Wednesday, January 17, 2018

2018 NYU Tax Policy Colloquium: Greg Leiserson on dynamic scoring, part 3

The central conclusion I reached in my prior two posts (here and here) was not that dynamic scoring - i.e., attempting to measure macroeconomic responses to proposed tax law changes and to incorporate them in revenue estimates - is inherently wrong (it's not), but rather that its prominence within the information package that Congress considers can lead to worsened short-termism and biased decision-making.

In the particular context of the 2017 act, suppose all that one changed was to base the centrally reported dynamic score numbers on gross national product (GNP), rather than gross domestic product (GDP). That would focus attention on the change in Americans' wealth, rather than on growth in the U.S. economy without regard to how much of the value being produced was owned by foreigners. That would be no less "dynamic" a score. What is more, neither GNP or GDP is inherently a better measure. - it depends entirely on what one wants to know. But in context this would likely have been less misleading, as consumers of the dynamic score, and the growth effects it suggested, probably implicitly assumed that it was all to the benefit of U.S. individuals.

This brings me back to the point that dynamic scoring was pushed by people on the right as a weaponized tool to favor their side in the tax cut debate. This point is not contradicted by dynamic scoring's having arguments in its favor, and indeed potentially improving information with regard to the particular narrow questions that it addresses.

This in turn calls less for rejecting it than recalibrating its use and seeking other tools to give greater prominence instead. These should both aim to supply useful information and to counter pervasive short-termism in the political budget process (possibly through different and complementary measures).

But a further question of interest is the following. Great, the right has had a shot at weaponizing the instruments used in budget debate in order to tilt the budgetary battlefield in its favor. Suppose people on the left wanted to do the same thing, only in their favor. Then what sorts of measures might they urge Congress, along with other information providers, to emphasize?

Here are three ideas that emerged from discussions that I had in relation to the colloquium. (I am putting it this way to minimize taking undue personal credit for ideas I got from other people, while also not directly reporting on the colloquium discussion, which was off the record.) None is anywhere close to fully formed or ready for primetime. They are rather possible directions for further thinking.

Idea #1 - dynamic scoring for growth-promoting public spending - For example, educational and infrastructure investment could have budget estimates that reduce the net cost by taking account of expected productivity gains and (perhaps separately) the tax revenue consequences of productivity gains.

Idea #2 - a measure that focuses on how tax changes affect inequality. This might be focused on high-end inequality (and separately on low-end inequality), and could take a number of different forms.

I don't think that a Gini-style composite measure is at all useful here. It both conflates two quite distinct issues - high-end and low-end inequality - and is too bloodless and technocratic-looking.

Instead, some sort of measure that looks at gains to the top 1% and the top 0.1%. This could be put in a number of different ways, but the point is to have something that combines good optics with being intellectually defensible to focus attention on plutocrats' gains from 2017-style tax changes.

Idea #3 - middle-class tax impact: Suppose one were to assume that unfunded tax cuts (or, say, income tax cuts) will be offset at some point by income tax increases, and that the latter will be proportionate to the different income percentiles' shares of overall federal tax (or income tax) liability after adoption of the tax cuts. Hence, anything that cut taxes disproportionately for people at the top, a la the 2017 tax act, would be shown as increasing middle class taxes once the tax cut was funded in the specified manner.

In each of these cases, accurate information would actually have been provided. (In case 3, this pertains to the particular set of questions being asked, whether or not it's true that the funding for the tax cut would definitely take that form.) So, no less than dynamic scoring, both may expand the information that policymakers have, only with a rather different focus on what questions are being asked.

Given that these ideas are still so preliminary and unformed, let me close here by making a more general point. This is not a matter of right or wrong - political players have every reason to try to tilt the process in their own favor - but I believe Republicans have, for decades, been much more active than Democrats in trying to shift the rules of various ongoing poltical games in their favor - whether we're talking about districting, campaign finance, voting restrictions, budget rules, or budgetary information. This has led to asymmetric warfare that one could blame, if one is so inclined, more on the Democrats than on the Republicans.

Democrats ought as a matter of self-interest to address this. In the budgetary realm in particular, one thing they ought to do, if they take control of Congress in 2018 or later, is change the budgetary and information reporting rules, and much else as well, in their favor. It's how the game is played these days. Dynamic scoring, other ways of doing dynamic scoring, and budgetary and information-providing rules more generally (in tax and elsewhere) are areas that they would be poring over carefully, if they were smart, in search of places to take advantage.

