Charted Choices Costing of election platforms by CPB

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Charted Choices Costing of election platforms by CPB Johannes Hers 02 -02 -2015 CPB

Charted Choices Costing of election platforms by CPB Johannes Hers 02 -02 -2015 CPB Netherlands Bureau for Economic Policy Analysis

Charted Choices • Setting • Pros and Cons • Content and Tools • In

Charted Choices • Setting • Pros and Cons • Content and Tools • In practice - 8 th edition • Final Considerations CPB Netherlands Bureau for Economic Policy Analysis

CPB - Setting • Established shortly after World War II • Jan Tinbergen first

CPB - Setting • Established shortly after World War II • Jan Tinbergen first Director • Independent in practice, but formally part of the Ministry of Economic Affairs • Staff of 100 -120 economists • CPB macro forecasts must be used by government for the budget • Policy Analysis on broad range of topics (Education, CBA, Ageing, Health Care) and • Evaluation of Election Platforms! CPB Netherlands Bureau for Economic Policy Analysis

Evaluation of Election Platforms - Setting • Netherlands, land of coalition government: – extensive

Evaluation of Election Platforms - Setting • Netherlands, land of coalition government: – extensive negotiation on Coalition Agreement – extensive Financial Annex to Coalition Agreement – relatively fact based policies • Enhances importance of Election Platforms and their Financial Annex CPB Netherlands Bureau for Economic Policy Analysis

Evaluation of Election Platforms - Setting • • • Mid-term economic forecast incl sustainability

Evaluation of Election Platforms - Setting • • • Mid-term economic forecast incl sustainability of public finance Advisory Group on Fiscal Policy recommends fiscal target Publication of CPB analysis of election manifestos Elections Negotiations on new coalition agreement Publication of CPB analysis of coalition agreement • Start: about 5 -6 months prior to elections CPB Netherlands Bureau for Economic Policy Analysis

Evaluation of Election Platforms - Setting • Builds on regular work CPB: – Forecasts

Evaluation of Election Platforms - Setting • Builds on regular work CPB: – Forecasts for short and medium term – Policy analysis – Sustainability analysis • Started in 1986, scope gradually extended over time: – number of parties – number of topics • At the request of political parties: – almost all parties participate (public pressure) – based on information provided by parties CPB Netherlands Bureau for Economic Policy Analysis

Evaluation of Election Platforms - Pros • Same underlying economic scenario • Evaluation by

Evaluation of Election Platforms - Pros • Same underlying economic scenario • Evaluation by identical standards • Makes programs comparable • Improves technicalities in proposals • Deeply suspicious regarding free lunches • Checks practical and juridical feasibility • Extends credibility to parties • Starting point bargaining for new government CPB Netherlands Bureau for Economic Policy Analysis

Evaluation of Election Platforms - Cons • Individual party proposals – Constrain on political

Evaluation of Election Platforms - Cons • Individual party proposals – Constrain on political debate (e. g. juridical feasibility) – Bias towards proposal that are easily evaluated – Bias against new innovative proposals (unknown scores zero) – Bias against choices for proposals that do not score well (ODA) – Gaming: select proposals just with an eye to getting a good score – Short sighted as opposed to long term structural reform • Scope – Too broad and process too burdensome, but also – What is not evaluated gets less attention – There is more than economics CPB Netherlands Bureau for Economic Policy Analysis

Evaluation of Election Platforms - Content Key trade – off’s • Short (1 -4

Evaluation of Election Platforms - Content Key trade – off’s • Short (1 -4 years) vs long term (2040) effects • Demand side vs supply side effects • Efficiency (GDP, employment) vs redistribution Examples: • Improving government finance adverse effects on purchasing power • Improving incentives for labor supply adverse effects on equity CPB Netherlands Bureau for Economic Policy Analysis

Evaluation of Election Platforms - Content • (0) Direct fiscal effect of policy measures

