordon

    Steve,

    My response is the same. It applies to your second comment just as it does to your first. I’m not rejecting your premise re: lower spending and impact on middle class taxation. I’m disputing your view that anything you’ve said renders the point I suggest for Obama invalid, let alone, as you put it, silly. See my prior comment for explanation.

  8. comment number 8 by: Brooks / Gordon

    Steve,

    Just to illustrate a bit, it’s like the following (using a $1 trillion figure just for illustration, and putting aside the debate over dynamic effects).

    We can reduce projected deficits by $1 trillion over 10 years if the tax rate on high income-earners goes back to the Clinton-era level. Alternatively, we could achieve that $1 trillion in deficit-reduction by making the middle class sacrifice that $1 trillion by paying additional taxes and/or by losing spending that mostly benefited them. Obama prefers the first approach, making “the rich” contribute more so the middle class doesn’t have to sacrifice more. Governor Romney chooses the opposite approach.

    That’s it. It’s a trade-off, and one that involves a significant dollar amount and thus effects on people. Again, I don’t see what you see as “silly”.

  9. comment number 9 by: SteveinCH

    Brooks,

    Alternatively we could spend $1 trillion less over the next 10 years for the same net effect.

    That’s the part you keep missing. I don’t expect you to change your mind and I’m not going to keep debating it.

    Take care.

  10. comment number 10 by: Brooks / Gordon

    Steve,

    I don’t know why in the world you think I “keep missing” something that I’ve already acknowledged. Sure, if $1 trillion less comes from “the rich”, then one way to achieve a given deficit level is to tax the non-rich $1 trillion more, and an alternative is to reduce spending by $1 trillion, or some combination. No kidding. I guess you still somehow think I’m missing that, even though I’ve acknowledged it again.

    What point you are making still evades me.

    Again, I stated in my suggested point in my initial comment:
    We can ask the rich to go back to contributing more to help reduce deficits, or if we don’t — if Governor Romney gets his way — the middle class will have to sacrifice that much more to reduce deficits.

    And as I’ve said to you, the point is that if $X less revenue comes from “the rich”, then, to hit a given deficit level, the middle class (actually, all “non-rich”) would have to sacrifice more via paying more taxes and/or reductions in spending from which they benefit.

    You still won’t tell me why it’s invalid or “silly” to point out that trade-off. It’s not like the amount involved is inconsequential, and there is at least very arguably a trade-off (unless one expects extremely strong dynamic effects) of either more sacrifice by “the rich” and less sacrifice by the non-rich or vice-versa. So I still don’t know what it is you’re disputing, let alone what you consider “silly”.

    I suppose you’ll just ignore what I’m saying again and just repeat that I’m “still missing” that deficit-reduction can occur on the spending side as well as on the tax side.

  11. comment number 11 by: SteveinCH

    Brooks,

    Is it your contention that only the non-rich benefit from government spending? Or that all government spending has significant benefits to us as a populace?

    If not, you argument above is still incorrect.

  12. comment number 12 by: Brooks / Gordon

    Steve,

    Of course I don’t think that only the non-rich benefit from government spending. But I believe your logic is incorrect. My argument isn’t dependent on such a premise. Apparently your argument is dependent on the presumption that none of the spending that would be cut benefits any non-rich at all.

    Leaving aside dynamic effects, to hit a given deficit level (or achieve a given level of reduction in whatever future deficits would otherwise be), if less revenue comes from “the rich” due to some choice in tax policy, then the only way that the non-rich won’t have to sacrifice more is if (1) they don’t pay more in taxes as a result, and (2) there are no cuts in types of spending from which they would have benefited. Why is this? Because (again, leaving aside dynamic effects), the non-rich get none of the benefit of lower taxes on the rich, so if they are made to sacrifice because at least some of the spending that is cut would have benefited them, then they are sacrificing more to make up for the gain of “the rich”, even if “the rich” also miss out on some benefit due to those cuts in spending. To illustrate, if Al, Bob, and Charlie have dinner together periodically, and up until now Al has chipped in $70 and Bob and Charlie only $10 each (total for the three $90), and if we even assume that the value of the food consumed is distributed evenly (which I assume isn’t even close to the case re: the distribution of government spending between “rich” and “non-rich”), meaning each eats $30 worth of food, what happens if Al suddenly chips in only $40? Now they have a total of $60 of food to divide evenly, so now they each eat only $20 of food, meaning they each lose $10 of food. So, have Bob and Charlie been made to sacrifice due to the reduction in Al’s contribution? Yes. Does this answer change simply because Al also sacrifices some food? No. And who benefits from the reduction in Al’s contribution? Only Al. So Al is the only one who benefits from his contributing less, and Bob and Charlie are made to sacrifice because of Al’s reduction in contribution.

    The only way your argument makes sense is if we presume that Al will eat (pardon the pun) all of the loss in financing, which in this illustration happens to me he eats nothing so that the entire $60 goes to $30 of food for Bob and another $30 for Charlie. But I assume you don’t really make such a presumption re: cuts in government spending — that the sacrificed spending would be a sacrifice ONLY on the part of “the rich”.

    So, unless I’m missing something, you’re logic is twisted and invalid.

  13. comment number 13 by: Patrick R. Sullivan

    To put it in terms Bill Gale and EconMom might be able to understand, if the speed limit is 50mph and we drive to LA from Boston in 60 hours, is it ‘mathematically impossible’ for us to get to the destination faster if we raise the speed limit to 70MPH?

  14. comment number 14 by: SteveinCH

    See Brooks, that’s a totally fair argument but it isn’t the one you initially made. You made a 1:1 argument about tax burdens. Now, in effect, you say “well but the burden on the nonrich will go up some” whereas before you argued “the nonrich will have to sacrifice to the same dollar degree the taxes of the rich are not raised.”

    Totally different argument. If your point is that failing to raise taxes on group A will result in some sacrifice over some period of time by group not A, I agree completely.

    If the current argument is what you intended to make initially, I apologize for misreading it.

  15. comment number 15 by: Brooks / Gordon

    Steve,

    You are apparently focusing now on a fairly minor bit of suggested rhetoric I included in the suggested Obama argument — “that much more” — while also crafting a straw man — that my argument implied only a higher tax burden for the “non-rich”, whereas it actually referred quite clearly and repeatedly to “sacrifice”, which I’ve explained repeatedly to you includes lost benefit via spending cuts.

    The last argument in my suggested arguments for Obama was this, copied in entirety (so you can’t claim I’m taking something misleadingly out of context), with bolding here for emphasis of what is pertinent.

    We have to bring down (projected) deficits (so our debt doesn’t grow out of control and eventually kill our economy and saddle Americans with a huge burden of debt repayment) and we have to make choices that reflect our values and good economics. I believe the Bush tax cuts should not be extended for the wealthiest Americans, and that their tax rates should go back up to where they were under the Clinton Administration when our economy was very strong and the rich did just fine along with most other Americans. Since the Bush tax cuts the rich have done much better than most Americans, and now we have a choice: We can ask the rich to go back to contributing more to help reduce deficits, or if we don’t — if Governor Romney gets his way — the middle class will have to sacrifice that much more to reduce deficits. Now, he essentially makes the argument of trickle down economics — that if we cut taxes on the rich, even if that means the middle class has to sacrifice more, all that extra money the rich have will trickle down to most Americans and also the deficit won’t grow. Well, that has been proven to be a false promise again and again, and I don’t think Americans will be suckered by it, frankly. Governor Romney’s priority is protecting the wealthy from going back to the Clinton era tax rates, even though that means the middle class has to sacrifice that much more. That does not reflect our values, and it is bad economics. My priority is the middle class. That is what is fair, and that is what will enable our economy to continue to grow and continue to bring unemployment down while also reducing deficits.

    Your response was:
    Brooks,

    No offense but your last Obama argument is a wee bit silly. You are talking about less than 20% of the cost of the “Bush tax cuts” And of course, the entirety of that argument ignores the spending side of the equation. The difference between the spending levels in the Romney and Obama budgets is far larger than the entirety of the “Bush tax cuts,” much less those only on high income taxpayers.

    You then proceeded with responses that weren’t arguments re: relative size but continued to emphasize that spending could be reduced as opposed to taxes raised on the “non-rich”, which I explained does not refute my argument that the “rich” paying less means the “non-rich” sacrificing more.

    I repeatedly explained to you that, unless one makes the assumption that cuts in spending would ONLY adversely affect the rich, then cuts in spending would adversely affect the non-rich, along with the rich to some extent, albeit probably a much lesser extent. As I’ve explained, that means a tax cut that benefits ONLY the rich, and sacrifice (via spending cuts) to make up for that benefit to the rich (the revenue loss) that is at least very substantially shared by the non-rich, and probably borne mostly by them.

    Re: If your point is that failing to raise taxes on group A will result in some sacrifice over some period of time by group not A, I agree completely.

    Basically, yup. For the same deficit target, less revenue from group A means more revenue from group not-A and/or lower spending that in this case is not only borne in part by not-A, but borne mostly by not-A, so it means more sacrifice by not-A one way or another (again, ignoring any arguments re: dynamic effects).

    I never indicated that I was talking about impact on respective taxes, as you suggest (”a 1:1 argument about tax burdens”). I did include a bit of imprecise rhetoric (”that much more”), so my apologies for not making that clearer (although, again, I think the lion’s share of the sacrifice on the spending side would be borne by the non-rich, so it’s not far off) but I don’t think the matter of exactly 1:1 has been the thrust of your argument in at least most of this exchange.

    Thanks for apologizing. No problem.

  16. comment number 16 by: Vivian Darkbloom

    Most analogies are imperfect. This one is no exception. In fact, it is much less perfect than most.

    How many times have we read here, at the TPC and elsewhere, that Romney’s plan is “mathematically impossible”? Or, that Romney’s math “doesn’t add up”? The clear suggestion here is that the TPC, the OMB, the JCT or any other group is actually able, *as a matter of arithmetic* to make that case. Revenue scoring is *not* a matter of arithmetic. Math is the least important element of the process. Rather, the outcome depends on the many, many, assumptions and imprecise estimates that are made before the *arithmetic* is even applied. Calculating the distance to Los Angeles and the speed it would take to arrive there (if at all) in a given time can be solved as a matter of arithmetic. The feasibility of Romney’s tax plan certainly cannot. If, for example, the TPC would estimate that eliminating a particular “tax expenditure” would generate $50 billion in additional revenue, is that a matter of “arithmetic” or is it merely an imprecise estimate?

    Thus, I’m lead to wonder why the TPC and Mr. Gale and Economist Mom persistently argue that this *is* simply a matter of arithmetic and nothing else. Again, the suggestion is that the outcome of the TPC model which incorporates their own estimates and assumptions (largely unseen by the public) is not only susceptible to mathematical accuracy, but that it actually is. That is no small amount of hubrus. Is this self-deception or is it an over-the-top defensive response to legitimate criticism?

    When Mr. Gale suggests that his analogy is the correct manner to assess the TPC’s “math” he’s not only misleading himself and other “tax geeks”, but especially the general public.

    I would have been much less disappointed with the TPC analysis of Romney’s tax plan had they admitted this from the start rather than claiming, as here, that it is a matter of “arithmetic”. My reaction would likely have been much less dis-favorable had they been very clear that their analysis, as any other, is merely an estimate that has quite a high margin of error.

  17. comment number 17 by: Brooks / Gordon

    Vivian,

    I’m not sufficiently familiar with all the assumptions and other aspects of the TPC analysis, so let me ask this as a hypothetical.

    Suppose an analyst does the following in reaching the kind of conclusion TPC reached: that the tax cuts specified in a candidate’s plan would bring down revenue among tax units $200k+ more than could be recouped by eliminating tax deductions, credits, etc. (other than those the candidate with that tax plan has indicated he would not reduce).

    1. Observes the total deductions, credits, etc. (for applicable provisions — those not apparently put off the table by the candidate) taken in recent years by tax units $200k+, and makes an assumption (based on that recent history) favorable to the candidate re: dollars of such deductions (etc.) to project the dollars deducted in the future by that segment, let’s say not even considering the likelihood that less would be deducted at the new, lower tax rates because there is less incentive (this assumption would be very favorable to the candidate).

