But there is a much bigger problem with Warren’s figures: As The Washington Examiner’s Philip Klein wrote yesterday, she’s using estimates that rely on two different sets of opposing assumptions. Warren’s cost estimate relies on dynamic scoring, which builds growth effects into the model. Basically, it assumes that widely subsidizing child care would boost the economy by allowing more people to work, either in an enlarged child care sector or in other types of jobs. That assumption is built into the cost estimate, giving it credit for any economic benefits it might provide.
The revenue estimate for Warren’s wealth tax, however, relies on what’s known as a static analysis—it counts no growth effects into its assumptions, presumably because a wealth tax, by taxing the sort of people who are likely to make large, economy-building investments, would have a negative impact on growth. In other words, it ignores any negative impacts. As Klein writes, “Warren is relying on two different methods of analysis, one of which makes her spending seem less costly, and one of which makes her tax plan seem like it would raise more money.” Either this is a deliberate attempt to mislead, or it is an oversight that just so happens to be extremely convenient.
These are admittedly wonky details. But that’s what Warren says she’s focused on, and she is not getting them right. Nor is this the first time that she has launched major policy initiatives based on dubious evidence.