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Fake Math

Today, the Treasury Department revised its Economic Forecast, based on the Senate Tax Plan.

OTP has modeled the revenue impact of higher growth effects, using the Administration projections of approximately a 2.9% real GDP growth rate over 10 years contained in the Administration’s Fiscal Year 2018 budget.OTP compared this 2.9% GDP growth scenario to a baseline of previous projections of 2.2% GDP growth. Treasury expects approximately half of this 0.7% increase in growth to come from changes to corporate taxation. We expect the other half to come from changes to pass-through taxation and individual tax reform, as well as from a combination of regulatory reform, infrastructure development, and welfare reform as proposed in the Administration’s Fiscal Year 2018 budget.This 0.7% increase in the annual real growth rate results in an increase in tax revenues during the 10- year period of approximately $1.8 trillion. Adding this $1.8 trillion of incremental revenue to the static current law score of -$1.5 trillion results in total receipts over the 10-year window increasing by $300 billion. These increased receipts are primarily collected in the last five years, as full expensing creates growth in early years but results in a deferral of collection of taxes.

Other Opinions

Business Insider posted a list of comments shredding the analysis.

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  • Jacob Leibenluft, former deputy director of the National Economic Council: "This document is a tacit admission that Treasury's career tax experts have no analysis showing the tax plan pays for itself."
  • Jason Furman, a previous chairman of the Council of Economic Advisors, called the report an "embarrassing joke."
  • Senate Minority Leader Chuck Schumer blasted the report: "The latest Treasury 'analysis' is nothing more than one page of fake math," Schumer said.

No Miracles

The Treasury predictions are both biased and absurd. They assume the tax cuts will spur hiring and investment.

The implied notion the tax cuts will stave off a recession for 10 years or that a recession won't matter is ridiculous.

We already know the hiring and investment idea is fallacious. The repatriation holiday caused a Spike in Buybacks Announcements. Shareholders, not workers will get a tax break.

Mike "Mish" Shedlock