    2. Multiplies the lower tax rates for the $200k+ segment by the dollar amounts of deductions (etc.) to calculate the upper bound on how much could possibly be recouped by eliminated the deductability.

    3. Finds that this upper bound in #2 is less than the revenue “lost” by lowering the tax rates on the $200k+ segment, even after applying an optimistic assumption re: dynamic effects (revenue feedback effects), meaning that it is impossible to recoup all the revenue lost from the rate cuts for this segment by eliminating deductions, etc., for this segment, and therefore less revenue will be collected from this segment, and therefore, to be revenue neutral, more revenue must be collected from the under $200k segment, and the portion of total (income) taxes paid by the under $200k segment would thus increase.

    4. Says that, based on math, the candidate’s plan cannot provide those tax rate cuts AND be revenue-neutral AND avoid increasing the portion of taxes paid by those under $200k.

    What would be necessarily wrong with the above — again, assuming all the assumptions I’ve stated above are clearly favorable to the candidate?

    My point is that, while assumptions can be very imprecise, sometimes analysts can reasonably establish upper bounds via assumptions very favorable to the candidate’s claims, and still conclude that it is, realistically speaking, impossible for his plan to do everything he claims.

  18. comment number 18 by: Vivian Darkbloom

    “I’m not sufficiently familiar with all the assumptions and other aspects of the TPC analysis, so let me ask this as a hypothetical.”

    Brooks,

    You’ve really answered your own question with your question.

    If this was simply a “matter of math” you would not need to be familiar with “all the assumptions and other aspects of the TPC analysis” because in “simple questions of arithmetic” there aren’t any. In essence, it would be like saying, “assuming that 3 equals 2, then 3 plus 3 equals 4 and therefore the Romney plan, which says it is 6, is mathematically impossible”.

    The TPC has indicated that “as a matter of math” the plan is impossible basically because taking away certain tax expenditures (not all, but the ones the TPC decided to include) cannot pay for a reduction in tax rates, would not be a net tax increase on “the middle class”, etc. Even if this were simply “a question of math” (which it isn’t), one cannot check even the arithmetical part of their analysis because they have not released it. And yet, the TPC has the audacity to blame *Romney* for not releasing sufficient details of his plan. Why won’t the TPC release the details of their analysis to include, for example, at a minimum, the numerical value of each tax expenditure they scored?

    To give you a very small example of how this revenue scoring works (or doesn’t) I did some research on the value of a tax expenditure the JCT calls “exemption of capital gains at death” and what the OMB in a similar analysis calls “step-up in basis at death”. These are two different federal agencies that come up with revenue scoring on tax expenditures and frequently come up with vastly different numbers. In the above example, the JCT number was approximately $58 billion for 2015 and the OMB number was about $38 billion for the same year. I talked to the guy at the OMB responsible for preparing that number. He told me how hard it is to come up with a precise number and why those numbers often deviate so much from other estimate sources. He and the JCT are also clear that these numbers are not *revenue* estimates and when used for that purpose are very imprecise. What effect did the TPC assumption on this item have in their analysis? You don’t know, but I do. I know only because I pressed Mr. Gale in private correspondence to provide it. I don’t feel at liberty to disclose it here, but it does have an effect on their bottom line. It is disappointing to me that you don’t know that and the American public at large does not know that or the many, many other details that went into the TPC’s “simple matter of arithmetic”.

    Now, feed the above into the second paragraph of your comment. It is possible for those objectives to be met simultaneously if one makes different assumptions regarding which tax expenditures to use and how they are scored, what to include in the baseline (the TPC devised their own), how to perform the distributional analysis, etc. To claim that a particular plan is “mathematically impossible” simply because it does not meet a particular group’s assumptions fed into their own micro economic simulator is not just hubrus, it’s out and out dishonesty, particularly as repeated here. Sorry to be so frank about it, but I’m following our President and Vice President’s cue that we’re being too polite.

    And, of course, we’ve not even gotten to the issue of the micro and macro analysis that needs to go into revenue scoring.

    When the TPC says that it is “mathematically impossible” for Romney’s plan to meet the stated goals, in essence, they are saying that there is a 100 percent probability that it won’t. This is the way they presented their “findings”, without even a suggestion that perhaps the estimates produced by their “microeconomic simulator” are not exactly science. On the other hand, a statement that a plan is “possible” does not suggest that degree of certainty, at least to my ear. I could charitably put that way of putting things in the original report as naive, but now that that “simple math” meme has become a major campaign theme, to repeat that line here is simply inexcusable.

    “Simple arithmetic” does not involve any margin of error. Have you ever heard the TPC admit that, well, there might just be something called “margin of error” at play here?

    Coincidentally, I’ve now come across the following at the Tax Foundation written by William McBride. I don’t check that site very often. The Tax Foundation strikes me as being somewhat partisan (on the conservative side). But, on this point, McBride is spot on.

    http://taxfoundation.org/blog/how-far-we-are-enlightenment

  19. comment number 19 by: Patrick R. Sullivan

    Following up on Vivian’s remarks, it was amusing to hear Joe Biden, last night, decrying the ‘guarantees’ lacking in Paul Ryan’s arguments.

    He also said some amazing things himself about how the 1986 Tax Reform Act came about. Things we here know to be false thanks to Jim Glass’s exposition a few posts ago.

  20. comment number 20 by: Brooks / Gordon

    Vivian,

    I don’t know enough to comment on your charge that TPC has been significantly insufficiently open about the assumptions, methodology, and calculations of that analysis. So the following is not meant as criticism of your criticism.

    First, if the TPC paper is/were wrong in it’s conclusion that Romney’s plan (combined with his other promises and strong indications re: what he would put off the table) can’t deliver on all promises, assuming (as Romney himself subsequently stated*) that not raising the taxes paid by those with “middle income” means not raising taxes paid by tax units with income at or under $200k, then why did Martin Feldstein apparently need to use $100k rather than $200k to make it all work out?

    Second, I don’t know what review and approval process there was at TPC for this paper, but I’m assuming that Director Donald Marron reviewed the methodology, assumptions, etc. I have the highest regard for Donald Marron in terms of expertise, integrity, and objectivity (avoidance of partisan bias). By the way, profile of him starting at 1:38 of this video http://www.bloomberg.com/video/the-taxing-work-of-staying-non-partisan-on-taxes-BgJsyXlnS9qZynZIZc4zCw.html

    * Romney said on ABC’s This Week program that he saw middle income as topping out at either $200k or $250k, and he did so in the context of Q & A on his plan and on the TPC report and on Feldstein’s WSJ Op-Ed.

  21. comment number 21 by: Vivian Darkbloom

    Brooks,

    Judging from your last comment, there seems a lot that you don’t know. And yet, you seem quite willing to accept the TPC’s “analysis” and their assertions that this is a “simple matter of math” without having those necessary details. Why is that? Is is because you want to believe it?

    I agree wholeheartedly with your statement that Don Marron is, also, normally, in my experience, a very objective and conscientious person. I think he personally tries quite hard to be non-partisan. I doubt he has an agenda of any kind. I’ve praised his work more than once here. He has responded to a few of my inquiries in what I believe to be good faith. Alas, in this case, it is my understanding that he was not responsible for the report in question. I have absolutely no idea of the extent to which he may have reviewed or approved that report before it went out, but in this particular case I think the manner in which the assumptions were made and the report was worded showed extremely bad judgement. Despite all his positive qualities, Don Marron has to bear part of the responsibility for that.

    Regardless of Marron’s seemingly impeccable character, I think the TPC really screwed up on this one. It is easy to understand the inclination of a Director of the TPC to come to the defense of the work of “his people” when they are subject to criticism, but in this case I think that defense goes too far. The public interest needs to go first here. Mr. Marron would have been much better off, and the reputation of the TPC would have been better preserved, if he had insisted, for example, that the initial report be a little less “certain” about their conclusions as the nature of this type of work should dictate. An honest report would have admitted from the get go that this revenue scoring stuff is simply not as precise as they’ve led the public to believe and certainly not that it is a “simple question of arithmetic”. There is a very large margin of error involved and I believe the Romney plan is within that margin even if we work from the TPC’s final numbers. You don’t get that though from reading the TPC report or the information they have subsequently “channelled” through friendly sources such as Ezra Klein at WAPO. They should have anticipated that this would have been seized upon for partisan political purposes. Their subsequent statements on the subject (e.g; the FAQ document issued later) were much too little, and too late. They’ve backtracked somewhat from that original report but each time they do so they claim that the basic conclusions are are not effected. When doing so, they take each adjustment separately and not cumulatively and claim it does not affect the outcome.

    I see absolutely no excuse for the TPC to not reveal more details behind their study that would help the public better understand what went into (and out of) that analysis. The stakes are just too high to merely be concerned about the reputations and the pride of a couple of TPC staff members and that strikes me as what is going on here.

    As I indicated above, I see absolutely no excuse (other than personal pride and avoiding potentially more public review and criticism) for the TPC to not disclose more of the details that went into their analysis. And yet, they have the audacity to criticize Romney and Ryan for not revealing “more details”. I recently posted here an observation on the last point by Gene Steuerle who is associated with the Urban Institute which in turn is a joint venturer of the TPC. If only the TPC leadership had taken his sage words to heart earlier.

    What I find most disappointing is the continuing insistence, primarily by Bill Gale, that this whole thing is a “simple matter of arithmetic”. That’s simply not true and of course its a line that has enthusiastically been picked up on for partisan purposes in a major way in this political campaign.

    As for Feldstein and others, they have, unfortunately, been presented with the task of disproving an analysis the details of which they are not privy to. There are any number of scenarios in which the Romney plan could “work”, but, frankly, if someone is going to assert that it is “mathematically impossible”, the burden should be on them to show that, and to show all the details of their work. The TPC has failed to meet that challenge. I find it inexcusable and irresponsible.

  22. comment number 22 by: Brooks / Gordon

    Vivian,

    Re: Judging from your last comment, there seems a lot that you don’t know. And yet, you seem quite willing to accept the TPC’s “analysis” and their assertions that this is a “simple matter of math” without having those necessary details. Why is that? Is is because you want to believe it?

    I’ve given you the main reasons I’m inclined to believe it. And no, it’s not because I want to believe it. I think my comments over time on this blog show my even-handedness and objectivity with regard to whether or not one side or the other is or seems to be misleading people.

    Re: your response re: Feldstein, I find it quite inadequate. Your odd presumption is that Feldstein is confined to the content of TPC’s report. Why do you presume that Feldstein not only didn’t do his own analysis, but couldn’t?

  23. comment number 23 by: Brooks / Gordon

    For reference:

    http://online.wsj.com/article/SB10000872396390444327204577617421727000592.html

    and

    http://gregmankiw.blogspot.com/2012/09/a-reply-from-martin-feldstein.html

    Doesn’t look to me like Feldstein was confined to content (or lack of additional content) from the TPC report.

  24. comment number 24 by: AMTbuff

    Patrick, Biden’s most misleading argument was that Ryan’s plan represents a cut from current benefits in the long run. We all know that the current benefits will bankrupt the government in the long run. In other words, Biden’s baseline is a fantasy. Maybe he’s too dense to realize that, but Ryan knows better.

    I don’t know why Ryan didn’t make the point that what cannot continue will stop. Therefore it’s not a viable baseline for any comparison. Only viable plans should be compared.

  25. comment number 25 by: Steveinch

    He did make that point at least I think he did but not loudly or vigorously enough

  26. comment number 26 by: Brooks / Gordon

    AMT,

    I have a question that perhaps you answered in a previous discussion we had, but if so, please forgive and indulge me by answering again. (I searched a bit for a previous discussion we had, but couldn’t find it, so if you happen to have a link or can easily get it, please provide.)

    My question does not pertain (at least not directly) to our difference of opinion re: the use of baselines as a reference point for discussing cuts in spending that is otherwise projected to become unsustainable.

    Rather, my question is:

    On what basis you say that Medicare (or Medicare plus Social Security, or whatever your argument(s) is/are) is unsustainable, or as you put it this time, that they will “bankrupt the government in the long run”, and that they “cannot continue [over some long term]“?

