The House of Representatives has approved a rule requiring the Joint Committee on Taxation and the Congressional Budget Office to use macroeconomic feedback effects into its revenue estimates when considering any “major” tax or mandatory spending legislation. This means that analysts will consider a wider impact on growth, employment, inflation, as well as the possible secondary effect on budget deficit. A major legislation is defined as a bill that will have a gross revenue impact of more than 0.25% of the GDP in any year. For 2015, that would be about $45 billion. Additionally, either the chair of the House Ways and Means Committee or the chair of the House Budget Committee can characterize a bill as major legislation.
Concerns regarding this new rule seem to highlight the coverage it’s getting. Economic experts have introduced concerns which question whether the Joint Committee on Taxation and Congressional Budget Office can accurately model a tax or spending bill’s effect on the economy, and even more so, the secondary effect on budget deficits.
Another concern introduced by opponents is the exclusion of discretionary spending. This exclusion is questioned because discretionary spending bills can have a significant economic impact and, therefore, should be afforded the budgetary and economic information a dynamic estimation would provide, giving them the same treatment as tax bills and mandatory spending bills. An additional concern is the ability of the chair of a committee to arbitrarily characterize a bill as major legislation. This appears to add a level of political bias to the process by giving a partisan committee chair the opportunity to choose the method of estimation which provides a result which is most favorable to their position.
In general, more information and deeper analysis prior to making a decision is usually a good thing. Giving Congress and taxpayers more in-depth and precise information regarding the impact of policy decisions should be a desirable result. In this case, some critics question the accuracy of the dynamic scoring model and believe the manner in which dynamic scoring is being implemented has political biases.