With trillions of taxpayer dollars on the line each year, the way Washington chooses to crunch its numbers matters – a lot. Subtle differences in economic assumptions, methodologies and priorities that inform annual budget choices can have dramatic effects on spending and revenue decisions.
For this reason, the decades-long fight over how Congress' bills are "scored," or how a bill's budgetary impact is estimated, has been characterized as the "Civil War of revenue estimating reform." The debate boils down to "static scoring," the status quo, versus "dynamic scoring," which incorporates unknown but anticipated feedback effects.
For the Senate's recently proposed immigration bill, the Congressional Budget Office uncharacteristically performed two dynamic scores of the legislation, instead of a traditional static score. The CBO assumed, as it did for the proposed 2006 immigration bill, that adding millions of laborers into the U.S. economy will have a positive effect on economic growth. Including this behavioral assumption in the legislative analysis – a key feature of dynamic scoring – aims to provide a more realistic picture of the effects of major legislation on the broader economy.
Federal scorekeepers such as CBO, the administration's Office of Management and Budget and Congress' Joint Committee on Taxation have traditionally used static scoring to calculate the budgetary impact of legislation. While static scoring is often misunderstood as "basic arithmetic," static scoring does take some behavioral effects into account.
Dynamic scoring, on the other hand, involves a more ambitious incorporation of projected macroeconomic effects. Dynamic scoring is considered by many to be theoretically superior, and can provide a more accurate budgetary picture. Unfortunately, many of the necessary variables for dynamic scoring – such as anticipated effects on labor, savings and output – are often unknown, or even unknowable.
Politically, legislators will push against any methodology that portrays their prized policies in a less flattering light. Supply-siders, for instance, favor dynamic scoring for tax proposals, because it includes beneficial growth assumptions that make tax cuts appear less costly. At the same time, legislators seeking to portray runaway government would rather not apply dynamic scoring to spending proposals, as they may appear less costly.
For legislators seeking to expand the role of government, the incentives run the other way. They tend to support dynamic scoring when it benefits spending proposals they back. When it comes to cutting taxes, however, dynamic scoring becomes, according to Sen. Chuck Schumer, D-N.Y., a "Rumplestiltskin fairy tale."
On top of this partisan inconsistency, there is a possibility that the economic assumptions underlying dynamic scoring could be creatively tinkered with to serve political ends.
To the extent that dynamic scoring can clarify our economic vision, it can be a useful tool for budgeting. In practice, however, dynamic scoring is more often used as a political tool than an objective guide. The day after some Democrats cheered the dynamic score of the immigration bill, many voted against a proposal that would require more consistent use of dynamic scoring for all major legislation. Many Republicans, too, only support dynamic scoring when convenient. Even if dynamic scoring becomes practically feasible in the future, political inconsistency towards scoring may be here to stay.
Andrea Castillo is a program associate at the Mercatus Center at George Mason University.