    Per the CBO Long Term Budget Outlook, Medicare is projected to cost in 2037 6.0% of GDP (Extended Baseline Scenario) or 6.7% (Alternative Fiscal Scenario), per Table 1-2, and even (eyeballing the chart) about 11% or 12% by 2085 (and who knows what might bring that projection down very substantially in terms of science or anything else, or perhaps bring it up), per Figure B-1. http://www.cbo.gov/sites/default/files/cbofiles/attachments/06-05-Long-Term_Budget_Outlook_2.pdf

    Again, please specify what you are saying is unsustainable — Medicare alone, or some combination of programs.

    And please tell me what you mean by “unsustainable” (etc.). Are you saying that the program(s) is/are literally unsustainable, meaning we would hit the inflection point on the Laffer Curve before we could raise enough revenue to pay for the program(s) if we spent money on little/nothing else? Please tell me what you mean.

    As a note, I don’t know if CBO has changed their past practice of using the same GDP projection for both fiscal scenarios (i.e., regardless of levels and composition of spending and taxation). They discuss such dynamics starting on page 34 of the PDF, and seem to be saying that they adjust the GDP projections for these factors, but I only see one set of projected GDP numbers in the data (from just a quick check; perhaps I missed it), so I don’t know which it is. In any case, these scenarios involve spending beyond just Medicare or all entitlements, and make assumptions regarding revenues and thus debt levels, so (as far as I can see) it is hard/impossible to apply such projected effects on GDP to the question of sustainability of Medicare or of all entitlements per se.

  27. comment number 27 by: Vivian Darkbloom

    Brooks,

    A friend of mine recently told me about a recent exchange he had with his 12 year-old grandson. The grandson said “Papi, are you an atheist”? My friend replied, “No, I’m an agnostic”. The grandson then asked, what’s the difference”. My friend explained it as follows: “The way I see it, an atheist is pretty much like a true believer. An atheist believes with 100 percent certainty that God does not exist. A true believer believes with 100 percent certainty that God does exist. An agnostic is someone who falls in between those two extremes”.

    I think this is like the TPC saying it is (as a matter of “simple arithmetic”) *impossible* for Romney’s proposal to meet his goals. What they really meant, if you read the report carefully, is this: “if you accept all of our assumptions and our partially undisclosed baseline, and if you further accept the results of all of our (largely undisclosed) estimates, the math does not add up”. Those are a couple of big “if’s”—the “simple arithmetic “is quite secondary and comes only after those big if’s are swallowed. This has been grasped upon by Democrats to simply mean that Romney’s plan is impossible and “his math does not add up”. Unfortunately, Bill Gale has recently been reinforcing that campaign line by repeating the same thing, without all the necessary caveats. He’s even invented a new misleading analogy to reinforce that. In other words, the media and key TPC personnel have conveniently forgotten all about those assumptions and estimates. They are like those atheists who say it is “impossible”, that is to say, that there is a zero percent chance that it can work.

    Those who have protested the TPC report, in my view, have not presented their case like true believers, but rather as agnostics. They have not argued it will work, but that it can. There is a huge difference here.

    I’m not here to defend Feldstein’s rebuttals. I think he made a good faith effort to prove that this can work and his effort was to some extent flawed. Harvey Rosen did a better job and so did the Tax Foundation. There is no need to limit your comments to Feldstein, although I can understand how you might feel that would be convenient.

    Several persons who have criticized the TPC report have fallen into the trap of accepting the TPC’s final numbers and then trying to work from those without having the benefit of knowing what is behind those numbers. The TPC then takes those
    Proposed adustments individually and basically says “if I accept your adjustment, it still won’t work”. In doing so, however, they pointedly refuse to disclose the original number they had used. So, if someone were to propose an adjustment of, say $20 billion on one item and the TPC had originally used $40 billion in *their own* analysis, the might agree to the former without ever revealing the latter. This is a game of hide and seek.

    The original comment I made was to question whether it is accurate and appropriate for people (especially the authors of that TPC report) to refer to this issue as a matter of “simple arithmetic” playing directly into misleading campaign rhetoric. You did not answer that, so I will pose it to you again directly:

    1. Is this a matter of “simple arithmetic” and is it appropriate to say it is?

    Also, you’ve been dancing around this one:

    2.Should the TPC release to the public their detailed estimates and their own “arithmetic”? If not, why not?

    Apropos Don Marron, I think he got it more or less correct in his latest TPC blog post (also posted on his own blog) regarding the Dem’s claim that he is proposing a $5 trillion tax cut, which even you have admitted is preposterous.

    Marron correctly refers to the TPC’s numbers as “estimates” and he admits that the TPC really can’t know and does not know “as a matter of simple arithmetic” that what Romney is proposing would ultimately constitute a net tax cut, be neutral, or constitute a tax increase (or meet simultaneously his other stated criteria). That’s a far cry from “as a matter of simple arithmetic, Romney’s plan can’t work”. But, that’s the line being passed here and elsewhere by other folks at the TPC.

  28. comment number 28 by: AMTbuff

    Brooks, the unsustainability of Medicare and Medicaid is a result of their structure: allowing recipients to use as much health care as they want at zero or low incremental cost. Private insurance, especially as required under ObamaCare, has the same structural flaw. Health care costs so much because it’s free (apologies to P.J. O’Rourke).

    It’s impossible to pay for all the health care people will demand when it’s free (zero marginal cost to the patient). Sustainability requires structural reform. Reform must give patients and their families financial incentives to spend the taxpayers’ money wisely.

    Progressives want the government to ensure top-quality health care for all at low cost or free. That’s simply not possible. The government can’t even achieve that goal for K-12 education where costs are highly predictable and fairly uniform. The health care challenge is much worse, given that a single patient can incur more than $1M of cost on procedures that might or might not succeed.

    An expert in this field suggested privately to me a system in which the government would pay for a basic insurance policy for everyone capped at say $50,000 lifetime expenditure. If you wanted a higher cap, you would have to pay the extra premium for it. That idea might not be politically or practically feasible, but conceptually it would limit the government’s cost and give patients a motivation to conserve their finite coverage.

    Any reform which does not give patients very strong incentives not to incur health care expenses is unsustainable.

  29. comment number 29 by: AMTbuff

    Off topic, I recommend that everyone here listen to Gene Steuerle’s comments last week from the 7:15 mark to the 16:40 mark of this Tax Analysts seminar:

    http://www.tax.org/www/conferences.nsf/KeyLookup/GBRO-8XNLVD/$file/Tax%20Analysts%20Audiocast%20101212.mp3

    Gene comes back in the Q&A at 1:43:50 through 1:46:00
    Listen to that segment twice, because it’s an important point that’s counter-intuitive: Since the middle class has most of the money, bigger governments necessarily have more regressive taxation. Gene thinks that this relationship works in both directions: that increasing progressivity will shrink government by shrinking revenues.

  30. comment number 30 by: Brooks / Gordon

    AMT,

    Apparently you misunderstood my question.

    I’m not asking you about why you think Medicare and Medicaid are as expensive as they are and will be, let alone what you think would contain costs.

    I’m asking you:

    (1) What program(s) are you referring to as “unsustainable” and “cannot continue” and “will bankrupt the government” (Medicare alone? Or Medicare + Medicaid? Or those + SS?)?

    (2) What do you mean by “unsustainable” and “cannot continue” and “will bankrupt the government”? Do you mean that, at some point, under roughly current policies, it would literally be impossible to fund that/those programs regardless of how high a priority it/they were (i.e., if we spent as little as possible on everything else), or do you mean something else?

    (3) On what projections do you base that conclusion, and why do those data support your conclusion? (And please note the data in my comment and any other data you deem relevant in the CBO report.)

    That’s all I’m asking. Presumably you know what you’re referring to, what you mean, and what your basis is. So please tell me.

  31. comment number 31 by: Brooks / Gordon

    Vivian,

    I’m not here to defend Feldstein’s rebuttals. I think he made a good faith effort to prove that this can work and his effort was to some extent flawed. Harvey Rosen did a better job and so did the Tax Foundation. There is no need to limit your comments to Feldstein, although I can understand how you might feel that would be convenient.

    First, regarding the “convenient” snark, let me try (perhaps in vain) to dispense with some assumptions/suspicion you may have. I realize the typical political blog commenter is (1) at least somewhat (and usually very) hyperpartisan, meaning not only that he is advocating for one “side”, and is not only quite biased, but will also spin for his side (knowingly serving up half-truths, cherry-picking information, becoming deliberately evasive when confronted with a challenge he doesn’t feel confident he can refute, etc.), and (2) so insecure that he won’t admit being wrong and will try to avoid refutation of an argument/claim of his via many of the same methods mentioned in #1. I am neither. On many, many, many occasions on blogs (and elsewhere) I’ve challenged the validity arguments made in support of policies that I want or even for which I am advocating. I am just as eager to do so with what I see as an invalid argument supporting some policy or whatever as I am with an opposing argument. And I’m never deliberately evasive as some defensive measure (ideological, political, or personal). In short, I engage in good faith. I do my best to be vigilant against any bias, I do my best to respond to questions (except occasionally when someone is clearly out to lunch, clearly not engaging in good faith himself, etc.), and I do so honestly and without any deliberate spin, “convenient” cherry-picking, etc.

    Re: Harvey Rosen or others who have (per you) provided analyses with conclusions contrary to TPC’s, I am not familiar with their analyses. Now you can fault me for not taking the time to review more, but that is a criticism that seems inapplicable to the question I posed to you re: Feldstein, and inapplicable to my inference that what Feldstein did is a reasonable reason for a layperson such as me to consider it likely that TPC’s conclusion is valid. As with most matters requiring expert analysis, laypeople (and we’re all laypeople regarding most such things) usually rely to a large extent on expert analysis because we lack the expertise and time to do “peer review” (since we’re not peers) and assess the quality of methodology, assumptions, raw data, calculations, and conclusion. One very sensible element of using experts is to check if even experts supporting some policy or “side” are (explicitly or implicitly) acknowledging some fact or assumption or conclusion that is contrary to their agenda, or seem to be so indicating, as (in my view) is the case with Feldstein not finding a way to refute TPC’s conclusion, which pertained to that $200k limit on “middle income”. That’s why, several years ago, when I wanted to get a sense of how likely (or not) it is that the claim that “tax cuts generally/always increase revenues,” I searched for prominent conservative, pro-tax-cut economists opining on the matter. I found a whole bunch, and they all explicitly rejected that claim. That was very persuasive to me, and I think that’s very sensible. Needless to say, although analysis supporting some policy can be valuable, it generally lacks the credibility of this sort (If some tech expert at Company X admits that Company Y’s product is superior on some dimension that I have to rely on some expert to assess (and with which I lack the ability to critique how an expert reached his conclusion), that is generally more credible than if he tells me that his own company’s product is superior. That’s just common sense. I’m assuming Rosen and others you’ve mentioned are supportive of Romney’s tax plan and/or of Romney’s candidacy. Please correct me if that’s not correct.

    And you seem to be letting Feldstein off the hook, perhaps because it’s “convenient”. Feldstein is (I think) Romney’s most prominent expert defender on this matter, and (I think) had the most prominent venue to seek to invalidate TPC’s conclusions (WSJ Op-Ed page). And I assume he’s very capable and sufficiently motivated and approached the matter diligently as someone who I presume cares about his reputation and his cause. Don’t you think it is likely that, if he could make the case using $200k he would have done so – either in his initial piece or in response to TPC’s response to it, in which they say that his piece fails to refute their conclusion because (among other things, but most notably per TPC’s response) he used $100k instead of $200k, or even to this point, after Romney stated on national TV that his cut-off point is either $200k or $250k? Are you objectively applying your common sense here? I’m not saying it’s proof, just I think a good indication of probability that Feldstein couldn’t find a way to make it work with what he considered defensible assumptions, and in turn, that no one else can.

    Re: atheist vs. agnostic, first of all, you may be taking TPC and/or others saying “mathematically impossible” hyper-literally. I think everyone is aware that some assumptions must be made and that, if some different, yet clearly unrealistic assumptions were made instead (e.g., some huge increase in GDP growth rate resulting from Romney’s “plan”, or in just huge growth in income of the $200k+ segment), obviously the numbers could work out per all Romney’s commitments. So if that literal matter is your beef with “mathematically impossible” I think we can dispense with that straw man, particularly since I think (not sure) you’ve indicated that you accept the idea that, if assumptions are made that are sufficiently favorable to the candidate (yet are at least somewhat realistic, on the favorable side), and if it is clear that all the commitments cannot be met based on those favorable, yet realistic assumptions, then it is not unreasonable for an analyst to conclude and say that all commitments cannot be met even when assumptions are stretched to the favorable side yet kept at least somewhat realistic. I think anyone with a clue realizes that that is the meaning: “mathematically impossible” using even arguably reasonable favorable assumptions.

