'Dynamic' scorekeeping may help House Republicans pass tax reform

Republicans controlling the House have changed the rules on budget scorekeeping and Democrats are unhappy with the new math.

At issue is so-called dynamic scoring, which factors in the economic effects of legislation when estimating its effect on the deficit.

The rules change promises to make it somewhat easier for Republicans to advance legislation such as an overhaul of the loophole-ridden tax code, since the positive economic effects of such legislation would generate greater tax revenue. That means lawmakers would have to come up with less in offsetting revenues to make up for bold cuts in income tax rates.

The House adopted the rule changes on a nearly party-line vote on Tuesday.

Republicans call it "macroeconomic scoring." The rule would direct congressional scorekeepers to incorporate the macroeconomic effects of major legislation into their official cost estimates.

Democrats say the shift to dynamic scorekeeping will drive up the deficit.

"The bottom line is that this is a way to try to fast-track tax cuts for millionaires and make it look like there are not large costs," said Rep. Chris Van Hollen of Maryland, the top Democrat on the Budget Committee.

The rules change comes as Republicans appear likely to replace Congressional Budget Office Director Doug Elmendorf, a Democratic appointee, whose term expired last week. Democrats fear that a new GOP appointee to run the agency would be more likely to take liberties with the new scorekeeping mandate to help drive the GOP agenda. There are several competing models for evaluating the economic effects of legislation and estimates can vary widely.

Republicans say that the twin scorekeeping agencies — the Joint Committee on Taxation focuses on tax legislation while the CBO deals with most everything else — already perform macroeconomic analysis of major bills such as the Senate's 2013 immigration overhaul or the 2010 health care law. The new mandate would incorporate such analysis into official cost estimates of legislation.

The incoming chairman of the House Budget Committee denied that the change amounted to "cooking the books" in favor of tax cuts.

"All that we're trying to do is make certain that members of Congress have more information upon which to make decisions," said Rep. Tom Price, R-Ga., who is replacing former Budget Committee Chairman Paul Ryan, R-Wis. "What we're trying to do is to simply say that if a piece of legislation is going to have a large effect on the economy that we include that effect in the official estimate."

"Republicans will be able to hide the true costs of tax cuts behind a debunked mantra that tax cuts pay for themselves," said No. 2 House Democrat Steny Hoyer of Maryland. In fact, Rules Committee Chairman Pete Sessions, R-Texas, explicitly acknowledged during floor debate that tax cuts do not finance themselves through higher growth, and Republicans said the change is likely to only produce modest changes in cost estimates.

The new scoring approach would only be required for major legislation in which the budgetary effects of legislation — meaning an increase or decrease in revenue, spending or deficits — are at least 0.25 percent of the size of the economy. Had the rule been in effect last year, the threshold would have been $43 billion.

White House budget office director Shaun Donovan wrote a blog post blasting the idea.

"While all budget estimates are uncertain, there is substantially more disagreement among economists and experts about how policy changes affect the macroeconomy than about most other scoring issues," Donovan wrote. "Dynamic scoring can create a bias favoring tax cuts over investments in infrastructure, education and other priorities."

Estimates created under current "static" scoring rules only take into account the direct effects of legislation to government coffers.

"Right now, the House usually uses conventional estimates, which assume that, no matter what the federal government does, the size of the economy will stay exactly the same," says a GOP fact sheet, adding, "But for major legislation, that's not true."