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GOP getting ready to eliminate dishonest 'scoring' of spending and tax bills



You may not know a lot about the Congressional Budget Office or its "scoring" of tax and spending bills, but it carries a lot of weight in Washington - and that's often a problem given the rules congressional Democrats have imposed on the economists who run the CBO.
When Congress proposes a spending and/or tax bill, the CBO develops a "score" of the bill that's designed to show its impact on the budget and deficits. Now that can be a useful thing if it's done honestly, but under Democrat-imposed rules, it's not. The CBO has to score the bills under the assumption that the numbers Congress gives it are accurate, and it makes no provision for the likelihood that a major change in spending or tax laws will impact people's economic behavior. So if the Democrats want to raise taxes by $10 billion in a year, the CBO has to assume this will automatically raise exactly $10 billion in revenue. We all know life doesn't work that way, of course, because people make adjustments to new costs imposed on them. It's like me raising the price of my books by $5 each and assuming the sales wouldn't be affected in any way by the higher price. That's nuts. Of course they would. (Otherwise I would obviously raise them through the roof. Why not?) But this is how the Democrats have been making the CBO do things for years, which makes it all the more maddening that the political class and many pundits (including many conservatives) treat pronouncements from the CBO as if they are an unassailable look into the future, rather than some Keynesian economist's wild guess about what's going to happen. Thankfully, it looks like the new Republican Congress is finally going to change these rules:
A major shortcoming in current budget rules is that they assume that legislation has little or no impact on the real economy. For 19 years CBO and Joint Tax have been developing models to measure economic effects. And since 2003 Joint Tax has done a separate economic analysis of tax legislation. But none of this has been used as part of the official tax and spending budget score.

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This makes no sense because everyone knows major changes in law affect human and business behavior. It would be wiser for Congress to consider the economic impact of those changes in behavior when debating legislation. This is what the House GOP is now proposing to do on major bills. An example of when this would be especially useful is tax reform. Nearly all private economists believe that reform that cuts tax rates while eliminating loopholes would spur faster growth and thus increase tax revenue over time. It seems crazy to ignore this effect and assume zero growth from tax reform for budget purposes. Liberals will deride this as “dynamic” scoring that assumes tax cuts “pay for” themselves, but that is a distortion. We’ve long argued that not all tax cuts are created equal, and some (like the child tax credit) have little impact on growth. They are a form of income redistribution through the tax code that loses about as much revenue as Joint Tax currently estimates. The truth is that no matter what the CBO says about a bill's likely effect, it's still just a guess. But at least the new rules - if they pass - would see the guesses based more on how the real world works. I suppose one thing that will happen as a result of this is that we'll see old-line Democrats showing up on their favorite talk shows bemoaning the "politicization" of the CBO, which the media loves to tell us has been heretofore "nonpartisan." The media may now tell us with every reference to the CBO that it is now forced to operate according to the dastardly rulese imposed on it by right-wing Republicans, or they might just stop referring to the CBO's work altogether. Even if that happens, it's better than the status quo, in which we have a clearly biased set of economists operating according to nonsense rules, but held up by the media as if they are paragons of truth and accuracy. This may seem like insider baseball to many of you, but it's an important development toward basing economic policy more on truth and the real-world behavior of people - not the imaginations of politicians who don't really understand what people do or why.


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Dan Calabrese’s column is distributed by HermanCain.com, which can be found at HermanCain

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