Disturbing Pattern Emerging on Government Budget Analyses

When it comes to federal tax and budget policy, it is essential that good forecasts and good estimates exist on the effects of policy options. Unfortunately, the current administration is showing a propensity to conceal and selectively release budget information when it suits their narrow political agenda.

When it comes to federal tax and budget policy, it is essential that good forecasts and good estimates exist on the effects of policy options. Unfortunately, the current administration is showing a propensity to conceal and selectively release budget information when it suits their narrow political agenda.

Several examples illustrate this point.

  • The Office of Management and Budget (OMB) releases estimates of federal revenue, expenditures, and the deficit at least twice a year. The Fiscal Year 2002 Budget and Mid-Session Review contained budget deficit estimates (which were actually surpluses) for the following 10 years. The same publications for fiscal year 2003 and 2004, however, only contain a five-year projection. The likely reason is that the numbers would show a ballooning deficit if the projections extended beyond the five-year horizon. This budget deterioration is largely due to tax cuts that were scheduled to phase-in over several years. The administration apparently wishes to mask the true costs of their legislation.
     
  • The Department of Treasury, which employs a large number of economists and “number crunchers,” routinely released so-called distribution tables – that is, tables illustrating which income groups benefit or lose under various policy proposals. Under the current administration, the Treasury Department only selectively releases this kind of analysis and the results are often misleading.
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    • In early 2001, the Center on Budget and Policy Priorities noted that a released table “departs markedly from the Treasury Department's established methodology for analyzing and providing information on the effects of tax proposals on different income groups.” A table released in May offers an example of the new standard. As before, the new table provides information by individual and family income (eg. $30,000 to $50,000). But instead of showing how much money will be gained or lost by the income category, it only provides the percentage gained or lost.
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    • In a recent Tax Notes article, Martin Sullivan comments, “The repackaging of the distribution analysis is clearly politically motivated by the arrival of Bush administration officials in the White House and in the Treasury. This questionable and misleading practice was employed in the Bush election campaign. While almost anything goes during the heat of a political campaign, it was shocking to see the prestige of the Treasury staff compromised with the release on March 8, 2001, of a similar ‘income tax only’ analysis.”
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    In fact, the withholding of this information has made it necessary for an entirely new organization to independently calculate the distributional effects of policy proposals. The Tax Policy Center, a joint project of the Brookings Institution and the Urban Institute, has done these calculations.
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  • The most recent budget deficit estimates from OMB do not include a number of significant items, including:
    • Ongoing costs of the military operations in Iraq, despite repeated requested from Congress.
    • Extension of several tax provisions in the 2001 and 2003 tax cut legislation that are set to expire, but that the President and Congress expect to continue.
    • The cost of extending reforms to the Alternative Minimum Tax, which is projected to affect 40 million tax payers by the end of the decade.
    • The cost of likely federal expenditures, including a prescription drug benefit.
    One estimate places these and other omitted costs at over $4.3 trillion over the next 10 years.
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  • Economic assumptions that appear quite rosey, thereby lowering deficit estimates. See the last OMB Watcher.

The public has a right to have all the information on the federal budget – not just the information the administration feels supports their argument. By limiting the release of information, they are limiting open debate and the foundations of a true democratic process.

When asked about the government's misleading estimate of the effects of the 2003 tax cut, the American economist and Nobel Laureate George Akerlof noted, “there is a systematic reason. The government is not really telling the truth to the American people. Past administrations from the time of Alexander Hamilton have on the average run responsible budgetary policies. What we have here is a form of looting.”

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