Tuesday, March 12, 2013

Comparing Imaginary Numbers

How do you go about comparing imaginary numbers?

Kevin Drum says:
The fiscal cliff deal increased top marginal rates from 36 percent to 39.6 percent. Ryan's plan is based on reducing top rates to 25 percent. In other words, not only does he want to get rid of the 39.6 percent rate, he wants to make it even lower than it was before the fiscal cliff deal. He doesn't accept the fiscal cliff increases at all.

Right? What am I missing here?
While Suzy Khimm reads the same budget and concludes:
Buried in Rep. Paul Ryan’s new budget is one surprising detail: He wants to raise more revenue for the government than he did before.

Ryan’s budget sets a revenue to GDP target of 19.1 percent by 2023. That’s higher than his target last year (18.7 percent after a decade) and his target two years ago (18.3 percent), as the Urban Institute’s Howard Gleckman points out. It’s a notable shift as many Republicans have used an 18 percent revenue to GDP ratio as a benchmark to justify or oppose changes to the tax code—including Ryan (R-Wis.) himself.
Who is right? Both, either of them, neither...what's important is to pay attention to what is real, and what is imaginary.

There are three ways to look at this. One is that we can basically trust the budget. In that case, we need to pretend that revenue-neutral tax reform will happen, and with real numbers.

Or, we can assume that tax reform will pass, but that the House will wind up ignoring the revenue targets in their budget, either through phony numbers or by just insisting on setting rates at a low number even if it means less revenue. In that case, it doesn't really matter what Ryan puts in the budget.

And yet another possibility is that tax reform collapses. In that case...it doesn't really matter what the budget said about it.

But step back, and you realize that all of that is imaginary. After all, this is the House Budget, and at best it winds up totally changing in negotiations with Democrats in the Senate and the White House. So we're not really talking about a real budget that's going to be carried out, regardless.

However, there is some reality in here: the budget, whatever it isn't, is almost certainly the Republicans' opening bid in budget negotiations. And yes, it probably does matter, at least to some extent, that Republicans start off that dealing by fully accepting a higher level of revenues than they did last year -- just as it probably does matter that Democrats start by accepting the deficit targets in the Budget Control Act, including sequestration. 


  1. Can his budget be scored by the CBO? What kind of impact do they say that it has on:
    the deficit?

  2. But you are not really talking about imaginary numbers. ;-)

  3. As always, the irony is unintentional, but...how is it possible to lower the top marginal rate and still raise revenues?

    This takes one back to the fiscal cliff brouhaha, itself on the heels of the "47%" era, which in combination led to the unmistakable impression that rich folks are the only taxable demographic in the US.

    I'm having that impression all over again.

    1. It's probably not possible to lower tax rates to Ryan's goal of 25% and 10% and still maintain current revenue. But taxes aren't actually Paul Ryan's job. They're the job of the Ways and Means Committee, which swears it will have such a plan ready real soon now. Presumeably Dave Camp and co. fully intend to square this circle.

      That's kind of the point of this post. The Ryan budget is fun for wonks to talk about, but it's never actually going to be implemented. It's not actually intended as a budget, it's intended as a negotiating position. It's important as a negotiating position, but all this deep analysis of what the Ryan budget actually means is irrelevant to actual reality.

      What will actually happen is the incoherent mess that emerges from Senate/WH/GOP negotiations, and since this budget includes a lot of big new ideas that everyone else will veto it's probably further from what will actually happen then the proposals from the other two players.

      Heck last year's budget will probably be closer to what we get then any of the Pres/Senate/House proposals.

    2. Nick, thanks for the reply, fwiw I agree with you about Ryan's intentions, though I think I might even go a little further: Ryan himself has no intention of his budget passing. IMHO, the incoherent mess you describe is a by-product of both Repubs and Dems endlessly tossing the hot potato of ownership of the inevitable entitlement reforms to come. (If the Repubs seem a bit daffier in the process, that may just be a result of their ideology more strongly suggesting they'd act here as opposed to throwing the potato).

      Its also probably true that this audience more strongly favors a more progressive tax code; nevertheless I have this sense from the last few months that a flatter tax is not only an impossibility, the concept itself no longer exists. I'm sure you're right that the circle can't be squared.

      But we can talk about it, right?

  4. Don't you see what the GOP's doing here?
    Go so far to the right that it's wacky so that you end up after negotiations about as far right as you always wanted to be.

    1. They keep trying that, and it does burn up a hell of a lot of negotiating time, but can you name one actual Conservative priority they've managed to get signed into law?

    2. On the one hand, there's nothing really illegitimate about putting forth a negotiating position. That's part of the process. On the other hand, if the Republicans haven't advanced any of their priorities, it's in large part because they refuse to sign off on the deal. Cantor's rejection of the Obama-Boehner grand bargain of 2011 is the main example that comes to mind.

  5. Statements entirely consistent with the republican ideology.

    Top rates down, overall taxes up.

    Billionaires good, ordinary folks screwed.

    Attempted upward redistribution by the judas goats for the kleptcrats. Nothing to see here, move along...


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