If the so-called wave emerges later this year, we will see if any of this actually happens.

5 comments:

URGENT LOAN said...

Hello Everybody,
My name is Mrs Sharon Sim. I live in Singapore and i am a happy woman today? and i told my self that any lender that rescue my family from our poor situation, i will refer any person that is looking for loan to him, he gave me happiness to me and my family, i was in need of a loan of S$250,000.00 to start my life all over as i am a single mother with 3 kids I met this honest and GOD fearing man loan lender that help me with a loan of S$250,000.00 SG. Dollar, he is a GOD fearing man, if you are in need of loan and you will pay back the loan please contact him tell him that is Mrs Sharon, that refer you to him. contact Dr Purva Pius,via email:(urgentloan22@gmail.com) Thank you.

Dr Purva Pius said...

I’m Charles David by name, i want to use this medium to alert all loan seekers to be very careful because there are scam everywhere, Few months ago I was financially strained, and due to my desperation I was scammed by several online lenders. I had almost lost hope until a friend of mine referred me to a very reliable lender called Dr Purva Pius ( A God fearing man) who lend me a loan of $237,000 under 72 working hours without any stress. I explain to the company by mail and all they told me was to cry no more because i will get my loan from this company and also i have made the right choice of contacting them i filled the loan application form and proceeded with all that was requested of me and to my shock I was given the loan, If you are in need of any kind of loan just contact him now via: {urgentloan22@gmail.com}

I‘m using this medium to alert all loan seekers because of the hell I passed through in the hands of those fraudulent lenders.

Thanks you Dr Purva Pius Loan service for your help.

Michelle Huxford said...


ALL THANKS TO UPSTART LOAN AM NOW FINANCIALLY STABLE . upstartloan@yahoo.com
I am Michelle Huxford from Casper, Wyoming. I was in a very chronic financial issue and terminal health situation some few weeks back. After all my search for assistance from friends and neighbors proved abortive, I feel there was no one who truly cares. I became so emaciated due to lack of good food and my 2 kids age 5 and 8 were not also good looking due to lack of proper care as a result of finance. One faithful morning I saw an old time friend of my late husband and I told him all I have been going through and he said the only way he could help was to direct me to a good loan agency that also helped him, He explained to me on how he was financially down and how he got boosted by this loan agency UPSTART LOAN INC ( upstartloan@yahoo.com ) who grant him 245,000 USD loan at an affordable rate. He further assured me that they were the only legit loan firm he found in the quest of seeking for loan after been scammed by various fake loan lenders online. He gave me their email: upstartloan@yahoo.com or text/call (574) 301-1639, That was how i applied and was also granted a loan and my life changed for the good. CONTACT THE ONLY GENUINE LENDERS( UPSTART LOAN INC) VIA email: upstartloan@yahoo.com or call +1 (574) 301-1639 to resolve your financial mess. []===

Sr. Walter Oscar said...


Attention!!!

Do you have a bad credit?
Do you need money to pay bills?
Do you need to start up a new business?
Do you have unfinished project at hand due to bad financing?
Do you need money to invest in some area of specialization which will profit you? and you don’t know what to do.

we render all kinds of loan in good services, contact us via email: inforamzanloan@gmail.com
Thanks
Mr Ramzan

Jessica Shannon Shirley said...



We Offers Financial Consulting To Client, Companies Seeking Debt / Loan Financing And Seeking For Working Capital To Start A New Business Or To Expand Existing Business. Interested Parties Should Contact Us For More Information Through Via E-mail: inforamzanloan@gmail.com (Phone Number or WhatsApp : +1 (712) 600 2838 )

We Have Loan Programs Tailored For Any Profile And You've Come To The Right Place To Satisfy Your Business Needs. If Your Company Or You Know Of Any Company With Viable Projects / Proposals That Needs Financing, Kindly Write Us With The Loan Requirement. Please, Contact Us For More Information: inforamzanloan@gmail.com ( Phone Number or WhatsApp : +1 (712) 600 2838)

You Will Hear From Us. Well Nice To Meet You And I look forward to our Business Acquaintance. Interested Parties Should Contact Us For More Information Through Via E-mail: inforamzanloan@gmail.com