Don’t trust CBO

The S-R has devoted a lot of space to criticizing the tax reform effort. Here are statistics from a Wall Street Journal article that offer some hope.

The Congressional Budget Office (CBO) predicts that the economy will grow at a measly 1.9 percent over the next decade as a result of the projected tax reform. This would increase the national debt by $1.5 trillion over the next decade. Yet during similar tax reform enacted during the Reagan years, the economy grew by 4.42 percent from 1983-88. The CBO consistently predicted economic growth between 3.4 percent and 4.2 percent during the Obama years of 2010-13, but his policies shackled growth to around 2 percent. Even when taxes were raised in 2013 and the CBO predicted 3.7 percent growth for the next three years, actual growth was 2.3 percent.

So the question becomes: Just how much faith should we put in the CBO when it hasn’t been remotely close in its projections for the past decade? If growth averages just 2.6 percent, the reform will be revenue neutral. Historically, from World War II through 2008, the economy grew at 3.4 percent. If we simply meet that average, tax reform will generate trillions in revenue!

Hal Dixon

Spokane