Paul Krugman is Still Wrong on Paul Ryan and the CBO

By Megan McArdle

On Saturday, I pointed out that Krugman seemed to have made a few errors in his attack on Paul Ryan.  He said that Ryan was a lowdown dishonest skunk because he had not gotten the Congressional Budget Office to score the revenue side of his "Roadmap", and instead had directed the CBO to assume revenues around the post-war historical average.  I noted that first, Krugman seemed to be unaware that the Joint Committee on Taxation, and not the CBO, generally scores changes to the Internal Revenue code; and second Krugman seemed to be unaware that Paul Ryan had asked both the CBO and the JCT to score the revenue side, and been turned down.  The CBO turned him down because, ahem, scoring changes to the Internal Revenue code is the proper job of the JCT.  The JCT turned him down because it doesn't do long-term revenue forecasts, and didn't have the staff time to do a ten year forecast.

On Sunday, Paul Krugman came back with a sort of Oceania-has-always-been-at-war-with-Eastasia post in which he acknowledged the JCT/CBO distinction without noting that his prior posts had missed it.  He then doubled-down on his charges of dishonesty:



I also see that Ryan is perpetuating the runaround on revenue estimates. If you read either this article or his original response to the Tax Policy Center, you could easily get the impression that nobody would do a revenue estimate, that CBO said it was JCT's job, and JCT balked. Even Nate Silver has fallen for this. But read the original response carefully:

The Tax Policy Center analysis covers a 10-year period, but the Roadmap is a long-term plan with spending and revenue projections covering 75 years. As such, the analysis is not consistent with the long-term horizon of the plan. Staff originally asked CBO to do a long-term analysis of both the tax and spending provisions in the Roadmap. However, CBO declined to do a revenue analysis of the tax plan, citing that it did not want to infringe on the traditional jurisdiction of the JCT. JCT, however, does not have the capability at this time to provide longer-term revenue estimates (i.e. beyond 10 years) [my emphasis]. Given these functional constraints for an official analysis, staff relied on its original work with the Treasury Department and other tax experts to formulate a reasonable expected path for long-term revenues given the tax policies in the Roadmap combined with the economic growth projections available at the time.

In other words, Ryan could have gotten JCT to do a 10-year estimate; it just wouldn't go beyond that. And he chose not to get that 10-year estimate. So it was Ryan's choice not to have any independent estimate of the 10-year revenue effects.

To be honest, I too found that passage ambiguous.  Which is why I contacted Ryan's staff, who were happy to clarify that yes, they asked the JCT to do a forecast, and JCT said no.  I don't understand why Krugman keeps diving deeper into these Talmudic interpretations rather than just calling to ask, when their phone number is easily available on their website.  There are some questions that are easier to resolve by talking to a live human being than by re-parsing a report, and this happens to be one of them.

Ryan's a nice guy.  I'm sure he'd have been happy to take the good professor's call. 

I mean, before Krugman called him a "Flim-Flam" man, anyway.  The Weekly Standard called Congressman Ryan for comment, and by now he seems to be a little bit ticked:

Krugman wrote on his blog on Saturday that "Ryan could have gotten JCT to do a 10-year estimate; it just wouldn't go beyond that. And he chose not to get that 10-year estimate." Ryan says that's not true. "We asked Joint Tax to do it," Ryan told me. "They said they couldn't. They don't do them long-term outside the 10 year window. They couldn't do it in the first 10 years because of just how busy they were." Ryan says Krugman could have cleared this confusion up with a simple phone call. . . .[ * ]

When the tax committee declined his request, Ryan took his proposal to experts at the Treasury Department who said his plan would hit its revenue target. Ryan said that the Treasury Department's numbers may, in fact, be more accurate than the Tax Policy Center's analysis. "Nobody knows the answer to this, by the way, if TPC is right or if the data we got from Treasury was right," said Ryan, who thinks Treasury's numbers are "closer" to reality. "The point is this: we made a full effort to hit revenue targets. They may hit the revenue targets and TPC may be wrong."

Ryan said that if the Treasury Department's analysis lowballed the revenue needed, there are "plenty of different ways" you "can tweak the rates and the numbers" so the numbers add up.

A number of people suggested that I was "missing the point", which is that there are legitimate concerns about whether the roadmap would actually reduce the deficit.  Of course there are legitimate concerns; I share them.  (For that matter, I have legitimate concerns about pretty much every policy proposal ever invented.)  But I am not the person who titled his column "The Flim-Flam Man" and turned the raising of legitimate concerns into the side-show of an all-out attack on Paul Ryan's credibility and ethics, while treating an estimate from the Tax Policy Center as a fact rather than one possible model. 

If you think that this is all rather beside the point, then bring it up with Krugman, who not only did multiple follow-up posts on Ryan's alleged dishonest campaign to prevent his tax program from getting scored, but also seems to have been so tickled by his column title that he threw in a bonus Diana Krall video**.

Nor, in my experience, do such attacks help get one's legitimate concerns addressed.  Rather the opposite, in fact; they tend to entrench the opposition, who for some reason often fear that they will not get a fair hearing.  Paul Ryan's been really rather measured in his response, considering that Paul Krugman kept hammering away at the same easily checkable misunderstanding.

On a side note, a number of people have tried to argue that this sort of thing is not necessarily the proper provenance of the JCT.  They tend to offer various carefully snipped quotes from sundry sources, so let me quote Doug Holtz-Eakin's excellent summary of how it works:

For virtually every bill reported out of committee, the Congressional Budget Office (CBO) provides Congress with an estimate of the legislation's budgetary impact. Those estimates serve as the bill's official "score" in the congressional budget process and consist of a projection of the bill's year-by-year effects on revenues or outlays (excluding interest). Although CBO prepares all estimates of spending proposals, it reports the revenue estimates of the Joint Committee on Taxation (JCT) for most tax legislation. (CBO is required to use JCT's revenue estimates for most tax legislation. In general, JCT estimates the revenue effects of legislation that changes the Internal Revenue Code. CBO estimates the revenue effects of other bills.) Both CBO and JCT also provide numerous informal estimates of proposals earlier in the legislative process to assist policymakers in bill writing.

I actually checked with Holtz-Eakin, who graciously interrupted his vacation to explain that these sorts of estimates are in no-man's land, because while the JCT normally scores the revenue side, it doesn't do long-term projections.  CBO occasionally does, but as I understand it, they are for things like baseline revenue projections, and social security, where you're examining demographic and macroeconomic interaction with basically well-understood tax law.

Even if this were not the case, it remains true that the CBO told Ryan that they wouldn't score the bill because it was the provenance of the JCT--a fact that was well known to anyone who had read the response that Ryan offered to the TPC months ago, when its report first came out

Moreover, Eakin said that what Ryan had done seemed entirely reasonable:  he did his own analysis, and then faced with a different model that conflicted with his results, said that he would be happy to tweak his numbers until he got either the spending side down, or the tax side up.  Many policy proposals that have been marinating considerably longer than Ryan's roadmap have to go through grueling marathons of tweaking and resubmission until they get a good score.  Indeed, that's why we have the CBO and the JCT as an independent check on our politicians.

* Flattering reference to yours truly omitted.

** Sure, it's hard to describe any Diana Krall video as a "bonus".  You should probably take that up with Paul Krugman, as well.

This article available online at:

http://www.theatlantic.com/business/archive/2010/08/paul-krugman-is-still-wrong-on-paul-ryan-and-the-cbo/61236/