    I think when someone says in this case that it’s a matter of “simple arithmetic”, so re: your question (1. Is this a matter of “simple arithmetic” and is it appropriate to say it is?) whether or not it is appropriate (again, given that no one can reasonably take that absolutely literally) depends on whether or not they have made such assumptions. I do not know whether or not that applies to TPC’s analysis. I’m inclined to think it does, for the admittedly derivative reasons I’ve given.

    Re: Also, you’ve been dancing around this one:
    2.Should the TPC release to the public their detailed estimates and their own “arithmetic”? If not, why not?

    Silly for you to say I’m “dancing around” that or anything else (because I don’t do that and I’ve never shown any such tendency), but here’s the best I can do to reply to that question (which I think you’ve asked now for the first time): I don’t know how what they’ve released compares with what is considered conventional or appropriate for such reports, including when they become so politically “hot” and when the question is so important in an election, so I don’t know whether or not your criticism is valid. From what you say it sounds like they should disclose more. For one thing, if, as you claim, they haven’t provided “the numerical value of each tax expenditure they scored” (not in the paper or elsewhere), I would think that is something they should provide. I don’t know if that’s the case or not, or if there is some reasonable explanation that doesn’t occur to me.

  32. comment number 32 by: AMTbuff

    Brooks:
    1. Medicare and Medicaid. Not SS which only needs a cut in benefits to balance long-term.
    2. Yes. Health care costs have grown and are projected to continue to grow faster than the economy. At some point they will exceed the entire GDP. Long before that they will exceed the revenue raising capability of the government.
    3. The CBO and everyone else projects health care costs to grow faster than the GDP indefinitely. I claim that this will continue until recipients are given adequate incentives to stop demanding services that have poor cost-benefit ratios.

  33. comment number 33 by: Brooks / Gordon

    AMT,

    Re: #1, I’m surprised to hear you put SS in that (invalid) perspective. For purposes of the question we’re discussing, the internal bookkeeping of SS and the size of the “gap” and degree of “solvency” of SS are irrelevant. The question is what program(s) amount(s) to projected spending that you claim is literally “unsustainable”. What matters is that spending and total revenues, not some subset of revenues from a dedicated tax (e.g., FICA SS) and spending on the associated program (SS). But that’s not key to our discussion here and I’d like not to dwell on it.

    Re: #2, you say “yes” to my question, meaning you mean (per my question) “it would literally be impossible to fund that/those programs regardless of how high a priority it/they were (i.e., if we spent as little as possible on everything else)”. You write as intended support for your assertion:

    Health care costs have grown and are projected to continue to grow faster than the economy. At some point they will exceed the entire GDP.

    That could be said of any program, no matter how small, if it is projected to grow faster than the economy. Even if it is projected to be 3% of GDP in 2099, it would still hold that “at some point it will exceed the entire GDP.” Maybe that means in a few centuries for this hypothetical program, but it’s still a valid statement. That’s just math. But absent perspective on how soon that is projected to happen, that statement does not support your assertion. Which is why I pointed you to those CBO projections.

    You then add:
    Long before that they will exceed the revenue raising capability of the government.

    Well, around how soon do you think that will happen? And what is your assumption re: maximum revenue that the government can raise?

    Re: #3:
    You repeat the aforementioned useless observation, and the rest is irrelevant to the question. Please tell me what you think max revenue is as percent of GDP, and at what point you think CBO projects spending on Medicare and Medicaid to exceed that level. And note that Figure B-1 shows the total of Medicare, Medicaid, and Children’s Health Insurance Program and exchange subsidies at about 18% of GDP in 2085 under Alternative Fiscal Scenario (a bit less under Baseline Scenario).

    Help me out here. I think you know that I’m asking you to tell me and show me what your basis is for asserting that those two programs alone will exceed maximum revenue-raising ability within some time horizon you have in mind (even very roughly). Please don’t make this like pulling teeth.

    Are you saying that max revenue under that scenario is less than 18% of GDP (or another percentage per some other projection you have) in 2085? If so, please explain.

    If not, is there some other way to support your assertion with data, other than saying that “at some point” — perhaps sometime in the 22nd century — that will happen?

  34. comment number 34 by: Brooks / Gordon

    Oh, and when I ask about “max revenue under that scenario”, I don’t mean necessarily CBO’s alternative fiscal scenario if you have some very different projection you find more credible. I just meant under the scenario of no major changes to those programs to contain costs in a big way.

  35. comment number 35 by: AMTbuff

    “That could be said of any program, no matter how small, if it is projected to grow faster than the economy.”

    Yes, but only health care programs are in this category over their entire existence and beyond the death of the baby boomers. SS expenditures will shrink relative to GDP when the boomers die. If you could cap Medicare and Medicaid spending at current percentages of GDP, the long-term fiscal gap would be of fixed and manageable size. Meaning that the siutation would be sustainable after some reforms.

    Max revenue really needs to be considered in absolute terms, not percent of GDP. Because in theory the government could take 100% of GDP, causing the GDP to crash. The max revenue point allows the economy to remain reasonably healthy. This is the same calculation that nature performs for all parasites.

    My personal guess is that with an optimal tax structure max revenue occurs somewhere between US and European levels of taxation.

    Identifying an optimum level of taxation requires balancing the interests of current and future taxpayers and recipients. High tax levels reduce growth, causing future generations to be less well-off than they would have been.

    For example, if country A holds taxes at 20% of GDP and country B holds taxes at 30% of GDP, country A will have higher growth, eventually collecting more revenue than country B despite the lower rate. If we don’t care about that effect, then the optimum level of taxation is higher.

    Sorry I don’t have the time today to research numbers for you. The above is the concept, and the statistics are an exercise for the reader.

  36. comment number 36 by: Brooks / Gordon

    AMT,

    That’s a non-answer.

    You are the one repeatedly making the assertion, which you’ve made more specific in this thread, that projected spending on Medicare + Medicaid is literally unsustainable, by which you mean that spending on those two programs alone will exceed the maximum revenue the government can collect.

    It seems you have no basis for that assertion, other than the mathematical — but useless — fact that any program growing faster than GDP indefinitely will eventually exceed GDP, and prior to that, will exceed maximum collectible revenue. That “concept” is not substantive support for your assertion, and to claim it is and dismiss projected figures as “an exercise for the reader” is quite absurd. Obviously magnitudes and time horizon are key here, not the aforementioned generic mathematical “concept”.

    Have you seen any projection that has spending on these two programs alone exceeding what you think is the maximum collectible revenue?If so, by when?

    Do you have any other data from which the above can be inferred?

    If not, then on what basis — without considering any projected figures — do you make the assertion that this will occur, and (even very, very roughly) about when? In 50 years? 100 years? And what is your basis for this projection, if you are not basing it on “statistics”?

    If you don’t have any basis for this assertion, please — in good faith — just say so. Otherwise, given that you often make the assertion, please give some actual substantive basis for it.

  37. comment number 37 by: Brooks / Gordon

    …and AMT, just to illustrate the emptiness of your response…

    You say that Medicare + Medicaid will amount to a level of spending that will exceed max revenue, but apparently you don’t assert that about Medicaid alone, even though Medicaid is apparently projected to grow faster than GDP indefinitely (Medicaid, CHIP, and exchange subsidies are projected to grow steadily from 1.8% of GDP in 2011 to 5.0% in 2087 per Alternative Fiscal Scenario).

    Given that a higher program spending growth rate vs. GDP seems to be the extent of your supposed basis for your assertion, why don’t you make your assertion about Medicaid alone, since the same “concept” is there?

    I assume it’s because of magnitudes and time horizon, which is my point.

    Anyway, hopefully you’ll give a real response to my bolded questions in comment above as well as this one here, or just tell me you don’t really have a substantive basis for your assertion (unless you mean that it will happen, but you don’t even know if that will be in this century), rather than copping out and/or giving me a runaround.

  38. comment number 38 by: Vivian Darkbloom

    Brooks,

    Let me first address your first paragraph, which strikes me as an attempted paean to your own objectivity and non-partisanship. Let’s quickly dismiss that as self-serving and irrelevant. I seriously doubt that you are less (or more) “partisan” than most other commenters here who strike me as coming to the forum with good faith arguments based on facts and logic. I think most people who post here, like you, want to exchange thoughts and likely win any ensuing argument. I think they understand that simply being “partisan” is not likely going to lead to learning something and that by being “partisan” is like tying one hand behind one’s back—a sure way to lose any argument. On this score, you are not, as you seem to suggest, in a league of your own. As to the relevancy, even “partisans” can make valid arguments and “non-partisans” invalid ones. You need not interpret my comment on convenience to be a commentary on partisanship. In fact, it wasn’t intended as that at all, but rather one on the convenience of ignoring contrary evidence in order to bolster or even win an argument.

    This also ties in to what appears to be your attempt to discredit Feldstein and Rosen (and perhaps the Tax Foundation and perhaps even good Ole Viv ) on the basis of their partisanship and your alleged objectivity. On that point, I guess I could dodge it and say “I don’t know”; however, I’ll be honest and say all of them are likely “partisan” in the sense that, yes, they do not support Obama and his tax policies in this particular fight (although to similarly burnish my credentials as an open but mortal thinker, Viv took the opposite side the last time ‘round). I’ve got big problems with the TPC analysis and the subsequent follow-up to it, but think I’ve tried to address those problems on the merits and not simply trying to discredit it based on charges of “partisanship”. One can certainly have suspicions about motivation when faulty facts and/or logic are used to support argument; however, simply calling someone partisan isn’t persuasive.

    In that vein, I’m not buying in to your attempted false syllogisms that seem to go something like this:

    –Arguments made by “non-partisans” are valid and correct;

    –I am a non-partisan (by my own definition);

    –Therefore, my argument is valid and correct.

    And,

    –Arguments made by partisans are invalid and incorrect;

    –Feldstein, Rosen, the Tax Foundation (and perhaps by not-so-subtle implication, Vivian Darkbloom) are partisans;

    –Therefore, their arguments are invalid and incorrect.

    As to the “simple arithmetic” point, I’m also not buying your “I don’t know” answer. You’ve got sufficient information to know that revenue scoring and this particular “analysis” is not the matter of adding up a few numbers. It is based on many, many subjectively drawn assumptions as well as estimates that are all subject to a pretty large margin of error. For you to feign ignorance on that frankly is not bolstering your case for objectivity.

    And, no, I’m not being “hyper-literal” here. The very partisan Obama campaign (I trust you will agree with that characterization) has seized upon the TPC “analysis” and improperly characterized that analysis as simple math and alleged that based on that “simple math” on Romney’s plan “does not add up”. As an objective non-partisan, I trust you can see how that bit of rhetoric is misleading, just like the $5 trillion “tax cut” meme is. My original suggestion, and I will repeat it here, is that it is irresponsible and frankly dishonest for anyone at the TPC to reinforce that “simple math” mischaracterization including, for example, the analogy that was the original subject of this post.

    As to Feldstein, again, I’ve already answered your query here (and previously). His analysis was incomplete and in some respects flawed. You seem to be trying to argue that because of this, and ignoring everything and everyone else, the TPC analysis that the plan is mathematically impossible (much less a matter of “simple math”) must be correct.

    As to your similar “I don’t know” answer to the issue of whether the TPC should disclose more of the details of its analysis, I am also un-persuaded. If you think about this, Brooks, there is a certain lack of symmetry in your assignment of benefits of the doubt. You seem to suggest that since there is a possible explanation (one that you can’t come up with on your own) for lack of further disclosure, the TPC should be given that benefit. But, when it comes to the issue of whether Romney’s plan can mathematically work, which strikes me as a much, much more complicated issue, you are inclined to assign the burden otherwise. For someone as objective and non-partisan as you, that strikes me as a bit odd.

  39. comment number 39 by: Vivian Darkbloom

    Brooks,

    A few questions:

    1. You are correct that you can’t consider Medicare and Medicaid in isolation. In arguing that Medicare and Medicaid are “sustainable” (or are not “unsustainable”), are you assuming that those programs can continue to grow at the current rate and not affect other programs and/or taxes? For example, that to maintain them we would not need to cut defense, education, infrastracture spending, other public services, etc? Money (and debt) is, after all, fungible.

