Moving the Goalposts

By James Kwak

Ezra Klein yesterday highlighted one of the underlying problems with even apparently informed discussions of deficits and the national debt: the CBO’s “alternative fiscal scenario.” As opposed to the (extended) baseline scenario, which simply projects the future based on existing law, the alternative scenario is supposed to be more realistic. And it is more realistic in some ways: for example, it assumes that spending on Afghanistan will follow current drawdown plans, not a simple extrapolation of the current year’s spending. But the problem is that it has become excessively conservative in recent years—to the point where, as Klein says, “Policy makers, pundits and others almost exclusively use this model to stoke Washington’s deficit anxieties.”

The basic problem is that the alternative fiscal scenario simply assumes, without further support, that laws will mysteriously change in ways that reduce tax revenue and increase spending (relative to current law). As I put it a while ago,

” The definitive report on our long-term budget gap implicitly assumes that we do nothing about that budget gap — that we keep cutting taxes and blocking spending cuts at every opportunity.”

Or, in other words, it assumes that Republicans win every fight over taxes and Democrats win every fight over spending.

Things weren’t always this way. For example, the immaculate assumption that tax revenues will remain constant as a share of the economy—despite, for example, real bracket creep, which moves people into higher tax brackets as their inflation-adjusted incomes rise—was only introduced in the past few years: as recently as 2009, the alternative scenario did not assume these mysterious tax cuts. (See this earlier blog post for an explanation.)

I didn’t realize until reading Klein’s blog post that the CBO changed its spending assumption just last year. In 2011, this is how it projected spending other than on Social Security and health care: “Beyond 2021, other spending stays at the same share of GDP projected for 2021 . . .” And this is how it changed in 2012: “For projections beyond 2022, CBO assumed that such spending would, during a five-year transition period, gradually return to its average share of GDP during the past 20 years.” The net difference from this one assumption is about 2 percent of GDP. This is a huge amount—equivalent, for example, to all of the growth in Medicaid, the Children’s Health Insurance Program, and health insurance subsidies over the next twenty-five years.

It’s almost as if, as Congress does things that reduce the long-term national debt (like the Budget Control Act of 2011, which may be a stupid bill, but did reduce the debt under current law), the CBO moves the goalposts further away so the problem remains the same size. This is why, in White House Burning, we adjusted the CBO’s projections, and we showed scenarios with and without the Bush tax cuts (rather than simply assuming, as most people did, that the Bush tax cuts would be made permanent for everyone).

As Klein says,

“Because everyone was used to a fake baseline that assumed their full extension, a supposedly deficit-obsessed Congress managed to resolve the so-called ‘fiscal cliff’ in January by passing a huge tax cut that added trillions to deficits while calling it, amazingly, a fiscally responsible tax increase.”

If only more people had pointed that out beforehand, maybe Congress wouldn’t have been able to get away with that one.

47 thoughts on “Moving the Goalposts

  1. Where are the rest of the founding fathers when a real crisis arrives? And how did we get here any how??

  2. Well the redoubtable Krugman recently had an analysis about how the deficit is vanishing faster than one might have expected. So the GOP’s main talking point is a wasting asset.

  3. …the true debt, known to economists as the fiscal gap, which includes all the off-the-book obligations of the government, is 20 times larger!

    These off-the-book obligations include the requirement, under current law, to pay today’s 40 million seniors, on average, $30,000 per year in today’s dollars in Social Security, Medicare, and Medicaid benefits through the rest of their days. They include the requirement, under current law, to pay today’s 78 million baby boomers, when fully retired, $40,000 per head, in today’s dollars, in Social Security, Medicare, and Medicaid benefits. They include the requirement to pay for all future military expenditures, all future welfare benefits, all future Supreme Court Justices salaries, and the list goes on.

  4. Since you pocketed 13.6% of my salary for SSI for 30 some years you damn better pay me back with interest. You being the liberals, the Reaganites now controlling the House, the Freedom party, and all the phony grassroot budget hawks. Remember Alan Greenspan and Ronald Reagan fixed SSI back in 1986 by collecting more tax than needed and dumping the surplus in to the general fund. Now his Ayn Rand bastard children claim it disappeared.

