Ryan Budget Critics Incorrectly Attack Heritage Analysis

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Except in Jeopardy!,  questions usually come first, followed by answers. Likewise, when criticizing public policy studies and their underlying methodologies, it typically helps to see the policy study and methodology used before one embarks on criticism.

Today at 8:37 a.m. ET, Matt Yglesias of the Center for American Progress’ Think Progress blog released a critique of the Heritage Foundation’s Center for Data Analysis (CDA) econometric analysis of the federal budget for FY 2012 proposed by Rep. Paul Ryan (R-WI). Yglesias’ posting preceded Heritage’s public release of the CDA’s study and the detailed description of how we prepared our analysis. In the interest of answering questions after they were asked (before our study was released), here’s some QA in response to criticisms and questions concerning our study:

Q: What did CDA use in preparing its analysis of the Ryan budget?

A: We used the same economic model that is employed by leading government agencies (Energy, Treasury, Labor, Office of Management and Budget) and the Congressional Budget Office (CBO). The model is the Global Insight U.S. Macroeconomic Model, which has been in widespread use among government agencies and Fortune 500 companies for over 40 years. Its commercial success is a measure of its award-winning accuracy.

Q: Why should anyone believe the CDA’s estimates on the Ryan budget when CDA predicted job growth from enactment of President Bush’s tax plan in 2001 that did not materialize?

A: For all of its strengths, the Global Insight model is not designed to predict dot-com bubble bursts, terrorist attacks, or foreign wars — and following the CDA estimate of the effect of the Bush plan, the nation had the dot-com bubble burst, the 9/11 attacks, the war against terrorists around the globe, war in Afghanistan, and war in Iraq. None of those events was foreseeable when CDA published its estimates on the Bush economic plan in January 2001. However, the model has a good track record of predicting where the trends of the economy are leading us and how those trends would be affected by policy change.  That’s why the CBO and other government agencies, like the Energy Department, use this model.

Q: Is the Ryan budget plan similar to the Bush economic plan of the last decade? Can you compare economic analysis of one with the other?

A: Mr. Yglesias lays part of his argument for not believing Heritage’s analysis of the Ryan plan on the claim that it’s like the Bush plan: a “myriad of tax cuts for the rich….” While President Bush’s plan contained lower taxes for everyone as does the Ryan budget, the similarity ends there. Rep. Ryan advances fiscal responsibility on two fronts: spending cuts and tax reform.  The Bush plan did nothing on the spending side. In fact, spending under President Bush increased dramatically and that spending, coupled with accelerated spending and borrowing under President Obama, has contributed to the fiscal imbalance that the Ryan budget is trying to unwind. Thus, our analysis of the Ryan plan differs significantly in scope from work we’ve done in the past on other economic plans.

Q: Won’t just the rich benefit from the Ryan budget plan?

A: As our analysis shows, job creation and income growth will be widely shared under the Ryan plan.

Source material can be found at this site.

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