Elizabeth Warren's child care proposal is based on dishonest accounting



Sin. Elizabeth Warren's proposal to extend affordable child care services to everyone relies on dishonest accounting to give the impression that she is financially more healthy than she is. " she would not really be.

Warren, D-Mass., Seeking to run for the Democratic presidency in 2020, unveiled on Tuesday a radical proposal to provide free, quality childcare to all people earning less than $ 50,000. as well as highly subsidized care to all others. According to his campaign, it would cost $ 700 billion over a decade, to cover a small portion of his wealth tax imposed on ultra-millionaires.

The problem lies in the two estimates on which it is based (the one that determines the cost of the program, the other which provides the income generated by the wealth tax) do not allow a comparison between two apples.

Moody's economists, Mark Zandi and Sophia Koropeckyj, have estimated the cost of child care for 700 years over a decade; they note that the analysis is carried out on a "dynamic basis (after taking into account the economic impacts of the proposal)". The liberals have long despised Republicans' efforts to use "dynamic scoring" to incorporate the effects of tax cuts on economic growth when determining their effects on the budget. But Warren is now using such an analysis, based on assumptions about the economic effects of affordable child care, to give the impression that his spending proposal seems lower than it actually is.

In itself, this may not be a big problem – just an example of Warren using methods that have been advocated by Republicans for the sole purpose of lowering taxes. However, what is problematic is that, when it comes to estimating the effect of his wealth tax, Warren does not rely on a dynamic analysis, even if the imposition of wealth could distort investment decisions and thus have a negative impact on growth.

The analysis of Zandi and Koropeckyj states that "there is only little impact on the economy of higher taxes imposed on wealthy households". However, footnote vii, "a complication is that we have not evaluated the budget or the economic implications of the Senator's wealth tax." We assume, therefore, that his Children are funded by inheritance tax reforms sufficient to generate income. the necessary tax revenue ".

Wait what? Thus, the "dynamic" analysis of Warren's proposal by Zandi and Koropeckyj takes into account all the positive economic effects, does not take into account the economic disadvantages of his wealth tax, but bases his economic conclusions on a other formulation of the inheritance tax the plan?

Previously, economists at Berkeley, California Liberal University, Emmanuel Saez and Gabriel Zucman, estimated that the wealth tax would generate $ 2.75 billion over a decade. But it was not a dynamic analysis. Instead, they took data from the US Federal Reserve's Consumer Finance Survey, some of their own data sources and the Forbes list of the 400 richest Americans, to determine the amount of wealth exceeding the thresholds of $ 50 million and $ 1 billion submitted to Warren's tax. This gave them an estimate for 2019, which they then used to extrapolate the cost over 10 years.

They do not take into account the economic effects of the wealth tax.

Thus, Warren draws on two different methods of analysis, one that gives the impression that his expenses are less expensive and the other that gives the impression that his tax plan would pay more.

She is therefore dishonest when she claims that the wealth tax would increase, "four times more than the total cost of my universal childcare and preschool education plan".

If analysts only considered the cost to the federal government, Warren's childcare program would cost well over $ 700 billion, whereas if one used economic analysis, his tax would on fortune would raise less money than it appears.


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