Congress has enacted a major reform to the way it does business that will enable a more accurate analysis of how legislation affects the economy.
Heritage’s Patrick Knudsen explained last spring what this reform, known as “dynamic scoring,” really means: “The principle is that certain changes in fiscal policy, such as reductions in tax rates, can alter both behavior and economic output, which in turn can affect the magnitude of changes in federal tax revenue.”
Had dynamic scoring been used by Congress earlier, lawmakers and the public might have better understood the costs of Obamacare and the benefits of conservative proposals like tax reform.
Heritage experts have given lawmakers the intellectual ammunition to adopt this reform, and spent much of 2014 making the case:
- Last April, Knudsen urged Congress to consider dynamic scoring as part of a broader budget-process reform.
- In June, former Rep. Dave Camp (R-MI) came to Heritage to explain his tax plan, which included a dynamic score.
- In August, Heritage’s Curtis Dubay testified before Congress that “traditional static scoring hampers tax reform’s progress because it does not measure how it strengthens the economy. It is incomplete. A tax reform plan with only a static score is like a business plan without an estimate of profitability.”
- In October, Dubay defended dynamic analysis against attacks from liberals including the New York Times’ Paul Krugman. Liberals, he argued, disregard the effects of taxes on how people behave.
- Last month, Heritage economist Salim Furth pointed out that the Congressional Budget Office’s existing models made crude assumptions about how the world works. “A dynamic approach,” he wrote, would adopt economic best practices and “would be less dogmatic, allowing for and trying to calculate a range of potential effects, and it would improve the accuracy of budgetary estimates.”
What do you think of this small but important victory?