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House Budget-Process Bills Are Ill-Advised

March 28, 2014 at 9:00 AM

The House will consider three bills in the coming weeks that would make the budget process more complicated, less transparent, and less credible.

  • The Pro-Growth Budgeting Act (H.R.1874) would require the Congressional Budget Office (CBO) to prepare “dynamic” estimates of the budgetary impact of major legislation.  Contrary to widespread misunderstanding, CBO’s standard estimates of tax and spending proposals already incorporate many changes in individual and business behavior that occur in response to changes in tax rates and other policies.  CBO often provides supplemental analyses of how a change in tax or spending policy would affect the overall economy, but it does not reflect such “macroeconomic feedbacks” in its standard estimates because of their high degree of uncertainty.  For this and other reasons, Congress should resist the temptation to expand the use of dynamic scoring.
  • The Budget and Accounting Transparency Act (H.R. 1872) would add an extra amount to the recorded budgetary cost of federal credit programs, beyond their actual cost to the government, to reflect what private lenders would charge if they issued the loans and loan guarantees.  By artificially inflating federal lending costs, this change would disadvantage direct loans and loan guarantees relative to other federal programs and expose them to a greater likelihood of cuts.  We explain the bill’s serious flaws in this in-depth analysis and this shorter paper.  We list the major loan programs that would be affected here.
  • The Baseline Reform Act (H.R. 1871) would require CBO to assume, in constructing the budget baseline that projects spending for future years, that discretionary spending is frozen indefinitely, rather than growing with inflation or with the 2011 Budget Control Act’s spending caps.  That would establish a misleading benchmark against which to measure changes in funding — one that assumes a one-fifth cut in purchasing power for discretionary programs after ten years, at currently projected rates of inflation.  Removing inflation adjustments could also weaken budget discipline by making deficit projections unrealistically rosy, as my colleague Richard Kogan has written.