Fiscal Plans & False Equivalency (Sep. 22)

Mike & Co. —
As the candidates refine their policy positions, think tanks, bloggers, journalists, and pundits try to make sense of it all for us.  Sometimes there is spin, intentionally and unintentionally, as mistakes or misconceptions get amplified in the media echo chamber.
So it matters who is publishing the report or the poll — organizations depend on people trusting them not to create or unwittingly aid and abet misleading data.
Today we look at a case in point in the area of fiscal policy.  It’s so recondite that it may not matter, but this is how rumors get started.
The non-partisan Committee for a Responsible Federal Budget (CRFB) released an updated analysis yesterday on the impact of HRC’s and Trump’s fiscal policies on the nation’s debt.  The report took into account candidates’ policy announcements and changes in position made over the past three months.
The Trump plan would increase debt over the next decade by $5.3 trillion, compared to HRC’s $200 billion.  The current estimate from Trump’s policies also decreased by $6.2 trillion from the $11.5 trillion estimate in June, whereas HRC’s estimate only dropped $50 billion from the $250 June report.
HRC’s plan increases both revenues and spending.  She intends to raise revenue by $1.65 trillion, primarily through tax reform. The report said that the increased revenue would go toward spending on
•. college education ($500 billion)
•. paid family leave ($300 billion)
•  infrastructure ($300 billion)
•. additional health care spending
Trump’s plan would both decrease non-interest spending and revenue.  Trump’s plan is estimated to lose about $5.8 trillion in revenue through
• individual tax reform ($1.45 trillion)
• business tax reform ($2.85)
• taxes imposed by ACA ($1.2 trillion)
His plan will also reduce net spending by $1.2 trillion, as he will cut $3.2 trillion from programs like the Affordable Care Act and Medicaid, while increasing spending by $2 trillion on defense, veterans and Medicare.
One of the challenges in debating Trump is the false equivalence created by the media.  Its tendency to report on incomparably different policies, presented as equal in scope, coverage and depth, while ignoring details and specifics. Judged on the same scale, the policy choices are compared as equals, even though one of the options would lead to universally unwanted economic outcomes, with both intended and unintended consequences (the loss of two million jobs if Trump’s plan were enacted, for example).
The Committee’s report may have propagated a set of small but telling false equivalency errors in ways that happen consistently to favor Trump’s plan.
• CRFB calculated that under HRC’s plan, debt to GDP ratio would rise from 77 percent to 86 percent over the next decade, while Trump’s plan would cause the ratio to grow to 105 percent.  The choice to use this figure is misleading as it misrepresents the scale and magnitude of the differences between the two policies.
• Trump’s debt estimate is 26.5 times greater than HRC’s.  HRC’s plan with a $200 billion increase in debt, represents only a 1.4% increase in the current debt level held by the public (reported as $14 trillion in CRFB’s report).  Trump’s $5.3 trillion increase in debt, on the other hand, represents a 37.9 percent increase over the current debt held by the public.  By presenting the differences through the debt to GDP ratio, CRFB disguises the sheer difference in magnitude between the two plans.
• In HRC’s calculations, childcare policies are taken out twice — once in tax policy as “promote child care and caregiving”, and again in spending policy as “support Early education and Childcare.”  In Trump’s calculations, expenses are listed in the tax section, but not in the spending policy section., This ignores several aspects of the Trump plan, such as the $500 contribution to savings accounts for childcare.
• Trump’s infrastructure spending is listed as $0, which is incorrect. Trump has promised infrastructure spending but has not provided any figures. However, instead of providing an estimate, the Committee simply does not count infrastructure spending. These different accounting figures increase HRC’s apparent spending while decreasing Trump’s, penalizing her for having a more clear and detailed plan.
• Tax numbers are gained from different sources for the two plans, with HRC’s coming from the Tax Policy Center while Trump’s are from the Tax Foundation. As it is quite probable the two groups used different working equations to estimate the numbers, they cannot be objectively compared as equal.
Volatility of Policy
Shown, though not stressed in the report, is the magnitude in change between the June and September estimates. HRC’s policies have been well laid out and publicized, accounting for the moderate shifts to the change in estimated debt.  If HRC’s new estimate represents a fine tuning, Trumps dramatic $6.2 trillion decrease represents an engine overhaul.  The most significant change in the campaigns’ fiscal plan stems from Trump’s tax policy update, which reduced his debt estimate by $5.3 trillion dollars.  Even with Trump better defining his policies, significant ambiguity still remains. The Tax Foundation published a $1.5 trillion range of estimates to reflect his policy uncertainty. Given the dramatic change since June and the current uncertainty, predicting exactly where and when his policy will solidify is difficult.
Media Reaction
Major news networks reacted to the CRFB report, with Fortune, Forbes, TIME, CBS News and Washington Post, all publishing articles earlier this morning.  Almost all titles focused exclusively on the $5.3 trillion Trump debt figure, with few mentioning Clinton’s figure of $200 billion. Beyond the raw numbers, the majority of news outlets chose to use the 86 percent and 105 percent debt to GDP ratio.  Furthermore, most of the texts incorporated the report’s concluding text that “Unfortunately, neither candidate has presented a proposal to address our growing national debt and put it on a more sustainable path, nor have they offered a proposal for shoring up the Social Security, Medicare, or Highway trust funds.”
Conclusion / Key Takeaways
In the effort to remain neutral and “non-partisan,” both the Committee report and the accompanying media coverage on it are misleading.  Through the arbitrary selection of the Debt to GDP ratio as the primary figure, the report misrepresents the magnitude of the difference between the two plans.  Moreover, the report consistently calculates the numbers in Trump’s favor, frequently punishing HRC for her detail, and forgiving Trump for his vagueness.  Finally, though the report admits that Trump’s proposal would worsen the debt, it concludes that neither candidate presents a suitable plan that addresses the growing national debt.  Given the vast gulf between $5.3 and $.2 trillion, this conclusion equivocates.   If HRC’s impact on the debt were a drop in a pond, Trump’s would be comparable to an elephant bellyflopping in a baby pool.
The simple side-by-sides are not helpful where the numbers imply real economic consequences not addressed or reflected in analysis and subsequent media reports.  While Trump’s plan does not include direct references to Monetary policy, his statements have also threatened the independence of the Federal Reserve. Trump criticized Chairwoman Janet Yellen for keeping the reserve rates low to help the Obama administration and HRC’s campaign, and compromising the nonpartisan nature of the Fed.
In remarks in May, Trump said that he would replace Yellen with a Republican, citing her main weakness as a chairwoman as “But she’s not a Republican.” This breaks with the tradition of appointing nonpartisan chairs and undermines the independent nature of the Federal Reserve. Trump’s economic plans would also put stress on the Federal Reserve, as his plans to cut taxes and increase government spending would inject large amounts of money into the economy, threatening higher inflation rates which the Fed would have to address to maintain inflation targets.

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