    2. Are you assuming, as the CBO does, in the extended baseline scenario, that provider reimbursements will be reduced?

    3. Why are you considering only the spending on Medicare/Medicaid as a percentage of GDP and not the associated interest costs? Per the alternative fiscal scenario (the more reasonable in my view), debt held by the public would reach 200 percent in 2037 (not so far away). That, I think, is a rate higher than Greece currently and it appears to me that their situation is not sustainable, even given their dramatic reduction in spending on public programs. The CBO explicitly says that in the longer run debt cannot grow faster than the economy. Einstein once said that the “most powerful force in the universe is compound interest”.

    4. Did you consider the fact that the CBO, in its alternate fiscal scenario, does not include the effect of rising interest rates as the increasing debt pushes up interest rates on borrowing? They demonstrate in that report that even a 0.5 percent increase in interest rates can have a significant effect on the “sustainability” of our overall spending (of which Medicaid and Medicare are now, and will be in the future) the largest segment.

    5. Do you agree or disagree that if we need to raise taxes (dramatically) to sustain this programs at the current rate of growth, this will have a negative effect (the extent of which is debatable) on future economic growth? Are you aware that the CBO is aware and agrees with this but does not consider it in their projections?

    6. Are you assuming, as does the CBO, that these financial projections do not include any negative shocks, such as recessions, wars, natural disasters, etc?

    7. Finally, would you agree that, whether these programs are “sustainable” like scoring the Romney tax “plan”, is not “a simple matter of arithmetic”?

  40. comment number 40 by: Vivian Darkbloom

    As an afterthought to the above, Brooks, I hope that you can see that it would be child’s play for AMT (or anyone else) to create certain assumptions regarding the above-listed variables and come to the conclusion that the “math” on Medicare and Medicaid “don’t add up” and that it is impossible “as a matter of simple arithmetic” for those programs to be “sustained”.

  41. comment number 41 by: AMTbuff

    Brooks, I have never seen a long-term estimate of costs for Medicare or Medicaid by CBO or any other experts that did NOT grow faster than GDP indefinitely. Can you find any counterexample?

    I claim that this is a result of the lack of incentives for the patient to weigh costs and benefits, not to mention that patients typically don’t even know or have any reason to know the costs and benefits.

  42. comment number 42 by: Brooks / Gordon

    Vivian,

    You have posted a lot that is way, way off.

    Re: your 2:40am:

    You go on at length with what is nothing but a silly, absolute straw man portraying my point as if reflected a set of ad hominem sort of beliefs/arguments of mine. I never indicated anything of the sort re: partisans necessarily being invalid/incorrect, etc., etc. You fabricated that straw man, every facet of it.

    Rather, I made the sensible point that laypeople, when confronted with some conclusion from an expert analysis that is favorable or unfavorable to one ideological/political/policy “side”, and when the layperson lacks the time and/or expertise to assess the validity of the methodology, data, and conclusions, one very sensible thing for the layperson to do is to look at what even experts on the other “side” are conceding even in their support/defense. I’ve explained the common sense of this. Either you get it at some point or you don’t. And I’ve explained very clearly how I see that common sense approach applies regarding Feldstein.

    And among other elements (and the whole) of your straw man, your claim that I “attempt[ed] to discredit Feldstein…on the basis of [his] partisanship” is just so sillily (I think that can be an adverb) invalid. Where did I try to discredit him on any basis, let alone on the basis of his partisanship? I’m just inferring from what he has done — and from what he has very conspicuously declined to do under the circumstances — that he couldn’t make it “add up” (1) using the TPC’s and Romney’s $200k cut-off point for “middle income” and (2) under assumptions that he considered defensible as realistic.

    Your initial responses to my arguments to that effect were (1) the odd and apparently invalid argument, apparently contradicted by just looking at what Feldstein wrote, that the reason Feldstein couldn’t refute TPC’s assertion using $200k was because Feldstein was limited to the information provided by TPC, as if Feldstein didn’t — and couldn’t — have done his own analysis (that argument of yours was so odd I think it raises doubts about your “good faith”; perhaps it was just some sloppy lack of thought, but then it would have been appropriate for you to acknowledge it as such rather than ignoring my response), and (2) the apparent dodge of just saying Feldstein (who I assume is highly qualified, is the most prominent expert seeking to refute TPC, and had the most prominent venue to do so), “made a good faith effort to prove that this can work and his effort was to some extent flawed”.

    I’ll ask again: Why do you think it’s likely or even that there’s a substantial chance that Feldstein could have made it “add up” using $200k and what he considered defensible assumptions (and by the way, based on his initial defense (in WSJ), the critiques of it, and his reply on Mankiw’s blog, he didn’t seem shy about making arguably favorable assumptions for his case), but simply chose not to do so in both his initial piece (WSJ) and his reply (on Mankiw’s blog) to critics, including TPC who put great emphasis that Feldstein had to use $100k to make it work, boldy proclaiming that in doing so Feldstein had actually confirmed TPC’s conclusion?? Is your reason for thinking that based entirely on analyses and conclusions favorable to Romney on this matter put forth by (I assume) Romney supporters?

    Re: “simple arithmetic” and “hyper-literal”, you either totally don’t get what I said or your pretending not to get it. Yes, of course there are numerous assumptions. No kidding. That has nothing to do with my point. Again, my point is simply this: Any sensible person reads “mathematically impossible” in this context as meaning “mathematically impossible” unless we make clearly unrealistic assumptions. And if — IF — that is a valid premise, then the shorthand of “mathematically impossible” or “does not add up” can be appropriate. (And yes, there should be sufficient disclosure of the assumptions, calculations, etc.). If one accepts that premise re: assumptions, then criticizing the shorthand would reflect a hyper-literal take on it. But obviously, given that you don’t accept the premise, and you think it is quite possible that it can “add up” under realistic assumptions, then criticizing the shorthand is not being hyper-literal and it’s understandable (given your view of the premise) that you’d criticize that shorthand, and if you are/were correct re: the premise, your criticism is/would be valid. As I said before, it all depends on the validity (or invalidity) of that premise: the implicit or explicit claim that only under unrealistically favorable assumptions could it “add up”.

    Which brings us back to my (admittedly derivative) reasons for thinking the premise is probably valid, one of which is Feldstein, as I explained clearly upthread and repeated partially here. And by the way, another straw man from you was that I supposed said that because of Feldstein, TPC “must be correct”. I never said or indicated that what Feldstein has done shows that TPC “must” be right, only that I think it makes it seem “likely”.

    Re:
    As to your similar “I don’t know” answer to the issue of whether the TPC should disclose more of the details of its analysis, I am also un-persuaded. If you think about this, Brooks, there is a certain lack of symmetry in your assignment of benefits of the doubt. You seem to suggest that since there is a possible explanation (one that you can’t come up with on your own) for lack of further disclosure, the TPC should be given that benefit. But, when it comes to the issue of whether Romney’s plan can mathematically work, which strikes me as a much, much more complicated issue, you are inclined to assign the burden otherwise. For someone as objective and non-partisan as you, that strikes me as a bit odd.

    All gross distortions, Vivian. I’ve given you my two main reasons for thinking TPC’s conclusion is probably valid. They are common sense reasons, albeit limited. Re: disclosure, I said I don’t know if your characterizations of what they haven’t released are accurate and I don’t know how what they’ve released compares with what is reasonable in this case, so I don’t know if they should release more, but I added “From what you say it sounds like they should disclose more. For one thing, if, as you claim, they haven’t provided “the numerical value of each tax expenditure they scored” (not in the paper or elsewhere), I would think that is something they should provide. I don’t know if that’s the case or not, or if there is some reasonable explanation that doesn’t occur to me.” By the way, have public figures or organizations been publicly requesting/demanding that TPC release more of it’s methodology, assumptions, calculations, etc.? That’s not a rhetorical question. I’d like to know either way. And if there have been such demands, I’d like to know how TPC has responded. Have anything?

    Re: your 3:14am:

    1) I am not making any assumption. AMT said that those two programs alone would exceed max collectible revenue. I’m just asking him if he simply means at some point in time beyond 2085 as a matter of math, or, if he is asserting that it will happen sooner than that, does he have some actual substantive basis for that assertion. All he’s said despite my repeated requests is that he just has that mathematical “concept”. Even today, despite what I clearly explained re: the inadequacy of this mathematical point (that those programs are projected to grow indefinitely at a higher rate than GDP), and despite my clear requests, AMT is still offering up only that point. It appears he is going to just continue to be evasive rather than engaging in good faith.

    There are, of course, various possibilities for other spending, taxation levels, debt levels and impact on GDP if those programs grow per CBO’s projections or anyone else’s that AMT sees as more credible. Whatever AMT is basing his assertion on — if anything — I’m all ears.

    2. See #1
    3. See #1

    4. See #1. And note that (I assume) you are referring to rising interest rates in a scenario of rising deficits and growth in debt/GDP, as opposed to some scenario in which there is less gap between taxation and spending (i.e., lower deficits).

    5. Your question has an implicit premise that is at least questionable: that we would or would likely need a dramatic increase in taxes just to fund those two programs. But if you mean “if we have to raise taxes dramatically to sustain those programs without huge cuts in other spending to offset much of the growth in those programs”, then I agree.

    As a note, I also think that dramatically cutting other spending to shift spending dramatically to Medicare and Medicaid would probably reduce GDP growth. I assume some such cuts would mean cuts in more investment-oriented spending (education, infrastructure, arguably Defense, etc.).

    Re: CBO’s GDP assumptions, I think you are correct, but I’m not sure. I said upthread:
    I don’t know if CBO has changed their past practice of using the same GDP projection for both fiscal scenarios (i.e., regardless of levels and composition of spending and taxation). They discuss such dynamics starting on page 34 of the PDF, and seem to be saying that they adjust the GDP projections for these factors, but I only see one set of projected GDP numbers in the data (from just a quick check; perhaps I missed it), so I don’t know which it is. In any case, these scenarios involve spending beyond just Medicare or all entitlements, and make assumptions regarding revenues and thus debt levels, so (as far as I can see) it is hard/impossible to apply such projected effects on GDP to the question of sustainability of Medicare or of all entitlements per se.

    If, as appears more likely than not, that one set of GDP projections applies to AFS, then I assume it is a fiction, because debt/GDP growth will drive up interest rates and (I assume) destroy growth (and then some). But AFS makes assumptions for all spending, particular levels of taxation, and thus deficits.

    Pulling all of #5 together, including my addition re: cutting other spending to fund growth in those programs, I see projected long-term growth in those programs as hurting GDP one way or another — through higher taxes and/or higher debt/GDP and/or shift to less investment-oriented spending. And AFS in the long-term is a fiction because it vastly overstates GDP, but I referred to it with AMT primarily because spending on those programs as % of GDP per AFS or EBS doesn’t seem, in itself, to be AMT’s basis, so I’m trying to find out what is his basis, and secondarily, if the spending on those programs is per AFS, perhaps other spending and taxation could be adjusted such that neither debt/GDP nor the adverse effect of higher taxation (if any) would render the projected GDP useless as the denominator.

    6. See #1. And I don’t know, by the way.

    7. First, it depends on how one is defining “sustainable”. One may mean politically. One may mean that continuing on that path would be awful. Or one may mean, as AMT does, literal unsustainable — i.e., that it would become impossible to collect as much revenue as those programs will cost.

    Can one say that will happen as a matter of math? I don’t think one should, but that’s based on my assumption that one doesn’t have a strong case that there’s no way, under reasonable assumptions (i.e., not wildly unrealistic), to adjust other spending and taxation enough to collect as much revenue as these programs will cost. If someone could make such a case, the mere fact that assumptions are involved wouldn’t make it inappropriate to say “unsustainable as a matter of math.”

    Re: your 3:21

    See my #1 above. AMT made the assertion of literal unsustainability (that the cost of those programs will exceed max collectible revenue). Either he has some basis for it or he doesn’t, except to say that if a program is growing faster than GDP indefinitely (as those programs are), eventually it must exceed GDP, and before that, max collectible revenue. I’ve explained that that is true, but useless in itself, devoid of magnitudes and time horizon. And time horizon matters because assumptions become less reliable several decades or over a century out regarding spending growth for those programs vs. GDP.

