April, 06 2011, 11:31am EDT
Ryan's Unbelievable Path to Prosperity
New House Republican Budget Plan Relies on Fantastical Heritage Foundation Predictions
WASHINGTON
The budget put forth by Congressman Paul Ryan (R-WI) for fiscal year 2012 beginning in October makes fantastical claims about its impact on investment, economic growth, and jobs. Rep. Ryan is basing claims of incredible economic benefits from his 2012-2021 budget proposal--that cuts taxes for the rich and lumps burdens onto middle-class families--on forecasts generated by an economic model from the conservative Heritage Foundation. We've been down this path before.
And it wasn't pretty. Nor was it a prosperous path for most American families. Twice before, in 2001 and 2003, the Heritage Foundation provided economic forecasts purporting massive economic gains from President George W. Bush's tax cuts similarly slanted toward the very rich. To put it mildly, the Heritage economic model is worth less than a broken clock, which can at least be right twice a day. And something doesn't smell right about their latest predictions either--the ones that Rep. Ryan is trumpeting in support of his "Path to Prosperity."
If Heritage's model boasts any track record at all, it is that the opposite of what it predicts will happen, which means Rep. Ryan's new budget plan would be more aptly named "Path to Prosperity, But Only for the Rich." Consider the think tank's most recent predictions for the House Republican budget plan with its past failures.
The Heritage economic model predicts:
- Nearly 1 million additional jobs created in 2012, with the unemployment rate falling to 6.4 percent. Actually, at the pace of job creation they estimate, unemployment will likely be around 8 percent by the end of 2012. Heritage's job-creation estimate would need to be more than 2.3 million higher between now and 2012--more than 50 percent higher than their estimate--in order to actually reach an unemployment rate of 6.4 percent by the end of 2012; past Heritage predictions overestimated job creation by an average of 6.2 million jobs per year.
- An additional 2.1 million jobs by 2021, which they say will lead to an unemployment rate of 2.8 percent. This rate is below what most economists--and the Federal Reserve--consider inflationary. Well before reaching this rate, the Fed would certainly intervene to create more unemployment and slow the economy. That the Heritage model doesn't reflect this demonstrates it is not based in reality.
- Average 2.7 percent real annual growth in gross domestic product after accounting for inflation; past Heritage predictions overestimated GDP growth by nearly 1 percentage point, which means they overstated growth by a factor of more than one-third.
- Housing investment will grow, incredibly, at more than double the pace of its peak in the 2000s housing bubble, while business investment will grow at more than double the pace of the business cycle between 2001-2007. Past Heritage predictions for investment overall would grow 5.4 percent annually, while actual investment grew by less than half of that at 2.1 percent a year.
We've seen the reliability of Heritage economic modeling before. There's no reason to believe it now, either.
But this time around, the Heritage model's economic forecasts touted by Rep. Ryan are not just fantastical, they are wildly fantastical. We now have the data to evaluate the economic policies of tax cutting slanted toward corporations and the wealthy at the expense of middle-class families during the Bush presidency. We also have the data to evaluate the credibility of the Heritage Foundation's economic model. Both are clear failures that should be rejected by policymakers and the American people. So let's dig a little deeper into Heritage's inauspicious record.
Heritage economic model's inauspicious record
Economists use models to predict how changes in policy or other factors will potentially affect economic outcomes. But, as with any modeling exercise, the real issue is what assumptions about how the economy works go into the mix. And it's those assumptions that are the fatal flaw of the Heritage model.
The Heritage estimates begin with the Joint Committee on Taxation's model of the effects of tax changes on the federal budget. They incorporate this into a so-called "dynamic" model of the economy. Heritage's model incorporates what they believe to be changes in people's behavior that will occur as a result of the changes in tax policy, thus the moniker "dynamic." The problem isn't that Heritage models behavior; it is that their model of behavior is not connected to how people in our economy have been shown to actually behave.
The Heritage model then compares its estimates to the Congressional Budget Office "alternative fiscal scenario," which include the fixes to the Alternative Minimum Tax and Medicare payments to physicians, both of which Congress repeatedly "fixes" every year. Heritage researchers then claim that the difference between that CBO baseline and their model's output is what we should expect if Ryan's budget is implemented. Since their model includes unrealistic models of how people will react to the Ryan policy changes, this leads to fantastical estimates of output and employment growth.
