The real impediment

So George Will writes awidely-cited column questioning John McCain’s off-the-handle temperament. Yeah, I know, been there and done that. However, there’s an interesting background toWill’s criticism of McCain, which revolves around McCain’sreckless comments about Chris Cox’s performance as SEC chairman (Securities and Exchange Commission, not Southeastern Conference football). George Will speculates that

Perhaps an old antagonism is involved in McCain’s fact-free slander [against Cox]. His most conspicuous economic adviser is Douglas Holtz-Eakin, who previously headed the Congressional Budget Office. There he was an impediment to conservatives, including then-Rep. Cox, who, as chairman of the Republican Policy Committee, persistently tried and generally failed to enlist CBO support for dynamic scoring that would estimate the economic growth effects of proposed tax cuts.

Well, as George Will might say. That’s quite an interesting charge in and of itself.
Preciselywhy did Douglas Holtz-Eakin disappoint “conservatives” by failing to deliver CBO support for dynamic scoring models to appease supply-side fantacists? Was it for lack of trying?
Sadly No! According to an importantWall Street Journal column byAlan Murray in April 2003, one of the first things Holtz-Eakin did as CBO director was a mammoth study of “dynamic scoring” (the idea that tax cuts pay for themselves). Thirty five CBO analysts spent six weeks crunching budgetary numbers, and Alan Murraysummarized the results:

DO TAX CUTS pay for themselves? That’s been the hot debate of American political economy for the better part of three decades. But it ended last week — with a whimper.

The great argument got its start in 1974, when a White House chief of staff named Donald Rumsfeld sent his deputy, Richard Cheney, to have lunch with an ebullient young economist named Art Laffer and his journalistic sidekick, Jude Wanniski. According to local lore, Mr. Laffer sketched a curve on a cocktail napkin suggesting that a cut in income taxes could provide such a spark to the economy that government revenues would rise, not fall. The free lunch was born.

The problem with Mr. Laffer’s graph, however, was that it had no numbers on the axes. How much would growth be boosted? At what level of taxation would tax cuts become self-financing? Those remained the big unknowns as the issue became a central question of American politics…

Enter Douglas Holtz-Eakin, an economist on leave from Syracuse University and an avowed advocate of supply-side “dynamic” scoring… Last week, in his agency’s analysis of President Bush’s tax and budget plan, he provided his new bosses with their first taste of dynamic scoring.

The results: Some provisions of the president’s plan would speed up the economy; others would slow it down. Using some models, the plan would reduce the budget deficit from what it otherwise would have been; using others, it would widen the deficit.

But in every case, the effects are relatively small. And in no case does Mr. Bush’s tax cut come close to paying for itself over the next 10 years.

FOR THE HANDFUL of people who read the report in its entirety, there is another surprise. Of the nine different economic models used to analyze the president’s plan, only two showed a large improvement in the deficit over the next decade as a result of “supply side” effects.Both those models got their results by assuming that after 2013, taxes would be raised to eliminate the remaining deficit. The theory is that people will work harder between 2004 and 2013 because they know that their taxes will be going up, and will want to earn more money before those tax increases take effect.

Using those same models, if the assumption is changed so that government spending falls after 2013 to close the deficit — the outcome preferred by most supply-siders — the economic benefits disappear. The president’s plan would cause the deficit to become slightly wider over the next 10 years than it would have been otherwise.

So, contra Will, it wasn’t that Douglas Holtz-Eakin was an “impediment to conservatives” because he didn’t personally champion supply side voodoo economics. Nor was he an “impediment to conservatives” because he wouldn’t intensively study their supply side voodoo. He was an “impediment” because when the CBO studies on dynamic scoring came back with disappointing, “reality-based” results, he didn’t try to sugarcoat or massage the numbers. The CBO models found that the Bush tax cuts would not somehow dynamically remove deficits. Period. Tax cuts had to be paid for… (well, who’da thunk it?
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Now, of course, if you’re like VP Dick “often wrong but never in doubt” Cheney, you believe that“deficits don’t matter”. However, deficitsdo still “matter” to a few Republicans and rational conservatives who will be voting in six weeks, and I don’t want them to read George Will and think that Holtz-Eakin is a reasonable fiscal moderate simply because he angered the Bushies. Well, he’s not a reasonable fiscal moderate. He’s a supply-sider like most of McCain’s other advisors. The difference with Holtz-Eakin is that he had enough intellectual honesty tonot fudge the numbers when they came back punk, and stood his ground and (no doubt) weathered enormous pressure from the White House to have the CBO studies changed, reconfigured, massaged, proofread by Kooky-Con think tanks… etc. He wasn’t a complete ideological hack, that’s all. And these days, conservatives who yield to reality over ideology are viewed as “impediments”.

4 thoughts on “The real impediment

  1. “The great argument got its start in 1974, when a White House chief of staff named Donald Rumsfeld sent his deputy, Richard Cheney, to have lunch with an ebullient young economist named Art Laffer and his journalistic sidekick, Jude Wanniski. According to local lore, Mr. Laffer sketched a curve on a cocktail napkin…”
    Jesus Fucking Christ we’ve had Decades of these 2 asshats and their disasterous fucked up ideas.
    Great post Oyster!

  2. According to what I’ve heard, Laffer wasn’t even what professional economists would call an economist; he was sort of a guy who’d maybe taken a couple economics courses in college…
    That’s right, folks, the entire world’s monetary policy these days is being directed by people who are walking, talking examples of the Dunning-Krueger Effect…

  3. Unfortunately, our collective Lake Wobegon mentality will keep us electing Laffers, Cheneys and other used-car salesmen.

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