Dynamic scoring sounds like something a home town fan would like to do when his team is losing badly. Substitute “politician” for “home town fan” and you are not far from the truth. A technique employed by economists and politicians to predict the future, dynamic scoring is used to evaluate fiscal (tax) policy changes and foretell how they will affect economic results. Its success or failure depends on how radical the change is, the time horizon projected, and the accuracy of the underlying econometric model in foreseeing behavioral changes. Of course, as the time horizon lengthens, the likelihood that the authors of the predictions will be around to apologize for their mistakes plummets. That, in part, explains its popularity. At IBM in the late sixties our acclaimed chief economist predicted a boom year. When profits tanked after twelve months, no heads rolled.
Slashing taxes is the most irresistible idea any conservative politician can think of. In South Carolina, for example, if a politician routinely chops taxes and thumps Bibles he can look forward to a long and often rewarding career - except that cutting taxes for the wealthy as an economic stimulus has never worked and never will. But then, except for a handful of the truly rich, it was never meant to improve the economy. Its goal is to enrich corporations (aka Republican donors) and generous contributors. Overuse of that technique helps explain why America now enjoys the greatest income disparity in its history.
And so the Congressional Budget Office (CBO), home of many Ph.D.’s and non-partisan economic experts, says the Trump tax proposal will result in a $3.4 trillion loss of federal revenue. The unpronounceable Steve Mnuchin (Treasury Secretary) and Gary Cohn (Trump’s chief economic adviser) of Goldman Sachs fame claim it is revenue neutral. How can such intelligent men be so completely wrong? Most voters know almost nothing about economics and remember even less, so economists cum politicians can say anything. Projecting a growth rate of 3 percent a year for the next 10 years when that rate has been 1.8 percent for the past 50 years is accounted for by the following Biblical explanation: And then a miracle happened!
Since the 2008 banking debacle, brought to us by wish-driven Republicans, the economy has been on a steadily upward climb. Add Mnuchin’s 10-year prediction of unbroken prosperity, and the total is 19 years without a recession. Capitalism never has been that kind to us. From 1945 to 2001 there were 10 recessions lasting 10 months each. Unless Trump and Mnuchin know how to repeal the law of gravity and overturn the conclusions of all the great economists, we are fools if we believe them.
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But conjecturing about such economic specters is unnecessary. We’ve got facts and data. Reagan tried it and tripled the deficit. Kansas Gov. Sam Brownback recently tried it and nearly destroyed his state’s economy until his GOP legislature told him to get lost. Not even the GOP’s complete abandonment of facts, science and analysis in favor of ideology could convince an economic simpleton that it will work. When your outgo exceeds your income then your upkeep becomes your downfall. That applies to governments, companies, and individuals. Occasional truth teller George Bush Sr. called Reaganomics “voodoo economics.” We fell for it anyway.
Will we fall for it again?
The writer lives in Pawleys Island.