The morning sun begins to rise in front of the U.S. Capitol on March 11, 2014 in Washington, DC.
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On Capitol Hill, there’s math and there’s Republican math

Given the hyper-partisan atmosphere in Washington, it doesn’t come as too big a surprise that the first day of the new Congress would start on a contentious note. But it’s nevertheless amazing to watch lawmakers argue, not over how much things cost, but over how to determine how much things cost.
After the drama of electing a new speaker of the House and the changing of control in the Senate, the House on Tuesday approved an obscure but significant rule change requiring the economic effects of legislation to be included in a bill’s official cost to the Treasury.
 
The change on “dynamic scoring” – ardently sought since the 1990s by Republicans – could ease passage of major tax cuts by showing that their impact on economic growth would substantially reduce their cost to the Treasury. The move is widely seen as a way for Republican leaders to set ground rules for an ambitious overhaul of the entire United States tax code.
At this point, some of you are probably inclined to stop reading. No one has ever suggested phrases like “dynamic scoring,” “tax code,” and “Congressional Budget Office” constitute click-bait. All of this, I’ll concede seems a little dry and wonky.
 
But look at this way: thanks to the 2014 elections and the GOP takeover of Congress, we’re poised to see math do battle with Republican math.
 
As we discussed a couple of weeks ago, when the Congressional Budget Office publishes a “score,” it offers an official price tag of sorts, hoping to make clear what a proposal will cost, how it will affect the deficit, how it will affect revenues, how will it shift unemployment, etc. Sometimes the CBO is correct and sometimes it’s not – especially over the long term, we’re dealing with projections that are subject to considerable change – but the scores are at least based on verifiable data.
 
Republicans, however, don’t like the way the CBO comes up with its scores because, as the right sees it, non-partisan economists don’t realize the magical, macroeconomic benefits of tax cuts. The CBO looks at a tax cut and determines its cost, but Republicans insist that those price tags are misleading – conservatives want the CBO to assume that tax cuts necessarily produce greater economic growth, which in turn generates more revenue, which in return reduces the real-world cost of the tax cut, possibly even to $0.
 
And what about progressive proposals, such as infrastructure investment, that might also have a powerful macroeconomic bang for the buck? Under the rules adopted by Republicans yesterday, “the measure would not apply to economic stimulus bills favored by Democrats.”
 
Shaun Donovan, director of the Office of Management and Budget, explained that the change risks “injecting bias into a broadly accepted, non-partisan scoring process that has existed for decades. As a result, it could allow Congress to adopt legislation that increases Federal deficits, while masking its costs.”
 
I have a sinking suspicion that for Congress’ new majority, that’s a feature, not a bug.
 
This analysis from the Center on Budget and Policy Priorities is also well worth your time.
By requiring [the Congressional Budget Office] and [the Joint Committee on Taxation] to count these “dynamic” effects in their official cost estimates, the House rule doesn’t ask for more information, as some of its proponents claim – rather, it allows lawmakers to use a single highly uncertain estimate in order to cut tax rates more deeply or curb tax breaks less substantially (or both) than they otherwise could do without facing criticism for adding to deficits and possibly violating key budget rules.  For example, congressional budget rules prohibit budget reconciliation bills from increasing deficits in future decades, a requirement that dynamic scoring could be used to help circumvent.
 
In short, dynamic scoring could make it easier for Congress to fashion a tax reform package that appears revenue neutral, on the basis of questionable and uncertain growth estimates.  If those effects then failed to materialize, the increased deficits would worsen the nation’s long-run fiscal problems and, in so doing, could actually create a drag on future economic growth, as CBO and JCT have explained.
The Republican Senate has not yet adopted the same policy, but it’s expected to do soon.
 

CBO, Congressional Budget Office, House Republicans and Tax Policy

On Capitol Hill, there's math and there's Republican math