The new Congress has already pushed through some controversial new rules. Republicans on Tuesday passed a package of rules that will govern how the House of Representatives operates over the next two years, including an obscure change that has infuriated many on the left, who see it as designed to favor tax cuts by tinkering with federal budget math.
The new rule requires that major legislation be subject to so-called dynamic scoring by the Congressional Budget Office and the Joint Committee on Taxation, meaning that the official analysis of the costs of legislation would have to factor in assumptions about the macroeconomic effects it might have. The rule applies to any bill that would have an effect on the federal budget equal to .25 percent of projected GDP in a given year, which works out to about $45 billion as of now.
It’s a change Republicans have spent 17 years trying to implement. One reason why Republicans like this idea so much is that they assume tax cuts drive economic growth and partially pay for themselves by increasing tax revenue. That means that when their cost to the federal budget is measured, they look cheaper.
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“What we are saying is let us take what the experts at [Congressional Budget Office] and [Joint Committee on Taxation] can measure about the real-world impact of policies and incorporate those more realistic assessments into an honest analysis that policymakers can use to make better informed decisions,” new House Budget Committee Chairman Tom Price (R-GA) said in a statement praising the move.
One problem is that while dynamic scoring models are useful in an academic setting, experts say their imprecision means they are far less so in the world of actual budget math. For instance, a dynamic analysis of a major tax reform proposal issued by former House Ways and Means Chairman Dave Camp (R-MI) found the effect of the bill on U.S. GDP would be an increase of between .1 percent and 1.6 percent – an enormous range when talking about something the size of the U.S. economy.
They also avoid some difficult issues.
“These models were not developed for the purpose of answering the question, ‘Do we have enough money to pay our bills?’” said Edward D. Kleinbard, a former chief of staff of the Congressional Joint Committee on Taxation, now a law professor at the University of Southern California.
According to Kleinbard, the models assume that tax cuts are offset with future federal spending cuts. However, he said, those cuts “aren’t defined or described and are not part of the debate when they are in fact vitally important.”
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Democrats have criticized the rule change as a return to “voodoo economics,” but in theory, the voodoo could make some of their priorities look more affordable as well. In theory. Democrats likely won’t see particularly favorable assessments of spending bills anytime soon, Kleinbard said, because the existing models used by the budget scorekeepers don’t allow it. While the models assume that injecting money into the economy via tax cuts has a positive effect on growth, they ignore similar effects from government spending.
“The models assume zero return on investment to all government spending,” Kleinbard said. “That’s just plainly false.”
Another issue is the loose definition of what constitutes “major” legislation. Commentators including Chye-Ching Huan and Paul Van de Water of the Center on Budget and Policy Priorities have pointed out that what bills count as “major” is highly subject to manipulation by the party in charge of the House at any given time.
“[I]t would effectively give House leaders the discretion to use dynamic scoring only when it helps them,” they write. “While the new House rule would apply dynamic scoring to ‘major legislation’ that has a fiscal impact of more than 0.25 percent of projected GDP, House leaders could easily render this standard meaningless by splitting up bills to avoid the threshold or combining proposals into larger bills to meet it.”
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Though they will have little ability to challenge it in a Republican-controlled Congress, senior Democrats, including House Budget Committee Ranking Member Chris Van Hollen (D-MD) and House Budget Committee Ranking Member Sander Levin (D-MI) have both been very vocal in criticizing the change.
“Republicans today are extending their embrace of voodoo economics by wrapping their arms around voodoo scorekeeping,” Levin said on the House floor this week. “They are changing House rules to be able to cook the books to implement their long-held, discredited notion that tax cuts pay for themselves.”
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