  43. comment number 43 by: Brooks / Gordon

    Vivian,

    I should add (as if I haven’t written enough) re: your 3:21, that you are mixing apples and oranges if you are likening what I’m asking AMT with the TPC matter re: “mathematically impossible”. I’m not even asking AMT if it’s impossible, under anything but unrealistic assumptions, for those programs to be sustainable (per his definition, and within some sort of very rough time frame), just if he has a basis for thinking it is unlikely. TPC, on the other hand, is implicitly making an assertion that demands the higher standard — that something is only possible under clearly unrealistic assumptions, not just that they consider it unlikely.

  44. comment number 44 by: Brooks / Gordon

    AMT,

    You must be aware that I’ve explicitly, repeatedly accepted as a premise that those programs will projected to grow faster than GDP indefinitely, and that this means (as a matter of math) that they would, if that trend really does continue indefinitely, eventually exceed GDP.

    Look, if you don’t want to engage in good faith, just stop. Otherwise, please respond substantively to my questions. I’m simply asking for your basis for your assertion (what projections or other quantitative basis), and what rough time frame you’re talking about — this century? within 50 years? anything? Otherwise, your “concept” is just baseless hyperbole.

    As for your second paragraph, instead of continuing to spend time in your comments on stuff that is clearly irrelevant as I’ve said (in this case, why you think those programs will grow so fast), why not just answer my questions, unless you can’t because you don’t really have any basis for an assertion that those programs will exceed max collectible revenue even 70 years from now.

  45. comment number 45 by: Brooks / Gordon

    AMT,

    In case this makes any difference re: your responsiveness, let me rephrase my question slightly:

    Do you think it is likely that those two programs, without major changes, will likely exceed maximum collectible revenue within the next 75 years (by 2087)? If so, on what basis (what numbers) do you make that assertion?

  46. comment number 46 by: AMTbuff

    Back of the envelope. Let’s say that minor reform brings the cost growth to GDP rate + 1%. That will more than double their current size. If you zeroed out the rest of the government these two could be affordable. Otherwise not.

    But really what is the point of continuing an unsustainable structure even one more year? Isn’t that purely a waste of money?

    On the TPC analysis: After Tuesday’s debate I surmise that Romney has in mind something similar to the Bowles-Simpson treatment of mortgage interest: a 15% tax credit rather than a deduction from taxable income. If Romney caps total tax benefits at 15% of $25,000, I’ll bet his numbers would work. You’d just have to include enough of the current tax preferences: employer-paid health care, mortgage interest, state and local taxes, charitable contributions, education expenses, flexible spending accounts, and possibly retirement plan contributions (although that last one is a deferral benefit rather than a straight exclusion from taxable income).

    I don’t think that TPC analyzed replacement of deductions with a 15% credit and then capping the total credit. I also don’t think the public will like that idea.

  47. comment number 47 by: Brooks / Gordon

    AMT,

    Geez, this is at best like pulling teeth (and at worst like trying to pull non-existent teeth).

    Can’t you give me the courtesy of taking a couple of minutes to state clearly what you’re saying??

    Double their size by when?? And are you saying that at that point the cost would exceed maximum collectible revenue? And what % of GDP would that be?

    I just did a very quick spreadsheet, and found that if GDP grows at 1% and those programs at 2% (i.e., GDP growth + 1%), in 75 years (2087) those programs would grow to 11.3% of GDP. If I use 3% and 4%, respectively, they grow to 11.1% of GDP.

    Is my math wrong? If not, are you saying 11.3% of GDP is the maximum collectible revenue?

    Or are you just giving me a runaround?

  48. comment number 48 by: AMTbuff

    My math was 1.01^75 = 2.1

    So whatever size they are now, they would be 2.1 times that size after 75 years. I figure that if we maximized revenue (which incidentally would require a much more regressive tax system) we could almost balance the budget now. We’re currently spending 25% of GDP federal plus about 10% for state and local government. Nobody knows for sure, but I’m guessing that 40% of GDP is about the maximum sustainable tax take. I.e., if we tried to exceed that we would suppress growth so much that our revenue would soon lag what we would have collected under lower rates with a better economy.

    Given my guesstimate that we are spending at within 5% of max potential revenue levels, doubling health care spending takes us into the unaffordable range.

    If you pick 150 years at GDP+1% or 75 years at GDP + 2% the health care spending quadruples. Then it alone exceeds max revenue.

  49. comment number 49 by: Brooks / Gordon

    AMT,

    Leaving aside your implicit dubious assumption that GDP 75 years from now will be no greater than it is today, even if I take that assumption arguendo, those two programs would indeed, per your formula, be 2.1 times current size, and GDP the same, so those programs would grow from 5.4% of GDP to 11.4% of GDP. So my question stands, adjusted only very, very slightly: Are you saying 11.4% of GDP would be the maximum collectible (federal) revenue in 2087?

    And remember, we aren’t talking about total spending, just spending on those two programs, because your assertion was that those two programs will exceed max collectible (federal) revenue, and apparently you’re asserting that will happen within 75 years (by 2087). So it seems that either you’re saying that max revenue would be 11.4% of GDP or you’re disagreeing with yourself. By all means, if there’s a third possibility let me know. Otherwise, please tell me if you think 11.4% is it, or if you retract that assertion.

  50. comment number 50 by: Brooks / Gordon

    …I should add that your assertion also was per your formula of GDP + 1% growth of those program. So please answer accordingly. If you erred, please just say so. Otherwise tell me what I’m missing.

  51. comment number 51 by: AMTbuff

    If a program grows at GDP+1% and you are only measuring the program relative to GDP you can do the math as if the GDP were constant and still have an accurate result. The GDP itself is the deflator.

  52. comment number 52 by: Brooks / Gordon

    AMT,

    Wow, it’s been a while since I’ve seen this degree of pathetic evasiveness on a blog.

    You apparently have no intention of engaging in good faith, and you’ve been giving me the runaround all along.

    Very, very, very lame.

  53. comment number 53 by: Brooks / Gordon

    …and AMT, to make sure it’s clear, I WAS holding GDP constant (just to use the assumption you used, regardless of plausibility). That’s why, when those programs grow to 2.1 times their current size per your formula, they grow from 5.4% of GDP to 11.4% of GDP.

  54. comment number 54 by: AMTbuff

    Brooks as near as I can tell you are letting second-order effects confuse you. When I say cost grows 1% faster than GDP I mean cost(year i+1)/cost(year i) = 1.01 x GDP(year i+1)/GDP(year i). You can do the math from there. I was assuming real GDP, after taking out inflation.

    There’s a second order difference between this model, which I consider more correct, than just adding 1% to the GDP growth rate. That is to say, if the GDP were to have 5% real growth, the cost growth would be 1.01*1.05, which is slightly more than 6%.

  55. comment number 55 by: Brooks / Gordon

    AMT,

    If you have any intention of engaging in good faith, just answer the questions I’ve been asking you all along:

    You’ve been making an assertion constantly on this blog, which you’ve specified here as asserting that Medicare + Medicaid, without major reform, will grow to exceed maximum collectible federal revenue within 75 years (by 2087).

    I’ve been asking you for your basis for this assertion:
    (1) What % of GDP are you saying that point is (that they will grow to, at which point they will exceed max collectible federal revenue)?
    (2) At least very roughly when they will reach that point?
    (3) What is your basis for that projection? (This would mean some projection(s) you have seen from credible sources and/or some assumptions of yours for which you have some basis, and your related calculations.)

    So far the closest I’ve gotten from you was an assumption of “cost growth to GDP rate + 1%”, which you said means “whatever size they are now, they would be 2.1 times that size after 75 years.”

    I pointed out that that means they would grow from their current 5.4% of GDP to about 11% of GDP in 75 years, per your apparent assumption re: GDP.

    You shifted nonsensically to TOTAL federal spending to try to make an argument re: reaching max collectible revenue, when obviously our question pertains the ability to fund only to those two programs.

    So, unless you are intent on trying to continue giving me the runaround, tell me: How does your 2.1 times their current size mean that they will exceed max collectible federal revenue by 2087, and what % of GDP are you saying that level is?

    (As a note, I’m not even asking about the basis for your growth assumption, because even if is valid for this purpose, your calculated result doesn’t seem to support your assertion, because I don’t see why we should assume that 11% of GDP will be max collectible fed revenue in 2087.)

  56. comment number 56 by: AMTbuff

    Brooks, I don’t see the need to argue about numbers that are completely unknown over time periods that far exceed the borrowing crisis horizon, but here are my opinions:

    1. Medicare and Medicaid are growing at GDP plus 2.7 percent (see the bottom of page 4 of this report by the actuary http://budget.house.gov/uploadedfiles/fostertestimony_2-28-22012.pdf ). At that rate they would need about 75 years to exceed 40% of GDP.

    2. If Medicare and Medicaid growth could somehow be held to GDP plus 1 percent, they would break the 40% of GDP level within 75 years if the rest of the current government still existed.

    3. If the 40% guess is wrong, it’s just a matter of time before any threshold you pick is exceeded. As you noted, programs which grow faster than GDP forever are not sustainable. I claim that Medicare and Medicaid require fundamental change to the decision-making incentives in order to be sustainable, and that spending other people’s money is never sustainable, as Lady Thatcher observed long ago.

    I was making a big picture point. Variations in the details would not change that point.

    Finally, I have to register a complaint about the tone of your posts. People are more responsive to temperate posts. Internet discussion can be productive or it can be a fight club, but it can’t be both at the same time.

  57. comment number 57 by: Brooks / Gordon

    AMT,

    First, re: your complaint about my tone, let’s get something straight: BEFORE I accused you of not engaging in good faith, several times I asked you clear questions and you responded with what I think just about anyone would view as apparent deliberate, persistent evasiveness (obviously the mere pretense of actual responses to my questions). Your complaint (that I finally called you on it) is, therefore, unjustified. I’m the one who can make a reasonable complaint, as I have. It’s rather inconsiderate to give someone the runaround.

    Second, re:
    I don’t see the need to argue about numbers that are completely unknown over time periods that far exceed the borrowing crisis horizon

    You seem to be implying that I’m forcing you to project to 2087. How absurd. I have very clearly asked you to tell me why you think those programs will exceed maximum collectible federal revenue by 2087 (i.e, in that year or any time before that year). Moreover, per the “concept” that constituted your argument (using the term “argument” loosely), moving farther out in time would only make your case stronger. So please, stop the sillinenss.

    You write, with bolding mine:
    If Medicare and Medicaid growth could somehow be held to GDP plus 1 percent, they would break the 40% of GDP level within 75 years if the rest of the current government still existed.

    Pardon me? “If the rest of the current government still existed”? As I pointed out to you before, your assertion is that those two programs alone would exceed max collectible federal revenue by 2075, not those programs plus all or some other spending.

    I was making a big picture point. Variations in the details would not change that point.

    That’s a garbage point. The assertion you make that those programs will exceed max collectible federal revenue within 75 years (by 2087) is one that depends on some projection, not on just the “concept” of program growth exceeding GDP growth.

    Now then, let me try yet again to get an answer from you to this question (I guess bolding it in my last comment didn’t suffice to prevent you from somehow overlooking it). Again, You gave me your math before for GDP + 1%, saying “cost growth to GDP rate + 1%” means “whatever size they are now, they would be 2.1 times that size after 75 years.” They now total 5.4% of GDP. So I ask you again: How does your 2.1 times their current size mean that they will exceed max collectible federal revenue by 2087, and what % of GDP are you saying that level is?

  58. comment number 58 by: Brooks / Gordon

    …Essentially, AMT, all I was able to eventually get out of you is the following:

    First, you start with current spending at 25% of GDP. You add 10% for current state and local spending. You then add the growth in Medicare and Medicaid per your assumption of possible growth rate without major reform, which adds another roughly 6% of GDP by 2087, bringing the total to about 40% (about 41%), which you say would be maximum collectible total (federal, state and local) revenue.

    Well, that means you are assuming it’s not possible for all other federal spending (not Medicare or Medicaid) to be below 19% or 20% of GDP (because Medicare + Medicaid would total about 11% of GDP, and you’re assuming state and local at 10%, so 19% is left for all other spending to reach your 40%).

