off the charts

The Risks of Dynamic Scoring

In a guest TaxVox blog post for the Tax Policy Center’s series on “dynamic scoring,” I discuss some of the risks of a new House rule requiring dynamic scoring for official cost estimates of tax reform and other major legislation.  Under dynamic scoring, those estimates would incorporate estimates of how legislation would affect the size of the U. S. economy and, in turn, federal revenues and spending. Dynamic estimates vary widely depending on the models and assumptions used.  I conclude that to make sense of those scores, policymakers will need more information about the models and assumptions than the House rule requires:
The House rule allows the House to use any increase in revenue from highly uncertain estimates of macroeconomic growth to pay for other policies. Policymakers will also be tempted to use a favorable dynamic estimate as proof that a policy is good for the economy and therefore should be enacted.  But the uncertainty and gaps in the models may mean that such a simple conclusion isn’t appropriate. Lawmakers will need more information than the House rule requires to assess the reliability of the estimate and to understand a bill’s possible economic effects.