Anyone can make an economic forecasting model. But the true measure of a model's worth is how accurately it forecasts future economic developments. Before looking at what their model predicts for the Ryan budget proposal, it's important to understand how well this model has performed in the past. Heritage analyzed the 2001 and 2003 Bush tax cuts using a similar dynamic scoring methodology. In 2001 they predicted that if the Bush tax cuts were implemented, between FY 2002 and FY 2011 income for a family of four would increase by $4,544, investment in our economy would grow 1.9 percent a year, gross domestic product would grow by an average of 3.3 percent per year, more than 1.6 million more jobs would be added, and the unemployment rate would average to 4.7 percent over the 10-year period. But that's not what happened.
In fact, the period following the Bush tax cuts yielded one of the worst economic performances, as investment growth, employment, and output were slower than in any other economic recovery in the post-World War II era. Further, rather than growing by nearly $5,000, for the first time in any economic recovery since the end of World War II, our nation's middle-class families saw their incomes fall after factoring for inflation.
The actual feeble performance of our economy under the Bush-era tax cuts was a far cry from what the Heritage Foundation's economic model had predicted. Take, for example, Heritage's 2001 forecasts for job creation and GDP growth effects from the Bush tax cuts. To measure the effect of the Bush tax-cut policies, Heritage's forecasts and actual economic performance are compared to a baseline scenario of what would have happened in the absence of any policy changes. Heritage's model did not fare well in predicting the job-creation effect of the Bush tax cuts (see Figure 1).
In every year, the Heritage model simply gets the employment forecasts wrong, even before the start of the Great Recession in December 2007. Between 2001 and 2007, Heritage predicted the economy--spurred by the tax cuts--would add an average of 739,000 new jobs in addition to what would have been created in the baseline scenario. Instead, the Bush tax cuts failed to even maintain job creation at the baseline and job growth fell short of the baseline by 5.5 million jobs per year on average, and 6.2 million fewer per year than predicted by the Heritage model.
Including the years of the Great Recession shows the Heritage job forecasts to be even farther from the mark. But perhaps it is too much to ask their forecasting model to predict the drastic economic consequences of the tax-cutting policies it supported. And as the Bush tax cuts underperformed, the economy also fell farther and farther away from the baseline employment scenario, let alone the egregiously errant Heritage model predictions (to see Figure 2 and for the full article, click here).
Heather Boushey is a Senior Economist at the Center for American Progress. Adam Hersh is an Economist at the Center.
The Center for American Progress is a think tank dedicated to improving the lives of Americans through ideas and action. We combine bold policy ideas with a modern communications platform to help shape the national debate, expose the hollowness of conservative governing philosophy and challenge the media to cover the issues that truly matter.
LATEST NEWS
Grand Jury Indicts Top Trump Aides, 11 Arizona Republicans Over 'Fake Electors' Scheme
Had it succeeded, said the state's attorney general, the scheme would have "deprived Arizona's voters of their right to have their votes counted for their chosen president."
Apr 25, 2024
A grand jury in Arizona on Wednesday charged seven aides to Donald Trump and nearly a dozen Republican officials over a "fake electors" scheme in the state that aimed to keep the former president in power after his 2020 loss to President Joe Biden.
Trump, who is currently facing nearly 90 charges across four criminal cases as he runs for another White House term, was described as "unindicted co-conspirator 1" in the 58-page indictment, which was announced by Arizona Attorney General Kris Mayes.
"The people of Arizona elected President Biden," Mayes, a Democrat, said Wednesday. "Unwilling to accept this fact, the defendants charged by the state grand jury allegedly schemed to prevent the lawful transfer of the presidency. Whatever their reasoning was, the plot to violate the law must be answered for."
The indictment names former Arizona Republican Party Chair Kelli Ward, sitting state Republican Sens. Jake Hoffman and Anthony Kern, former U.S. Senate candidate Jim Lamon, and seven others as the "fake electors" who sought to declare Trump the rightful winner of the state's presidential contest.
The names of other individuals indicted by the state grand jury are redacted, but the document's descriptions make clear that former White House Chief of Staff Mark Meadows, former Trump attorney Rudy Giuliani, and top Trump legal strategist Boris Epshteyn are among those facing felony charges—including fraud, forgery, and conspiracy.
"In Arizona, defendants, unindicted coconspirators, and others pressured the three groups of election officials responsible for certifying election results to encourage them to change the election results," the document reads. "Discussions about using the Republican electors to change the outcome of the election began as early as November 4, 2020. Those plans evolved during
November based on memos drafted by [an attorney for the Trump campaign, Kenneth Chesebro]."
