Misunderestimated

[banana republican]

A new study from the American Shareholders Association examined the 10-year forecast for economic growth and federal revenue collections for the period 1997-2006. And over these years, it found, the CBO underestimated tax revenue collections by a cumulative $800 billion. To paraphrase President Bush: That's a pretty severe misunderestimation.

The forecasting faux pas is actually larger because those estimates excluded the impact of at least three major tax cuts (in 1997, 2001 and 2003) that subsequently passed Congress. These tax cuts were estimated by the wizards at Joint Tax to deplete federal tax collections by an additional $1.24 trillion through 2006, according to the Shareholders Association study.

So if you add those together, CBO and JTC have managed to underestimate revenues by $2.04 trillion over the past decade. Here's one way to appreciate how large this error is: It would be as if CBO forgot to count all the federal income tax payments made by every resident of Florida for an entire decade. Tied to their outdated forecasting models, these agencies refuse to acknowledge that there is any Laffer Curve effect from changes in tax rates that help the economy grow and revenues increase. Thus CBO also managed to project a decade ago that the U.S. economy would be $1.3 trillion smaller today than it actually is.

http://online.wsj.com/article/SB115145995757892652.html?mod=opinion_main_review_and_outlooks