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Summary:

When Congress considers legislation, it takes into account the proposal’s potential budgetary effects. Although this information may come from numerous sources, Congress generally relies on estimates provided by the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) when determining whether legislation complies with congressional budgetary rules.

Generally, CBO and JCT estimates include projections of the budgetary effects that would result from proposed policy changes, and incorporate anticipated individual behavioral responses to the policy. The estimates do not typically include the macroeconomic effects of those individual behavioral responses that would alter gross domestic product (GDP).  

In recent decades, however, Congress has sometimes required that JCT and CBO provide estimates that incorporate such macroeconomic effects (effects on overall economic output—GDP). These estimates are often referred to as dynamic estimates or dynamic scores.  Proponents of dynamic estimates have argued that such estimates provide a more accurate assessment of budgetary impact than conventional scoring, and that they can improve Congress’s ability to compare competing policy proposals.

Proponents argue that dynamic estimates are important for the sake of consistency, and that by not including dynamic effects, the legislative process is biased against policy proposals designed to encourage productive economic activity. Opponents of dynamic estimates argue that estimates of macroeconomic feedback effects are too uncertain to be relied upon as accurate projections of budgetary outcomes. Opponents of dynamic estimates have stated that, with assumptions about the behavioral responses that determine macroeconomic feedback being so uncertain, there is consistency in assuming, for all legislative proposals, that GDP remains the same, regardless of changes in tax or spending policy.

Between 1997 and 2018, congressional rules existed that required JCT or CBO to provide dynamic estimates under certain circumstances. These congressional rules and requirements varied, sometimes permitting the creation of dynamic estimates, and sometimes requiring it. During this period, some dynamic estimates provided a range of potential budgetary outcomes, while some included a point estimate. During this period, dynamic estimates were used only for informational purposes, as opposed to being used to determine whether Congress was complying with its budgetary rules. In some cases, published estimates showed wide variation in estimated results depending on the model type and assumptions.

While committees and Members continue to have the ability to request that CBO or JCT provide dynamic estimates for certain policies or legislative proposals, there are currently no explicit congressional rules or requirements that pertain specifically to the preparation or use of such estimates. If Congress were to reinstitute explicit rules related to dynamic estimates, it may choose to consider many facets of such a potential rule, such as whether a threshold should exist for the creation of such estimates (i.e., should such estimates be provided only for “major legislation”); whether dynamic estimates should be provided for spending as well as revenue proposals; what types of information should be included in such estimates; whether dynamic estimates should be used only for informational purposes, or also for enforcement purposes; and whether additional resources ought to be provided to CBO and JCT so that they might develop greater capacity for providing dynamic estimates.

Considerations for Congress

Currently, no House or Senate rules explicitly require the preparation or use of dynamic estimates, and Congress may choose to examine what rules changes, if any, are needed in the area of dynamic estimates.

While committees and Members continue to have the ability to request that CBO or JCT provide dynamic estimates for certain policies or legislative proposals, at some point Congress may choose to reinstitute explicit rules related to such dynamic estimates. These requirements could be articulated as formal direction from the committees of jurisdiction or leadership to JCT and CBO. Alternatively, as was done previously, these requirements might be included in chamber rules or in budget resolutions, or might be included in a standing order or in statute.

If Congress were to reinstitute explicit rules related to dynamic estimates, it may choose to consider many facets of such potential rules:

Will there be a threshold for the creation of such estimates? Should the proposal also allow the legislation to be designated as “major” by either majority or minority committee and/or chamber leadership? Should CBO and JCT provide dynamic estimates only for “major proposals,” such as those that have a large estimated budgetary impact? If so, what would be the threshold for major? Past rules have used a measure equal to 0.25% of GDP. Would the effect on GDP be measured by the entire legislation, or would it be triggered by an individual provision or group of provisions (such as revenue raisers or revenue losers in a tax bill) that met the threshold? The latter approach would capture revenueneutral legislation that nevertheless made significant changes that could affect GDP.  

Should rules for dynamic estimates apply to spending as well as revenue proposals since both have the potential to cause notable macroeconomic effects? And if the rule applies to spending, would it apply to discretionary spending that varies from the baseline as well as direct/mandatory spending?

What information should be included in such estimates? Practices prior to 2015 provided insight into how sensitive the results were to choice of model and parameters . The JCT has also continued t o present information on the parameters of its models that lead to behavioral responses . model weights might 59 The justification for assigning also be addressed in more detail.

Should dynamic estimates be used only for informational purposes, or also for enforcement purposes? the legislation — Dynamic estimates allow Congress to weigh the merits of should they also be used to determine whether the legislation complies with the budgetary rules that Congress has created for itself?

Should additional resources be provided to CBO and JCT so that they might develop greater capacity for providing dynamic estimates?

R46233| Dynamic Scoring in the Congressional Budget Process: https://crsreports.congress.gov/product/pdf/R/R46233

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