In addition, CBO's estimates of the recent tax bill take into account the macrodynamic effects on unemployment, inflation, interest rates, and the size of the economy. As a result of this economic boost — as well as stimulus from the recent spending bill and overall good economic conditions — CBO estimates the economy will grow by 3. Not only does CBO estimate the economic effects of tax reform, but those estimates are in line with nearly every other organization that has evaluated the bill.
CBO estimates the tax bill will increase the size of the economy by 0. This estimate is higher than the initial estimate of 0. To produce the 3 percent growth Kudlow and the White House claim can be sustained, tax reform would need to increase the growth rate by 1.
And not only are CBO's growth estimates in line with others, but its fiscal estimates are as well. While Kudlow claims CBO is "always wrong," its revenue and growth estimates have actually been quite close.
While no estimator can predict the future with precision, CBO's growth and revenue estimates have been as good or in some cases better than other agencies. The largest difference is that fewer employers than expected have dropped coverage and moved their employees onto exchanges, so roughly the same number remain uninsured.
Specifically, CBO now projects 27 million to be uninsured in , which is actually 2 million lower than the projection, but only 10 million will purchase coverage through the exchanges — 15 million less than in the projection. In its second claim, the White House says CBO is using a "faulty baseline" because it is using estimates from March , where it projected that 18 million individuals would purchase insurance through the exchanges in CBO revises its projections of insurance coverage every year, and this projection has been subsequently revised down to 11 million in the January baseline a number that will increase to 13 million in and beyond.
Because Congress used the Fiscal Year FY budget resolution to set up the reconciliation process that allows them to pass the BCRA with a simple majority, that reconciliation legislation is supposed to be measured against the same baseline as the budget.
In each of its reports on the House and Senate ACA "repeal and replace" legislation, CBO has explained that it uses the March baseline in "consultation with the budget committees. CBO notes that "it is unclear how different categories of insurance would be affected and whether the budgetary effects would differ noticeably" if it used the baseline instead. CBO offered an explanation as to why its estimates are so different between March and January Although the number of insured people is similar, more people are covered by employer plans and less by the exchanges.
As CBO explained :. Debt levels were similarly overestimated in the budget year and underestimated in the sixth-year year, but naturally to a larger degree since debt levels compound over multi-year projections. Sixth-year year deficit estimates were underestimated by 0.
This report is part of an important effort to shed light on the uncertainty in its budget projections. Highlighting the uncertainty inherent in scorekeeping could help elevate the debate surrounding budgetary scores of legislation. This is due to a combination of variables, including demographic and economic factors, as well as the soundness of the key assumptions that CBO needs to make in the course of figuring out a proposals impact.
When it comes to eventually scoring incredibly massive and complex proposals such as Medicare for All, the number of factors and the interplay of those factors are greatly magnified, making budget estimates all the more precarious.
This is why it will be important to continue to include a range of outcomes, or to find other ways to illustrate the sensitivity of key variables to show how small changes in assumptions built into the scoring model can lead to much different fiscal consequences. In an important appendix to its errors report, CBO analyzed the impact that legislation enacted after the baselines were published had on the actual outcomes. This had a far greater impact than the projection errors analyzed in the main body of the report.
CBO found that legislation boosted the second-year deficits by 0. For the sixth-year projections, legislation added an average of 1. In other words, the largest confounding factor faced by CBO when analyzing the budget, by orders of magnitude, is in fact Congress.
By encouraging or requiring CBO to regularly produce a more realistic baseline that accounts for likely changes to policy like extensions to expiring tax provisions , Congress could help encourage more accurate scorekeeping. While legislators could simply mandate that the agency regularly produce a current policy baseline including scoring individual legislation against such a projection , this would impose substantial new workload.
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