Improving CBO

House Budget: Congress and the Congressional Budget Office (CBO): Examining Ways to Improve CBO, September 11, 2024

To restate the obvious, any changes to the Budget Act must be passed by both Chambers, preferably on a bipartisan basis. If this is not the case, the audience for any such discussion is the donor community. Most donors contribute on a bipartisan basis. This year that is not the case - and it is the radicals who seek to tear down the government who have been cut off. Discussions such as this one will not increase contributions.

That is not to say that no changes should be made by CBO, however changes to CBO are not required at this time.  CBO could identify the optimum level for the deficit, which we think should be adequate to fund interest payments and reinvestment by long-term debt holdings, with less or no investment by high yield funds who hold the debt so as to enable speculation in the Wall Street casino by investors whose taxes are too low.

In March of this year, in response to the Markup of the budget resolution that went nowhere (which was reported out, with no media attention, as a distraction from the President’s Budget release), we provided an analysis of who owns and owes the debt. It is excerpted in the first attachment.

We agree that the deficit is too high, largely because tax rates on capital gains and returns are too low. It is up to Congress to make these changes, however the CBO can certainly identify the impact of the deficit on the economy, given revenue policy. 

In April of this year, in a hearing before the Ways and Means Committee on renewing the Trump Tax Cuts (which are soon to expire), we included an analysis of the relationship between deficit finance and economic growth in the following year. They show that when Republican administrations (which lower taxes) are in charge, higher deficits are required to spur growth. When Democrats are in charge, higher taxes with lower deficits encourage growth.  I have included this analysis in the second attachment. 

The general rule is not the case during the current regime, because two “moderate” Democrats stopped the President’s fiscal policy from enactment - so we are still under the influence of the Trump era policies. The coming election will either lead to gridlock or domination by the current President’s party, which will end the Trump tax cuts and lead to a restoration of the Obama economy or election of the other party - which will encourage speculation until the economy crashes (although we may have passed the turning point already).

Attachment: HBUD FY25 Budget: Buried on Passage

Attachment: Deficit Economics