For many years, Republicans argued that the only fair way to predict the cost of tax cuts was to look at their impact on the economy. If slashing rates sped up growth, that would make the cuts cheaper. Conservatives like Paul Ryan insisted that Congress’s official budget forecasters should take that impact into account by analyzing bills using a process called “dynamic scoring.” And when Republicans took full control over Capitol Hill in 2015, they finally got their chance to make dynamic scoring an official part of the legislative process.
That year, the House approved a rule requiring both the Congressional Budget Office and its cousin, the Joint Committee on Taxation, to build macroeconomic effects into its cost estimates for major bills “to the greatest extent practicable.” Democrats were incensed. They argued that economic forecasting was an inexact art that relied on big, debatable assumptions, and that relying on it to score legislation was little more than a gimmick meant to hide the true price of the tax cuts Republicans were jonesing for. New York’s Jonathan Chait summed up the sentiment with a piece titled, “Why The Republican Congress’s First Act Was to Declare War on Math.”
But now that Republicans are actually trying to pass the massive tax bill they’ve so long desired, they seem to have decided that dynamic scoring wasn’t worth all the fuss after all. The budget resolution that set the stage for tax reform allowed dynamic scoring in both chambers of Congress, but only required it “for informational purposes” in the Senate. The House, led by the aforementioned Paul Ryan, eventually voted on its bill before a dynamic score was ready. Now, it looks as if the Senate will do the same. In a cost estimate released this weekend, the Congressional Budget Office essentially said that there hadn’t been enough time to work up a full macroeconomic analysis of all the bill’s provisions. It simply wasn’t “practicable.” But GOP leaders are hoping to vote this week anyway.
It’s ironic, but not especially surprising, that Republicans have decided to give up on dynamic scoring just as they’re making the very legislative push it was supposed to pave the way for. Comprehensive economic forecasts take time to do properly, and the GOP’s entire legislative strategy is aimed at pushing a bill to passage before the end of the year. But most importantly, any forecast Congress’s budgeteers produce will probably make the bill look bad.
Republicans got excited about the prospect of dynamic scoring in part because the JCT forecasted that an old tax reform bill designed by Rep. David Camp would lead to an additional $50 billion to $700 billion in government revenue, all thanks to economic growth. But Republicans are now attempting to pass legislation that looks very different from Camp’s bill. And while the conservative Tax Foundation, which has a long history of producing pollyannaish tax forecasts, is once again saying that tax cuts will lead to booming growth, most mainstream economic forecasters are far less bullish.The Penn-Wharton Budget Model, for instance, predicts that, before accounting for its economic impact, the House plan would add $2.11 trillion to the deficit over ten years. With optimistic assumptions about growth, it would add $1.96 trillion.
Most experts think that any official score by the JCT would probably yield similar results, since its analysts stick to conventional modeling assumptions. “Based on a review of prior JCT dynamic estimates, there is good reason to expect that the estimate of current legislation will show less-than-flattering growth effects,” Martin Sullivan wrote today at Tax Analysts.
A bad dynamic score wouldn’t just put the lie to the idea that the GOP’s corporate tax cuts will pay for themselves, though. It would also undermine the party’s entire argument for the cuts, which they claim will yield bountiful GDP growth and higher wages. It’s easy to wave off forecasts by center-left think tanks that suggest growth is unlikely to occur. It would be hard to wave off a forecast by Congress’s in-house budget analysts.
Not that they wouldn’t try. As we saw during the health care debate, Republicans were perfectly comfortable trashing the CBO’s predictions about what would happen if they replaced Obamacare. We heard echoes of that Monday, when Senate Finance Committee Chair Orrin Hatch said he simply didn’t believe the office’s assessment of his party’s tax plan. Ultimately, the GOP’s decision to give up on dynamic scoring is emblematic of its long-running rejection of all mainstream economic thinking.
