Dynamic Scoring Resource Guide
The Congressional Budget Office, the official arbiter of fiscal policy, provides budget estimates for legislation before both chambers of Congress, a process also known as scoring. CBO incorporates micro-dynamic analysis — looking at the effects of changes in behavior, supply and demand, and the timing of certain decisions – in official estimates but does not include changes in macro-economic variables such as labor supply or private investment that could affect total economic output. The Joint Committee on Taxation (JCT) uses similar methods to CBO in preparing estimates of revenue legislation. This is the practice that has been followed since the modern Congressional budget process was established in 1974.
There is increased interest in adopting dynamic scoring as a potential addition to the official scoring process. Dynamic scoring would incorporate the macro-economic impact of policy changes on the overall economy and the secondary “feedback effects” that occur as a result of these changes to the overall economy. This would require estimators to choose and refine an economic model to estimate macro-economic effects, an area where there is not a clear consensus among experts about the assumptions that should be used. CRFB recently held an event discussing dynamic scoring with policymakers.
There are important arguments made both for and against dynamic scoring. The CRFB paper "Understanding Dynamic Scoring" has outlined these arguments.
Arguments for dynamic scoring include:
- Dynamic scoring provides valuable information about the economic effects of legislation omitted from conventional scores.
- Conventional estimates create a bias against pro-growth policies by disregarding economic effects.
- Policymakers should take advantage of better technology and information.
Arguments against dynamic scoring include:
- Dynamic scoring is very sensitive to assumptions, including assumptions about future policy changes, and there is no consensus among economists about the best assumptions to use.
- Producing dynamic scores could impose an impractical workload on CBO.
- Dynamic scoring could undermine estimators’ credibility.
Below are resources on dynamic scoring, including background, support and opposition, and examples of dynamic analyses that CBO and JCT have done.
Background on Dynamic Scoring
- Summary of Understanding Dynamic Scoring
- Understanding Dynamic Scoring
- How CBO Analyzes the Effects of Changes in Federal Fiscal Policies
- Thomas Barthold-Testimony in Front of The Ways and Means Committee, September 2011
- JCT's Analysis of the Camp Tax Reform Proposal
- CBO's Analysis of S. 744, Border Security, Economic Opportunity, and Immigration Modernization Act
Additional CRFB Resources on Dynamic Scoring
- Senate Switch Could Boost Chances for Dynamic Scoring
- How Camp's Discussion Draft Would Impact the Economy
- Understanding CBO's Analysis of the Senate Immigration Bill
- Event Recap: A Discussion on Dynamic Scoring
- A "Dynamic" Amendment to the Senate Budget
Other Informative Sources in Favor of Dynamic Scoring
- Douglas Holtz-Eakin-Testimony in Front of The Ways and Means Committee, September 2011
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William Beach-Testimony in Front of The Ways and Means Committee, September 2011
- Portman Introduces Bill Requiring More Accurate Measure of Impact of Taxes on Jobs and the Economy
- How Critics of Dynamic Scoring Harm the Workers They Purport to Represent
Other Informative Sources Opposed to Dynamic Scoring
- Dynamic Scoring: Will S&P Have Company?
- Democratic House Budget Committee Fact Sheet on H.R. 1874
- John Buckley-Testimony in Front of The Ways and Means Committee, September 2011
- Treasury Dynamic Scoring Analysis Refutes Claims by Supporters of the Tax Cuts
Older Dynamic Scoring References
- CBO, “Analyzing the Economic and Budgetary Effects of a 10 Percent Cut in Income Tax Rates.” December 2005
- JCT, “Macroeconomic Analysis of Various Proposals to Provide $500 Billion in Tax Relief.” March 2005
- JCT, “Macroeconomic Analysis of a Proposal to Broaden the Individual Income Tax Base and Lower Individual Income Tax Rates.” December 2006
- CBO, “Macro Effects of American Recovery and Reinvestment Act.” March 2009
- CBO, "Economic Effects of Reducing the Fiscal Restraint That Is Scheduled to Occur in 2013." May 2012
- CBO, "Budget Estimates: Current Practices and Alternative Approaches." January 1995