Tax Analysts Blog

Wall Street Journal Prefers Ignorance to Expertise

Posted on Dec 10, 2014

The Wall Street Journal wants to banish expertise from Capitol Hill – at least when it comes to economic policy. In a defiantly anti-intellectual editorial, the paper suggested recently that Congress abolish both the Congressional Budget Office and the Joint Committee on Taxation. Both are bastions of left-wing ideology, the paper insisted, “operating for decades under liberal principles embedded in Democratic legislation.”

The Journal blamed the CBO and JCT for the failures of past Republican majorities. “One reason Republicans didn’t achieve more reform after taking Congress in 1994, and again after 2002, is that they didn’t either repeal or replace these institutions created to serve Democrats,” the editors wrote.

“The wisest course is to abolish CBO and Joint Tax and allow open debate about the tax and spending implications of policy changes,” the paper continued. “Let the politicians with the authority to make these decisions be accountable for the results.”

Now personally, I wouldn’t trust a member of Congress to figure the tip on my bar tab, let alone the revenue effect of repealing bonus depreciation. But that’s just me.

Maybe the Journal is right -- perhaps the policy process would benefit from radical simplification. Freed of having to deal with staff that actually know something, lawmakers could engage in some good old-fashioned, seat-of-your-pants budgeting.

Or maybe members would take the floor and argue the finer points of macroeconomic modeling, eventually settling on the best, most accurate budget projections. They’re good at that sort of thing.

If Republican leaders think they can do a better job without help from actual experts, then I wish them luck. Because they’ll need it. Abolishing the CBO and JCT would be a form of unilateral disarmament, hobbling lawmakers in their perennial battle with the executive branch.

Both agencies were created to give Congress its own source of fiscal expertise. Lawmakers were tired of relying on Treasury and White House estimates, so they created their own stable of resident eggheads. And over the years, the CBO and JCT have made it harder for presidents to steamroll Congress on a host of economic policy issues.

Sometimes the CBO and JCT have frustrated the budget cutting efforts of GOP presidents. But other times, they have constrained Democratic presidents in their drive for big government.

But hey, why take my word for it -- a little creative destruction might be just the ticket. In the interest of experimentation, I urge Republican leaders to follow the Journal’s advice and fire all the people who know what they’re talking about.

Let me know how that works out for you.

Read Comments (5)

edmund dantesDec 10, 2014

Great idea, you are absolutely correct. Both the CBO and JCT should be
scuttled.

BTW, do you have any examples of the CBO or JCT "constraining Democratic
presidents in their drive for big government"? I can't think of any--both
agencies rolled over on Obamacare, for example, with projections that have
already been shown to be wildly optimistic.

I've been watching these guys for 30 years, and what the CBO and JCT offer is
the illusion of expertise. Their projections have had all the accuracy of
throwing darts at a board. The most notorious error was projecting massive
revenue losses from cuts in capital gains taxes, when the reality turned out to
be massive revenue gains.

travis rechDec 10, 2014

"The most notorious error was projecting massive
revenue losses from cuts in capital gains taxes, when the reality turned out to
be massive revenue gains."

When was that?

Joe ThorndikeDec 10, 2014

Edmund -- I would counter your reasonable question with another one: What would
existing government programs (like Obamacare) look like without an official
scorekeeper? Is there any doubt that they would be much, much bigger and vastly
more expensive?

The legislative odyssey that resulted in Obamacare was mostly a story of
constraints, with Democrats trying to keep the bottom line cost under some
modicum of control. Absent any fear about scorekeeping, they would certainly
have spent a lot more. Even if you think CBO was imposing only loose
constraints, at least it was providing SOME.

If the cost of new programs were never laid out specifically, then lawmakers
and presidents would be free to do whatever they wanted. Advocates of bigger
programs would simply dismiss cost objections as partisan obstructionism.

Reforming CBO is one thing; Avik Roy has made an interesting (although to my
mind, not compelling) case for it. And changing leadership is certainly the
majority's prerogative, although plenty of conservatives have endorsed
retaining Elmendorf.

But abolishing the only agencies that are actually charged with toting up costs
on Capitol Hill seems like an invitation to profligacy. As if Congress needed
one...

edmund dantesDec 11, 2014

mr. rech: here's the background.

mr. thorndike: with the republicans in charge, i expect that there won't be
new programs adopted, and existing programs will be trimmed back, based upon
experience and not projections, until the budget is balanced. that eliminates
the need for the agencies. too optimistic?

the thing that bugs me the most about the process is that CBO projections are
treated as the holy grail, they cannot be questioned during the legislative
process. projections repeatedly have been used to force "offsets" to other
needed tax legislation, most notoriously the biannual renewal of the inflation
adjustment to the AMT exemption. but after the legislation is done, no one
ever goes back to check on the accuracy of the projections! oh, the WSJ did in
the article i cited for mr. rech, but only for the capital gains projections.
CBO and JCT should get a scorecard on how close they came with their
projections--once we learn that they are routinely off by 50% or more, we can
stop treating their predictions as sacred.

another problem is the absence of transparency in methodology. i have seen many
projections that just don't make sense if you try to unpack the assumptions
that must have led to them.

for example, look at the scoring of the expiring tax provisions. A two year
extension of the research credit is $15 billion, but a five times longer
extension costs ten times as much, $155 billion. There must be some
extraordinary economic growth built into those models.

Far worse, two years of bonus depreciation costs $3 billion while ten years
costs $269 billion? Is that a typo? Nearly 90 times more cost? Could some
one explain how that is remotely possible? Some kind of super-duper dynamic
scoring rubric?

fundamentally, CBO is pretending to have an expertise that doesn't exist, and
probably can't exist. we should all stop pretending.

Edmund DantesDec 12, 2014

Today's Tax Notes reports: "The omnibus package would eliminate the need for
expatriates to maintain healthcare coverage under the Affordable Care Act. The
provision would cost $1.4 billion over 10 years, according to an estimate from
the Joint Committee on Taxation."

If all expats have health insurance, there is zero revenue to be lost.
Presumably many of them lack health insurance, so that's why JCT says dropping
the penalty loses $161 million in 2015 alone. Let's say that the maximum
penalty for going without is $3,000, roughly the average cost of a bronze
plan. So the JCT is telling us that there are 54,000 expats who will not have
health insurance, will not get insurance in 2015, and who would have sent the
IRS a check for $3,000 for not having that insurance (which assumes their
income is large enough for the maximum penalty exposure). They will prefer
sending that check to using that money to buy health insurance. Really? The
penalty has no incentive effect?

Mr. Thorndike, does that seem reasonable to you? All of the expats I know
(admittedly, just a few) are covered by national health insurance that is
provided in the nations where they live, or by their employers, so they
wouldn't have to pay the penalty anyway.

To me, this revenue estimate is absurdly high--is there something I am missing?

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