Can the new director of the Congressional Budget Office get "beyond the basic pissing contest" of how to score legislation? The former heads of the official scorekeeping agency hope so.
As Washington awaits the identity of a new CBO director, fiscal policy wonks are delving into a pending rule change that will require Douglas W. Elmendorf's successor to incorporate a contentious way of estimating economic effects into the official price tags of major pieces of legislation.
Though the so-called dynamic scoring debate typically cuts along party lines in Congress — with Democrats accusing Republicans of using the macroeconomic measuring stick to paint rosier forecasts for their policies — a Monday Brookings Institution panel of former CBO leaders revealed the rule change is not a clear-cut red or blue issue.
Brookings' David Wessel asked the panel, initially with his micturating metaphor, then more seriously, where and when were the appropriate places for dynamic scoring?
Former CBO Director Douglas Holtz-Eakin, now president of the American Action Forum, doubted the rule change would enhance political pressure, or push analysts into answering questions they don't know. In high-stakes circumstances, the CBO faces criticism for each zero and Holtz-Eakin said there will be "disappointed advocates on all sides of scores."
"The key in scoring is to just recognize it's not forecasting," said Holtz-Eakin, who served as CBO director under Republican majorities in the 108th and 109th Congresses. "No good forecaster would take the March baseline and use it for a forecast in November, but in scoring you do that because you want to treat all bills the same."
Holtz-Eakin also acted as chief economic policy adviser on the 2008 presidential campaign of Sen. John McCain, R-Ariz. He said the House and Senate Budget committees, the Office of Management and Budget, CBO and others would sit down to figure out the rules for consistency in scoring. The CBO's job is to provide budget numbers for the window that policy makers have elected.
"A great mistake is for the staff to get this idea that we can somehow trick them into doing the right thing if we just show them the right numbers," Holtz-Eakin said. "That is a terrible place for staff to go. That's not their job."
Donald B. Marron, Jr., of the Urban Institute — a former CBO acting director and potential Elmendorf replacement — suggested immigration legislation as an area where analysts from CBO and the Joint Committee on Taxation already make an exception to so-called static scoring. In such a case, trying to follow convention would end with "nonsensical" results, he said. "You’d be letting 6 million new people join the labor force and you would be assuming that they’re all unemployed; right? That would just literally be insane,” he said.
Scoring of the past accounted for the fact that immigration policy would result in more tax revenue, plus more spending on various spending programs, Marron said, but it was reported in a score that includes some change in the macroeconomic situation, and a separate advisory report. Under the new rule, a bill that triggered dynamic scoring would incorporate all the macroeconomic changes.
"The pros of including a dynamic score is that, basically, it removes a constraint on estimators. If they actually knew what the macroeconomic effect was, they could improve their estimates by including it," Leonard Burman, director of the Tax Policy Center and a former senior analyst at CBO. "The con is, there's actually so many cases where they have no idea."
Offering President Barack Obama's capital gains tax plan as an example, Burman said analysts could make a rough estimate of how much revenue would be raised, but there would be "enormous pressure" on estimators once macroeconomics come into play. Some models would point to less savings and less investment, thus hurting the economy. Other models would assume Obama's plan boosts the economy by closing an individual income tax loophole that results in unproductive tax sheltering.
"Depending on the assumptions, you could conclude that that was good for growth, or that was bad for growth. [I] actually don't know what the answer is," said Burman, who has held high-level positions in both the executive and legislative branches, including as a deputy assistant secretary at the Treasury Department during the final years of the Clinton administration. "The problem is, there are going to be people who believe really, really fervently that there's one answer or the other answer."
The panel also touched on infrastructure spending, and appropriations, including the Highway Trust Fund. Wessel said the goal was to move "beyond the conversation" about whether dynamic scoring is the best or worst thing to hit Washington, and talk about what it means and how you present it to Congress.
A few hours after the panel concluded, CBO released its latest federal budget baseline and demonstrated the type of reactions it can facilitate. CBO projected a federal deficit of $468 billion in fiscal 2015, or 2.6 percent of gross domestic product, its lowest level since 2007.
New Senate Budget Chairman Michael B. Enzi, R-Wyo., brushed past any silver linings to focus on the baseline reports future deficit projections as evidence of the "need for urgent course correction," as his statement blared out.
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