Debt Digest | New Bipartisan Law Enhances the CBO’s Role as a Fiscal Watchdog

Links & Fiscal Facts

Here are this week’s reading links and fiscal facts:

• The new bipartisan law enhances the CBO’s role as a fiscal watchdog. Last week, President Biden signed the Congressional Budget Office Data Sharing Act (H.R. 7032) into law. This legislation expands the CBO’s authority to request and access data from executive agencies, addressing past challenges that have hindered the timely and accurate analysis of legislative proposals. It is promising that this bill—which supports the CBO’s critical role of providing budget and economic information to Congress—is the first House Budget Committee bill to unanimously pass both the House and Senate. We’ve covered this policy change in a previous edition of the Debt Digest. Hopefully, this will be the first step in a series of reforms that can strengthen the CBO’s role and improve budget accountability and transparency.

• Immigrants account for less Medicare and Medicaid spending per capita than US-born individuals. David Bier, the director of immigration studies at the Cato Institute, highlights that between 2002 and 2022, foreign-born individuals (mainly immigrants) accounted for 19 percent lower per capita Medicaid and Medicare expenditures than US-born individuals. Bier notes: “Figure 2 shows that this pattern of lower spending has persisted for the last 20 years. [...] Cumulatively, if the average immigrant had cost as much as the US-born population, the government would have had to spend about $300 billion more in those years.” He attributes the lower Medicare and Medicaid usage among immigrants to them being younger, healthier, and less likely to engage in high-risk activities, as well as stricter eligibility requirements for these programs. Bier argues that the government should further restrict Medicare and Medicaid availability for immigrants, writing: “Reducing the taxpayer costs of immigration would increase the already substantial fiscal benefits of immigration, making positive reforms more likely.”

  

• Economists think curbing the Fed’s independence, imposing tariffs, and enacting price controls are bad ideas. The University of Chicago’s Clark Center recently surveyed 44 economists on economic policy ideas. Of those surveyed, 93 percent agreed that giving the President more influence over monetary policy would result in worse monetary policy decisions. As we’ve covered in a previous Digest, “a central bank that is subservient to the president could result in a period of fiscal dominance akin to what was seen in Turkey.” Furthermore, 96 percent agreed that tariffs primarily affect the consumers of the country that enacts them—through higher prices. See this edition of the Debt Digest covering why Trump’s tariffs would be mostly paid by Americans. Additionally, 90 percent of economists agreed that there is little evidence that price gouging is the cause of higher grocery prices, and 99 percent agreed that price controls create economic distortions. As we’ve covered in another edition of the Debt Digest, inflation—not price gouging—drives higher prices.

• Fiscal New Year resolutions. Thomas Savidge from the American Institute for Economic Research (AIER) offers “resolutions” for the federal government for the new fiscal year. Savidge argues that tax policy should “allow Americans to keep as much of their hard-earned money as possible,” while acknowledging that extending the Tax Cuts and Jobs Act (TCJA) won’t pay for itself without accompanying spending cuts. On the spending side, Savidge references my proposal of a BRAC-like fiscal commission to curb unsustainable spending. He writes: “The key benefit of a BRAC commission (whether for spending on military bases or managing the national debt) is that it mitigates the incentive problems facing politicians and bureaucrats by requiring ‘silent approval.’ Instead of a politician going on record in support of spending cuts (which will hurt reelection prospects), the spending cuts are enacted so long as the member of congress does nothing.” For more on how a BRAC-like commission would work, read here.

• Inflation hits the poor the hardest. In a Wall Street Journal article, Justin Lahart discusses a new study showing that, early in the pandemic, poorer Americans weren’t impacted the most by inflation—an unusual trend. According to the study, the soaring gasoline and used-car prices didn’t affect the poor as much because they spent less on cars and gasoline and more on public transportation. However, since then: “Gasoline prices have fallen, vehicle prices are edging lower, and inflation is now higher for lower-income than other groups.“ Furthermore, the study “show[s] that in any given year, inflation for the poor tends to be a bit higher than for other people because more of their spending is on items that have risen faster than the overall CPI over time [...]“ As I’ve pointed out in my critique of Modern Monetary Theory (MMT), “​​The luxury of academic and theoretical detachment allows influential voices to promote ideas [MMT] that would be perilous if enacted. The consequences [inflation] of such policies are less often borne by their proponents but by those least equipped to manage them—poorer working-class Americans.”