Evaluation of Election Platforms - Content • (0) Direct fiscal effect of policy measures (“ex ante”) • • • (1) Effect on government balance and debt in medium term (“ex post”) (1) Effects on macro economic variables in medium term – 4 years (2) Effects on purchasing power / income distribution in medium term (3) Effect on structural employment in long run (4) Effect on sustainable public finances in long run ü(5) No longer in the next edition: program effects on greenhouse gases, education, housing market, transport and mobility CPB Netherlands Bureau for Economic Policy Analysis

Example of outcomes and key trade off's VVD Pvd. A PVV CDA changes compared

Example of outcomes and key trade off's VVD Pvd. A PVV CDA changes compared to baseline (1) EMU balance (2017, ex post, % GDP) (1) GDP volume (2017, %) (1) Unemployment (2017, pp*) (2) Purchasing power median (2017) (2) Lowest and highest income ratio (2017) SP D 66 GL 1. 4 -0. 2 0. 8 -1¼ -2 1. 1 -2. 3 1. 3 -¼ 3¾ 1. 3 0. 7 -0. 5 2 ¼ 1. 1 -0. 6 1. 2 -3¼ -½ 0. 8 -1. 8 0. 4 3 6¼ 1. 0 -1. 1 1. 3 -2½ -¾ 1. 0 -2. 0 1. 1 2½ 1 (3) Structural employment (2040, pp) 3¾ -1 -¼ 2¼ -3¾ 1½ 2¼ (4) Sustainability (% GDP) 3. 2 2. 4 0. 4 3. 4 1. 6 3. 3 3. 2 -14 2. 9 -0. 2 -0. 01 -34 2. 7 0. 4 0. 02 5 -0. 2 -0. 9 -0. 02 -7 0. 7 -0. 1 -0. 02 -23 0. 5 -0. 4 0. 01 -31 3. 5 0. 1 0. 04 -63 1 0. 7 -0. 04 (5) Greenhouse gases (2020, Mt CO 2 eq) (5) GDP effect education (structural, %) (5) Housing market (welfare gains, % GDP) (5) Transport and mobility (welfare gains, % GDP) CPB Netherlands Bureau for Economic Policy Analysis

Evaluation of Election Platforms - Tools • Simple calculations (P x Q) • Expert

Evaluation of Election Platforms - Tools • Simple calculations (P x Q) • Expert Opinion by CPB or obtained elsewhere (ao Ministries) • Complex Models – (1) Saffier, macroeconometric model for medium term projections – (2) Mi. Mo. Si, Micro simulation system on purchasing power, labour costs, social security and income tax – (3) Micsim, our new microsimulation model for labour market effects – (4) Gamma, simulation model for ageing, pensions and public finances – (5) Specific models for education, transport, housing market etc. CPB Netherlands Bureau for Economic Policy Analysis

Evaluation of Election Platforms - What's different? • Charted Choices = business as usual

Evaluation of Election Platforms - What's different? • Charted Choices = business as usual times 10: – – – Many parties as opposed to 1 (the cabinet) Ensure Chinese Walls while analysing party platforms Level of expertise / common language varies Many measures (for 4 years instead 1) Broad range of analyses at one point in time More novel, untested ideas CPB Netherlands Bureau for Economic Policy Analysis

In Practice - 8 th edition • • • production time: 3 months, 60

In Practice - 8 th edition • • • production time: 3 months, 60 people (+ 20 PBL) 456 pages 2468 measures reported size individual measure > 50 mln (= 0, 008% of GDP) 10 parties Per party 14 -18 pages with measures and 20 pages with results CPB Netherlands Bureau for Economic Policy Analysis

Final Considerations • • • Focuses political debate on differences in policy view True

Final Considerations • • • Focuses political debate on differences in policy view True assessment requires involvement of parties Broad scope of issues to avoid shopping / gaming In depth knowledge of government budget and forecasting Stakes are high: difficult to exclude parties, need to deliver You need to love to be hated CPB Netherlands Bureau for Economic Policy Analysis

Questions? http: //www. cpb. nl/en/publication/chartedchoices-2013 -2017 CPB Netherlands Bureau for Economic Policy Analysis

Questions? http: //www. cpb. nl/en/publication/chartedchoices-2013 -2017 CPB Netherlands Bureau for Economic Policy Analysis