Remora


The nineties have yet to earn a definitive moniker as a decade. Limited Inc. suggest that it be called the New Math decade. Remember, a few years ago, the dispute over metrics? Okay, those of you who weren't swept up in the Net biz bubble might not remember the dispute over metrics, or care, but for a while, the argument, made by highly paid stock analysts, was that the metric that counted was not quarterly earnings, which had the mildewy, moth ball scent of Old Economics. No, we were another generation, and we wanted the more intangible numbers associated with number of hits, or expected number of hits, or the amount of energy, in watts, given off by the synergies and efficiencies the disintermediation of commodities effected in Seattle on an average Wednesday. Etc. Numbers suddenly became ineffable. They were so impressive, the new numbers - the sudden spike in productivity if you jiggered the way you measured it, the trickle down that was finally sticking in the average household, the wondrous surpluses. Here, finally, was the justification for every gutted social service. Ah those numbers ... too bad they were so, uh, wrong. The homework was turned in, and now we are turning it back with red marks scrawled across it. Listen to the sound of tumbling dice in this story from the AP:


"Federal surpluses over the next decade have plunged 71 percent from last year's estimates and annual deficits are back for the next two years, says a new congressional forecast that heralds a budget squeeze sure to color this fall's elections.

The nonpartisan Congressional Budget Office estimated on Wednesday a 10-year surplus of $1.6 trillion, a staggering $4 trillion less than the $5.6 trillion the office estimated only a year ago. Both projections by CBO, Congress' official budget analyst, are for 2002 through 2011, and assume no changes in current tax or spending programs."

The Center for Budget and Policy Priorities issued a report a few days ago foreshadowing the CBO report. It analyzes what happened. Here's a long three grafs from that report:

"A tax cut reduces federal revenues and thus reduces projected budget surpluses. Similarly, increases in funding for federal programs boost federal expenditures and thereby reduce the surpluses. The decreases in revenues and increases in expenditures that occur as a result of a recession also shrink the surplus. In each of these cases, the reduction in the surplus results in an increase in the federal debt, compared with the level of debt that CBO had assumed in its previous budget projections. This increase in the debt automatically causes federal interest payments to rise, since interest must be paid on a higher level of debt. Moreover, the increase in the amount the federal government must pay in interest itself causes the surplus to shrink further. The new CBO estimates are likely to show that interest payments on the debt will cost the government roughly $1 trillion more between 2002 and 2011 than CBO projected just one year ago.

These increases in interest payments are a major factor in the deterioration of the surplus. To measure accurately the budgetary consequences of a tax cut, a spending increase, or any other change in the budget, one must include the resulting increase in interest payments caused by the tax cut, spending increase, or change in economic or other conditions.

The third trap that can lead to misuse of the CBO numbers occurs when someone includes the resulting increase in interest payments when measuring the effect on the surplus of some budget changes � such as the reduction in revenues and increase in expenditures that has occurred because of the recession � but then excludes the resulting interest increases when measuring the effects of other budgetary changes such as the tax cut. Such inconsistent treatment of interest payments leads to apples-to-oranges comparisons when assessing the relative impact of various factors on the change in the surplus."

Well, the CBPP, being properly wonkish, doesn't go for the jugular about the CBO projections. We will. Being 71 percent wrong on your projections gives you, what, a D? no, surely an F, here. It's one of those who-flicked-the-switch-on-the-Chernobyl- control-board kind of mistakes. In a more rational world, the admission that one's projections were that far off should lead to peremptory firing. At the very least, we should pack up the CBO, lock stock and barrel, and send it to Houston, to work with their confreres in the Arthur Andersen office. This is what comes of having a politics in total disconnect with reality: a presidential election fought over prescription drug prices for the Floridian elderly, an issue that burned out December 17, 2000; a tax cut using figures so wildly off that they are more like dreams of a madman; and a President who has decided that his best strategy, as the economy continues sour, is to remind people that there's a war on. But like all disconnects, there's a purpose to the politics of illusion -- the purpose is to reward the haves, at no matter what cost to the country.