The swift backlash helped defuse concerns about the deficit impact long enough for the bill to pass by a vote of 51 to 49. Some deficit hawks in the Senate caucus were sufficiently concerned about the report on Thursday night to delay the tax vote by a day, but the only Republican lawmaker to vote no was Senator Bob Corker of Tennessee, whose last-minute efforts to cut the size of the package or otherwise offset the deficit impact were unsuccessful.
Instead, Senate Republicans questioned the timing of the analysis’ release on Thursday, and a spokeswoman for the Senate Finance Committee released a statement saying the findings are “curious and deserve further scrutiny.”
Republicans say the committee’s model underestimates how workers will respond to lower taxes and how private investment affects growth. They also say the model assumes that the Federal Reserve will raise interest rates faster than Republican lawmakers expect, which would make borrowing more expensive and could slow economic growth.
That sentiment was repeated over and over, before and after the vote. “We think they lowballed it,” Senator John Cornyn of Texas, the majority whip, told reporters on Thursday. On Sunday, Senator Tim Scott of South Carolina said on CNN that “there’s no doubt that the J.C.T. has been consistently underestimating the activity in our economy.”
In the final hours before and after the bill passed, party leaders insisted that the tax plan would produce enough economic growth to pay for themselves with additional tax revenue from growing businesses and higher-paid workers. “I’m totally confident this is a revenue-neutral bill,” Senator Mitch McConnell of Kentucky, the majority leader, told reporters early Saturday morning after the vote, adding that he believed the bill would actually be a “revenue producer.”
Yet there was no data to support those claims, despite promises by the Trump administration that such an analysis would be forthcoming. The Treasury, whose secretary, Steven Mnuchin, has said repeatedly that his department was working on an analysis to show how the tax cuts would not add to the deficit, has not produced any studies that back up those claims. Last week, the Treasury’s inspector general said it was opening an inquiry into the department’s analysis of the tax plan.
The attack on the joint committee and its analysis is a change from the praise Republicans have long heaped on the body, which is staffed with economists and other career bureaucrats who analyze legislation in depth.
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“The people who prepare our cost estimates are the best in the business,” Republicans on the House Budget Committee said on a page that has since been removed from their website, “and they’ve been working on this issue for years.”
The critique is the latest example of Republican lawmakers muddying the waters on empirical research in an effort to boost their policy agendas. During the debate over repealing and replacing the Affordable Care Act, lawmakers lashed out preemptively at the Congressional Budget Office over how many people would lose health insurance.
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At stake in the debate is more than the reputation of the economic analysts whose lifeblood is understanding the vagaries and intersections of the federal budget and tax code.
If Republicans are wrong and the joint committee is correct, the tax bill will add to an already worsening fiscal forecast in the United States. The federal government is already running an annual deficit of nearly $700 billion. The amount of federal debt has surpassed $20 trillion, and it is projected to grow by another $10 trillion over the next decade as government safety net spending rises because of retiring baby boomers and increasing health care costs.
The joint committee did find that the tax bill would rev up economic growth but, like other studies, it would not be enough to offset the loss of tax revenue. The analysis found growth from the tax cuts would offset $458 billion in lost revenue, but $51 billion of that would be eaten up by additional interest costs on money the United States would need to borrow to pay for the plan. That would leave just $407 billion to offset a nearly $1.5 trillion tax cut, the committee found.
Other independent analyses echo the joint committee’s findings. The Tax Foundation, which tends to find high growth effects from tax cuts, projected the House version of the tax bill would increase deficits by about $1 trillion after factoring in economic growth. The Tax Policy Center, which tends to find much smaller effects, estimated the deficit increase at nearly $1.5 trillion. So did the Penn Wharton Budget Model, which is run by a former Bush administration economist, Kent A. Smetters.
Both the Penn model and the Tax Policy Center’s model found the Senate version would increase deficits by more than $1 trillion after accounting for growth; the Penn model in particular produced a near-identical score to the joint committee’s. The Tax Foundation did not complete an analysis of the Senate bill as amended in committee, when senators made several large changes to the bill including sunsetting its tax cuts for individuals in 2025.
Until Thursday, though, Republicans could dismiss those findings by pointing to the lack of analysis from the joint committee. The House bill was passed two weeks after it was introduced, before the committee could issue a so-called dynamic score of the bill, one that estimates the legislation’s cost in light of its effect on the economy. When the Senate analysis was finally released, Republicans, who pushed the bill through Congress at such lightning-fast speed that the final bill had handwritten changes in the margins, questioned the timing.
“How is it,” they wrote in their response points, “that J.C.T. found the time to produce and make public its macroeconomic analysis of the Senate bill, when it has yet to produce the same analysis of the House bill that passed weeks ago.”
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In a November 28 email shared with The New York Times, the committee’s chief of staff, Thomas A. Barthold, said the committee had suspended its work on the House bill dynamic score in hopes of producing an analysis of the Senate bill before a final vote.
Looking at the calendar, Mr. Barthold wrote, “I made the decision to have my macro colleagues devote their time to producing a macroeconomic estimate of the Finance bill in time for the Finance Committee’s report (in this we failed) or in time for the Senate’s debate on the legislation. My colleagues and I reasoned that we could then return to complete work on H.R. 1” — the House bill — “and with good fortune have the two analyses available for a potential conference.”
The blowback came, in part, from lingering anger over unfavorable analyses of Republican health care plans by the budget office earlier this year, according to a Republican Senate aide. A finding that contradicted their philosophical belief that tax cuts will generate significant growth and revenues inflamed their suspicions.
Instead, they found comfort in ballpark estimates offered by some conservative economists, that the tax bill could increase the size of the economy by as much as 4 percent over a decade, or 0.4 percent a year. Mr. Smetters, of Penn, said that number is actually much higher — that the economy would need to grow by at least an additional 0.57 percent a year for tax cuts to pay for themselves.
Not even the most optimistic analysis of the Senate bill projected it would unleash anywhere close to that rate of additional growth.
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Article source: https://www.nytimes.com/2017/12/04/us/politics/republicans-joint-committee-on-taxation-estimate.html?partner=rss&emc=rss
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