Republicans change budget-math rules. A risky walk on the 'supply side'?
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| Washington
House Republicans have adopted new rules that will either A) better gauge the economic consequences of big legislation before it鈥檚 voted on or B) distort budget math to support their preferred policy of cutting taxes.
Whichever answer proves correct, it鈥檚 now game time for something called 鈥渄ynamic scoring鈥 of legislation. The idea is that if lawmakers are considering a tax cut 鈥 or other big-ticket legislation 鈥 Congress鈥檚 bean counters should base their tax-revenue forecasts partly on how the legislation itself might result in faster or slower economic growth.
The concept sounds logical enough. If you鈥檙e going to pass a major law, it鈥檚 wise to think through its likely effects.
But it鈥檚 also controversial because, critics say, it opens the door to conservative 鈥渟upply side鈥 theories that don鈥檛 end up delivering the hoped-for results. The state of Kansas, for example, recently found itself on the losing end of hopes that tax cuts would pay for themselves by fueling economic growth.
What lies ahead, though, may be neither a new golden era for tax cuts nor the quagmire of rosy assumptions that Democrats fear.
After all, President Obama isn鈥檛 about to become a rubber stamp for Congress-passed fiscal plans. And the Republican idea of new math will be implemented by congressional economists who are charged with doing their work in a nonpartisan way.
Instead, it鈥檚 possible that the accounting shift will usher in a period of healthy debate about how to best 鈥渟core鈥 the costs of legislation, and closer tracking of whether forecasts prove valid in the crucible of experience.
Beyond the politics, the big question behind the debate is whether it鈥檚 too difficult to provide useful forecasts.
鈥淐ongressional budget analysts should not be required to produce results which they believe would compromise the technical integrity of the work they do,鈥 cautions on the issue from a budget watchdog group, the Committee for a Responsible Federal Budget. But the report also says that economists鈥 modeling abilities have 鈥減rogressed significantly鈥 and that there are 鈥渞easonable arguments both for and against dynamic scoring.鈥
Congressional Budget Office (CBO) economists will be tasked with implementing the new scoring for bills that involve spending, while Congress鈥檚 Joint Committee on Taxation analyzes tax proposals.
The CBO has said the effort 鈥渞equires complex modeling and a significant amount of time, so they can be produced only for major proposals and reports鈥.鈥
The new Republican rules in the House (it鈥檚 not clear if the Senate will adopt a similar rule) would apply dynamic scoring only to major bills, with budget impacts greater than 0.25 percent of the nation鈥檚 gross domestic product. That鈥檚 about $45 billion at present. Not many bills exceed that size.
On Tuesday, as House Republicans were approving the new budget rules, the White House Office of Management and Budget issued a sharp critique of the move.
鈥淲hile this may seem like another example of Washington 鈥榠nside baseball鈥 with little impact on the American public, using dynamic scoring for official cost estimates would risk injecting bias into a broadly accepted, non-partisan scoring process that has existed for decades,鈥 OMB Director Shaun Donovan said in a blog post. 鈥淎s a result, it could allow Congress to adopt legislation that increases Federal deficits, while masking its costs.鈥
One risk that worries Democrats: If Republican-inspired tax cuts win approval, and then tax revenues come in lower than expected, the result could be new pressure to cut federal spending.
Mr. Donovan said the administration supports the idea of weighing the economic impacts of legislation, but that this can be done by continuing the聽 鈥渃urrent approach of providing supplementary macroeconomic analysis of major legislation.鈥
Both sides accuse the other of.
Liberals say Republicans are eager to promote tax cuts for their economic effects, but not so willing to consider the positive economic feedback of legislation like immigration reform or infrastructure investment.
Some the Obama administration of the precise opposite, shunting aside evidence in favor of tax relief.
鈥淒isregarding macroeconomic impacts of legislation is not neutral and the change by the House is a change for the better,鈥 argues Edward Lazear, a Stanford University economist who advised Republican President George W. Bush, in .
In the end, though, some analysts say the feedback between the economy and budget policies may be smaller than the combatants in the debate hope or fear.
Economists William Gale and Andrew Samwick, in a Brookings Institution analysis , argued that tax-cut plans can often give little long-term boost to economic growth, such as in cases where the benefits to taxpayers are offset by new debt burdens for the government.