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House Rule Change to Alter Cost Estimates of Major Legislation (2)

Changes to the House rules for the 114th Congress, proposed by House Majority Leader Kevin McCarthy (R-CA) would require long-term estimates of the macroeconomic effects of major legislation.

Republicans and Democrats are sharply divided over the issue of how to score legislation, with the debate threatening the continued tenure of current Congressional Budget Office (CBO) Director Douglas Elmendorf.

The rules change to utilize dynamic scoring for determining the overall score of proposed legislation is largely supported by the Republican Conference.

House Budget Committee Chairman Paul Ryan (R-WI) and new chairman for the committee in the 114th Congress, Rep. Tom Price (R-GA) support greater use of the budget scoring process. Legislation (H.R. 1874) sponsored by Rep. Price in 2013, which passed the House, would have mandated the CBO to prepare a macroeconomic analysis for legislation with a budget impact estimated to be at least equal to .25 percent of the GDP.

Yet Rep. Chris Van Hollen (D-MD), ranking member of the House Budget Committee, said “‘dynamic scoring’ is little more than an attempt to open the door to political manipulation of the budget process.”

The CBO and Joint Committee on Taxation (JCT) generally employ static scoring to assess the economic effects of tax and spending measures on the economy.

“CBO’s cost estimates generally do not reflect changes in behavior that would affect total output in the economy, such as any changes in the labor supply or private investment resulting from changes in fiscal policy. That is, CBO’s cost estimates generally do not include what is sometimes known as “dynamic scoring.” The convention of not incorporating macroeconomic effects in cost estimates, a practice that has been followed in the Congressional budget process since it was established in the 1970s, reflects several facts: Doing macroeconomic analysis of all proposed legislation would not be feasible; nearly all legislation analyzed by CBO would have negligible macroeconomic effects (and thus negligible feedback to the federal budget); and estimates of macroeconomic effects are highly uncertain,” the CBO states on its website.

Assumptions, methods and methodology used in the macroeconomic analysis conducted in dynamic scoring can greatly influence the outcome, explaining the hesitancy of CBO to use the method frequently.

A similar debate has recently taken place in Canada.

Mostafa Askari, the assistant parliamentary budget officer [Canada’s PBO is the equivalent of the CBO], said of dynamic scoring “It's not an economics issue, it's a political issue."

Posted in From the Hill

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