Unable to produce an actual analysis of its tax plan, the Trump administration has resorted to cooking the books.
White House officials and Republican lawmakers have claimed that their tax plan will unleash such tremendous growth that the bill will pay for itself.
Of course, no one remotely credible backs this up. Not the Tax Policy Center, not the Tax Foundation (which uses relatively rosy growth assumptions), not the Penn Wharton Budget Model, not Goldman Sachs, not the usual gang of Republican economists.
Not even the Joint Committee on Taxation, Congress’ nonpartisan internal scorekeepers on such matters, has found that the bill would be self-financing. Its most recently available analyses determined that even after accounting for economic effects, both the Senate and House bills would still cost about $1 trillion over the coming decade.
And that’s assuming many of the tax cuts actually expire after a few years, as the bills are currently written. If you take out the budget gimmicks and instead assume these tax cuts will be extended by future Congresses — as Trump officials and House Speaker Paul Ryan, R-Wis., have promised — the price would be closer to $2 trillion, according to the Committee for a Responsible Federal Budget.
Finally, on Monday, Treasury produced a report that purported to support the administration’s conclusions. Well, “report” is a strong word. It was, in fact, a one-page release containing no actual analysis or data, just fairy dust.
Rather than calculating the growth rate produced by the Senate tax plan, or any tax plan at all, the release merely … assumed a big growth rate. Then it said that if that growth rate happened to materialize, the plan would produce a whole lotta revenue. Enough to plug a big budget hole, even!
Which is a pretty big if.
“If I can assume I could serve at 150 mph, I could derive the conclusion that I could compete with Roger Federer,” Harvard economist and former Obama administration official Lawrence H. Summers cracked on Twitter.
Treasury assumes the economy would grow at 2.9 percent, which is much higher than what officials at the Federal Reserve and the Congressional Budget Office expect under current law. (Both project closer to 1.8 percent.) In other words, the Treasury one-pager suggests an enormous boost from the Trump agenda.
This is not how this works
This 2.9 percent figure is pretty specific, though, giving it a veneer of precision. How exactly did the Treasury Department choose that number from all the possible numbers in the world, you ask?
It lifted it from a forecast in the President’s Fiscal 2018 Budget, a sloppy, error-riddled document that came out in May. There are a few problems with this sourcing.
First, that budget was released before a tax bill was ever even written. The president’s budget did vaguely describe a tax-reform proposal, but it departed in critical ways from the ones the Senate and the House passed.
Second, the 2.9 percent figure in the president’s budget was supposed to reflect the effects of the president’s entire agenda, including infrastructure development, welfare reform and deregulation. In other words, it includes the economic effects of policy proposals that are not only unrelated to taxes and don’t yet exist. Despite months of teases, the Trump administration has released neither an infrastructure plan nor a comprehensive welfare-reform package.
And third, even those comprehensive economic growth effects may be plucked from thin air.
As I wrote in February, in putting together estimates for the budget, Trump transition officials directed staffers to assume growth rates of about 3 percent, and then backfill the other numbers in their models to get the final numbers to add up.
To be clear, none of this is how policy projections usually work.
Sure, previous administrations have selectively cited studies or assumptions that favor their pet projects. But this kind of stuff? It’s fan fiction, not economics.