Wednesday, December 9, 2015

Whose budget plans are more realistic, Trump or Kasich? (this is not a rhetorical question)*

Nor is it one with an obvious answer, at least not according Jonathan Chait, who takes apart all of the candidate's claims, starting with his habit of taking credit for the balanced budgets of the nineties:
The key element of the Kasich myth is the 1997 Balanced Budget Act, which he credits with producing surpluses in the 1990s. “I balanced the budget in Washington as a chief architect,” he claimed at the last Republican debate, echoing a frequent boast. Kasich’s iteration of his origin story is almost a pure inversion of fiscal reality.

Kasich, in other words, opposed the two main laws that created the balanced budget in the 1990s, and supported one that had nothing to do with it. He continues to maintain that he would oppose any tax increase, even a budget deal that combined a 10-1 ratio of spending cuts to tax hikes. 

It is worth taking a moment to note that most of the same publications and often the same journalists who labeled Al Gore a self-aggrandizing fabulist for making entirely accurate statements about supporting the early funding of the internet have largely allowed Kasich's fables to go unchallenged.

Building upon his almost entirely imagined record as mastermind of the 1990s budget surplus, Kasich touts what he and his press clippings call his “plan” to balance the budget in eight years. In actuality, it is not a plan at all. Kasich has a bunch of numbers for spending, but he does not say what he would do to arrive at those numbers. For instance, he would freeze all domestic discretionary spending, a wide catch-all category of general federal spending on scientific research, infrastructure, law enforcement, and many other things. This spending has absorbed deep cuts for several years — so deep, in fact, that Republicans in Congress have had trouble funding tolerable savings and compromised on a plan to cancel out some of the additional cutting. Kasich proposes to hold spending on this category constant in nominal dollars, which means that, accounting for population growth and inflation, services will have to be reduced every year. Kasich does not specify how he would allocate those service cuts.


Balancing that off is Kasich’s plan to cut taxes. There is not yet an official score for the cost of Kasich’s plan, a fact that by itself nullifies the campaign's claim to have a plan to balance the budget. You can't bring revenues and outlays into line if you have no idea what revenue levels will be. Imagine a business claiming it has a target date for breaking even, and then conceding it has no idea whatsoever what its earnings will be.

By the eyeball test, the scale of the revenue lost by Kasich's tax cuts will be absolutely massive. Kasich would cut the top tax rate to 28 percent from its current 39.6 percent rate. He would cut the capital gains tax rate from 25 percent to 15 percent, cut the estate tax rate from 40 percent to zero, cut the business tax rate from 35 percent to 25 percent, and allow businesses to immediately write off the full cost of all investments — a tax cut for the rich of a scale never before seen in American history. Kasich would also expand the Earned Income Tax Credit for the working poor, which is nice, though it further raises questions as to where he will find the trillions of dollars in savings to pay for all this. Kasich’s campaign tells me that he believes deep tax cuts will encourage faster growth, undeterred by the clear past failure of his beliefs about tax rates and growth.

In sum, it is inaccurate to say Kasich has a plan to balance the budget. It would be accurate to say that he is promising to eliminate the deficit, but he has a plan to dramatically increase it, at least if you define plan to mean the actual change to taxes and spending that he has specified.

As we've frequently noted before, today's journalists love not just narratives, but specifically simplistic, cliched narratives. Once they have latched onto one of these stories, they will go to great lengths to maintain it. This goes beyond selection bias. Many, perhaps most, reporters and editors will actively play down those facts that contradict conventional wisdom and play up or even invent facts that support it (not to name any names).

The press has long since made its casting decisions when it comes to Kasich. Frank, mature, moderate, dull but reliable. Nothing he says or does at this point is going to change the spin. He can lay out a supply-sider vision so extreme it would have both Reagan and Kemp spinning in their graves. He can insist the science is undecided on global warming. He can propose a new federal agency to spread Judeo-Christian values throughout the world as a way to combat the Islamic State. None of this will matter.

That's how typecasting works.

* I wrote this a few days a few days ago before Trump upped the crazy yet again. I might have approached this differently today and probably used a different title, but I still stand by the main points.

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