“CBO? Wrong then, wrong now.”
— Sen. Tim Scott (R-South Carolina), in a video posted on social media, June 12
As part of the GOP campaign attacking the nonpartisan Congressional Budget Office for the grim fiscal projections for the One Big Beautiful Bill Act of tax and spending cuts pending in the Senate, Scott posted a one-minute video that was instantly ridiculed for its errors — nine, by our count. That’s one mistake every 6.66 seconds. It even received a community note on the X platform.
Apparently the senator, who chairs the Banking Committee, is beyond embarrassment. The video has not been removed, and a spokesperson did not respond to repeated queries. But we thought it would be worth going through his commentary line by line, as it makes the sort of lazy arguments one might hear in a bar late at night. While it’s common these days for Republicans to attack the CBO,
it’s headed by a Republican twice appointed by GOP-led Congresses.
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“In 2017, the CBO said the Tax Cuts and Jobs Act would increase the deficit and debt by trillions of dollars. What would happen? They were wrong.”
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By any objective measure, the CBO was right and Scott is wrong. He voted for the 2017 tax cut, but he may have forgotten that lawmakers at first wanted to pass revenue-neutral tax changes, fearing it would increase the budget deficit. But then they switched to deficit-financed tax cuts, arguing any loss would be made up by economic growth.
CBO
first estimated an increase in the deficit of $1.5 trillion over 10 years — though that score was artificially reduced because lawmakers decided to terminate the tax cut after nine years. (
That’s why Congress is now scrambling to expand it.) Updated CBO projections in 2018 found that the revenue loss would be $1.9 trillion but that macroeconomic effects of the tax cuts would reduce the deficit impact to $1.4 trillion. In other words, CBO found the tax cuts did not pay for themselves and deficits would increase.
Scott suggests that the budget deficit did not increase because of the tax cut. But CBO was right. The deficit had grown, by leaps and bounds, exacerbated by pandemic-relief spending passed under Presidents Donald Trump and Joe Biden.
“Now this is not surprising. They were wrong on the Mellon tax cuts in the 1930s.”
Two things wrong here. The CBO was created in 1974 and started forecasting in 1975, so the agency would not have scored the tax cuts pushed by Treasury Secretary Andrew Mellon, who was treasury secretary from 1921 to 1932, under three presidents. Scott’s staff must not have access to Google (or they relied on an AI fantasy).
On top of that, Mellon instituted his tax cuts under Warren G. Harding and Calvin Coolidge in 1921, 1924, and 1926 — not the 1930s. (Note to Scott: The 1930s were the Great Depression.) These tax cuts often are hailed as the first supply-side tax cuts, as Mellon cut tax rates to stimulate growth. There was an initial decline in federal revenue as tax rates were cut, but revenue grew during the subsequent economic expansion.
But the story doesn’t end there. Mellon was also a big believer in a balanced budget, and when tax revenue fell because of the Depression, in 1931, he recommended to Herbert Hoover a hike in taxes, including the estate tax, to balance the budget,
according to tax historian Joseph Thorndike. Hoover took that advice, which helped extend the Depression.
“They were wrong on the Kennedy tax cuts in the 1960s.”
Again, CBO didn’t exist at the time.
John F. Kennedy proposed a tax cut, but the Revenue Act of 1964 was not enacted until after his assassination, under Lyndon B. Johnson. In addition to corporate tax cuts, the law reduced the top individual tax rate from 91 percent to 70 percent. (It’s now 37 percent.) Before Kennedy was killed, the bill was stalled by conservatives because Kennedy had embraced the then-radical idea of allowing more deficit spending to spur economic growth.
“They were wrong on the Reagan tax cuts in the 1980s.”
Okay, the CBO did exist when Ronald Reagan was president. But we’re going to count this as yet another error because Scott suggests CBO overestimated the deficit impact of the Reagan tax cuts. In fact, it overestimated how much revenue the tax cut would yield.
Reagan further cut tax rates, with the highest individual income tax rate going from 70 percent (set by Johnson’s tax cut) to 50 percent. Back then, tax brackets were not automatically adjusted for inflation so a large part of Reagan’s tax cut also adjusted the brackets after a period of high inflation. Reagan’s Economic Recovery Tax Act of 1981 reduced revenue by 2.89 percent of the gross domestic product over four years,
according to a Treasury Department estimate. It was the biggest tax cut in history — and the deficit soared.
“The CBO baseline budget projections have changed 180 degrees from previous projections, which always showed revenues growing faster than outlays and the budget moving toward a surplus within two or three years,”
CBO Director Alice Rivlin told Congress in 1982. “The reason for this change is quite simple. Last year, the Congress enacted the Economic Recovery Tax Act of 1981 which provides for major reductions in individual and corporate income taxes. The effect of the tax act will be to reverse the trend of a growing federal tax burden … The price of this reduction in the tax burden, however, is a widening gap between revenues and outlays.”
But the story doesn’t end there. Reagan was sufficiently concerned about the tide of red ink that he subsequently signed into law a series of tax increases to boost revenue. His former vice president, George H.W. Bush, and Bill Clinton followed up with more tax increases, so by 1993,
the revenue loss from Reagan’s tax cut had been restored, setting the stage for the budget surplus at the end of Clinton’s presidency.
“When have they been right? I don’t know either. What I can tell you is the 2017 TCJA produced a 3 percent increase in revenues in 2018 and another 3 percent increase in 2019.”
Wrong again, Senator. That’s basically what CBO estimated in those years. If anything, it
slightly overestimated the revenue after the tax cut; the agency did not underestimate it.
CBO estimated that revenue in 2018 would be $3.338 trillion; it turned out to be $3.330 trillion. In 2019, CBO estimated revenue would be $3.490 trillion; it turned out to $3.463 trillion.
For economic forecasting, that’s like hitting nearly a bull's eye in archery from more than 200 feet.
“Why? Because the Laffer curve is right. If you lower taxes, you increase production, and that means more revenue for the government. It always has worked. I think it always will work.”
Wrong again! Scott doesn’t understand the Laffer curve.
The term comes from economist Arthur Laffer,
who reportedly sketched the curve on a napkin in 1974 for two aides to then-President Gerald Ford — Donald H. Rumsfeld and Dick Cheney — to argue against a tax increase under consideration. (We say “reportedly” because Laffer
says he has no memory of doing so.)
The point Laffer tried to make was that there is an optimum level of taxation between zero percent and 100 percent that will yield the most revenue for a government. At a certain point, he argues, tax rates can be too high and will yield only the same revenue as lower tax rates — and vice versa. But,
he wrote: “The Laffer Curve itself does not say whether a tax cut will raise or lower revenues.”
“CBO? Wrong then, wrong now.”
Since every example cited by Scott has failed to show the CBO was wrong, this last line counts as the ninth error in 60 seconds. Maybe that counts as an achievement in Scott’s office. We’d give it Four Pinocchios.
Four Pinocchios
