The Wall Street reported on Friday (but behind their paywall) that the Congressional Budget Office will have a new director, saying that that "Keith Hall, who served as commissioner of the Bureau of Labor Statistics, will replace Doug Elmendorf starting April 1. The story, reported by Nick Timiraos, pointed out:
"The decision over who would follow Mr. Elmendorf—the director doesn’t need to be voted on by Congress—attracted all the more interest because House Republicans passed a rule earlier this year requiring nonpartisan budget and tax offices to analyze the macroeconomic effects of certain bills in their influential estimates, known as “dynamic scoring.”
Since frequent Growls include CBO data, e.g., February 3, 2015, January 27, 2015, and November 27, 2014, we took special note a report by Scott Hodge for the Tax Foundation last month (Fiscal Fact No. 451). [Or you can search Growls for additional entries]. The Tax Foundation report had five key findings:
- "Dynamic scoring is a tool to give members of Congress the information they need to evaluate the tradeoffs in tax policy changes.
- "Dynamic scoring provides an estimate of the effect of tax changes on jobs, wages, investment, federal revenue, and the overall size of the economy.
- "Using dynamic scoring, policymakers can differentiate between policies that look similar using conventional scoring methods, but have vastly different effects on economic growth under dynamic scoring.
- "For example—using Tax Foundation’s Taxes and Growth model—we find that five tax change with the same static revenue cost can have vastly different effects on GDP, investment, jobs, and federal revenue—ranging from virtually no change in GDP to an increase of over 5 percent.
- "The use of dynamic scoring is crucial to ensure that comprehensive tax reform grows the economy and meets revenue expectations."
In concluding Fiscal Facts No. 451, Hodge writes:
"Despite the recent criticism of dynamic scoring, Members of Congress are being ill-served by the current conventional, or “static,” scoring method, which provides lawmakers a very one-dimensional picture of the effects of tax changes.
"If Members of Congress are to make sound tax decisions that impact today’s complex, global economy, they need the three-dimensional perspective that is only possible with dynamic scoring.
"As we have seen, five different tax policies that conventional scoring would say have the same cost to the U.S. Treasury, can have very different effects on the economy and, ultimately, on federal revenues when those effects are accounted for.
"The primary goal of comprehensive tax reform is economic growth. Conventional scoring treats this process as an exercise in arithmetic, whereas dynamic scoring makes the process an exercise in economics. The well-being of the American people is at stake. It is critically important that lawmakers make the right choices that lift everyone’s standards of living. Only dynamic scoring can help them do that."
For more about the appointment of Keith Hall as CBO director, see this release from George Mason University's Mercatus center as well as this Washington Post story, this story from Politico, and this Fiscal Times story.
At Townhall.com on February 12, 2015, columnist Dan Mitchell, a senior fellow at the Cato Institute, has a detailed explanation, with numerous links, explaining both the Laffer Curve and "why 'dynamic scoring' is far more accurate measuring the impact of fiscal policy changes."
At the New York Times on January 7, 2015, Jonathan Weisman reported the House of Representatives adopted the dynamic scoring rules. And here is a Google Search for other stories about 'dynamic scoring.'" At the Washington Examiner on December 16, 2014, the CBO director says it's up to Congress to decide on 'dynamic scoring." In the Wall Street Journal on February 3, 2015 (behind the WSJ paywall), Michael Solon, former adviser to a U.S. Senator, points out:
"The recent rule change by House Republicans to incorporate the macroeconomic impact of major legislation into official budget estimates—“dynamic scoring”—has triggered heated criticisms. But three decades of hard accounting data, in addition to supporting the rule change, should prompt Washington to reconsider the way it thinks about what drives federal revenues.
"Since 1984 the Congressional Budget Office has tracked all revisions to its triennial projections of federal revenues, outlays and deficits to account for economic, technical and legislative changes. Its data—from the “Changes in CBO’s Baseline Projections” tables that are published annually in the CBO Budget Outlook, the Budget Update and the Analysis of the President’s Budget—indicate which federal policies grew or shrank the economy significantly enough to generate measurable revenue gains or losses. The data also reveal the failures of core Democratic economic policies and flaws within the CBO’s current economic model.
"One fact above all others emerges from the data: Economic growth is the single most powerful determinant of federal revenues."
And finally, in Investor's Business Daily on February 1o, 2015, Ernest Christian and Gary Robbins, for Treasury Department officials, write (Mitchell references this article, too):
"The 114th Congress can make history by using computer-aided dynamic analysis to quantify and disclose to voters in stark dollars-and-cents terms the heretofore hidden, but nevertheless real, harm that government is doing to them. Voters can then for the first time weigh the true costs of government against its benefits."
In concluding their IBD op-ed, Christian and Robbins write:
"Like truth in general, dynamic analysis can help bring about beneficial changes in taxes, regulations, spending and almost everything else Washington does.
"Putting the facts out on the table may also beneficially affect how election campaigns are conducted and who wins.
"No matter how the truth is arrived at, the overriding goal is accurate scoring of the costs and benefits of government."
Without economic growth, it is hard to see how the nation can emerge from all the debt that our politicians have created. Of course, we probably should not have elected them, but that is a story for another day.