Monday, October 12, 2009

How to make $ trillion in new spending appear to improve the deficit

The Congressional Budget Office is part of the smoke and mirrors game this time. Their finding that the Baucus Bill might add spending, but it will improved the budget deficit it nonsense. And they know it; everyone knows it. First, there is no Baucus Bill. There is a "plain-English" outline of over 200 pages. But the real bill has not been written. Semi-legible though it is now, Senate staff will turn the current into legalese to be the real bill. Of course the result will not be exactly the same. CBO should expense out the real bill, not this. Second, CBO assumed that we will go for increased taxes like sheep. They dutifully accept Baucus's assumptions about his proposed taxes being enacted and Americans going along and not changing their habits to avoid new taxes. But people always change their behavior when the incentives change. [REFERENCE] His claimed increased tax revenues are unlikely to come about. But that happens with every tax increase. Third, Baucus pulled a very obvious trick. He put all the tax increases and cuts to Medicare up front - in the next two to three years. But the new benefits are delayed for three to four years. The cost estimate Congress uses is the next ten years. But this start up is not an accurate picture of a typical ten years. The increased costs are greatly understated. If you understate the increased costs and overstate the revenues how can you claim to have an accurate picture? This "bill" will clearly increase the deficit that Obama promised to reduce.

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