Making Stuff Up About the Buffett Rule?

On the White House website, as of 7PM Eastern on April 10, you can find the following graph






Now if you read to the bottom, you'll see the source as "CBO."  I found this pretty interesting because, to my knowledge, the CBO has never published effective tax rates back to 1960.  I know because I've spent a lot of time looking for them.

They have published effective tax rates back to 1979 and you can find those here.  Let's do a quick comparison.  The WH chart shows the effective tax rates of the top 0.1% as below those of the top 1% from 2003 on and says the source is the CBO.  Meanwhile the CBO data (which only goes through 2005) shows no such thing.  The WH chart also appears to show (based on interpreting the axes) far higher tax rates than were actually in place according to the CBO report in 1980.  But since they haven't published the data or linked to the CBO, it's a bit hard to know.

But it's this chart that allows the WH to argue that tax rates have declined by more than 50 percent for "the wealthy."  Meanwhile the CBO data for the top 0.01% shows a decline of about 30 percent from 1979 to 2005, pretty much the same decline in percentage terms as most income groups although less than those in the bottom quintile.

So I'm left with 2 questions:  Did the WH misquote the CBO?  If they did, where did the data come from?  If they didn't, can they show us the CBO data?

Update:  The White House shows in a different report the same data but in this report, they clearly source the data as not coming from the CBO and not even being actual data but rather data created by the CEA.  The specific quote is: "Average Federal tax rates for a sample of 2005 taxpayers after adjusting for growth in the national wage index" and the source is basically CEA analysis.  CEA/CBO what's the difference?

Hyperventilating about Dystopia

Dystopia is one of those words that you don't read all that often in blogs about politics.  Yet it seems to be showing up with surprising frequency in recent discussions about the Ryan budget proposal.  You see, the proposal to reduce non entitlement spending to 3.75% of GDP by 2050 is going to require the dismantling of the government, at least according to the critics

But is this critique actually true?  Math would suggest it isn't.  In 2010 according to the CBO historical tables, Federal spending (ex-social security, medicare, medicaid, and interest) was about 13 percent of GDP.

Now let's make a few adjustments.  Let's exclude overseas contingency operations (Afghanistan and Iraq).  Today those account for about 1.0% of GDP.  Let's also exclude higher than normal automatic stabilizers (TANF, UI, etc) that account for about 0.5% of GDP.  That leave us an adjusted baseline of about 11.5% of GDP.

Now let's make some assumptions and do some math.  Let's assume that GDP grows at its average rate from 1970 to 2010 (about 2.8% real) and let's assume inflation of about 3 percent per annum.  This latter assumption is higher than what the government typically uses but the model isn't particularly sensitive to the inflation assumption.

If you now run the model out to 2050, the 11.5% of GDP under those assumptions would become 3.75% of GDP, exactly equivalent to the number in the Ryan budget.  Please note that Ryan doesn't get to the number with these assumptions but in aggregate, spending continues to grow under the Ryan budget at the rate of inflation throughout the period and still reaches the 3.75% target.  In other words, Ryan's budget "cuts" simply amount to a COLA on the federal government outside of entitlements.

Dystopia indeed.