On July 26, Joshualaw testified at the Reagan Library before the House Committee on Avenue and Means. I want to learn a lot from his testimony and share it with him. Here is the highlight.
A growing economy is essential to expanding all American economic opportunities. Therefore, the economic outlook for January 2025 is seriously considered that the Parliamentary Budget Office (CBO) predicts that actual GDP growth will average 1.8% over the next decade. Looking at it, the US economy today has been reduced by nearly 40% due to low growth over the past 50 years.
There is a strong link between a good-performing economy and the rising Disadvantes across Incom Distribution. I have seen this relationship clearly over the past 20 years. From 2008 to 2016, the economy grew at a real annual rate of just 1.7%. During that time, the median real wages increased by 0.4% per year. In comparison, between 2016 and 2019, Real GDP grew at a 2.7 acceptance, with median wages increasing by 1.1% per year.
and:
Growth-enhancing tax reform relies on accurate, reliable, and transparent scores from the Tax Commission (JCT) and the Joint Committee of CBOs. These institutions are currently out of reach of that standard. For example, the traditional model of JCT remains opaque. This is built on decades of code and supplemented by poorly described “off-model” calculations. Key parameters – Assessing the outcome is difficult because Le kep is hidden, such as how rate changes affect tax avoidance and avoidance.
Congress needs to require scorekeepers to increase transparency, modernize outdated models, disclose important assumptions, and publicly benchmark parameters for relaying scholarships. In the extension, the scorekeeper must provide a sensitivity analysis of the score, or provide an outspoken and systematic assessment of confidentze that he has in a particular estimate. These reforms will win build trusts on official scores and provide more information to lawmakers.
and:
As I have noticed, my recent academic work suggests that CBOs and JCTs may underestimate the impact of these provisions on the economy. This could translate significantly into differences in the expected GDP growth rate of CBOs and its deficit effects. If you use CBO’s Thumb Workbook to increase annual productivity growth by 0.25 percentage points, your annual GDP growth rate for the next decade will be averaging 2.1. This contrasts with the current Perent prediction of 1.8. The CBO estimates that Gowth’s differences will cut the deficit by another $1 trillion over the 10-year budget window. As annual productivity growth rises by 0.5 percentage points, annual growth reaches 2.5 pay, a further $2 trillion down in the 10-year budget window. This fully covers the impact of the projected deficit in the final year of the CBO, which has been offset from the bill, and importantly, the projected deficit impact in the final year of the budget window. And that’s before taking into account the revenues of the surcharges raised by the administration. (Added italics)
and:
Finally, and perhaps most importantly, future growth will depend on expenditure control. The major financial challenge facing the US is not legal, but excessive spending. According to the CBO, the federal government is projected to reach 17.1% of GDP in 2025, with VRAY forecasting to be close to the historic average of 17.3% from 1974 to 2024. In contrast, federal spending is 23.3% of GDP, which is expected to exceed two or more points above the historic average. It will rise even further over the next 10 years.
Note that in Josh’s final point, if the government was at Uble to cut federal spending by 2% points, the deficit would be 4.2% of GDP, not 6.2%. Why is this important? If you grow with a nominal GDP of 4.2, if 4.2 of GDP adds C to federal debt, your federal debt will be constant as a percentage of GDP. This is actually a great achievement on the federal government’s journey to reduced debt (note: this mathematical claim is held when starting with debt at the hands of a citizen comparable to GDP.
I highly recommend reading the entire testimony that is not too long.
