ON ITS face, there is nothing particularly mischievous about the budget accounting rule that the House of Representatives adopted last week. It simply calls for the two nonpartisan bodies that keep score on fiscal matters, the Congressional Budget Office and the Joint Committee on Taxation, to “incorporate the macroeconomic effects” of “major” tax or mandatory spending legislation when they develop official cost estimates: That is, analysts are supposed to factor in the wider impact on growth, employment and inflation and how that might feed back to make the budget deficit larger or smaller.
The rule covers bills that affect at least 0.25 percent or more of the economy and then only “to the extent practicable.” According to the Republican majority that adopted the rule, this is simply to ensure that Congress has the best information when it acts — and it’s only common sense to suggest that the budgetary impact of a tax cut, say, must account for whatever additional growth that tax cut might create.
Well, yes and no. It would be strange, indeed, to oppose a methodological change that promised to give Congress, and taxpayers, more precise policy-impact information. Already, the CBO and JCT take account of micro-economic effects, such as the reduction in fuel consumption that might come from a gas tax hike. Yet a more aggressive “dynamic scoring” of tax cuts has been a longtime GOP desideratum, supposedly because existing methodology understates the cuts’ growth-enhancing magic; the GOP would also like to have the CBO’s imprimatur on its view that repealing Obamacare is pro-growth. Therefore, it would be strange if the GOP-backed rule change did not at least partly reflect Republican ideology, as Democrats loudly charged last week.
The rule’s practical impact may be small, limited to a few pet GOP bills that will be vetoed by President Obama anyway. But there would be reason to worry about “dynamic scoring” if it were to become the dominant method, even if it were done in good faith — without the cherry-picking of which the Democrats preemptively accuse the Republicans. The U.S. economy is so complex, and the assumptions that must be built into any model of its workings so inherently subject to educated guesswork, that it’s not clear that dynamic scoring actually would add precision to imprecise budget estimates. Conversely, to the extent analysts try to be cautious in their assumptions, the more they would simply replicate existing procedures.
So the risks that the new rule will enable fiscally irresponsible tax cuts are high in relation to the prospects that it will actually enhance information quality.
Much will depend on how the new CBO director, working with that agency’s professional staff, implements it. All the more reason for the Republican majority in Congress to choose that official wisely and to treat the appointment as an opportunity to show that the GOP is, as its leaders emphasized in the first week of the new session, dedicated to governance, not partisanship.
The risks of the new dynamic scoring rule - The Washington Post
