NCPA - National Center for Policy Analysis

Will Congress Adopt Dynamic Budget Scoring?

July 17, 2002

Members of Congress are again pushing dynamic budget scoring, to the alarm of Senate Democratic leaders, says Bruce Bartlett. Dynamic scoring takes into account how the economic and behavioral effects of cutting taxes or raising them will change federal revenues.

Congress's Joint Committee on Taxation (JCT) has stayed with static scoring mainly for political reasons.

  • Democrats oppose dynamic scoring because they fear it would make it harder to raise taxes and easier to cut them.
  • Since it ignores the higher growth resulting from tax cuts and the lower growth from tax hikes, static scoring systematically overestimates revenue losses from the former and increases from the latter.
  • Some "budget hawks" in the Republican leadership don't like dynamic scoring, because they have wanted the revenue loss from tax cuts to appear as large as possible, so that they could reduce federal spending more.
  • Thus when Republicans took control of Congress in 1995 they did not take advantage of the opportunity to institute dynamic scoring.

Now a new effort is being made. Senate Majority Leader Tom Daschle (D-S.D.) and Senate Budget Committee Chairman Kent Conrad (D-N.D.) have written to JCT Chief of Staff Lindy Paull, warning her against making any improvements in estimating procedures. House Ways and Means Committee Chairman Bill Thomas (R-C.A.) countered by sending her a letter saying she should go ahead and use dynamic scoring.

Council of Economic Advisers Chairman Glenn Hubbard has testified in favor of dynamic scoring, while Congressional Budget Office Director Dan Crippen has testified against it.

The goal should be to incorporate all the economic effects of tax changes, both positive and negative, into revenue estimates. Partisan politics should not stand in the way.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, July 17, 2002.

 

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