    But I don’t think that’s an assumption you consider valid. So it’s not an answer to my question of your basis for asserting that, even if we cut other spending as much as necessary, those two programs would leave us with a level of federal spending that exceeds maximum collectible federal revenue.

  59. comment number 59 by: AMTbuff

    Brooks, you win.

    Now use your free time to check out that actuary’s report for analysis of the growth rates of these programs and you’ll see that getting them down to GDP + 1% will be be quite difficult. IMHO it will require either harsh rationing (as in England and Canada) or reform that gives patients an incentive to avoid cost-ineffective care. I had initially believed that 1%+GDP was a reasonably achievable growth rate, but I don’t after reading the report I linked.

  60. comment number 60 by: Brooks / Gordon

    AMT,

    ok, I assume that by “you win” you mean that, if we were to apply your earlier assumption re: (reasonably) possible growth rate for those programs without major reforms (GDP + 1%, meaning 2.1 times their current size as % of GDP by 2087), you would no longer see that as causing federal spending to exceed maximum collectible federal revenue within 75 years, assuming we cut other spending as much as necessary, (1) correct?

    Are you now saying that the above would occur under a more reasonable assumption of what growth of those programs could be without major reforms? If so, please answer my (same) questions using your new assumption. Presumably you can perform the same calculation for that new growth assumption that you did for your earlier growth assumption, and you seem to have a figure in mind for maximum collectible revenue, so: When would those programs cause federal spending to exceed maximum collectible (despite cutting other spending is cut as much as necessary), and is your assumption still that that point would be 30% of GDP (assuming 10% state and local)?

    Just for illustration using your methodology, at GDP + 2% those programs would become 1.81 times current size in 30 years (growing from their current 5.4% of GDP* to 9.8% of GDP). You’ve said “I don’t see the need to argue about numbers that are completely unknown over time periods that far exceed the borrowing crisis horizon”, and I don’t know what your cutoff point is, and I assume you were excluding even 50 years, let along 75 years, but FWIW, those programs (per your methodology, and using GDP + 2%) would become 2.69 times current size in 50 years (14.5% of GDP).

    * That 5.4% also includes CHIP and “exchange subsidies”, per the CBO report. I don’t know how much less only Medicare + Medicaid is, but I assume they comprise the lion’s share of that 5.4%.

  61. comment number 61 by: Brooks / Gordon

    (meant to put a “(2)” and (3), respectively, for the questions in the second paragraph above.)

  62. comment number 62 by: Brooks / Gordon

    …and to spell it out a bit more:

    Per your methodology and using GDP + 2%, in 30 years that leaves about 20% for all other federal spending (non-Medicare, non-Medicaid) before hitting your assumed maximum collectible revenue as % of GDP (40% less 10% for state & local, less another 9.8% for Medicare and Medicaid), and in 50 years it leaves about 15% of GDP for all other federal spending.

    I’m not saying GDP + 2% is the right number for this purpose. I’m just illustrating. If you are still making your assertion, you would need to do so based on some such growth assumption, so if that’s the case, please tell me what that assumption is and at what point that means those programs bring spending above max collectible federal revenue, assuming we cut other spending as much as necessary.

  63. comment number 63 by: AMTbuff

    1. correct.

    The actuary’s report shows GDP+2.7% over the history of the these programs. That compounds to a factor of 7 over 75 years. See point 2 under my post of October 21st, 2012 at 1:28 pm and please do read that eye-opening document.

  64. comment number 64 by: Brooks / Gordon

    AMT,

    ok, so I finally have your answer on a growth rate you think is appropriate for this purpose and which would bring those programs up to about your 40% point in (not within, but actually in) 75 years (in 2087).

    That GDP + 2.7%, per your methodology, brings them to 12% of GDP in 30 years, leaving 18% for all other federal spending before hitting your 40%. And even in 50 years, they grow to 20.5%, leaving 9.5% of GDP for all other federal spending. So it seems you have to go out to a time horizon that you seemed earlier to regard as “numbers that are completely unknown” (if I’m interpreting what you said correctly). Are you still comfortable with your assertion if you have to go out that far in time?

    By the way, I don’t think you have to literally get to where those programs are 100% of federal spending, because at some point cutting other spending further would probably hurt GDP enough to make it harder to finance those programs as 100% of spending than it would be to finance those programs plus some other critical spending. That said, I don’t know if you’d assume that that would mean 3% of GDP on other spending or 5% or 10% or what. But unless you’re saying it’s more than 9.5%, then it does NOT seem that, per your assumptions and methodology, these programs would cause federal spending to exceed your assumed max federal revenue of of 30% (on top of another 10% state and local) in even 50 years.

    Given all of the above re: calculated levels over 30 and 50 years, are you still comfortable with your assertion, even assuming 30% of GDP (on top of 10% state and local) would be a good number for max federal revenue?

    Also, what is your basis for assuming 40% of GDP iwould be a good (more precisely, the best) number to use for maximum possible total federal, state, and local revenue? I know Laffer Curve stuff is a big unknown (as far as I know), but why do you think 40% is best?

  65. comment number 65 by: Brooks / Gordon

    …Also:

    Not sure if some average growth rate over “the history of these programs” is best to use for projections”. For one thing (and there could be many problems, but this is one), I’m assuming the retiring baby boomers will put upward pressure on the rate of cost growth.

    On the other hand, we are speaking of growth absent major reforms, not excluding what you’ve termed minor reforms. So that would be a downward force on the cost growth rate.

    Before I spend time searching for it if it isn’t there, do you know whether or not that papers offers projections based on some scenarios of degrees of reform (or no reform)?

  66. comment number 66 by: AMTbuff

    “I’m assuming the retiring baby boomers will put upward pressure on the rate of cost growth.”

    Yes, the paper makes that point, but I don’t think it attempts to quantify it. As to reforms, I figure that non-structural forms can achieve some percentage of savings but they cannot change the underlying growth rate in any lasting way. For example, if you make delivery of health care 20% more efficient you save 20%, but you haven’t reduced the incentive to demand government-paid health care. Reducing the supply would work, but it’s simply a crude form of rationing.

    I consider rationing structural reform, albeit not anyone’s favorite type of reform. IPAB is arguably rationing, with the main argument being whether or not its harsh long-term bite will be politically viable.

  67. comment number 67 by: Brooks / Gordon

    AMT,

    ok re: the paper — thanks.

    I also want to make sure you didn’t overlook my prior comment with two questions, one re: the very, very long time horizon apparently needed to make those programs literally unsustainable assuming GDP +2.7%, your methodology, and your 40% total max revenue (30% federal plus 10% state and local), and the other re: your assumption for max revenue as a % of GDP. Please let me know your answers to those two questions.

    As a note re: the CBO Long-term Budget Outlook that may interest you, in addition to long-term GDP assumptions in the CBO report being hard/impossible to use for our denominator (because of the great uncertainty of long-term GDP projection and because their GDP projection doesn’t consider the impact on GDP of the increases in total spending and shifts in its composition that apply to our discussion), but also the numerator of projected spending on Medicare and Medicaid is difficult/impossible to use, because their projections are apparently based on the assumption that cost pressures will generate cost containment, but I don’t know if that means “major” reform, “minor reform”, or what, so I don’t know if/how we could apply even their projected dollars for those programs to our scenario of only “minor” reform (however defined).

  68. comment number 68 by: Steveinch

    Ingesting to watch the back and forth. I do wonder why both of you seem to be ignoring interest payments in your analysis. Interest payments need to come “off the top” of the 40 percent or whatever assumption you want to use.

    Even at current debt levels, a reasonable long term assumption for interest is about 3.5% of GDP. Under most reasonable assumptions that have Medicare and Medicaid growing at GDp +2.7%, that number will quickly rise to 5 or 6 percent.

    In addition, both of you seem to be accepting the assumption that state and local spending will be constant at 10 percent. Looked at historically, this also seems unlikely to be true, in part because state and local government absorb a great deal of Medicaid spending and have very large unfunded pension liabilities.

    In point of fact, state and local spending is already well north of 10 percent and the trend line is upward.

    So to conclude. State and local spending is closer to 20 percent than 10 and on an upward trajectory. Interest costs are likely to grow by 4 or 5 percentage points of GDP by 2030. My math therefore looks something like 40 total minus 25 state and local minus 5 percent interest minus 10 percent Medicare and Medicaid equals 0 for all other by 2030.

    http://www.usgovernmentspending.com/spending_chart_1950_2015USp_13s1li011mcn_F0sF0lF0f

  69. comment number 69 by: Vivian Darkbloom

    “Ingesting to watch the back and forth”

    Interesting usage of “ingesting”. I thought perhaps you meant to write “interesting”, but resort to my online dictionary suggests a few logical possibilities as a variant of “ingest” (as verb):

    1. Primary meaning of “ingest” is to “take in fluids or food”, (”Marine ciliates … can be observed … ingesting other single-celled creatures and harvesting their chloroplasts”); but, the usage is usually confined to consuming bad stuff, as in, for example, ingesting water contaminated by mercury, fecal matter, etc. In other words, harmful to one’s health.

    2. In engineering, to suck something into a plane engine, such as a bird;

    Use of “ingest” as a participle seems to be rare; but, who knows? These are, after all, ingesting times.

    As to your point on interest, you are absolutely right (see my #3 to Brooks, above). One could, I suppose, assume that we would pay as we go along for the higher growth rate in Medicare and Medicaid costs by raising taxes. As Brooks seems to concede, this would, however, have the tendency to lower GDP, making the delta between the spending and taxes increasingly higher. Brooks has indicated elsewhere in this blog that this is no time to raise taxes (to do so would cause a recession) , so that would presumably occur sometime down the road–but when?. In the meantime, the spending goes on.

    If one factors in higher interest rates due to the higher debt-to-GDP ratio that would result from assuming these programs are “sustainable” under the status quo, the situation only gets worse (see my point 4, above).

    Bowles/Simpson took a careful look at the situation and concluded, I think, that the status quo is not “sustainable”—a term that is admittedly open to some reasonable (and unreasonable) interpretation. They pointed out that the normal baseline assumes the postponed SGR cuts (now north of $350 billion) will actually be made for the past (and also the future). They correctly note that this is fantasy (see also, my point 2, above:

    “Under the Extended Baseline scenario, CBO projects that federal health care spending for Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), and the health insurance exchange subsidies will grow from nearly 6 percent of GDP in 2010 to about 10 percent in 2035, and continue to grow thereafter;

    These projections likely understate the true amount, because they count on large phantom savings –from a scheduled 23 percent dut in Medicare physician payments that will never occur and from long-term care premiums in an unsustainable (!!!) program (the Community Living Assistance Services and Supports Act, or CLASS Act”.

    They propose *major*, not “minor” cuts and “savings” to Medicare and Medicaid. Even after those major reforms they are still not comfortable that those programs won’t grow in excess of 1 percent of GDP annually. To backstop this, they simply propose automatic spending cuts in those programs should that occur to keep them within the GDP plus 1 percent range.

    The above, of course, include not only Medicare and Medicaid, but also the cost of the new exchanges, CHIPS and the CLASS Act. Is that fair? I think so, particularly when the original GDP plus 1 percent estimate (without interest) seems quite low and since one can easily cut Medicaid costs in order to transfer those funds to another government health program with a different name as was done with ObamaCare.

    Simple math? No, but ingesting nevertheless.

  70. comment number 70 by: Brooks / Gordon

    Steve,

    Interesting points.

    Re: state and local at 10%, I was just taking AMT’s assumption, arguendo. I think your point is valid that as federal Medicaid spending grows, so would state Medicaid spending, but whether or not state spending could stay at 10% depends on if they could cut enough other state spending or not. If they could, then the 10% assumption still works (as long as there is at least minimal other state functions being funded sufficiently to keep the economy from becoming dysfunctional in a way that makes it harder to fund whatever spending is left).

    Ditto for unfunded pensions. It depends if states could cut enough other spending to keep the total at 10% of GDP.

    Re: interest expense, couldn’t we (if we chose to) pay down much/all of our debt over some number of years to avoid those levels of interest expense? Yes, it would mean higher taxation during that paydown period, but not thereafter, and the higher taxes perhaps would reduce GDP short-term, but the lower debt and deficits could even increase GDP longer term via lower interest rates. In any case, seems to me we could pay down much of the debt if we chose to, and we are looking at what is possible, not what is politically likely, so I don’t think we need to add those levels of interest expense to our calculations.

