Saturday, June 29, 2013

In Reckoning a Law's Cost, Final Score Unclear

by Carl Bialik

Wall Street Journal

June 28, 2013

The official scorers of federal legislation gave backers of a sweeping immigration bill major support with the recent finding that the proposed law would cut the deficit and boost the economy. The Senate voted Thursday to approve the legislation, 68-32, with the House of Representatives still to vote on it.

But to some critics and even some supporters of the bill, as well as independent economists and policy analysts, the precise forecasts made by the Congressional Budget Office of the bill's fiscal and economic impact are fresh signs that the agency projects too much confidence. A little humility could go a long way toward boosting its credibility, they say.

For example, the CBO says that in 10 years, the immigration bill—which is expected to expand the flow of immigrants into the country and provide a path to citizenship for those who have already come illegally—would, if enacted, lift gross domestic product by 3.3% in a decade and by 5.4% in two decades. Allowing for wiggle room, though, the CBO says the 20-year boost may be as small as 5.1% or as big as 5.7%.

"The actual effects could be well outside CBO's ranges," the report said. But the agency doesn't say by how much. And for other numbers, such as the effect on the federal deficit, it doesn't provide any range.

That modest admission of potential fallibility doesn't come close to reflecting the true uncertainty of long-run economic forecasts, economists say. Even the CBO's one-year and five-year estimates for the budget surplus or deficit are frequently inaccurate. Yet the CBO's immigration numbers were cited in many media reports as certain predictions.


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