03.07.2012 Policy Points

Fear The Dynamism

Simon Johnson warns people to be very afraid of “dynamic scoring.”

The macroeconomic models used to claim big growth effects for tax cuts are simply wrong – and completely at odds with the empirical evidence.  A smart modeler can assume something different and show you that with a great deal of math, but this is just an assumption dressed up in a complicated fashion.

Put more bluntly – there is no magic in the real world, just very large budget deficits.  As Mr. Buckley puts it, “One cannot find in the economic data for the last 30 years any evidence that supply-side-based tax policy has delivered its promised benefits.”

If you cut taxes, revenues will fall and deficits will increase.  If you change the CBO’s scoring process to hide this fact – as is under consideration by leading Republicans on the House Budget Committee and the House Ways and Means Committee – you are engaging in exactly the same sort of deception that brought down Greece.

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