Mayes said Wednesday that had the fake elector scheme succeeded, it would have "deprived Arizona's voters of their right to have their votes counted for their chosen president."
"It effectively would have made their right to vote meaningless," said Mayes.
A state grand jury, made up of everyday, regular Arizonans, has handed down felony indictments in the ongoing investigation into the fake elector scheme in Arizona. pic.twitter.com/Nu8GcD4ZqJ
— AZ Attorney General Kris Mayes (@AZAGMayes) April 24, 2024
Alex Gulotta, state director of All Voting Is Local Action Arizona, said Wednesday that "the indictment of the eleven fake electors is one of the first steps required in holding these election deniers accountable for their alleged attempts to take power away from voters by disrupting our free and fair elections."
"Arizonans deserve to trust the election officials responsible for administering our elections and preserving our democracy," said Gulotta, "and this is a positive step forward as we continue to strengthen the foundations of our democracy and restore faith in our elections."
The Arizona Republicreported Wednesday that "several of the Arizona electors have previously claimed they were merely offering Congress a backup plan, though nothing in the documents they sent to Congress and the National Archives backs up that assertion."
"The indictment includes several statements the false electors made on social media that contradict those claims," the newspaper observed.
Jenny Guzman, director of Common Cause's Arizona program, said the indictment "marks the start of a new chapter for the fake elector scheme that has plagued Arizona."
"Arizonans are still dealing with the fallout from the false electors and the Big Lie about the 2020 elections," said Guzman. "We are relieved that the investigation by Attorney General Mayes has concluded and Arizonans can now know that what comes next is accountability. These efforts by these fake electors to undermine the will of Arizona’s voters have had implications far beyond their failed attempt to overthrow the 2020 election."
"This indictment can reassure all Arizonans that if anyone, regardless of their political affiliation, attempts to undermine their vote, consequences will follow," Guzman added.
Keep ReadingShow Less
Watchdog Urges FEC to Investigate Trump Campaign Over Scheme for Legal Fees
"By not disclosing the vendors that actually provided legal services, the Trump-affiliated committees effectively blocked the public from knowing which attorneys and firms are being paid—and how much."
Apr 24, 2024
A campaign finance watchdog on Wednesday filed a Federal Election Commission complaint accusing former President Donald Trump's 2024 campaign, affiliated political groups, and an accounting firm of violating U.S. law in a scheme "seemingly designed to obscure the true recipients of a noteworthy portion of Trump's legal bills."
The Washington, D.C.-based Campaign Legal Center (CLC) said that "evidence appears to show an illegal arrangement between several Trump-affiliated committees and a compliance firm named Red Curve Solutions that is designed to obscure the identities of those providing legal services and how much they are being paid."
"Voters have a right to know how the presidential campaigns and other committees supporting presidential candidates spend their money."
CLC alleges that the Trump campaign, Trump's political action committee (PAC) Save America, and three affiliated organizations "violated federal reporting requirements based on a scheme in which the committees reportedly paid over $7.2 million—described as 'reimbursement for legal' costs or expenses"—to Red Curve.
The watchdog also said that Red Curve appears to be "making or facilitating illegal contributions that violate either federal contribution limits or the prohibition on corporate contributions."
According to CLC:
Red Curve is a domestic limited liability company that offers compliance and FEC reporting services but does not appear to offer any legal services. It is managed by Bradley Crate, who also serves as the treasurer for each of the five Trump-affiliated committees concerned in this complaint, as well as over 200 other federal committees.
According to filings with the FEC, Red Curve appears to have been fronting legal costs for Trump since at least December 2022, with Trump-affiliated committees repaying the company later. This arrangement appears to violate FEC rules that require campaigns to disclose not only the entity being reimbursed (here, Red Curve) but also the underlying vendor. By not disclosing the vendors that actually provided legal services, the Trump-affiliated committees effectively blocked the public from knowing which attorneys and firms are being paid—and how much they are being paid—through this arrangement.
"Voters have a right to know how the presidential campaigns and other committees supporting presidential candidates spend their money," CLC senior director of campaign finance Erin Chlopak said in a statement. "When campaigns and committees obscure that information from the public, not only do they make it difficult to determine if the law has been violated, but they deny voters the ability to make an informed choice when casting a ballot."
"The steps taken by the Trump campaign, its affiliated committees, and Red Curve Solutions concealed information about how campaign funds were used to pay former President Trump's legal expenditures, including the amounts and ultimate recipients of these expenditures—and the FEC must investigate immediately," Chlopak added.