    Medicare, of course, is a unfunded fantasy and the health care industry want its cost control objectives eviscerated on the operating table, hence the Ryan surgery.

  5. always interesting to see how some estimate future costs without any idea how long some will live, or not, or how much it will cost for them to do so. so far we haven’t been able to forecast next year, ;let alone 20 years into the future


    This just means that the AynRandZombies under the cover of The Patrio Act have already been doing it and they need to make it “legal” before the lawsuits proving it wasn’t for “national security” but to rip you off – PRIMA FACIE – pile up. This is the whole recent decade’s legaltainment schtick in a nutshell.

    Nothing will stop this extraction inertia except for the classic – the bullet to the forehead when you catch them red-handed, otherwise they’ll hide behind the excuse of being functionally autistic and therefore unable to know right from wrong and who owns what since it’s all “theory” and they are geniuses in “theories”

  7. Perhaps the CBO should be closed down and congress should use the WHB numbers??

    Haha, Nobody buying the book? Not surprising!!

    Glenn Greenwald at Yale Law School –
    “With Liberty and Justice for Some”

  9. This fiscal debate is driving me to distraction. I know that it must be doing the same for so many others who are knowledgeable enough to understand that it is like one huge absurd human filibuster which is intent on denying reality in favor of puffery to support a continuation of the status quo. I’d like to get all of Congress and the White House into one large room and ask for a show of hands regarding those who desire to accomplish governance. Anyone who raised their hand would have to sign a pledge to make a constructive attempt to bring reality to governing.

    The answers are so simple, once the problem is understood and described in realistic terms. I was so disappointed that the trillion dollar coin debate went away, since it was beginning to look like the start of sanity in governance. It is truly what Bernanke would want. He hs stressed frequently that austerity is something that should be exercised in the future, and only when the economy is back on its feet and unemployment is at a more normal level, say 6% or so (a real 6% not like the notional and ridiculously believed 7.7% currently).

    If Treasury would simply mint the trillion dollar coin and deposit it with the FED to be specifically used for the purpose of stimulous, with about half for infrastructure, about 25% for education, and the rest for main street lending to small business (of under 100 employees), that could easily jump start things. If the pentagon would close about 90% of overseas bases, and ditch the absurd “joint strike figter program, and drop all weapons systems that are not in keeping with current military practices, we could actually save about 25% of the nearly trillion dollars we spend on that boondoggle. If the ACA could be scrapped and replaced with a universal single-payer Medicare for All health care program where the government simply told the medical community what it could charge for everything (as in Scandinavia), we could cut our health care costs by 50% and get truly universal coverage. If we taxed transactions, and did away with special rates for carried interest and capital gains and imposed a minimum rate on those making 5 million or more.

    Many more ifs to go, but I’m tired. And none of this will happen as it all is subsumed by greed and corruption.

  10. Why buy a book when ye can’t see anything but yer own backwoods country yahoo cohorts.

  11. @theViking

    “I” didn’t pocket your SSI taxes from your paycheck, some long dead person did. So because someone stole from you, you think it is moral to steal from me? Even so, maybe the average Boomer paid in 150K at most, yet will collect way way more than that in SSI and medicare. The most selfish generation ever…

  12. Come on, we all know this purported battle over the budget isn’t about the budget at all. If the Right cared about debt, they wouldn’t have given us the Bush tax cuts, two unfunded wars and an unfunded drug benefit (read: subsidy for Big Pharma). No, this is about dismantling all the social programs, dating back to the New Deal, and returning us to the Gilded Age, where we all must rely on the charity and beneficence of the likes of the Koch brothers. No, this isn’t a war on debt, it is a war on the middle class, which has not been so weak and exposed to attack since the Depression. It is obscene to talk about Social Security and Medicare cuts, as well as the dismantling of social programs, in the midst of high unemployment, under employed youth facing crushing debt and millions of Baby Boomers facing retirement with depleted savings and without pensions. We should call these arguments what they are and not dignify them by characterizing them as legitimate debating points concerning long term debt. This isn’t about debt. This is class warfare the likes of which we haven’t seen in generations.

