'Dynamic' deceptions: Washington's enlightened budgeting vs. cooking the books

The dustup over "dynamic scoring" is a small indicator of the routine irrelevancy of Washington's budget debate. Instead of facing the real issues — how much we should spend, on what, who should be taxed and how much — Republicans and Democrats find it easier to argue over technical questions that, in the end, won't much affect the budget.

Only policy wonks can love the controversy over dynamic scoring. It refers to how Congress estimates the budgetary impact of spending and tax proposals. The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) make these estimates. They examine how individuals and businesses will respond to proposed legislation — and translate that into changes in the deficit, outlays or taxes. But in their estimates, the CBO and the JCT assume that the economy's overall growth remains the same.

That's crazy, say many Republicans: Government policies clearly affect — for good and ill — the economy's performance. So dynamic scoring would compel the CBO and the JCT to alter their estimating procedures. They'd have to predict how legislative proposals would affect economic growth, employment, inflation and other economic variables. These shifts would then be translated into new estimates of the proposals' budgetary costs. If the economy were improved, the budget costs would drop, and vice versa.

Sounds straightforward. It isn't.

The Republican-controlled House of Representatives has just required dynamic scoring. It provides "a more .?.?. honest analysis," House Budget Committee chairman Tom Price said in a statement. Wrong, countered Shaun Donovan, head of the White House Office of Management and Budget. Dynamic scoring risks "injecting bias" into budget estimates, he said in a blog post.

It's enlightened budgeting vs. cooking the books. Existing procedures, Republicans argue, are skewed against pro-growth policies. Democrats fear Republicans will push tax cuts based on over-optimistic projections of economic growth.

What neither says is that it probably won't make much difference. In theory, it's hard to disagree with Republicans. We need budget estimates based on the best available information. But in practice, it's hard to predict how most tax and spending proposals will move a $17 trillion economy. They're too small, and there are too many other influences.

Consider some: technology; management, good or bad; employees' skills and work ethic; interest rates; foreign competition; the business cycle — and much more. Tax and spending changes are easily swamped. It's hard to tease out their impact.

Given these difficulties, the House plan requires dynamic scoring only for large proposals whose budgetary impact exceeds 0.25 percent of gross domestic product (GDP). In 2014, the threshold would have been $43 billion, according to the House Budget Committee. In the last Congress, the House considered only three bills that exceeded the threshold, the committee says.

So Democrats are right? Not exactly. There's a fair amount of hypocrisy in their opposition. As Keith Hennessey, a top economic official in George W. Bush's White House, has noted, Democrats happily tout favorable economic forecasts for policies they support — the 2009 stimulus package and proposed immigration legislation being good examples.

The truth is that both parties will summon forecasts, whether required by dynamic scoring or created on an ad hoc basis, to advance their agendas. But the effort is worth the trouble only for a few sizable proposals. This fight was mostly about symbolism: Republicans brandishing their tax-cutting credentials and Democrats boasting of being "responsible."

Meanwhile, the real budget issues are ignored. For Democrats, these would include cuts in Social Security and Medicare, whose growth is squeezing other programs. For Republicans, it would be recognition that, even after spending cuts, balancing the budget requires tax increases.

So what else is new?

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Previously:
• 01/12/15: Who stopped inflation? Volcker, Reagan and history
• 01/08/15: Europe's other unending crisis
• 01/05/15: Is the economic slog really over?
• 01/02/15: Five economic stories to watch in 2015
• 12/29/14: 'Helping' the middle class won't fix its psychological problems