    Again, remember that we are not trying to make assumptions for what is most likely politically. AMT’s assertion is that these programs (without major reform) will cause federal spending to become literally unfundable. So assumptions re: cuts in other spending and re: taxation are intended to stretch to see if there could be a way to fund them if we chose such a path.

  71. comment number 71 by: Brooks / Gordon

    Vivian,

    Re: Brooks has indicated elsewhere in this blog that this is no time to raise taxes (to do so would cause a recession)

    I don’t think I’ve said that. I don’t know if raising taxes now would cause a recession, and I assume some tax increase that wasn’t too large (perhaps letting the Bush/Obama tax cut expire for the top rate) would not cause a recession, but I’m not an economist, and I don’t recall economists’ opinions on this. I’m just speaking from a very general sense of what I’ve heard/read.

  72. comment number 72 by: Steveinch

    Brooks

    State and local spending is already 20 percent of GDP and increasing so talking about 10 is not terribly relevant.

    Could we pay down the debt to avoid the increase in debt service? Not materially if you accept AMTs argument about the 40 percent cap on taxes. Today, government spending is already higher than 40 percent of GDP.

    It feels like you are having a math discussion and trying to prove a very technical point. If you are intending to say, “Assuming away all constraints, both political and practical, does the US have the capacity to pay for rising health care costs for the foreseeable future?” The answer would appear to be yes to me. But that is a point that isn’t worth making because it is of the assume a can opener school of argumentation.

    VD, nice read of my typo. Made me smile.

  73. comment number 73 by: Brooks / Gordon

    Steve,

    I agree that Vivian’s take on “ingesting” was amusing, particularly the possibility she raised that you were likening reading my exchange with AMT to ingesting fecal matter.

    Re: state and local spending, AMT said 10%, which I took arguendo, and you say 20%. Obviously a big discrepancy. Perhaps you guys could cite and ideally link to your sources and that can be sorted out.

    If your 20% is valid, seems to me we could still cut enough other (non-Medicare, non-Medicaid) spending (again, I’m talking literal feasibility, not political plausibility) and/or raise taxes to pay down much of our debt over some number of years and keep it low without reaching 40% total taxation (federal, state, and local). I haven’t laid out figures for such a pay-down, but for general perspective, even taking, arguendo, your 20% state and local, plus about 5% current federal Medicare + Medicaid (+ CHIP, etc.) that leaves 15% of GDP for all other federal spending. And that’s assuming no cuts in (non-Medicaid) state and local spending, which is another assumption that doesn’t seem to fit the purpose here.

    Re: If you are intending to say, “Assuming away all constraints, both political and practical, does the US have the capacity to pay for rising health care costs for the foreseeable future?” The answer would appear to be yes to me.

    I’m not assuming away “practical” constraints insofar as some minimal other government functioning would probably be needed to avoid such a dysfunctional economy that none of this would make sense (as an extreme example, zero infrastructure spending at any level of government for decades). But beyond that, I don’t know what you mean by “practical”. I am indeed assuming away “political” constraints, only because the hypothesis I have been trying to test with AMT is AMT’s assertion of literal unsustainability, which he has specified (at my request) as meaning that, Medicare and Medicaid, without major reforms will cause federal spending to exceed maximum collectible federal revenue within 75 years, even if we raise taxes and cut as much other spending as necessary to try to avoid that occurring.

    As to the worth of that point, I do think it is a worthwhile distinction as a starting point, but YMMV, and one may prefer to start with what he considers politically plausible. The difference is that the former — if the hypothesis is invalidated — means the policy matter may be purely about our priorities insofar as elections and politicians reflect them (granted, imperfectly due to voters having very incomplete information and ability to assess trade-offs, and due to disproportionate influence on politicians of some elements/segments of society), whereas starting with “political plausibility” already incorporates into the starting point some reflection of those priorities.

    In any case, one certainly should try to get to political plausibility, because, if one assumes that it is simply not politically plausible to cut all other spending down to X% of GDP to accommodate the assumed growth in Medicare and Medicaid (without major reform), then that is a legitimate version of “unsustainable” as a label for those programs, as long as one is clear about that meaning.

  74. comment number 74 by: Vivian Darkbloom

    Brooks,

    Regarding your comment about the advisability of immediate tax increases, I’m pretty sure I’m right. I’ve done a brief search and have not yet found it, but if time permits I will look forward. My memory is quirky, but when I do think I remember something, it is normally correct.

    I did, however, run across the following exchanges between you, Gipper and Steve on the issue of the “sustainability” of entitlements (Social Security, Medicare, Medicaid) you may have forgotten about:

    “Gipper,
    Took me a whole 2 minutes on Concord’s site to come across this from Executive Director Bob Bixby:

    Put simply, we have promised ourselves an array of future retirement and health care benefits that is unaffordable…

    It is true that no immediate crisis is confronting Social Security. Nor is an immediate crisis facing Medicare and Medicaid - the other two large entitlement programs for the aged. Yet, a broad bipartisan consensus exits that these three programs are on an unsustainable course. No one can say exactly when a crisis will hit, but by the time it does we will have likely burdened the economy with a debilitating amount of debt; leaving painful benefit cuts and steep tax increases as the only solutions. Waiting for this gut-wrenching outcome, knowing full well that is coming, would be an act of fiscal and generational irresponsibility on a grand scale.

    That’s 2 minutes worth of good-faith searching on Concord’s site. I guess that’s 2 minutes more than you put in to fact-check your claims.”

    http://economistmom.com/2010/09/the-wrong-tax-debate-the-wrong-tax-policy/#comment-12439

    And, then, there was this in the same string in response to Steve:

    Steve,

    “First, that was just a tiny sample of strong statements by them that we cannot continue with current entitlement policy — that’s what “unsustainable” means: we must change policy so projected spending on those programs comes down substantially.”

    I guess that was just you relaying what the Concord Coalition has written on the subject of “sustainability” rather than endorsing it?

    Ingesting, nevertheless and quite relevant to the “back and forth” with AMT. BTW, I agree with what you wrote and quoted, way back then.

  75. comment number 75 by: Brooks / Gordon

    Vivian,

    Please do keep searching if you are willing (because it will prove my point), but I hope you would agree that such a statement made a couple of years ago (or even one year ago, arguably) cannot be equated saying now that “this is no time to raise taxes (to do so would cause a recession)”. A couple of years ago I did observe that most economists were saying that it was not the time for a tax increase, and although I don’t recall if most were saying (at what point) that a tax increase would cause recession or just stall recovery, whichever apparent consensus I saw at different points in time I observed and probably said I go with that assumption (I’m not an economist, so I’m inclined to defer to at least a fairly strong consensus of economists on a point like that). Perhaps you recall that, back a couple of years ago when there was that consensus of economists saying “now is not the time” to raise taxes (or more generally, to avoid/end large deficits) because of the fragility of the economy/recovery, with many of them seeming to imply that it would be counterproductive re: our long-term fiscal imbalance, I repeatedly lamented that almost none of them would say if they were asserting that higher deficits in the short term would actually improve our long-term debt/GDP outlook (i.e, a win-win) OR if they believed (let alone had some analysis to show) that it would worsen our long-term debt/GDP outlook but nevertheless was good policy because mitigating the short-term pain was worth some cost later.

    Also you seem to be assuming that whether or not we raise taxes next year as opposed to the following year or the next has a material impact on the hypothetical projections AMT and I have calculated. I don’t think that’s the case.

    Re: I guess that’s 2 minutes more than you put in to fact-check your claims.”

    What supposed claims of mine are you referring to??

    Re: your quote of my quote of Concord, what the heck is your point? You seem to have a grudge (based on at least our last exchange upthread, I presume) you’re trying very hard to satisfy in some way. The alternative (or joint) possibility is that perhaps somehow — inexplicably if you actually read any of it, not to mention if you read my enumerated answers to your own enumerated questions in at least one comment addressed to you (comment #42) — missed that my whole exchange with AMT regarded a specific assertion of AMT’s with a particular, literal definition of “unsustainability” (of two particular programs), which I repeated in most of my comments, and throughout I was asking AMT for his/her basis. I did NOT say that those programs were “sustainable” by some other definition. (I did not even say that they were sustainable per AMT’s definition — only that I wasn’t seeing in his comments any substantiation of his assertion that they were unsustainable per the definition AMT was using in his assertion, and that the math based on his assumptions [at least until the very end, and perhaps even then; perhaps not] seemed to indicate that his assertion was invalid, as AMT eventually acknowledged). And your point in presenting that quote of me is…what?

    Perhaps the problem here is one that you’ve been prone to, although in fairness to you, you’re not alone here or elsewhere in the blogosphere in having this tendency: Rather than taking a question or point at face value, you read into it some much larger or broader argument than would be reasonably read into it, and often assuming and attributing some sort of policy advocacy too, also inappropriately.

    My exchange with AMT has been all about finding out from AMT his/her basis for an assertion he/she was making, and making often on this blog, which (at my request) he/she made clearer and more precise on this thread. That’s it. Arguing that those programs (as is) are “unsustainable” per some definition (e.g., considering political plausibility re: limits on tax increases and cuts in other spending) is obviously not the same. So already your apparent attempt to catch me in some self-contradiction (not to mention your attempt to paint my comment there as some sort of bad faith slipperiness) is nonsensical and silly on multiple levels. And just for good measure, you left out important context: As can be seen on that thread, I was responding to Gipper’s charge that Concord and EconomistMom warned of the long-range problem of entitlement spending only to “agitate for tax increases” and that they didn’t seem to really be advocating for reducing projected entitlement spending. The point of my response was obviously to dispute Gipper’s view of what Concord had been communicating on the issue, regardless of whatever my opinion was. So add another level to the inapplicability of your apparent point in quoting me.

    By the way, I do think that entitlements (Medicare + Medicaid + Social Security) are “unsustainable” in the sense that, at some point sooner or later within a few decades, I think it’s very highly likely that major cost-containment reforms will be implemented rather than allow further cost growth without major reforms. I’d also say that, up to that point, we probably won’t tax as much and/or cut as much other spending as we conceivably could, meaning what would be assumed to test AMT’s assertion, so debt and deficits could quite possibly grow to a crisis point, as Concord says. All of the above mean that we’re better off getting started on reform than delaying.

    Please, if you reply to this, listen to what I’ve said above first. No more straw men, non sequiturs, false attributions, etc., please.

  76. comment number 76 by: Brooks / Gordon

    Minor correction:

    Meant to put the parenthetical phrase earlier, referring to the apparent implication that higher deficits then would yield a better long-term fiscal outlook, as shown here:

    I repeatedly lamented that almost none of them would say if they were [actually] asserting (let alone had some analysis to show) that higher deficits in the short term would actually improve our long-term debt/GDP outlook (i.e, a win-win) OR if they believed that it would worsen our long-term debt/GDP outlook but nevertheless was good policy because mitigating the short-term pain was worth some cost later.

  77. comment number 77 by: Brooks / Gordon

    Vivian,

    I realized after copying & pasting that part about “your claims” that that was part of your quote of me (to Gipper), not addressed to me, and I forgot to delete my bolded question to you. Nevertheless your comment does seem to be attributing some claim by me that you are trying to show that I contradicted previously, so the question still applies, just not in response to that quote.

  78. comment number 78 by: SteveinCH

    Brooks,

    As you like it. It’s not clear than anyone is saying that our choices are healthcare or dystopia but I do think it fair to say that absent a radical reform of healthcare, the only realistic options are default or dollar devaluation.

  79. comment number 79 by: Brooks / Gordon

    Steve,

    If you can share a link to your source for that 20%, please do.

  80. comment number 80 by: Vivian Darkbloom

    Brooks,

    Are you now finished with your “corrections”?

  81. comment number 81 by: Brooks / Gordon

    Vivian,

    My corrections didn’t substantially affect my arguments or my (somewhat rhetorical) question re: what your point was. But yes, I’m done.

    So…your point was?

  82. comment number 82 by: SteveinCH

    Brooks,

    It’s in comment 68 above.

  83. comment number 83 by: Brooks / Gordon

    Thanks Steve.