Wednesday, March 18, 2015

The Republican Budget is Gimmicks - Smoke and Mirrors only

http://thinkprogress.org/economy/2015/03/18/3635394/republican-budget-gimmicks/

This Republican Budget is smoke and mirrors.

On Monday, House Republicans unveiled their latest budget proposal. It promises to cut spending by $5.5 trillion, balance the budget in less than a decade, and still do so without “tax increases or true austerity measures, or a loss of confidence in America’s creditworthiness.”
The proposal put forth by House Budget Committee Chairman Tom Price (R-GA) also promises not to “let rhetoric take the place of real results,” and to that end says, “Real results means we do not rely on gimmicks or creative accounting tricks to balance our budget.” Yet there are at least five pieces of the budget proposal that look suspiciously like gimmicks.
Unusual accounting tricks
The budget reports that even with no extra revenue raised, it would increase the deficit by $18 billion within the first two years but then wind up with an actual surplus of $83 billion by 2025. To arrive at these numbers, it uses estimates that take into account “the positive impact of its overall deficit-reducing fiscal policy” to report an extra $147 in deficit reduction from “positive economic feedback effects,” such as an assumed increase in economic growth of 6.5 percent by 2040 thanks to reducing federal debt. This estimate uses what is called dynamic scoring: the inclusion of assumptions about changes in the economy and workforce that result from legislation when estimating its fiscal impact. This means relying on macroeconomic forecasts to come up with figures, which are incredibly uncertain and often necessitate making assumptions that can be politically charged, such as the idea that tax increases will boost growth.
The Republican budget assumes the economy won’t just benefit from its promised deficit reduction, but also from “fundamental tax reform, increasing domestic energy production, and the restoration of incentives for people to work, save, and invest,” while not necessarily outlining the details of those promises.
Unspecified spending cuts
The budget also gets to its deficit reduction by promising big savings through spending cuts on mandatory programs, the largest of which are Social Security, Medicare, and the Affordable Care Act (which it repeals and therefore counts as savings without taking into account increased deficits if the law were done away with). But other than the assumed savings from repealing Obamacare, the next largest savings in mandatory spending from a category simply called “Other Mandatory,” which it claims would be reduced by over $1 trillion by 2025. This category includes programs like food stamps, the Earned Income Tax Credit, and disability payments for veterans. The budget proposal’s cuts aren’t spelled out, and it’s not clear how these programs could be reduced by such a large number, but they’re a big chunk of the promised $5.5 trillion in promised savings.

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