    Dean Baker
    Big Bank Immunity: When Do We Crack Down on Wall Street?
    Posted: 03/11/2013 5:13 pm

    “The Wall Street gang must really be partying these days. Profits and bonuses are as high as ever as these super-rich takers were able to use trillions of dollars of below-market government loans to get themselves through the crisis they created. The rest of the country is still struggling with high unemployment, stagnant wages, underwater mortgages and hollowed out retirement accounts, but life is good again on Wall Street.
    Their world must have gotten even brighter last week when Attorney General Eric Holder told the Senate Judiciary Committee that the Justice Department may have to restrain its prosecutors in dealing with the big banks because it has to consider the possibility that a prosecution could lead to financial instability. Not only can the big banks count on taxpayer bailouts when they need them; it turns out that they can share profits with drug dealers with impunity.”


  14. @Woych, “…Not only can the big banks count on taxpayer bailouts when they need them; it turns out that they can share profits with drug dealers with impunity….”

    DIsgusting, ain’t it? But who did everyone think these people where who do 360 degree head spins at the mention of “universal health care”?

    Ethical scientists need to unionize – with POWER.

    Every human being has the RIGHT to make their lives less miserable through honest work. There is no group more deserving of the bullet to the forehead than the Drug Lord branch of the unholy trinity – War/Drug/Slave Lord hydra. They dared to TAKE the power on themselves to prevent people from pursuing ethical medical research and then having complete control over the “business model” that allows for the greatest good for the greatest number. But true “health care” includes public infrastructure like providing water and preventing industrial pollution. It also means setting steep fines on people who infect others with sexually transmitted diseases – set a stinkin’ FINE on that PERSONALLY CONTROLLABLE ACT instead of turning loose the mad dogs of the IRS to go after a family on the edge of the poverty line for a fine because they did not buy for-profit health insurance! Instead, let’s all focus on the people who are un-naturally obese thanks to the “high fructose corn syrup” molecule they put in everything in the supermarket that came in a package. Like Waterbury, I’m CONVINCED that Gen X in charge is a retrogressive force on human evolution of the kind that probably has never happened before. The ONLY thing that they are never too mentally or physically lazy to do is to prevaricate, speculate and gossip instead of LEARN THE FACTS. They constantly step on the toes instead of stand on the shoulders of all who came before them.

    Take those ludicrous gizmos away and they have absolutely NOTHING SUSTAINABLE to add to wisdom or progress on the timeline of 40,000 years of EARNED civilization. Hedonistic Nihilists, one and all.

    There isn’t even a goalpost left to move after the fans rioted.

  15. Ignorance is bliss when you can’t stomach the truth. So life maintenance on, and make life’s misery’s less, through honest work. There is no one stopping you from achieving those lofty goals, so quit complaining and DO something about it “because you can”.

  16. Thanks Annie! Have You seen this on where they moved the GOALPOSTS?
    More U.S. Profits Parked Abroad, Saving on Taxes
    Source: The Wall Street Journal

    Share This

    By Scott Thurm and Kate Linebaugh

    March 11, 2013
    “U.S. companies are making record profits. And more of the money is staying offshore, and lightly taxed.
    A Wall Street Journal analysis of 60 big U.S. companies found that, together, they parked a total of $166 billion offshore last year.”

    “..Within the group of 60 companies, the Journal found 10 that parked more earnings offshore last year than they generated for their bottom lines. They include Abbott Laboratories, whose store of untaxed overseas earnings rose by $8.1 billion, to $40 billion. The increase exceeded the pharmaceutical maker’s net income of $6 billion, which was weighed down by a $1.4 billion charge related to early repayment of debt. Including that charge, Abbott reported a pretax loss on its U.S. operations.”

  17. @Sue, “…There is no one stopping you from achieving those lofty goals…”

    That is such a lie, that you are delusional.

    PREDATORS have always been among us.

  18. @Woych – I wonder what % of that loot that Abbott parked overseas came from the Medicare Ddonut hole?

  19. Just the fact that you are going after ME, SuzieQ, is truly delusional. What a psychologically telling and b-chy act.

