Rebutted by Len Burman: Wall Street Journal’s Giant Non Sequitur on Taxes - Leonard Burman - The Impertinent Economist - Forbes:
Larry Lindsey argued in the Wall Street Journal that the debt situation is far worse than projected by the official scorekeepers.... He’s certainly got first-hand experience.... He was the Bush adviser who was fired for estimating the cost of the Iraq war at $100-200 billion. Don Rumsfeld thought that was way too high. His estimate was $50-60 billion. The actual direct cost of the war so far is almost $800 billion.... Lindsey implies that the deficit over the next decade could be $10 trillion higher than official estimates. This is another bad estimate.... But the really surprising thing is where he goes from this conclusion....
First, the premise is false. Our tax burden is the lowest among rich countries. We could raise taxes a lot if we wanted to.... The giant non sequitur, though, is Lindsey’s inference that this is a reason not to consider tax increases at all. Yes, we have to cut entitlement spending. But Lindsey’s logical leap—our very large deficit problem is actually much, much larger, which implies that tax increases aren’t part of the solution—is just bizarre....
As for Lindsey’s estimates.... His analysis makes three claims: (1) Interest rates will likely be much higher than predicted, which could add $4.9 trillion to the debt over the next decade; (2) The economy is likely to be much weaker, which will add another $4 trillion to the debt; and (3) Official estimators vastly underestimated the number of people who will lose employer-based health insurance coverage....
CBO assumes that interest rates will increase as the economy recovers—to 5.5% over the next 6 years, very close to Larry’s historical average of 5.7%.... In other words, it’s already in the forecast. On the pace of recovery, CBO bases their projections on the consensus forecast of blue chip economic forecasters.... And if the economy grows slower than we expect, interest rates will stay depressed. So we’ll gain less in tax revenues and spend more, but part of the additional deficits would be offset by lower interest on the debt. On employer dropping under the Affordable Care Act... some employers will drop coverage because they have a very low-income workforce that can get insurance more cheaply through the new exchanges, [but] other employers will start offering to avoid paying the penalties associated with the employer mandate or because of the subsidies offered to small employers....
Blowing smoke about forecast uncertainty and drawing absurd inferences is not helpful.
Rebuttals to talking-points misinformation that I want to have at the forefront of my brain--for when I am surprised, as I will be, by an unexpected question from an unexpected direction while talking to reporters, phone callers, passers-by, radio interviewers, cable TV interviewers, etc....
