Senate Switch Could Boost Chances for Dynamic Scoring

If Republicans win a majority in the U.S. Senate this November, they may push to have the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) use dynamic estimates in official scoring of legislation, according to press reports. Dynamic estimates, which include the economic effects of proposed legislation, would provide useful information to lawmakers. Trying to determine these effects, however, is an uncertain science.

Analysis of the potential dynamic effects of legislation could provide policymakers with useful information in evaluating legislation. However, incorporating dynamic analysis into official budgetary scores of legislation could be problematic for a variety of reasons and could lead to Congress enacting legislation that increases the deficit. While such analysis could be beneficial to understanding the full implications of legislation, it should only be provided as supplementary information and not part of the official score.

In brief, dynamic estimates incorporate the effect that legislation would have on macroeconomic variables such as Gross Domestic Product, employment, and inflation. Current scoring conventions only include microeconomic changes. To learn more about dynamic scoring, read our report: Understanding Dynamic Scoring.

The issue of dynamic scoring is not new. This year, the House passed a bill that would have required CBO to use dynamic scoring. In addition, Ways and Means Committee Chairman Camp (R-MI) provided a supplemental macro-dynamic analysis of his tax reform legislation, and Budget Committee Chairman Ryan (R-WI) included the budgetary effects of a “fiscal dividend” from macroeconomic effects of deficit reduction in his budget resolution this spring. The Senate passed a dynamic scoring amendment to the budget resolution back in 2013. Occasionally, when legislation would have a particularly large effect on the economy, CBO already produces dynamic analysis, as it did most recently for the immigration reform bill.

Recently, several articles have indicated that Chairman Ryan is leading the charge for the use of dynamic scoring in the next session of Congress. As Politico Pro's Brian Faler reported yesterday (subscription required):

Republicans are eyeing a little-noticed benefit to a Senate takeover: changing budget rules so they can rewrite the tax code as they like.

The party’s chief economic spokesman, Paul Ryan, is leading a push to alter how nonpartisan scorekeepers tally up the cost of tax bills, to make it easier for them to deliver on promises to cut rates as part of a broader tax code cleanup.

"I really prefer to call it reality-based scoring,” Ryan (R-Wis.) told the Financial Service Roundtable recently. “We can do so much more in measuring the effects of tax legislation. The problem is our rules in Congress.”

Dynamic estimates, so long as they are provided as supplementary analysis, can provide valuable information for lawmakers to consider. Nonetheless, as we stated in our letter regarding Chairman Camp's tax reform bill, legislation should be written to add up before accounting for the impact of economic growth. Dynamic estimates should provide a bonus for deficit reduction, not a crutch.

Whether or not dynamic scoring is used, we encourage policymakers to implement policies that enhance economic growth and put the debt on a clear downward path.

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For additional budget process resources including specific options for reform, visit our Better Budget Process Initiative home page.