    @Woych – “don’t cry for me, Argentina”…

    This was a really good discussion – “silence is complicity”:

    Just what we need – a Pope blessing “austerity” by indulging himself in it. Seems like more of a fetish than spiritual superiority…

  20. Of course you are aware that all b-chys die in the end, and you are NO exception there, little fat fannie. And I don’t even think you know who ME is, the way you act in public.

  21. Some kind of serious deficiency in the totality of a *filthy rich* human being who has to publically expose his flaws on an MIT economic discussion website by STALKING a person who he believes has what money can’t buy.

    Here, Buddy, go play with your 1% club. I’m already eternal. You seem to be worried:

  22. All powerful Cretin – post the video of how I ACT “in public”….we’ll see how many “dislikes” it gets…

    Oh wait, you’re seeing “me” in opium induced “visions” in your head! Monkey brain on imagination?

    Well the, never mind…

  23. The imminent global economic collapse will obviate these issues. “Be afraid,” writes New York Times award winning business columnist Gretchen Morgenson. “The financial system, thanks to dissembling traders and bumbling regulators, is at greater risk than you know.” The ECB and IMF have declared open season on private property, simultaneously making the notion of deposit insurance a laughing stock. Run for your assets, boys and girls; if you don’t physically possess it, it’s ripe for the taking.

  24. No, you just stick to that rot theme there and the people will remove all doubt of your insanity. You don’t need no down votes in a place where your voice don’t count.

  25. Aw, go build a robot to transfer your brain into, only “thing” where your voice matters…

  26. And water will either boil the egg, smash it against a rock, or carry it and the person watching it far out to sea to drown.

    Crisis in “liquidity”?

  27. This post is so informative and makes a very nice image on the topic in my mind. It is the first time I visit your blog, but I was extremely impressed. Keep posting as I am gonna come to read it everyday! Mcx Tips

  28. Wondering what Professors J & K’s thoughts are on the Cyprus debacle. I have just returned from a business trip to Berlin, and every mainstream magazine from every European nation is screaming in front page bold that Europeans can no longer trust the banks with their savings. Honestly, the atmosphere everywhere I went was thick with fear. The bank runs on the Continent are in full swing and emergency capital controls are now a badly kept secret. Americans would do well to understand that this is a full-fledged crisis that threatens the global banking system. My colleagues are all extremely concerned (worried sick actually) about the contagion effects. The scariest thing is that we all realise that there is nothing the Eurocrats can do to reverse the damage caused by the absolute maddening bungling of the Cyprus affair.

  29. Great comments there Bryan. And we keep trying to find a cure for cancer when the daily routine don’t work so good, but the changing colors in the bathroom not only make my head hurt, but the toxic treasury secretary’s too.

  30. All the socalled governments numbers are manipulated to favor and shield the predatorclass and predatorclass oligarchs. If the financial oligarchs were forced to mark to market, they would all be insolvent. So these predatorclass den of vipers and thieves forced their spaniels in the socalled government to manipulate and distort the numbers by the ridiculous application of “mark to book”. Examine the deeper unemployment, GDP, inflation, war and warmaking numbers and you quickly unearth the same kind of systemic endemic distortion, manipulation, and alteration of the core or base numbers to favor and shield the predatorclass.

    We inhabit a fascist state. Predatorclass individuals and predatorclass oligarch own and control the socalled government. The people are deceived , manipulated, and ruthlessly oppressed by a fascist state favoring, shielding, and advancing predatorclass interests exclusively.

  31. @TonyF, “….If the financial oligarchs were forced to mark to market, they would all be insolvent….”

    Cue up another pre-emptive war…

  32. Manipulation and massaging numbers and baseline scenarios the shield and favor the predatorclass are status quo. Nothing has changed. The predatorclass rules, owns, and controls the socalled government and ruthlessly abuses, subverts, disinformation, manipulates, and oppresses the 99%. There are no political, judicial, or peaceful remedies left for the 99% who has absolutely no voice, representation, or say in the criminal conduct of the socalled government. The predatorclass owns and controls Amerika, and there is no – absolutely zero options or possibilities for the 99% to legally or peacefully resolve or redress these these grotesque abuses, systemic criminal activity, or horrorshow wrongs!!!

    Burn it all down!!! Reset!!! It’s the only option for the 99%!!!!

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