During that time, Congressional Budget Office (CBO) projections on almost any given legislation have failed to properly value the benefits of reduced taxation and regulation. Their bias is understandable since the CBO is, after all, a cog in the great machine of the federal government that that views itself as the prime mover of the economy (a mistaken perception often shared by all levels of government).
As an example, Gramm and Solon cite two CBO estimates that proved to be spectacularly incorrect:
“The CBO originally assumed that the 1986 tax reform would produce no economic benefits and that the 1997 Balanced Budget Act would have only a small positive effect, yet together they helped produce a quarter-century of rapid growth, surging federal revenues and a balanced budget.”
If the number-crunchers at the CBO were willing to look at actual historical outcomes, they might start noticing a pattern.
How They Could Get It Right
They wouldn’t have to look further than the economic legacies of Ronald Reagan and Barack Obama. Each of these presidents entered the White House during difficult times. Each oversaw economic recoveries. But that is where their similarities end.
Growth during the Reagan years was a robust 4.6%, while Obama’s economy averaged an anemic 1.47%. Our national debt more than doubled during the Obama administration. The contrast between Reagan’s and Obama’s economic policies is stark, and the contrast between their legacies, equally so.
Getting It Right in Collin County
Gramm and Solon write specifically about the CBO, but state and local governments are not immune to the same biases. It would be unwise to pretend government entities at any level can be objective when evaluating their own influence. For example, few local governments properly value reducing local property taxes.
Fortunately for us, the CBO doesn’t have much influence in Collin County. We already know what happens when the market is allowed to work, because we’ve experienced it ourselves.
The challenge is in not forgetting. As we approach a new budget cycle, I will write more about how Collin County can benefit from these lessons of history.