Instilling Trust in Federal Statistics
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1 Instilling Trust in Federal Statistics KEVIN D. DAYARATNA, PH.D. Senior Statistician and Research Programmer The Heritage Foundation Washington DC Nothing written here is to be construed as necessarily reflecting the views of The Heritage Foundation or as an attempt to aid or hinder the passage of any bill before Congress.
2 Myriads of policy questions Energy Climate modeling Tax Welfare policy Health care Social Security heritage.org 1/31/2017 2
3 Regardless of the question Models/Data need to made publicly available Test variety of assumptions Backtest when necessary heritage.org 1/31/2017 3
4 Energy The key building block of civilization 4
5 Can we quantify impacts of various energy policies? What exactly would the costs/benefits look like? 5
6 Overall employment freeing up the energy markets 6
7 Manufacturing employment Paris agreement 7
8 Family income Electricity prices Other impacts 8
9 Climate Change 9
10 Climate sensitivity Forecasts Equilibrium climate sensitivity distributions Impacts of climate policies on the environment 10
11 Forecasts of climate models 11
12 Comparison of ECS distributions Probability of temperature (in degrees C) increasing Outdated Roe Baker (2007) distribution Otto et al (2013) distribution Lewis (2013) distribution < < <
13 The impact of climate change The Social Cost of Carbon (SCC) General question What is the long term economic impact of carbon dioxide emissions summed over a particular time horizon? 13
14 So how does one actually estimate the SCC? Three statistical models DICE model FUND model PAGE model 14
15 As with any statistical model These models are grounded by assumptions Discount rate Time horizon Equilibrium climate sensitivity We ran two of the three models, rigorously examining these assumptions 15
16 What did we find? The SCC can drop by over 60% Can be negative! 16
17 Impacts of climate policy MAGICC Model Eliminating CO2 emissions From US Less than 0.1 degree C on global temperatures From all industrialized countries Less than 0.4 degree C on global temperatures heritage.org 1/31/
18 Tax Modeling 18
19 Important Tax Policy Questions Impact of Changing tax rates Changing brackets Removing deductions Reforming certain credits (such as the EITC) Want Revenues 19
20 Heritage Foundation Individual Income Tax Model Simulation based model Starts out with 2007 SOI Data Uses inputs based on past and future policies Applies growth rates to each year Forecast aggregate revenues and deductions up through
21 Policy question? What is the impact of removing state and local deductions? 1/31/
22 How Would Rates Change? Largest reductions for 28% and 25% brackets 22
23 Limitations of model Obviously, reasonable sample size needed Static, not dynamic OSPC model 23
24 Myriads of other questions Welfare policy Poverty Medicare/Medicaid Social Security heritage.org 1/31/
25 So what should the federal government do? Long term economic impact of policy proposals Models/data need to be made publicly available Fundamentally important to tweak assumptions Backtest forecasts when appropriate heritage.org 1/31/
26 Thank you! Any questions? heritage.org 1/31/
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