Trump—who is the presumptive 2024 GOP presidential nominee—faces 91 federal and state felony charges related to his role in the January 6 insurrection and his organization's business practices. He is currently on trial in New York for allegedly falsifying business records related to hush money payments to cover up sex scandals during the 2016 election cycle. The twice-impeached former president has been open about his use of campaign donations to pay his legal costs.
The new CLC filing comes a day after the watchdog filed separate FEC complaints urging investigations into a pair of Trump-affiliated "scam PACs," which "pretend to fundraise for major candidates or issues while secretly diverting almost all of their donors' money back into fundraising or the fraudsters' own pockets."
Keep ReadingShow Less
'One Step Closer': Arizona House Votes to Repeal 1864 Abortion Ban
"With a total ban still set to take effect June 8, the Arizona Abortion Access Act is needed now more than ever," one state campaigner said of a November ballot measure.
Apr 24, 2024
Three Republicans in the Arizona House of Representatives on Wednesday joined with Democrats to advance legislation that would repeal an 1864 ban on abortion—a development rights advocates welcomed while stressing that the fight is far from over.
The 32-28 vote on House Bill 2677—with GOP Reps. Tim Dunn (25), Matt Gress (4), and Justin Wilmeth (2) voting in favor—was the third attempt in as many weeks to pass repeal legislation since the Arizona Supreme Court upheld the ban.
"The state Senate could vote on the repeal as early as next Wednesday, after the bill comes on the floor for a 'third reading,' as is required under chamber rules," according toNBC News. Democratic Gov. Katie Hobbs on Wednesday toldThe Washington Post that "I am hopeful the Senate does the right thing and sends it to my desk so I can sign it."
Applauding the House passage of H.B. 2677, Planned Parenthood Advocates of Arizona president and CEO Angela Florez said that "today, Arizona is one step closer to repealing the state's Civil War-era total abortion ban. While the repeal still must pass the Senate, this is a major win for reproductive freedom."
"We must celebrate today's vote in support of abortion rights and harness our enthusiasm to spread the word and urge lawmakers in the Senate to support this necessary repeal bill," she continued. "Despite this step forward, Arizonans cannot stop fighting."
Florez noted that "even with the repeal of the Civil War-era ban, the state will still have a ban on abortion after 15 weeks of pregnancy that denies people access to critical care. And lawmakers continue to attack Arizonans' ability to access reproductive healthcare. Our right to control our bodies and lives is hanging on by a thread."
"Thankfully, voters will have the opportunity to take back control if the Arizona Abortion Access Act is on the ballot this November," she added. "Abortion bans are out-of-step with the will of Arizonans and will force pregnant people to leave their communities for essential healthcare. Planned Parenthood Advocates of Arizona will continue fighting to ensure everyone has the right to make decisions about their health and futures."
The Arizona Abortion Access Act is a proposed state constitutional amendment that would prevent many limits on abortions before fetal viability and safeguard access to care after viability to protect the life or physical or mental health of the patient.
The coalition supporting the amendment, Arizona for Abortion Access, highlighted on social media that the House-approved bill "did not include the emergency clause required to stop the 1864 ban from taking effect on June 8," meaning H.B. 2677 wouldn't apply until 90 days after the end of the legislative session.
Coalition campaign manager Cheryl Bruce said that "with a total ban still set to take effect June 8, the Arizona Abortion Access Act is needed now more than ever. We remain committed to taking these decisions out of the hands of extremist politicians."
Arizona is one of multiple states where rights advocates are promoting abortion rights ballot measures this cycle. Reproductive freedom is also dominating political races at all levels, including the presidential contest. Democratic President Joe Biden is set to face former Republican President Donald Trump in November.
"Donald Trump is responsible for Arizona's abortion ban. Women in the state are still living under a ban with no exceptions for rape or incest and have been stripped of the freedom to make their own healthcare decisions," said Julie Chávez Rodriguez, Biden and Vice President Kamala Harris' reelection campaign manager.
While the presumptive GOP nominee has tried to distance himself from the Arizona Supreme Court's reinstatement of a 160-year-old abortion ban, he has also campaigned on his three appointees to the U.S. Supreme Court who helped reverse Roe v. Wade.
"Trump brags that he is 'proudly' the person responsible for these bans and if he retakes power, the chaos and cruelty he has created will only get worse in all 50 states," Chávez Rodriguez said. "President Biden and Vice President Harris are the only candidates who will stop him."
Keep ReadingShow Less
Most Popular